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DECEMBER 31, 1997
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VAN ECK
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EMERGING
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MARKETS
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GROWTH FUND
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ANNUAL
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REPORT
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> > >
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Van Eck Global [LOGO]
<PAGE>
VAN ECK EMERGING MARKETS GROWTH FUND
------------------------------------
1997 ANNUAL REPORT
Dear Fellow Shareholder:
Although your Fund had risen 19.9% in the first six months of 1997 and as much
as 25.7% by the end of July, Asia's debt and currency crisis, which unfolded in
late summer, had a negative impact on the Fund's overall performance for 1997.
For the twelve months ending December 31, 1997, the Emerging Markets Growth Fund
lost 12.2%*. This compares to an 11.6% decline in the benchmark Morgan Stanley
Capital International Emerging Markets Free Index (MSCI EMF Index) and a 10.3%
drop by the Fund's mutual fund peer group as measured by the Lipper Emerging
Markets Fund Index.
Emerging Markets Review
It was a volatile year for the world's emerging markets. Many lost ground by
year end solely because of Asia's financial crisis. Although many markets began
the year with strong gains, the first hiccup appeared in early March as U.S.
interest rates threatened to rise on fears of wage inflation; but, by May, U.S.
economic growth had slowed and inflation remained stable, and most markets
enjoyed significant rallies going into the summer. After midyear, however,
Asia's woes began to adversely impact global markets, and October was
particularly difficult. By year end, Asia's emerging markets were the worst hit,
declining 48.2%+ in 1997 in U.S. dollar terms. On the positive side, however,
Latin America rose 31.6% and Eastern Europe posted a smaller gain of 6.1%, led
by Russia, Turkey and Hungary.
Asia and the Indian Subcontinent
Thailand's decision in July to permit its currency (the baht) to float sent
shockwaves through Asia's economies in the second half of 1997. Asian
policymakers were unprepared for the challenges of economic restructuring and
their currencies, in anticipation of much higher levels of inflation, plunged
against the U.S. dollar. The prospect of higher inflation and interest rates
caused severe damage to Southeast Asian stock markets. By October, the crisis
had gathered enough momentum to batter both Hong Kong and South Korea, causing a
global sell-off of equities. Your Fund's performance in 1997 was most directly
affected by Asia's crisis through its Hong Kong holdings, which comprised 12.7%
of net assets at June 30 and were reduced to 8.0% at year end.
Confidence in Asia -- although overly abundant in recent years -- was nowhere in
evidence in the second half of 1997, despite the region's continued high savings
rates and strong economic growth. This flagging confidence was further
exacerbated by a strong U.S. dollar, the weak Japanese economy, pegged exchange
rates and an over-reliance on short-term foreign currency funding. By year end,
however, appropriate policy responses had emerged in most Asian countries along
with bail-out packages from the International Monetary Fund (IMF) for Thailand,
South Korea, Indonesia and the Philippines; still, it may be several months
before a full recovery ensues.
From an opportunity standpoint, the region -- which on average has sold at a 60%
premium to Latin America for the past ten years -- now trades at a discount on a
forward basis; sentiment is at rock bottom and valuation parameters look
attractive. An export recovery is already under way in several countries and is
being complemented by a dramatic decline in imports. This will slowly rebuild
liquidity, which will be helped by foreign investment resulting from cheaper
prices and new investor-friendly policies. Nevertheless, global investors will
look for hard evidence of financial and economic reform, including full
liberalization of domestic financial markets, before committing the funds that
will spark Asia's recovery.
Overall, your Fund maintained an underweight and substantially divergent
position in Asia relative to the MSCI EMF Index, with less emphasis on Malaysia,
Taiwan and Korea and greater concentration in China/Hong Kong. Elsewhere in
Asia, India was one of the region's positive performers in 1997. At year end,
your Fund maintained an overweight position in India, given prospects of a
resumption of its economic reform program, improved economic growth and foreign
investment flow.
Latin America
In 1997, Latin America was somewhat immune to the impact of Asia's turmoil. The
region continued to benefit from its own economic recovery that followed the
peso crisis in early 1995. Mexico led the region as a return of confidence in
its economy has pushed
<PAGE>
shares in consumer goods and financial services companies higher. Going forward,
the economic outlook for Mexico will depend to a large extent on U.S. growth.
Last year, your Fund's holdings in the Mexican brewer Femsa and its listed
subsidiary, Coca-Cola Femsa, were particularly strong.
Brazil's impressive response to attacks on its currency reassured investors that
although economic growth will dip in 1998, its commitment to economic reform
remains in place. In the longer term, Brazil's privatization program will be the
key to its economic health. Brazil should capitalize on investor confidence in
1998 with a return to international bond markets to help finance its $70 billion
current account deficit. Foreign direct investment is likely to account for more
than half the needed financing (mainly from Brazil's privatization of its
telecommunication and electric utilities); however, funding the balance will
keep Brazil vulnerable to shocks emanating from other parts of the world. In
1997, the Fund's holdings in Brazilian utilities such as Telebras, Petrobras and
Copel gained ground, reflecting upcoming efficiency gains from privatization.
Elsewhere in Latin America, Argentina's market failed to regain momentum at year
end due to exaggerated fears of an economic collapse in Brazil. However, IYE de
la Patagonia, a regional supermarket chain held by the Fund, rose 91% for the
year and was among the region's best performers.
In 1998, we expect economic growth in Latin America to decline slightly,
averaging more than 4% for the region as a whole, and inflation to continue its
downward trend. In the first quarter, Mexico, Argentina and Brazil are likely to
outperform the region; therefore, we have placed the bulk of our Latin American
positions in these markets. As the year progresses, we will monitor Latin
America for signs of vulnerability to external account deterioration as Asian
exports recover.
Europe, the Middle East and Africa
Eastern Europe was a solid performer in 1997, spurred by prospects of economic
recovery and attractive valuations. Russia led the pack with its tremendous 112%
rise. Russia's economic recovery diminished the perceived risks of a severe
budget imbalance, although investor confidence remains much influenced by
politics. The region should continue to enjoy a modest rebound in growth and
falling inflation. Your Fund took profits in a number of Russian shares during
the year, but continues to hold Unified Energy Systems which gained 137% in 1997
and still appears undervalued. At year end, your Fund held an overweight
position in Eastern Europe relative to the MSCI EMF Index, with holdings
concentrated in Russia, Hungary and Romania.
Southern European markets performed strongly as a result of the prospect of
European Monetary Union (EMU) convergence. Current valuations, especially in
Portugal, reflect this enthusiasm. Greece faces the challenge of whether or not
it can participate in monetary union without currency devaluation and a high
level of EU transfers. Interest rates have eased since the Asian-induced spike
but Greece's stock market has not recovered, thus creating potential value.
The Middle East and Africa, highly disparate regions, posted mixed results in
1997. Israel's monetary policy remains tight as the government attempts to keep
inflation below 10%. In 1998, however, interest rates are likely to decline as
the year progresses. The Egyptian economy is likely to continue to experience
healthy real growth with inflation under 7%. Turkey will be worth watching
closely, as the government has signaled its intention to bring inflation down
dramatically from its current 80% level. Finally, we expect South Africa's
growth to slow as a result of Asia's crisis. Its interest rates should decline
in 1998, thus benefiting your Fund's South African financial services holdings.
The Outlook
Going forward, prospects for the emerging markets certainly look reasonable.
Although the past few months may have been uncomfortable, the long-term outlook
for many of the worst-hit emerging markets remains excellent. Some uncertainty
will persist until the full impact of Asia's financial crisis unfolds; this is
likely to make the emerging markets volatile in the near term. We continue to
favor the markets of Latin America and Eastern Europe, where economic progress
continues and the underlying economic fundamentals remain stronger than in Asia.
As Asian leaders are able to address the challenges posed by the global economy,
Asian currencies will stabilize, encouraging investors to return to the stock
markets. We continue to believe that it is prudent for investors to diversify
their investment portfolios, and that an allocation to the emerging markets may,
over the long term, increase returns.
Finally, we are pleased to announce that as of February 1, Gary Greenberg, Chief
Investment Officer of Peregrine Asset Management, will be joining the firm as
Managing Director, Van Eck Global Asset Management Asia, and Chief Investment
Officer, International Equities.
<PAGE>
We appreciate your participation in the Emerging Markets Growth Fund and look
forward to helping you meet your investment goals in the future.
[PHOTO OMITTED] [PHOTO OMITTED]
/s/ John C. van Eck /s/ Gary Greenberg
John C. van Eck Gary Greenberg
Chairman Portfolio Manager
January 21, 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 gross dividends. Indices are "Free" where applicable.
- --------------------------------------------------------------------------------
*PERFORMANCE RECORD AS OF 12/31/97
- --------------------------------------------------------------------------------
After Maximum Before
Total Return Sales Charge 4.75%++ Sales Charge
- --------------------------------------------------------------------------------
A shares-Life (since 12/30/96) (16.4)% (12.2)%
- --------------------------------------------------------------------------------
B shares-Life (since 12/30/96) (15.4)% (12.0)%
- --------------------------------------------------------------------------------
C shares-Life (since 12/30/96) (12.2)% (12.2)%
- --------------------------------------------------------------------------------
The performance data reflects 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%
C shares: 1% redemption charge, 1st year
[The following table was depicted as a pie chart in the printed material]
GEOGRAPHICAL DISTRIBUTION*
--------------------------
DECEMBER 31, 1997
The Phillippines 2.4%
Malaysia 2.5%
China 2.9%
Hungary 3.0%
Argentina 3.1%
Egypt 3.4%
Indonesia 3.7%
Russia 4.3%
Romania 5.5%
Cash/Equiv. 5.9%
Hong Kong 8.0%
Israel 8.9%
Other 9.1%+
India 10.9%
Mexico 12.8%
Brazil 13.6%
* Listed as a percentage of total net assets.
+ No other country represents more than 2.0%.
<PAGE>
TOP TEN EQUITY HOLDINGS*
------------------------
AS OF DECEMBER 31, 1997
TELECOMUNICACOES BRASILEIRAS S/A-TELEBRAS
(BRAZIL, 5.7%)
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 1998, thus supporting efficiency gains and increased value to
shareholders.
COCA-COLA FEMSA S. A.
(MEXICO, 2.3%)
Coca-Cola Femsa is a Coca-Cola anchor bottler with the franchise for the
metropolitan area of Mexico City, Southeastern Mexico and Buenos Aires,
Argentina. The company produces and distributes the Coca-Cola range of soft
drinks and has recently diversified into bottled water. Coca-Cola Femsa has been
increasing market share at the expense of Pepsi, through increased use of
technology and aggressive marketing campaigns.
JCG HOLDINGS LTD.
(HONG KONG, 2.3%)
JCG Holdings Ltd. is a consumer finance company characterized by low leverage
and high levels of profitability (it also operates a taxi company in Hong Kong).
JCG's conservative management has been able to maintain tight control over its
loan portfolio, thus keeping asset quality high.
GRUPO FINANCIERO BANCOMER S.A. DE C.V.
(MEXICO, 2.2%)
Bancomer is Mexico's second largest bank with associates in insurance, asset
management (including the largest pension fund in Mexico) and long-distance
telephony. Its healthy loan profile indicates that it is leading the recovery of
the Mexican banking system. Bancomer trades at a discount to the Latin American
banking sector average, despite having better-than-average growth potential.
GRUPO ELEKTRA, S.A. DE C.V.
(MEXICO, 2.2%)
Grupo Elektra operates more than 400 retail stores throughout Mexico and Central
America. The company sells consumer electronics, household appliances and
furniture, and offers money transfer services. It also provides financing to
low-income customers at very profitable interest rates. Elektra owns a minority
interest in Television Azteca, a highly successful Mexican television network.
PETROBRAZI S.A.
(ROMANIA, 2.2%)
Petrobrazi is one of the largest and most modern oil refineries in Romania, with
a capacity of 7 million tonnes per annum. It is being folded into the Romanian
State Oil Company, which will be the largest company in Romania by market
capitalization. Petrobrazi trades at an 80% discount to less modern refineries
in Russia.
NEW WORLD DEVELOPMENT COMPANY LTD.
(HONG KONG, 2.1%)
New World Development Company Ltd. is an investment holding company; its
subsidiaries are involved in property development and investment. The company is
also involved in hotel operations, construction and civil engineering
activities, telecommunication services, insurance, transportation and
investments in infrastructure. Through its listed subsidiary, New World
Infrastructure, the company has exposure to a number of projects in China,
including railroads, airports and mass residential housing.
TEVA PHARMACEUTICALS INDUSTRIES LTD.
(ISRAEL, 2.1%)
Teva is the largest company in Israel by market capitalization and is a
world-class drug producer little affected by the vagaries of the Middle East
peace process. Teva continues to benefit from its growing network of
distributors in the U.S., Continental Europe and the UK. Teva's proprietary
multiple sclerosis drug, Copaxone, has been approved for sale in the U.S. and
Canada and should be approved in Europe in 1998. This drug has the potential to
boost earnings dramatically.
KIMBERLY-CLARK DE MEXICO, SA DE CV
(MEXICO, 2.0%)
Kimberly-Clark de Mexico is the Mexican subsidiary of Kimberly-Clark USA and is
Mexico's leading manufacturer and seller of disposable hygiene products and
specialty papers. Its sales mix has strengthened recently, with consumers
purchasing more expensive brands as their spending power increases. This, along
with synergies obtained from the company's merger with Crisoba, has improved its
operating margins.
ORBOTECH, LTD.
(ISRAEL, 1.9%)
Orbotech, Ltd. designs, develops and manufactures automated optical inspection
systems that identify defects in the production process of printed circuit
boards (PCBs) and liquid crystal displays (LCDs). Demand for these systems has
increased as PCBs and LCDs have grown more complex and manual inspection has
become obsolete. The company also produces computer-aided manufacturing systems
and laser plotters. Orbotech has recently strengthened its presence in Europe by
acquiring a German manufacturer in the same industry.
* Portfolio is subject to change.
Note: Equities listed as percentage of total net assets.
<PAGE>
EMERGING MARKETS GROWTH FUND
SCHEDULE OF PORTFOLIO INVESTMENTS DECEMBER 31, 1997
- --------------------------------------------------------------------------------
No. of Shares Securities(a) Value (Note 1)
- --------------------------------------------------------------------------------
Argentina: 3.1%
2,500 Banco Del Suquia S.A. $ 6,501
1,030 Banco Frances del Rio de la Plata S.A. 28,196
1,400 YPF S.A. (Sponsored ADR) 47,775
-----------
82,472
-----------
Brazil: 13.6%
2,230,000 Banco de Credito Nacional S.A. Pfd. 19,382
600 CEMIG S.A. (ADR) 25,866
750,000 Cia Eletricidade da Bahia 34,481
2,700,479 Cia Paranaense de Energia -Copel Pfd. (b) 43,208
114,000 Cia Saneamento Basico S.A. 27,069
1,450 Petroleo Brasileiro S.A. Pfd. (b) 33,713
110,000 Telecomunicacoes de Sao Paulo S.A. 25,034
4,610 Telecomunicacoes de Sao Paulo S.A. Pfd. 1,227
1,300 Telecomunicacoes Brasileiras S/A 151,369
-----------
361,349
-----------
Chile: 0.9%
1,400 Banco de A. Edwards S.A. (ADR) 23,800
-----------
China: 2.9%
40,000 Huangshan Tourism Development Co. Ltd. 31,760
40,000 Shenzhen Fangda Co. Industry, Ltd. (Class B) 45,949
-----------
77,709
-----------
Egypt: 3.4%
1,038 Al-Ahram Beverages Co., (GDR)+ 29,168
500 Eastern Tobacco Co. 11,611
1,635 Industrial Engineering Enterprises+ 27,390
2,200 Misr Duty Free Shops 22,307
-----------
90,476
-----------
Greece: 1.0%
1,200 Hellenic Bottling Co. S.A. 27,846
-----------
Hong Kong: 8.0%
18,000 China Foods Holdings Ltd. 5,924
30,000 Huaneng Power International,
Convertible Bond 1.75% 5/21/2004 29,625
140,000 JCG Holdings Ltd. 60,082
16,000 New World Development Company Ltd. 55,344
22,000 Ng Fung Hong Ltd. 23,142
31,000 Qingling Motors Company 15,204
6,000 Shanghai Industrial Holdings Limited 22,303
-----------
211,624
-----------
Hungary: 3.0%
1,800 Euronet Services, Inc.+ 13,950
300 Gedeon Richter Rt. (Sponsored GDR)+ 34,875
3,500 Graboplast Rt. (GDR) 32,025
-----------
80,850
-----------
India: 10.9%
1,700 Asea Brown Boveri Ltd. 20,383
5,000 Asian Paints Ltd. 38,393
1,050 Associated Cement Companies Ltd. 37,145
800 Bajaj Auto Ltd. 12,347
900 Hindalco Industries, Ltd. 17,059
1,000 Hindustan Lever, Ltd. 35,293
3,000 Hoechst Marion Roussel, Ltd. 25,791
700 Infosys Technologies Limited 22,013
3,600 Mahanagar Telephone Nigam, Ltd. 23,694
91,500 PSI Data Systems, Ltd.+ 28,010
4,000 Tata Engineering and Locomotive
Company Ltd. 30,230
-----------
290,358
-----------
Indonesia: 3.7%
93,500 PT Bimantara Citra 17,689
238,500 PT Citra Marga Nusaphala Persada 25,784
19,000 PT Gudang Garam 28,671
10,700 PT Hanjaya Mandala Sampoerna "F" 8,000
19,500 PT Ramayana Lestari Sentosa 18,182
-----------
98,326
-----------
Israel: 8.9%
16,000 Bank Leumi Le-Israel 26,858
1,080 Bio-Technology General Corporation+ 11,610
1,000 Formula Systems (1985) Ltd.+ 30,775
500 Nice-Systems Ltd. (Sponsored ADR)+ 21,000
1,600 Orbotech, Ltd.+ 51,000
4,000 Oshap Technologies, Ltd.+ 39,500
1,160 Teva Pharmaceuticals Industries Ltd.
(Sponsored ADR) 54,883
-----------
235,626
-----------
Malaysia: 2.5%
8,000 Berjaya Sports Toto Berhad 20,492
17,000 KFC Holdings Berhad 27,571
15,500 Malaysian Assurance Alliance Berhad 17,796
-----------
65,859
-----------
Mexico: 12.8%
709 Cifra S.A. de C.V. (ADR) 17,284
1,040 Coca-Cola Femsa S.A. (Sponsored ADR) 60,320
3,300 Corp Internamericana de Entretenimiento S.A.+ 25,608
4,200 Fomento Economico Mexicano, S.A. de C.V. 33,737
1,675 Grupo Elektra, S.A. de C.V. (Sponsored GDR) 58,939
4,600 Grupo Financiero Bancomer S.A. de C.V.
(Sponsored ADR) (144A)+ 59,800
2,302 Kimberly-Clark de Mexico, SA de CV
(ADR) 54,385
1,300 Television Azteca S.A. de C.V.
(Sponsored ADR)+ 29,331
-----------
339,404
-----------
Peru: 0.7%
1,000 Credicorp Ltd. 18,000
-----------
See Notes to Financial Statements
<PAGE>
EMERGING MARKETS GROWTH FUND
SCHEDULE OF PORTFOLIO INVESTMENTS DECEMBER 31, 1997 (CONTINUED)
- --------------------------------------------------------------------------------
No. of Shares Securities(a) Value (Note 1)
- --------------------------------------------------------------------------------
Philippines: 2.4%
258,500 Belle Corporation $ 11,571
4,200 Benpres Holdings Corp. (Sponsored GDR)+ 11,865
400 Philippines Long Distance Telephone Company 10,100
169,000 SM Prime Holdings Inc. 29,096
-----------
62,632
-----------
Poland: 0.8%
1,415 Computerland Poland S.A.+ 22,479
-----------
Romania: 5.5%
228,067 Alimentara+ 15,544
3,861 Alro Slatina+ 19,855
46,903 Carbid Fox+ 15,692
13,534 Petrobrazi S.A. 57,859
6,918 Petromidia S.A.+ 20,145
53,106 Romcim 17,768
-----------
146,863
-----------
Russia: 4.3%
175 Mosenergo (Sponsored ADR) 6,545
5 Norilsk Nickel Pfd. (RDC) 29,400
2 Norilsk Nickel Rights (RDC) 12,500
1,000 Noyabrskneftegaz 6,875
1,350 Surgutneftegaz (Sponsored ADR) 13,669
130 AO Tatneft (Sponsored ADR) 18,525
990 Unified Energy Systems (GDR)+ 27,585
-----------
115,099
-----------
Singapore: 0.8%
8,000 Datacraft Asia Ltd. 20,640
-----------
South Africa: 2.0%
1,100 Liberty Life Assoc. of Africa Ltd. 28,600
1,150 Nedcor Limited 25,462
-----------
54,062
-----------
Taiwan: 1.8%
3,000 ROC Taiwan Fund 24,375
1,500 Taiwan Fund Inc. 24,750
-----------
49,125
-----------
Thailand: 1.1%
19,000 Ayudhya Jardine CMG Life Ansurance
Public Co., Ltd. 4,281
1,200 Ban Pu Public Company Ltd. 3,316
4,800 BEC World Public Co. Ltd. 20,404
-----------
28,001
-----------
Total Investments: 94.1% (Cost: $2,930,066) 2,502,600
Other Assets Less Liabilities: 5.9% 158,387
-----------
Net Assets: 100% $ 2,660,987
===========
Summary of
Investments % of
by Industry Net Assets
- ---------- ---------
Aluminum 1.4%
Auto & Truck 2.2%
Banking/Insurance 10.0%
Cement 0.7%
Chemicals 0.6%
Computer software &
equipment 6.2%
Consumer Products 1.9%
Electric Utilities 2.2%
Energy 1.4%
Engineering & Construction 2.8%
Entertainment & Leisure 2.9%
Financial Services 1.2%
Food Services 0.9%
Foreign Government Bond 1.8%
Holding Company 1.1%
Investment Fund 2.3%
Manufacturing 4.0%
Medical Services 0.4%
Metals 3.3%
Oil & Gas 7.5%
Personal Products 2.0%
Pharmaceuticals 4.3%
Real Estate 3.6%
Restaurants 1.0%
Retail 3.5%
Soft Drinks/Beer 5.7%
Telecommunications 8.4%
Television/Cable 2.3%
Tobacco 1.8%
Utilities 5.7%
Utilities-Water 1.0%
Other Assets Less Liabilities 5.9%
----
100.0%
=====
- ----------
(a) Unless otherwise indicated, securities owned are shares of common stock.
(b) Includes securities in the form of ADR.
+ Non-income producing.
Glossary:
ADR -- American Depositary Receipt
GDR -- Global Depositary Receipt
RDC -- Russian Depositary Certificate
See Notes to Financial Statements.
<PAGE>
EMERGING MARKETS GROWTH FUND
FINANCIAL STATEMENTS.
- --------------------------------------------------------------------------------
Statement of Assets and Liabilities
December 31, 1997
Assets:
Investments at value (cost $2,930,066) (Note 1) $ 2,502,600
Cash 65,341
Receivables:
From Adviser 58,678
Securities sold 38,975
Dividends and interest 16,248
Capital shares sold 6,735
Due from broker (Note 5) 40,983
Deferred organization costs and other assets (Note 1) 2,733
-----------
Total assets 2,732,293
-----------
Liabilities:
Payables:
Securities purchased 25,287
Capital shares redeemed 6,383
Dividends payable 4,779
Accounts payable 34,857
-----------
Total liabilities 71,306
-----------
Net Assets $ 2,660,987
===========
Class A
Net asset value and redemption price per share
($2,201,040/270,596) $ 8.13
===========
Maximum offering price per share
(NAV/(1-maximum sales commission)) $ 8.54
===========
Class B
Net asset value, offering price and redemption price per share
($165,552/20,346) (Redemption may be subject to a
contingent deferred sales charge within the first six years
of ownership) $ 8.14
===========
Class C
Net asset value, offering price and redemption price per share
($294,395/36,346) (Redemption may be subject to a
contingent deferred sales charge within the first year
of ownership) $ 8.10
===========
Net assets consist of:
Aggregate paid in capital $ 3,391,198
Unrealized depreciation of investments and foreign
currency denominated receivables and payables (428,162)
Overdistributed net investment income (6,155)
Accumulated net realized loss (295,894)
-----------
$ 2,660,987
===========
Statement of Operations
Year Ended December 31, 1997
Income:
Dividends (less foreign taxes withheld of $3,536) $ 47,786
Interest 294
-----------
Total income 48,080
Expenses:
Management (Note 2) $ 24,075
Distribution Class A (Note 4) 10,888
Distribution Class B (Note 4) 1,128
Distribution Class C (Note 4) 1,171
Administration (Note 2) 3,232
Transfer agent 46,094
Registration 36,458
Professional 18,070
Reports to shareholders 15,190
Custodian 6,107
Amortization of deferred organization costs 1,806
Trustees fees and expenses 305
Other 4,248
---------
Total expenses 168,772
Expenses assumed by the Adviser (Note 2) (168,772)
---------
Net expenses --
-----------
Net investment income 48,080
Realized and Unrealized Loss on Investments (Note 3)
Realized loss from security transactions (201,162)
Realized loss from foreign currency transactions (19,930)
Realized loss on equity swaps and futures contracts (55,479)
Unrealized depreciation of investments (427,466)
Unrealized depreciation of foreign currency
denominated receivables and payables (696)
-----------
Net Decrease in Net Assets Resulting
from Operations $(656,653)
===========
See Notes to Financial Statements.
<PAGE>
EMERGING MARKETS GROWTH FUND
FINANCIAL STATEMENTS (continued)
- --------------------------------------------------------------------------------
Statement of Changes in Net Assets
Year
Ended
December 31,
1997
-----------
Decrease in Net Assets:
Operations:
Net investment income $ 48,080
Realized loss from security
transactions (201,162)
Realized loss from foreign
currency transactions (19,930)
Realized loss on equity swaps and futures contracts (55,479)
Unrealized depreciation of investments (427,466)
Unrealized depreciation of foreign currency
denominated receivables and payables (696)
-----------
Net decrease in net assets resulting from operations (656,653)
-----------
Dividends to shareholders from:
Net Investment income:
Class A Shares (22,559)
Class B Shares (1,563)
Class C Shares (2,750)
Capital Gains:
Class A Shares (38,591)
Class B Shares (2,911)
Class C Shares (5,184)
Tax return of capital:
Class A Shares (927)
Class B Shares (70)
Class C Shares (125)
-----------
Total Distributions (74,680)
-----------
Capital share transactions*:
Net proceeds from sales of shares
Class A Shares 3,776,464
Class B Shares 226,716
Class C Shares 350,867
-----------
4,354,047
-----------
Reinvestment of dividends:
Class A Shares 57,444
Class B Shares 3,506
Class C Shares 7,990
-----------
68,940
-----------
Cost of Shares reacquired:
Class A Shares (1,017,740)
Class B Shares (35,593)
Class C Shares (7,334)
-----------
(1,060,667)
-----------
Increase in net assets resulting from
capital share transactions 3,362,320
-----------
Total increase in net assets 2,630,987
Net Assets:
Beginning of period (Note 1) 30,000
-----------
End of period (including overdistributed
net investment income of $(6,155)) $ 2,660,987
===========
*Shares of Beneficial Interest Issued and
Redeemed (unlimited number of $.001
par value shares authorized)
Year
Ended
December 31,
1997
-----------
Class A
Shares sold 366,733
Reinvestment of dividends 6,673
Shares reacquired (103,860)
-----------
Net increase 269,546
===========
Class B
Shares sold 22,920
Reinvestment of dividends 417
Shares reacquired (4,041)
-----------
Net increase 19,296
===========
Class C
Shares sold 35,075
Reinvestment of dividends 977
Shares reacquired (756)
-----------
Net increase 35,296
===========
See Notes to Financial Statements.
<PAGE>
EMERGING MARKETS GROWTH FUND
- --------------------------------------------------------------------------------
Financial Highlights
For a share outstanding throughout the period
<TABLE>
<CAPTION>
Class A Class B Class C
----------------- ----------------- -----------------
Year Ended Year Ended Year Ended
December 31, 1997 December 31, 1997 December 31, 1997
----------------- ----------------- -----------------
<S> <C> <C> <C>
Net Asset Value, Beginning of Period ............... $ 9.52 $ 9.52 $ 9.52
------- ------- -------
Income from Investment Operations:
Net Investment Income ............................ 0.16 0.15 0.13
Net Losses on Investments
(both realized and unrealized) ................. (1.31) (1.28) (1.28)
------- ------- -------
Total from Investment Operations ................... (1.15) (1.13) (1.15)
------- ------- -------
Less Distributions:
From net investment income ....................... (0.09) (0.10) (0.12)
From realized gains .............................. (0.15) (0.15) (0.15)
From tax return of capital ....................... (0.00) (0.00) (0.00)
------- ------- -------
Total Distributions ................................ (0.24) (0.25) (0.27)
------- ------- -------
Net Asset Value, End of Period ..................... $ 8.13 $ 8.14 $ 8.10
======= ======= =======
Total Return (a) ................................... (12.22%) (12.01%) (12.22%)
-------
- ---------------------------------------------------------------------------------------------------------------------------
Ratios/Supplementary Data
Net Assets, End of Period (000) .................... $ 2,201 $ 166 $ 294
Ratio of Gross Expenses to Average Net Assets (b) .. 6.01% 16.47% 16.06%
Ratio of Net Expenses to Average Net Assets ........ 0.00% 0.00% 0.00%
Ratio of Net Investment Income to Average Net Assets 1.94% 2.35% 2.66%
Portfolio Turnover Rate ............................ 151% 151% 151%
Average Commission Rate Paid ....................... $0.0014 $0.0014 $0.0014
</TABLE>
- ----------
(a) Total return is calculated assuming an initial investment made at the net
asset value at the beginning of the period, the reinvestment of dividend
distribution, and a redemption on the last day of the period. A sales
charge is not reflected in the calculation of total return.
(b) If the expenses had not been assumed by the Adviser.
See Notes to Financial Statements.
- --------------------------------------------------------------------------------
Notes to Financial Statements
Note 1 -- Significant Accounting Policies:
Van Eck Funds (the "Trust"), organized as a Massachusetts business trust on
April 3, 1985, is registered under the Investment Company Act of 1940. The
following is a summary of significant accounting policies consistently followed
by the Emerging Markets Growth Fund series, a non-diversified fund (the "Fund")
of the Trust in the preparation of its financial statements. The policies are in
conformity with generally accepted accounting principles. The preparation of
financial statements in conformity with generally accepted accounting principles
requires the use of management's estimates and the actual results could differ.
The Fund had no operations prior to January 1, 1997 except for sales to Van Eck
Associates Corporation ("the Adviser") in the amount of $10,000 in each of the
classes at a net asset value of $9.52.
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, not
included on the NASDAQ National Markets System, and listed securities for
which no sale was reported are valued at the mean of the bid and asked
prices. Short-term obligations are valued at amortized cost which with
accrued interest approximates value. Securities for which quotations are
not available are stated at fair value as determined by the Board of
Trustees.
B. Federal Income Taxes -- It is the Fund's policy to comply with the
provisions of the Internal Revenue Code applicable to regulated investment
companies and to distribute all of its taxable income to its shareholders.
Therefore, no federal income tax provision is required.
C. Currency Translation -- Assets and liabilities denominated in foreign
currencies and commitments under forward foreign currency contracts are
translated into U.S. dollars at the mean of the quoted bid and asked
prices of such currencies. Purchases and sales of investments are
translated at the exchange rates prevailing when such investments were
acquired or sold. Income and expenses are translated at the exchange rates
prevailing when accrued. The portion of realized and unrealized gains and
losses on investments that result from fluctuations in foreign currency
exchange rates is not separately disclosed. Recognized gains or losses
attributable to foreign currency fluctuations on foreign denominated
assets and liabilities are recorded as net realized gains and losses from
foreign currency.
<PAGE>
EMERGING MARKETS GROWTH FUND
NOTES TO FINANCIAL STATEMENTS (continued)
- --------------------------------------------------------------------------------
D. Other -- Security transactions are accounted for on the date the
securities are purchased or sold. Dividend income is recorded on the
ex-dividend date. Interest income is accrued as earned.
E. Distributions to Shareholders -- Distributions from net investment income
and realized gains, if any, are recorded on the ex-dividend date. Income
and capital gain distributions are determined in accordance with income
tax regulations which may differ from generally accepted accounting
principles. These differences are primarily due to differing treatments
for foreign currency transactions.
The effect of the differences for the year ended December 31, 1997
decreased undistributed net investment income by $54,235, decreased
accumulated net realized loss by $25,357, and increased aggregate paid-in
capital by $28,878.
F. Deferred Organization Costs -- Deferred organization costs are being
amortized over a period of five years beginning on January 1, 1997.
G. Futures Contracts -- The Fund may buy and sell financial futures contracts
for hedging purposes. When a Fund enters into a futures contract, it must
make an initial deposit ("initial margin") as a partial guarantee of its
performance under the contract. As the value of the futures contract
fluctuates, the Fund is required to make additional margin payments
("variation margin") to cover any additional obligation it may have under
the contract. In the remote chance a broker cannot fulfill its obligation,
the Fund could lose the variation margin due to it. Risks may be caused by
an imperfect correlation between the movements in the price of the futures
contract and the price of the underlying instrument and interest rates.
Gains and losses on futures contracts are separately disclosed.
Note 2 -- Van Eck Associates Corporation (the "Adviser") earned fees of $24,075
for investment management and advisory services. The fee is based on an annual
rate of 1% of the Fund's average daily net assets. The Adviser agreed to assume
all expenses for the year ended December 31, 1997. For the year ended December
31, 1997, the Fund's expenses were reduced by $168,772 under this agreement. In
accordance with the advisory agreement, the Fund reimbursed Van Eck Associates
Corporation $3,232 for costs incurred in connection with certain administrative
and operating functions. Van Eck Securities Corporation (the "Distributor")
received $2,985 for the year ended December 31, 1997, from commissions earned on
sales of Class A shares after deducting $14,741 allowed to other dealers.
Certain of the officers and trustees of the Trust are officers, directors or
stockholders of Van Eck Associates Corporation and Van Eck Securities
Corporation. As of December 31, 1997 Van Eck Associates Corporation owned 19.2%,
4.9% and 2.72% of the outstanding shares of Class A, Class B and Class C,
respectively.
Note 3 -- Purchases and proceeds from sales of investments, other than
short-term obligations, aggregated $6,553,601 and $3,422,373, respectively, for
the year ended December 31, 1997. For federal income tax purposes, the cost of
investments owned at December 31, 1997 was $2,979,234. As of December 31, 1997,
net unrealized depreciation for federal income tax purposes aggregated $476,634
of which $153,592 related to appreciated investments and $630,226 related to
depreciated investments.
Note 4 -- Pursuant to a Rule 12b-1 Plan of Distribution (the "Plan"), the Fund
is authorized to incur distribution expenses which will principally be payments
to securities dealers who have sold shares and service shareholder accounts and
payments to Van Eck Securities Corporation ("VESC"), the distributor, for
reimbursement of other actual promotion and distribution expenses incurred by
the distributor on behalf of the Fund. The amount paid under the Plan in any one
year is limited to .50% of average daily net assets for Class A shares and 1.00%
of average daily net assets for Classes B and C shares (the "Annual
Limitations"). For Class C shares, the Fund will pay to the selling broker at
the time of sale 1% of the amount of the purchase. Such 12b-1 advanced fees will
be expensed by the Fund over the course of the first twelve months from the time
of purchase. Should the payments to the brokers made by the Fund exceed, on an
annual basis, 1% of average daily net assets, VESC will reimburse the Fund for
any excess. Class C shareholders redeeming within one year of purchase will be
subject to a 1% redemption charge which will be retained by the Fund. After the
first year, the 1% 12b-1 fee will be paid to VESC which will retain a portion of
the fee for distribution services and pay the remainder to brokers.
Distribution expenses incurred under the Plan that have not been paid because
they exceed the Annual Limitation may be carried forward to future years and
paid by the Fund within the Annual Limitation. VESC has waived its right to
reimbursement of the carried forward amounts incurred for the period January 1,
1997 through December 31, 1997 in the event the Plan is terminated, unless the
Board of Trustees determines that reimbursement of the carried forward amounts
is appropriate. The cumulative amount of excess distribution expenses incurred
over the Annual Limitation at December 31, 1997 was $30,522 for Class A shares,
$11,500 for Class B shares and $11,525 for Class C shares.
Note 5 -- The Fund may enter into equity swaps to gain investment exposure to
the relevant market of the underlying securities. A swap is an agreement that
obligates the parties to exchange cash flows at specified intervals. In the case
of the following swaps, the Fund is obligated to pay the counterparty an amount
based upon the value of the underlying instrument at termination date. Final
payment is settled based on the value of the underlying securities on trade date
versus the value on termination date plus accrued dividends.
Risks may arise as a result of the failure of the other party to the contract to
comply with the terms of the swap contract. The losses incurred on the following
swaps are limited to the payments made on the purchase date by the Fund.
Therefore, the Fund considers
<PAGE>
EMERGING MARKETS GROWTH FUND
NOTES TO FINANCIAL STATEMENTS (continued)
- --------------------------------------------------------------------------------
the credit worthiness of each counterparty to a swap contract in evaluating
potential credit risk. Additionally, risks may arise from unanticipated
movements in the value of the swaps relative to the underlying securities.
The Fund records a net receivable or payable daily, based on the change in the
value of the underlying securities. The net receivable or payable for financial
statement purposes is shown as due to or from broker. At December 31, 1997, the
due from broker was $40,983.
Note 6 -- The Fund may purchase securities on foreign exchanges. Securities of
foreign issuers involve special risks and considerations not typically
associated with investing in U.S. issuers. These risks include devaluation of
currencies, less reliable information about issuers, different securities
transactions clearance and settlement practices, and future adverse political
and economic developments. These risks are heightened for investments in
emerging market countries. Moreover, securities of many foreign issuers and
their markets may be less liquid and their prices more volatile than those of
comparable U.S. issuers.
Note 7 -- Trustee Deferred Compensation Plan
The Trust established a Deferred Compensation Plan (the "Plan") for trustees.
The Trustees can elect to defer receipt of their trustee fees until retirement,
disability or termination from the board. The Fund's contributions to the Plan
are limited to the amount of fees earned by the participating trustees. The fees
otherwise payable to the participating trustees are invested in shares of the
Van Eck Funds as directed by the Trustees. If a Trustee has directed all or a
portion of his fee to be invested in the Fund, the unfunded liability remains
outstanding in the Fund's records since the Fund cannot invest in itself. The
Fund has elected to show this deferred liability net of the corresponding assets
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 $175.
- --------------------------------------------------------------------------------
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 Emerging Markets Growth Fund (the
"Fund") (one of the series constituting the Van Eck Funds) as of December 31,
1997, and the related statement of operations, changes in net assets and the
financial highlights for the year then ended. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of December 31, 1997, by
correspondence with the custodian and brokers. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Emerging Markets Growth Fund series of the Van Eck Funds as of December 31,
1997, and the results of its operations, changes in its net assets, and the
financial highlights for the year then ended, in conformity with generally
accepted accounting principles.
Coopers & Lybrand L.L.P.
New York, New York
February 24, 1998
<PAGE>
Van Eck Family of Funds
- --------------------------------------------------------------------------------
Global Hard Assets Fund
Seeks long-term capital appreciation by investing globally, primarily in "Hard
Asset Securities." Income is a secondary consideration.
International Investors Gold Fund
Founded in 1955, this Fund is the oldest gold-oriented mutual fund in the U.S.
It invests in gold-mining shares globally and seeks long-term capital
appreciation, moderate yield and protection against monetary uncertainties.
Gold/Resources Fund
Seeking a long-term global hedge against inflation and other risks, this Fund
invests in gold-mining and natural resources companies outside South Africa.
Global Real Estate Fund
This Fund seeks long-term capital appreciation by investing in equity securities
of domestic and foreign companies which are principally engaged in the real
estate industry or which own significant real estate assets.
Emerging Markets Growth Fund
This Fund seeks long-term capital appreciation by investing primarily in equity
securities in emerging markets around the world.
Asia Dynasty Fund
This Fund seeks long-term capital appreciation by investing in the equity
securities of companies that are expected to benefit from the development and
growth of the economies in the Asia Region.
Global Balanced Fund
This Fund seeks long-term capital appreciation together with current income by
investing in stocks, bonds and money market instruments worldwide.
Global Income Fund
This Fund seeks high total return through a flexible policy of investing
globally, primarily in debt securities.
U.S. Government Money Fund
This Fund seeks the highest safety of principal and daily liquidity by investing
in U.S. Treasury bills and repurchase agreements collateralized by U.S.
Government obligations.
Van Eck/Chubb Funds
- --------------------------------------------------------------------------------
Capital Appreciation Fund
Global Income Fund
Government Securities Fund
Growth and Income Fund
Tax-Exempt Fund
Total Return Fund
- --------------------------------------------------------------------------------
This report must be accompanied or preceded by a prospectus, which includes more
complete information, such as charges and expenses and the risks associated with
international investing, including currency fluctuations or controls,
expropriation, nationalization and confiscatory taxation. For a free Van Eck
Gold and Money Funds, Van Eck Global Funds or Van Eck/Chubb Funds prospectus,
please call the number listed below. Please read the prospectus before
investing.
Van Eck Global [LOGO]
Van Eck Securities Corporation
99 Park Avenue, New York, NY 10016
www.vaneck.com
For account assistance please call (800)o544-4653
FR1998-0123-0057
