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PROSPECTUS September 3, 1996
VAN ECK WORLDWIDE EMERGING MARKETS FUND
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99 Park Avenue, New York, New York 10016
(212) 687-5200
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Van Eck Worldwide Insurance Trust (the "Trust") is an open-end management
investment company consisting of five separate funds. This Prospectus relates
only to Van Eck Worldwide Emerging Markets Fund (the "Fund"). Shares of the
Fund are offered only to separate accounts of various insurance companies to
fund the benefits of variable life policies and variable annuity contracts
(the "Contracts").
WORLDWIDE EMERGING MARKETS FUND--seeks long term capital appreciation by
investing primarily in equity securities in emerging markets around the world.
Peregrine Asset Management (Hong Kong) Limited ("PAM" or "Sub-Adviser") serves
as sub-investment adviser to the Fund.
Worldwide Emerging Markets Fund is managed by Van Eck Associates Corporation
(the "Adviser"), 99 Park Avenue, New York, New York 10016. See "Management."
Van Eck Securities Corporation (the "Distributor"), a wholly-owned subsidiary
of the Adviser, serves as Distributor of the Fund's shares.
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This Prospectus sets forth concisely information about the Trust and Fund that
you should know before investing. It should be read in conjunction with the
prospectus for the Contract which accompanies this Prospectus and should be
retained for future reference. For further information about the Fund, please
call the Fund or the Distributor at the above telephone number.
The Contracts involve certain expenses not described in this Prospectus and
also may involve certain restrictions or limitations on the allocation of
purchase payments or Contract values to the Fund. See the applicable Contract
prospectus for information regarding expenses of the Contract and any
applicable restrictions or limitations with respect to the Fund.
Shares of the Fund are not deposits or obligations of, or guaranteed or
endorsed by, a bank, and the shares are not federally insured by the Federal
Deposit Insurance Corporation, the Federal Reserve Board, or any other agency.
A Statement of Additional Information, dated September 3, 1996, which further
discusses the Trust and Fund, has been filed with the Securities and Exchange
Commission and is incorporated herein by reference. It is available without
charge upon request to the Fund, or the Distributor at the above address or by
calling the telephone number listed above.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
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TABLE OF CONTENTS PAGE
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The Trust................................................................... 3
Financial Highlights........................................................ 3
Investment Objectives and Policies of the Fund.............................. 4
Risk Factors................................................................ 6
Limiting Investment Risks................................................... 14
Management.................................................................. 14
How to Buy Shares........................................................... 16
Dividends and Distributions................................................. 17
How to Redeem Shares........................................................ 17
Federal Taxation............................................................ 17
Description of the Trust.................................................... 17
Additional Information...................................................... 18
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THE TRUST
Van Eck Worldwide Insurance Trust (the "Trust") is an open-end management
investment company organized as a "business trust" under the laws of the
Commonwealth of Massachusetts on January 7, 1987. Worldwide Emerging Markets
Fund is classified as a diversified fund under the Investment Company Act of
1940, as amended (the "Act"). (See "Description of the Trust").
FINANCIAL HIGHLIGHTS
The Financial Highlights below give selected information for a share of the
Fund outstanding for the period indicated. The Financial Highlights presented
have been audited by Coopers & Lybrand L.L.P., independent accountants, whose
reports thereon appear in the Fund's Annual Report. This information should be
read in conjunction with the financial statements and related notes that also
appear in the Fund's Annual Report. The Annual Report also contains additional
performance information that will be made available upon request and without
charge.
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WORLDWIDE EMERGING
MARKETS FUND
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FOR THE PERIOD
DECEMBER 21, 1995(a)
TO APRIL 30, 1996
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Net Asset Value, Beginning of Period...................... $ 10.00
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INCOME FROM INVESTMENT OPERATIONS:
Net Investment Income(b)................................ 0.07
Net Gains on Securities (both
realized and unrealized)............................... 0.88
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Total From Investment Operations........................ 0.95
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Net Asset Value, End of Period............................ $ 10.95
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Total Return(c) .......................................... 9.50%
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RATIOS/SUPPLEMENTARY DATA:
Net Assets, End of Period (000)........................... $ 597
Ratio of Expenses to Average Net Assets(d)................ 0.00%
Ratio of Net Income to Average Net Assets(e).............. 1.89%
Portfolio Turnover Rate................................... 45.89%
Average Commission Rate Paid.............................. $ 0.0124
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(a) Commencement of operations.
(b) Based on average shares outstanding.
(c) Total return is calculated assuming an initial investment made at the net
asset value at the beginning of the period and a redemption on the last
day of the period. Total return for the period ended April 30, 1996 was
not annualized.
(d) Had the Adviser not reimbursed expenses and had there been no custodian
fee arrangement, the expense ratio for the period December 21, 1995
(commencement of operations) to April 30,1996 would have been 2.06%.
(e) Annualized.
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INVESTMENT OBJECTIVES AND POLICIES OF THE FUND
A description of the investment objective and policies of the Fund is set
forth below. The investment objective of the Fund may not be changed without
the affirmative vote of a majority of the outstanding voting securities of the
Fund, as defined in the Act. As a result of the market risk inherent in any
investment, there is no assurance that the Fund will achieve its objective.
For further information about the Fund's investment policies, see "Investment
Objectives and Policies" in the Statement of Additional Information.
OBJECTIVE:
The Fund seeks long-term capital appreciation by investing primarily in equity
securities in emerging markets around the world.
POLICIES:
In pursuit of its investment objective, the Fund emphasizes investment in
countries that, compared to the world's major economies, exhibit relatively
low gross national product per capita as well as the potential for rapid
economic growth. Specifically, an "emerging market" or "Emerging Country" is
any country that the World Bank, the International Finance Corporation, the
United Nations or its authorities has determined to have a low or middle
income economy. Emerging Countries can be found in regions such as Asia, Latin
America, Eastern Europe and Africa. The countries that will not be considered
Emerging Countries include the United States, Australia, Canada, Japan, New
Zealand and most countries located in Western Europe such as Austria, Belgium,
Denmark, Finland, France, Germany, Great Britain, Ireland, Italy, the
Netherlands, Norway, Spain, Sweden and Switzerland.
Under normal conditions, at least 65% of the Fund's total assets will be
invested in Emerging Countries and emerging market equity securities. The Fund
considers emerging market securities to include securities which are (i)
principally traded in the capital markets of an emerging market country; (ii)
securities of companies that derive at least 50% of their total revenues from
either goods produced or services performed in emerging market countries or
from sales made in Emerging Countries, regardless of where the securities of
such companies are principally traded; (iii) securities of companies organized
under the laws of, and with a principal office in, an Emerging Country; (iv)
securities of investment companies (such as country funds) that principally
invest in emerging market securities; and (v) American Depositary Receipts
(ADRs), American Depositary Shares (ADSs), European Depositary Receipts (EDRs)
and Global Depositary Receipts (GDRs) with respect to the securities of such
companies.
Equity securities in which the Fund may invest include common stocks;
preferred stocks (either convertible or non-convertible); rights; warrants;
direct equity interests in trusts, partnerships, joint ventures and other
unincorporated entities or enterprises; convertible debt instruments; and
special classes of shares available only to foreign persons in those markets
that restrict ownership of certain classes of equity to nationals or residents
of that country. These securities may be listed on securities exchanges or
traded over-the-counter. Direct investments are generally considered illiquid
and will be aggregated with other illiquid investments for purposes of the
limitation on illiquid investments. See "Risk Factors--Emerging Market
Securities".
The Fund may invest indirectly in emerging markets by investing in other
investment companies. Due to restrictions on direct investment by foreign
entities in certain emerging market countries, investment in other investment
companies may be the most practical or the only manner in which the Fund can
invest in the securities markets of certain emerging market countries. Such
investments may involve the payment of premiums above the net asset value of
such issuers' portfolio securities; are subject to limitations under the Act;
are constrained by market availability; and may constitute passive foreign
investment companies for Federal income tax purposes. As a shareholder in an
investment company, the Fund would bear its ratable share of that investment
company's expenses, including its advisory and administration fees. The
Adviser and Sub-Adviser have agreed to waive their management fees with
respect to the portion of the Fund's assets invested in shares of other open-
end investment companies. The Fund would continue to pay its own management
fees and other expenses with respect to its investments in shares of closed-
end investment companies.
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The Fund may, as described below in "Risk Factors," invest in derivatives.
Derivatives are investments whose value is "derived" from an underlying asset.
Derivatives in which the Fund may invest include futures contracts, forward
contracts, options, swaps, structured notes and other similar securities as
may become available in the market. These instruments offer certain
opportunities and are subject to additional risks that are described below.
The Fund may, for temporary defensive purposes, invest more than 35% of its
total assets in securities which are not emerging market securities, such as
high grade, liquid debt securities of foreign and United States companies,
foreign governments and the U.S. Government, and their respective agencies,
instrumentalities, political subdivisions and authorities, as well as in money
market instruments denominated in U.S. dollars or a foreign currency. These
money market instruments include, but are not limited to, negotiable or short-
term deposits with domestic or foreign banks with total surplus and undivided
profits of at least $50 million; high quality commercial paper; and repurchase
agreements maturing within seven days with domestic or foreign dealers, banks
and other financial institutions deemed to be creditworthy under guidelines
approved by the Board of Trustees of the Trust. The commercial paper in which
the Fund may invest will, at the time of purchase, be rated P-1 or better by
Moody's Investors Service, Inc. ("Moody's"); A-1 or better by Standard &
Poor's Corporation ("S&P"); Fitch-1 by Fitch; Duff-1 by Duff & Phelps ("D&P")
or if unrated, will be of comparable high quality as determined by the Adviser
or Sub-Adviser.
The Adviser expects that the Fund will normally invest in at least three
different countries. The Fund emphasizes equity securities, but may also
invest in other types of instruments, including debt securities of any quality
(other than commercial paper as described herein). Debt securities may include
fixed or floating rate bonds, notes, debentures, commercial paper, loans,
convertible securities and other debt securities issued or guaranteed by
governments, agencies or instrumentalities, central banks, commercial banks or
private issuers. See "Risk Factors--Debt Securities" and "Risk Factors--Low
Rated or Unrated Debt Securities".
The Adviser believes that the economies of emerging markets will continue to
have among the world's fastest rates of growth over the next decade. In many
instances, the growth in these countries is brought on by a move away from
governmental intervention in the marketplace and an aggressive move towards
free market capitalism. While many emerging markets are experiencing rapid
growth by U.S. standards, such markets are still developing and considerably
less liquid. Investors can expect there will be periods of volatility and
reduced liquidity in these markets. The Fund involves above-average risk, and
as such, is designed as a long-term investment. There can be no assurance that
the Fund will achieve its investment objective. See "Risk Factors--Foreign
Securities" and "Risk Factors--Emerging Markets Securities" below.
PAM serves as sub-adviser to the Fund. PAM has been registered with the
Securities and Exchange Commission ("SEC") as an investment adviser since
April 17, 1995. PAM was incorporated in Hong Kong in 1991 and is a 100% owned
subsidiary of Peregrine Asset Management Holdings Limited, which, in turn, is
a 75% owned subsidiary of Peregrine Investments Holdings Limited
("Peregrine"). Peregrine and its affiliates comprise the largest independent
Asian based investment bank located outside of Japan and Korea. Established in
1988, Peregrine and its affiliates have offices in thirteen Asian countries as
well as in Europe and the United States. Investment professionals at PAM
collectively have over forty years experience in managing funds which invest
in emerging markets. The Adviser believes PAM has unique knowledge and
experience in global emerging market investing. See "Management".
There is no limitation on the amount the Fund can invest in emerging markets.
Investors should consider carefully the substantial risks involved in
investing in securities issued by companies and governments of foreign
nations, which are in addition to the usual risks inherent in domestic
investment. Global investing involves economic and political considerations
not typically applicable to the U.S. markets. These considerations, which may
favorably or unfavorably affect the Fund's performance, include changes in
exchange rates and exchange rate controls (which may include suspension of the
ability to transfer currency from a given country), costs incurred in
conversion between currencies, non-negotiable brokerage commissions, default
in foreign government securities, lower trading volume and greater market
volatility, the difficulty of enforcing obligations in other countries, war,
expropriation, nationalization, confiscatory taxation, taxation of income
earned in foreign nations or other taxes imposed with respect to investments
in foreign nations, political and social instability and diplomatic
developments which could affect investments in securities of issuers in
foreign nations.
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In addition, there is typically less publicly available information concerning
foreign companies than for domestic companies. Foreign companies are not
generally subject to uniform accounting, auditing and financial reporting
standards, and the Fund may encounter difficulty or be unable to pursue legal
remedies and obtain judgments in foreign courts. Further, the settlement
period of securities transactions in foreign markets may be longer than in
domestic markets. In many foreign countries there is less government
supervision and regulation of business and industry practices, stock
exchanges, brokers and listed companies than in the U.S. The foreign
securities markets of many of the countries in which the Fund may invest may
also be smaller, less liquid and subject to greater price volatility than
those in the U.S. See "Risk Factors--Foreign Securities" and "Risk Factors--
Emerging Markets Securities" below.
PAM will select investments for the Fund based on its assessment of where
emerging market opportunities for long-term capital appreciation are most
attractive. When making investment decisions, PAM will evaluate
characteristics of various Emerging Countries such as the outlook for economic
growth and inflation and government monetary and fiscal policies. In selecting
specific companies for investment, PAM will analyze such factors as growth
potential, financial strength and management experience.
RISK FACTORS
Assets of the Fund are subject to market fluctuations and risks inherent in
all securities. In addition, assets of the Fund may be subject to other
special considerations, such as those listed below.
FOREIGN SECURITIES
The Fund may purchase securities of foreign issuers including foreign
investment companies. Investments in foreign securities may involve a greater
degree of risk than investments in domestic securities due to the possibility
of exchange rate fluctuations and exchange controls, less publicly available
information, more volatile or less liquid securities markets, and the
possibility of expropriation, confiscatory taxation or political, economic or
social instability. In addition, some foreign companies are not generally
subject to the same uniform accounting, auditing and financial reporting
standards as are American companies and there may be less government
supervision and regulation of foreign stock exchanges, brokers and companies.
Foreign securities may be subject to foreign taxes, higher custodian fees,
higher brokerage commissions and higher dividend collection fees which could
reduce the yield or return on such securities, although a shareholder of the
Fund may, subject to certain limitations, be entitled to claim a credit or
deduction for United States federal income tax purposes for his proportionate
share of such foreign taxes paid by the Fund. In addition, some foreign
securities in which the Fund may invest may be denominated in foreign
currencies, and since the Fund may temporarily hold funds in foreign
currencies, the value of the assets of the Fund (and thus its net asset value)
will be affected by changes in currency exchange rates. See "Foreign Currency
and Foreign Currency Transactions" below. Transactions in the securities of
foreign issuers may be subject to settlement delays. See "Taxes" in the
Prospectus and "Risks--Foreign Securities" in the Statement of Additional
Information. However, the Adviser (or Sub-Adviser) believes that
diversification of assets on an international basis decreases the degree to
which events in any one country will adversely affect an entire portfolio.
In addition to investing directly in the securities of United States and
foreign issuers, the Fund may also invest in American Depositary Receipts
(ADRs), European Depositary Receipts (EDRs), American Depositary Shares
(ADSs), Global Depositary Shares (GDSs) and securities of foreign investment
funds or trusts (including passive foreign investment companies). ADRs, EDRs,
ADSs and GDSs are certificates that are issued by a United States bank or
trust company representing the right to receive securities of a foreign issuer
deposited in a foreign subsidiary, branch or correspondent of that bank.
Generally, ADRs, in registered form, are designed for use in United States
securities markets.
Foreign brokerage commissions and custodial expenses are generally higher than
in the United States. Dividend collection fees on foreign securities and ADRs
are generally higher than on United States securities and dividends and
interest may be subject to foreign withholding tax at their source which may
not be permitted to be passed through to shareholders.
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EMERGING MARKETS SECURITIES
Investments of the Fund may be made from time to time in companies in
developing countries as well as in developed countries. Shareholders should be
aware that investing in the equity and fixed income markets of developing
countries involves exposure to potentially unstable governments, economies
based on only a few industries and securities markets which trade a small
number of securities and may therefore at times be illiquid. Securities
markets of developing countries tend to be more volatile than the markets of
developed countries. Countries with developing markets may present the risk of
nationalization of businesses, restrictions on foreign ownership, or
prohibitions of repatriation of assets, and may have less protection of
property rights than more developed countries. The economies of countries with
developing markets may be highly vulnerable to change in local or global trade
conditions, and may suffer from extreme and volatile debt burdens or inflation
rates. Local securities markets may be unable to respond effectively to
increases in trading volume, potentially making prompt liquidation of
substantial holdings difficult or impossible at times. Securities of issuers
located in developing markets may have limited marketability and may be
subject to more abrupt or erratic price movements. However, such markets have
in the past provided the opportunity for higher rates of return to investors.
There is no assurance that these markets will offer such opportunity in the
future.
For example, political and social conditions in a developing country caused by
an unstable government may pose certain risks to the Fund's investments. If
aggravated by local or international developments, such risks could have an
adverse affect on investments in such developing country, including the Fund's
investments and, under certain conditions, on the liquidity of the Fund's
portfolio and its ability to meet shareholder redemption requests. The ability
of the Fund to invest or hold its investments in companies situated in
developing countries may be further affected by changes in United States or
such countries' laws or regulations.
Many of these emerging markets limit the percentage of their domestic issuers
that foreign investors, such as the Fund, may own by requiring that such
issuers issue two classes of shares--"local" and "foreign" shares. Foreign
shares may be held only by investors that are not considered nationals or
residents of that country and generally are convertible into local shares.
Foreign shares may be subject to various restrictions, including restrictions
on the right to receive dividends and other distributions and on the right to
vote. Local shares are intended for ownership by nationals or residents of the
country. The market for foreign shares is generally less liquid than the
market for local shares, although in most cases foreign shares may be
converted into local shares. In addition, foreign shares often trade at a
premium to local shares, while at other times there is no premium. If the Fund
was to purchase foreign shares at a time when there is a premium and sell when
there is a lower or no premium, the Fund could realize a loss on its
investment. Ownership by foreign investors of local shares may be illegal in
some jurisdictions and, in others, foreign owners of local shares may not be
entitled, among other things, to participate in certain corporate actions such
as stock dividends, rights and warrant offerings or to vote at stockholders'
meetings (while foreign holders of foreign shares would participate). If the
Fund was to own local shares and could not participate in a stock, warrant or
other distribution, the Fund could suffer material dilution of its interest in
that issuer and the value of its holdings could decline dramatically, causing
a loss on its investment. Generally, it is expected that the Fund will hold
foreign shares. However, because of their limited number, foreign shares may,
at times, not be available for purchase by the Fund or, if available, the
premiums may be, in the opinion of the Adviser or Sub-Adviser, unjustified or
prohibitively high. In order to participate in these markets, the Fund may
deem it advisable to purchase local shares, which may expose the Fund to the
additional risks described above. The Fund will only purchase local shares
where foreign shares are not available for purchase and, when in the opinion
of the Adviser or Sub-Adviser, the potential for gain in these markets
outweighs the risks that issuers will take corporate actions which may result
in dilution to the Fund. Where permitted by local law, the Fund will attempt
to convert local shares to foreign shares promptly. There can be no assurance
that the Adviser or Sub-Adviser will be able to assess these risks accurately,
that the Fund will be able to convert its local shares to foreign shares or
that dilution will not result.
The securities markets in the emerging markets are substantially smaller, less
liquid and more volatile than the major securities markets in the United
States. A high proportion of the shares of many issuers may be held by a
limited number of persons and financial institutions. A limited number of
issuers may represent a disproportionately large percentage of market
capitalization and trading value and cause the securities markets to be
susceptible to influence by large investors trading significant blocks of
securities. The Fund's ability to participate fully in the markets may be
limited by its investment policy of investing not more
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than 15% of its total net assets in illiquid securities. In addition, limited
liquidity may impair the Fund's ability to liquidate a position at the time
and price it wishes to do so. Many of these stock markets are undergoing a
period of growth and change which may result in trading volatility, and in
difficulties in the settlement and recording of transactions and in
interpreting and applying the relevant law and regulations. Certain developing
countries do not have a comprehensive system of laws, although substantial
changes have occurred in this regard in recent years. Even where adequate law
exists in certain developing countries, it may be impossible to obtain swift
and equitable enforcement of such law or to obtain enforcement of the judgment
by a court of another jurisdiction.
In addition, stockbrokers and other intermediaries in emerging markets may not
perform as well as their counterparts in the United States and other more
developed securities markets. The prices at which the Fund may acquire
investments may be affected by trading by persons with material non-public
information and by securities transactions by brokers in anticipation of
transactions by the Fund in particular securities.
FOREIGN CURRENCY AND FOREIGN CURRENCY TRANSACTIONS
Since some foreign securities in which the Fund may invest may be denominated
in foreign currencies, and since the Fund may temporarily hold foreign
currencies, the value of the assets of the Fund (and thus its net asset value)
may be affected by changes in currency exchange rates. The Fund's performance
will be less favorable if foreign currency exchange rates move adversely,
relative to the U.S. dollar. Foreign exchange rates are affected by factors
such as actual and anticipated Balance of Payments accounts, central bank
policy, political concerns and changes in interest rates. There can be no
assurance that the Adviser will be able to anticipate currency fluctuations in
exchange rates accurately. The Fund may invest in a variety of derivatives.
The Fund may purchase and sell put and call options on, or enter into futures
contracts or forward contracts to purchase or sell, foreign currencies. The
Fund may use foreign currency contracts to hedge the U.S. dollar value of a
security which it already owns or anticipates purchasing. A forward currency
contract may thus help reduce the Fund's losses on a security when a foreign
currency's value changes. The Fund will enter into forward contracts to
duplicate a cash market transaction. However, the Fund will invest in
securities, including short-term obligations, denominated in a range of
foreign currencies and the value of the Fund will be affected by changes in
currency exchange rates. The Fund will not purchase or sell foreign currency
as an investment except that the Fund may enter into currency swaps. See
"Futures Contracts and Options on Futures Contracts" and "Hedging Strategies"
below and "Foreign Currency Transactions" and "Futures and Options
Transactions" in the Statement of Additional Information.
CURRENCY SWAPS
The Fund may enter into currency swaps solely for hedging purposes. Currency
swaps involve the exchange of rights to make or receive payments in specified
currencies. Since currency swaps are individually negotiated, the Fund may
expect to achieve an acceptable degree of correlation between its portfolio
investments and its currency swap positions. Currency swaps usually involve
the delivery of the entire principal value of one designated currency in
exchange for the other designated currency. Therefore, the entire principal
value of a currency swap is subject to the risk that the other party to the
swap will default on its contractual delivery obligations.
The use of swaps is a highly specialized activity which involves investment
techniques and risks different from those associated with ordinary portfolio
transactions. If the Adviser or Sub-Adviser is incorrect in its forecasts of
market values and currency exchange rates, the investment performance of the
Fund would be less favorable than it would have been if this investment
technique were not used. Swaps are generally considered illiquid and will be
aggregated with other illiquid positions for purposes of the limitation on
illiquid investments.
OPTIONS
For hedging and other purposes (such as creating synthetic positions), the
Fund may invest up to 5% of its total assets, taken at market value at the
time of investment, in premiums on call and put options on domestic and
foreign securities, foreign
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currencies, stock and bond indices, financial futures contracts and commodity
futures contracts. This policy may be changed without shareholder approval.
As the holder of a call or put option, the Fund pays a premium and has the
right (for generally 3 to 9 months) to purchase (in the case of a call option)
or sell (in the case of a put option) the underlying asset at the exercise
price at any time during the option period. An option on a futures contract
gives the purchaser the right, but not the obligation, in return for the
premium paid, to assume a position in a specified underlying futures contract
(which position may be a long or short position) at a specified exercise price
during the option exercise period. If the call or put is not exercised or sold
(whether or not at a profit), it will become worthless at its expiration date
and the Fund will lose its premium payment. The Fund may, with respect to
options it has purchased, sell them, exercise them or permit them to expire.
The Fund may 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. If the call or put option is exercised, the Fund must sell (in the
case of a written call option) or buy (in the case of a written put option)
the underlying asset at the exercise price. The Fund may write only covered
put and call options. A covered call option, which is a call option with
respect to which the Fund owns the underlying asset, 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 asset or to possible
continued holding of an underlying asset which might otherwise have been sold
to protect against depreciation in the market price of the underlying asset. A
covered put option written by the Fund exposes it during the term of the
option to a decline in price of the underlying asset. 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.
Covering a put option sold does not reduce the risk of loss.
The Fund may invest in options which are either listed on a domestic
securities exchange or traded on a recognized foreign exchange. In addition,
the Fund may purchase or sell over-the-counter options from dealers or banks
to hedge securities or currencies as approved by the Board of Trustees. In
general, exchange traded options are third party contracts with standardized
prices and expiration dates. Over-the-counter options are two party contracts
with price and terms negotiated by the buyer and seller, are generally
considered illiquid and will be limited to 15% of total net assets of the
Fund.
FUTURES CONTRACTS
The Fund may buy and sell financial futures contracts which may include
security and interest-rate futures, stock and bond index futures contracts and
foreign currency futures contracts. A security or interest-rate futures
contract is an agreement between two parties to buy or sell a specified
security at a set price on a future date. An index futures contract is an
agreement to take or make delivery of an amount of cash based on the
difference between the value of the index at the beginning and at the end of
the contract period. A foreign currency futures contract is an agreement to
buy or sell a specified amount of a currency for a set price on a future date.
When the Fund enters into a futures contract, it must make an initial deposit,
known as "initial margin," as a partial guarantee of its performance under the
contract. As the value of the underlying asset fluctuates, either party to the
contract is required to make additional margin payments, known as "variation
margin," to cover any additional obligation it may have under the contract.
The Fund will not commit more than 5% of its total assets to initial margin
deposits on futures contracts and premiums on options on futures contracts,
except that margin deposits for futures positions entered into for BONA FIDE
hedging purposes, as such term is defined in the Commodity Exchange Act, are
excluded from the 5% limitation.
The Fund may write, purchase or sell put and call options on financial futures
contracts. The Fund may write only covered put and call options. An option on
a futures contract gives the purchaser the right, but not the obligation, in
return for the premium paid, to assume a position in a specified underlying
futures contract (which position may be a long or short position) at a
specified exercise price during the option exercise period. The writer of an
option is obligated to assume a position in a specified futures contract if
the option is exercised.
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In establishing a position in a futures contract, which may be a long or short
position, cash or high quality debt instruments equal in value to the current
value of the underlying securities less the margin requirement will be
segregated, as may be required, with the Fund's Custodian to ensure that the
Fund's position is unleveraged. This segregated account will be marked-to-
market daily to reflect changes in the value of the underlying futures
contract.
SHORT SALES
The Fund may make short sales of equity securities. A short sale occurs when
the Fund sells a security which it does not own by borrowing it from a broker.
Following the short sale, the Fund must deposit collateral with the broker. In
the event that the value of the security that the Fund sold short declines,
the Fund will gain as it repurchases the security in the market at the lower
price. If the price of the security increases, the Fund will suffer a loss as
it will have to repurchase the security at the higher price. Short sales may
incur higher transaction costs than regular securities transactions.
The Fund will establish a segregated account with respect to its short sales
and maintain in such account cash not available for investment, U.S.
Government securities or other liquid, high-quality debt securities having a
value equal to the difference between (i) the market value of the securities
sold short at the time they were sold short and (ii) any cash, U.S. Government
securities or other liquid, high-quality debt securities required to be
deposited as collateral with the broker in connection with the short sale (not
including the proceeds from the short sale). Such segregated account will be
marked to market daily, so that (i) the amount in the segregated account plus
the amount deposited with the broker as collateral equals the current market
value of the securities sold short and (ii) in no event will the amount in the
segregated account plus the amount deposited with the broker as collateral
fall below the original value of the securities at the time they were sold
short. The total value of the assets deposited as collateral with the broker
and deposited in the segregated account will not exceed 50% of the Fund's net
assets. The Fund's ability to engage in short sales may be limited by the
requirements of current U.S. tax law that the Fund derive less than 30% of its
gross income from the sale or other disposition of securities held less than
three months. Securities sold short and then repurchased, regardless of the
actual time between the two transactions, are considered to have been held for
less than three months.
HEDGING AND OTHER INVESTMENT TECHNIQUES AND STRATEGIES
Options and futures contracts can be used by the Fund as part of various
hedging techniques and strategies.
When the Fund intends to acquire securities for its portfolio, it may use call
options or futures contracts as a means of fixing the price of the security it
intends to purchase at the exercise price (in the case of an option) or
contract price (in the case of a futures contract). An increase in the
acquisition cost would be offset, in whole or part, by a gain on the option or
futures contract. Options and futures contracts requiring delivery of a
security may also be useful to the Fund in purchasing a large block of
securities that would be more difficult to acquire by direct market purchases.
If the Fund holds a call option rather than the underlying security itself,
the Fund is partially protected from any unexpected decline in the market
price of the underlying security and in such event could allow the call option
to expire, incurring a loss only to the extent of the premium paid for the
option. Using a futures contract would not offer such partial protection
against market declines and the Fund would experience a loss as if it had
owned the underlying security.
To protect against anticipated declines in the value of the Fund's investment
holdings, the Fund may use options, forward and futures contracts, and similar
investments (commonly referred to as derivatives) as a defensive technique to
protect the value of an asset the Adviser (or Sub-Adviser) deems desirable to
hold for tax or other considerations or for investment reasons. One defensive
technique involves selling a futures or forward contract, purchasing a put
option or entering into a swap agreement whose value is expected to be
inversely related to the security or asset being hedged. If the anticipated
decline in the value of the asset occurs, it would be offset, in whole or
part, by a gain on the futures contract, put option or swap. The premium paid
for the put option would reduce any capital gain otherwise available for
distribution when the security is eventually sold.
The Fund may hedge against changes in the value of the U.S. dollar in relation
to a foreign currency in which portfolio securities of the Fund may be
denominated. The Fund may employ hedging strategies with options and futures
contracts on foreign
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currencies before the Fund purchases a foreign security, during the period the
Fund holds the foreign security, or between the date the foreign security is
purchased or sold and the date on which payment therefore is made or received.
Hedging against a change in the value of a foreign currency in the foregoing
manner does not eliminate fluctuations in the prices of portfolio securities
or prevent losses if the prices of such securities decline. Furthermore, such
hedging transactions reduce or preclude the opportunity for gain if the value
of the hedged currency should change relative to the U.S. dollar. Last, when
the Fund uses options and futures in anticipation of the purchase of a
portfolio security to hedge against adverse movements in the security's
underlying currency, but the purchase of such security is subsequently deemed
undesirable, the Fund may incur a gain or loss on the option or futures
contract.
The Fund may use futures contracts and options, forward contracts and swaps as
part of various investment techniques and strategies, such as creating non-
speculative "synthetic" positions or implementing "cross-hedging" strategies.
A synthetic position is deemed not to be speculative if the position is
covered by segregation of short-term liquid assets. However, since the
financial markets in the developing countries are not as developed as in the
United States, these financial investments may not be available to the Fund
and the Fund may be unable to hedge certain risks or enter into certain
transactions. A "synthetic position" is the duplication of a cash market
transaction when deemed advantageous by the Adviser (or Sub-Adviser) for cost,
liquidity or transactional efficiency reasons. A cash market transaction is
the purchase or sale of a security or other asset for cash. For example, from
time to time, the Fund experiences large cash inflows which may be redeemed
from the Fund in a relatively short period. In this case, the Fund currently
can leave the amounts uninvested in anticipation of the redemption or invest
in securities for a relatively short period, incurring transaction costs on
the purchase and subsequent sale. Alternatively, the Fund may create a
synthetic position by investing in a futures contract on a security, such as a
Deutschemark bond or on a securities index gaining investment exposure to the
relevant market while incurring lower overall transaction costs. The Fund
would enter into such transactions if the markets for these instruments were
sufficiently liquid and there was an acceptable degree of correlation to the
cash market. By segregating cash, the Fund's futures contract position would
generally be no more leveraged or riskier than if it had invested in the cash
market--i.e., purchased securities.
Consistent with the hedging strategy described above, the Fund may invest in
options and futures contracts and options on futures contracts on foreign
currencies for the purpose of hedging against a decline in the value of
certain U.S. dollar denominated securities or other "cross-hedging"
strategies. "Cross-hedging" involves the use of one currency to hedge against
the decline in the value of another currency. For example, the Fund could
hedge against a currency-related decline in the value of a security
denominated in deutschemark by taking a short position in the Swiss franc. The
Adviser (or Sub-Adviser) believes that the value of certain U.S. dollar
denominated debt securities is affected by fluctuations in the value of the
U.S. dollar relative to foreign currencies. Furthermore, the Adviser (or Sub-
Adviser) believes it can identify those currencies whose value is likely to
move inversely with the value of the U.S. dollar. By investing a portion of
the Fund's assets in options or futures contracts on those identified
currencies, the Adviser (or Sub-Adviser) believes that it may be able to
reduce the Fund's exposure to declines in the value of U.S. dollar denominated
securities attributable to currency value fluctuations. The use of such
instruments as described herein involves several risks. First, there can be no
assurance that the prices of such instruments and the hedged security or the
cash market position will move as anticipated. If prices do not move as
anticipated, the Fund may incur a loss on its investment, may not achieve the
hedging protection it anticipated and/or incur a loss greater than if it had
entered into a cash market position. Second, investments in such instruments
may reduce the gains which would otherwise be realized from the sale of the
underlying securities or assets which are being hedged. Third, positions in
such instruments can be closed out only on an exchange that provides a market
for those instruments. There can be no assurance that such a market will exist
for a particular futures contract or option. If the Fund cannot close out an
exchange traded futures contract or option which it holds, it would have to
perform its contract obligation or exercise its option to realize any profit
and would incur transaction costs on the sale of the underlying assets.
Over-the-counter options, together with repurchase agreements maturing in more
than seven days and other investments which do not have readily available
market quotations are, because of liquidity considerations, limited to 15% of
total net assets of the Fund.
In those situations where foreign currency options or futures contracts, or
options on futures contracts may not be readily purchased (or where such
options or contracts may be deemed illiquid) in the primary currency in which
the hedge is desired,
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the hedge may be obtained by purchasing or selling an option or futures
contract or forward contract on a secondary currency. The secondary currency
will be selected based upon the Adviser's (or Sub-Adviser's) belief that there
exists a significant correlation between the exchange rate movements of the
primary and secondary currencies. This strategy may be employed with respect
to other securities and assets in which the Fund may invest. However, there
can be no assurances that, in the case of foreign currencies, the exchange
rate or the primary and secondary currencies will move as anticipated or, in
the case of other securities, or generally, that the relationship between the
hedged security and the hedging instrument will continue. If they do not move
as anticipated or the relationship does not continue, a loss may result to the
Fund on its investments in the hedging positions.
See "Futures and Options Transactions" in the Statement of Additional
Information for further information about futures contracts and options,
including tax effects and risks to the Fund.
REPURCHASE AGREEMENTS
The Fund may engage in repurchase agreement transactions. Under the terms of a
typical repurchase agreement, the Fund would acquire an underlying debt
obligation for a relatively short period (usually not more than one week)
subject to an obligation of the seller to repurchase, and the Fund to resell,
the obligation at an agreed upon price and time, thereby determining the yield
during the Fund's holding period. The agreement results in a fixed rate of
return that is not subject to market fluctuations during the Fund's holding
period. The Fund will enter into repurchase agreements with respect to
securities in which it may invest with member banks of the Federal Reserve
System or certain non-bank dealers. Under each repurchase agreement the
selling institution will be required to maintain the value of the securities
subject to the repurchase agreement at not less than their repurchase price.
Repurchase agreements could involve certain risks in the event of default or
insolvency of the other party, including possible delays or restrictions upon
the Fund's ability to dispose of the underlying securities. The Adviser (or
Sub-Adviser), acting under the supervision of the Board of Trustees, reviews
the creditworthiness of those non-bank dealers with which the Fund enters into
repurchase agreements to evaluate these risks. See "Repurchase Agreements" in
the Statement of Additional Information.
DEBT SECURITIES
The Fund may invest in debt securities. The market value of debt securities
generally varies in response to changes in interest rates and the financial
condition of each issuer. During periods of declining interest rates, the
value of debt securities generally increases. Conversely, during periods of
rising interest rates, the value of such securities generally declines. These
changes in market value will be reflected in the Fund's net asset value.
Debt securities with similar maturities may have different yields, depending
upon several factors, including the relative financial condition of the
issuers. For example, higher yields are generally available from securities in
the lower rating categories of S&P's or Moody's. However, the values of lower-
rated securities generally fluctuate more than those of high grade securities
and lower-rated securities present greater risk of default. A description of
debt securities ratings is contained in the Appendix to the Statement of
Additional Information. High grade means a rating of A or better by Moody's or
S&P's, or of comparable quality in the judgment of the Adviser (or Sub-
Adviser) if no rating has been given by either service. Many securities of
foreign issuers are not rated by these services. Therefore, the selection of
such issuers depends to a large extent on the credit analysis performed by the
Adviser (or Sub-Adviser).
New issues of certain debt securities are often offered on a when-issued
basis, that is, the payment obligation and the interest rate are fixed at the
time the buyer enters into the commitment, but delivery and payment for the
securities normally take place after the date of the commitment to purchase.
The value of when-issued securities may vary prior to and after delivery
depending on market conditions and changes in interest rate levels. However,
the Fund will not accrue any income on these securities prior to delivery. The
Fund will maintain in a segregated account with its Custodian an amount of
cash or high quality debt securities equal (on a daily marked-to-market basis)
to the amount of its commitment to purchase the when-issued securities.
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LOW RATED OR UNRATED DEBT SECURITIES
The Fund may invest in lower quality, high-yielding debt securities, including
high-yielding foreign debt securities (commonly referred to as "junk bonds")
which are (i) rated as low as CCC by S&P or Caa by Moody's or (ii) unrated.
Lower rated and unrated debt securities have some "equity" characteristics and
are considered speculative and involve greater risk of loss than higher rated
debt securities and are more sensitive to changes in the financial condition
of their issuers and to price fluctuations in response to changes in interest
rates. Debt rated Caa or CCC presents a significantly greater risk of default
than do higher rated securities and, in times of poor business or economic
conditions, the Fund may lose interest and/or principal on such securities.
The Fund will not invest more than 25% of its assets in debt securities rated
below BBB by S&P or Baa by Moody's.
ASSET-BACKED SECURITIES
The Fund may invest in asset-backed securities. Asset-backed securities
represent interests in pools of consumer loans (generally unrelated to
mortgage loans) and most often are structured as pass-through securities.
Interest and principal payments ultimately depend on payment of the underlying
loans by individuals, although the securities may be supported by letters of
credit or other credit enhancements. The value of asset-backed securities may
also depend on the creditworthiness of the servicing agent for the loan pool,
the originator of the loans, or the financial institution providing the credit
enhancement. The issuer of asset-backed securities may not, in certain
instances, be able to perfect its security interest in the underlying
collateral.
COLLATERALIZED MORTGAGE OBLIGATIONS ("CMOS")
The Fund may invest in CMOs. CMOs are fixed-income securities which are
collateralized by pools of mortgage loans created by commercial banks, savings
and loan institutions, private mortgage insurance companies and mortgage
bankers. In effect, CMOs "pass through" the monthly payments made by
individual borrowers on their mortgage loans. Timely payment of interest and
principal (but not the market value) of these pools is supported by various
forms of insurance or guarantees issued by U.S. Government agencies, private
issuers and the mortgage poolers. The Fund may buy CMOs without insurance or
guarantees if, in the opinion of the Adviser (or Sub-Adviser), the pooler is
creditworthy or if rated A or better by S&P or Moody's. S&P and Moody's assign
the same rating classifications to CMOs as they do to bonds. Prepayments of
the mortgages included in the mortgage pool may influence the yield of the
CMO. In addition, prepayments usually increase when interest rates are
decreasing, thereby decreasing the life of the pool. As a result, reinvestment
of prepayments may be at a lower rate than that on the original CMO. In the
event that any CMOs are determined to be investment companies, the Fund will
be subject to certain limitations under the 1940 Act.
LOANS OF PORTFOLIO SECURITIES
The Fund may lend to broker-dealers portfolio securities with an aggregate
market value of up to one-third of its total assets. Such loans must be
secured by collateral (consisting of any combination of cash, U.S. Government
securities or irrevocable letters of credit) in an amount at least equal (on a
daily marked-to-market basis) to the current market value of the securities
loaned. The Fund may terminate the loans at any time and obtain the return of
the securities loaned within one business day. The Fund will continue to
receive any interest or dividends paid on the loaned securities and will
continue to have voting rights with respect to the securities. The Fund might
experience risk of loss if the broker-dealer with which it has engaged in a
portfolio loan transaction breaches its agreement with the Fund.
BORROWING
The Fund may borrow up to 30% of the value of its net assets to increase its
holdings of portfolio securities. Under the Act, the Fund is required to
maintain continuous asset coverage of 300% with respect to such borrowings and
to sell (within three days) sufficient portfolio holdings to restore such
coverage if it should decline to less than 300% because of market fluctuations
or other factors, even if the sale would be disadvantageous from an investment
standpoint. Leveraging by means of borrowing will
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<PAGE>
exaggerate the effect of any increase or decrease in the value of portfolio
securities on the Fund's net asset value, and money borrowed will be subject
to interest and other costs (which may include commitment fees and/or the cost
of maintaining minimum average balances) which may or may not exceed the
investment return received from the securities purchased with borrowed funds.
It is anticipated that such borrowings would be pursuant to a negotiated loan
agreement with a commercial bank or other institutional lender.
COMMERCIAL PAPER
The Fund may invest in commercial paper which is indexed to certain specific
foreign currency exchange rates. See "Risk Factors--Commercial Paper" in the
Statement of Additional Information.
DIRECT INVESTMENTS
The Fund may invest up to 10% of its total assets in direct investments;
however, the Fund does not currently intend to invest more than 5% of its
total net assets in direct investments. For more information, see "Risk
Factors--Direct Investments" in the Statement of Additional Information.
TEMPORARY DEFENSIVE STRATEGIES
During periods of less favorable economic and/or market conditions, the Fund
may make substantial investments for temporary defensive purposes in
obligations of the U.S. Government, debt obligations of one or more foreign
governments, certificates of deposit, time deposits, bankers' acceptances,
high grade commercial paper and repurchase agreements.
LIMITING INVESTMENT RISKS
While an investment in the Fund is not without risk, the Fund follows certain
policies in managing its investments which may help to reduce risk. These
policies may not be changed without shareholder approval. The following are
some of the more significant investment limitations:
1. The Fund will not invest more than 15% of the value of its total net
assets in securities which are "illiquid" (including repurchase
agreements which mature in more than seven days and over-the-counter
foreign currency options).
2. The Fund will not purchase more than 10% of any class of securities of
any issuer, including more than 10% of its outstanding voting
securities, except that the Fund may purchase more than 10% of any non-
voting class of securities.
3. The Fund will not invest more than 10% of its total assets in securities
of other investment companies.
Further information regarding these and other of the Fund's investment
policies and restrictions is provided in the Statement of Additional
Information.
MANAGEMENT
TRUSTEES
The management of the Fund's business and affairs is the responsibility of the
Board of Trustees. For information on the Trustees and Officers of the Fund,
see "Trustees and Officers" in the Statement of Additional Information.
INVESTMENT ADVISER, MANAGER AND ADMINISTRATOR
Van Eck Associates Corporation, located at 99 Park Avenue, New York, New York
10016, serves as investment adviser and manager to the Fund pursuant to an
Advisory Agreement with the Trust. The Adviser manages the investment
operations of the Fund and furnishes the Fund with a continuous investment
program which includes determining which securities should be bought, sold or
held.
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Peregrine Asset Management (Hong Kong) Limited ("PAM"), located at 1704 New
World Tower, 16-18 Queen's Road Central, Hong Kong, serves as sub-investment
adviser to the Fund pursuant to a Sub-Investment Advisory Agreement with the
Adviser. PAM manages the investment operations of the Fund and furnishes the
Fund with a continuous investment program that includes which securities
should be bought, sold or held. The Adviser manages and administers the
business and affairs of the Fund. As compensation for its services, PAM is
paid a monthly fee at an annual rate of .50% of average daily net assets by
the Adviser from the advisory fees it receives from the Fund. In addition to
advising foreign funds, PAM serves as an investment adviser to one U.S.
registered investment company. PAM is a 100% owned subsidiary of Peregrine
Asset Management Holdings Limited which in turn is a 75% owned subsidiary of
Peregrine Investments Holdings Limited ("Peregrine") which was founded in 1988
and is, along with its affiliates, the largest independent Asian based
investment bank outside of Japan and Korea. Peregrine and its affiliates have
offices in fifteen Asian countries as well as in Europe and the United States.
As of June 30, 1996, total assets under management by Peregrine exceeded $170
million.
The primary portfolio manager responsible for the day-to-day management of the
Fund is listed below:
Gary Greenberg, C.F.A.--Manager of the Fund has been serving in such capacity
since the Fund commenced operations. Mr. Greenberg, Deputy Managing Director
of PAM, joined PAM in July 1994 and is responsible for PAM's investment
strategy in various regions of the world including portfolio manager for a
fund which invests in smaller companies in India. Prior to joining PAM, Mr.
Greenberg served as co-manager of the Acorn International Fund from 1992 to
1994. During that time period he was principal and portfolio manager of Wanger
Asset Management, an asset management company which manages over $4 billion,
including approximately $2 billion in non-U.S. companies. Mr. Greenberg was
employed by Harris Associates as an analyst from 1989 until 1992.
Other investment professionals at PAM who are expected to have significant
input with respect to the Fund's investments include:
Bruce Seton--Chief Investment Officer of PAM has been serving in such capacity
since the Fund commenced operations. Mr. Seton serves as Chief Executive
Officer of PAM and is responsible for establishing PAM's overall investment
guidelines and strategies. Prior to joining PAM in 1994, Mr. Seton spent
twenty-two years at Gartmore Investment Limited managing funds emphasizing
Asian emerging market investments.
Aureole Foong--Senior Fund Manager of the Fund has been serving in this
capacity since the Fund commenced operations. Mr. Foong joined PAM in 1994 as
a fund manager. His responsibilities at PAM include managing a fund which
invests in equities and derivatives in the Asia region. Prior to joining PAM,
Mr. Foong worked from 1990 to 1994 at Unifund S.A., a Geneva based private
investment company, where he served as a Senior Vice President.
The Fund pays the Adviser a monthly fee at the annual rate of 1.00% of average
daily net assets which includes the fee paid to the Adviser for accounting and
administrative services. The advisory fees paid to the Adviser with respect to
the Fund are higher than the fees paid by most investment companies because of
the complexities of managing this type of fund (such as following trends,
industries and companies in many different countries and stock and bond
markets throughout the world) but are comparable to the fees charged to other
investment companies with similar objectives for comparable services.
With respect to the Fund, the Adviser and/or Sub-Adviser may from time to
time, at its discretion, waive the management fee and/or agree to pay some or
all expenses of the Fund. This has the effect of increasing the yield and
total return of the Fund during this period.
The Adviser also acts as investment adviser or sub-investment adviser to other
mutual funds registered with the Securities and Exchange Commission (the
"SEC") under the Act and manages or advises managers of portfolios of pension
plans and others.
John C. van Eck, Chairman and President of the Trust, and members of his
immediate family, own 100% of the voting stock of the Adviser. At June 30,
1996, total aggregate assets under the management of Van Eck Associates
Corporation were approximately $1.7 billion.
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The Fund sells its shares to various insurance company variable annuity and
variable life insurance separate accounts as a funding vehicle for such
separate accounts. The Fund currently does not foresee any disadvantages to
variable annuity and variable life contract owners arising out of the fact
that the Fund offers its shares to separate accounts of various insurance
companies to serve as the investment medium for their variable products.
Nevertheless, the Board of Trustees intends to monitor events in order to
identify any material irreconcilable conflicts which may possibly arise, and
to determine what action, if any, should be taken in response to such
conflicts. If such a conflict were to occur, one or more insurance companies'
separate accounts might be required to withdraw its/their investments in the
Fund and shares of another fund may be substituted. This might force the Fund
to sell securities at disadvantageous prices. In addition, the Board of
Trustees may refuse to sell shares of the Fund to any separate account or may
suspend or terminate the offering of shares of the Fund if such action is
required by law or regulatory authority or is in the best interests of the
shareholders of the Fund.
EXPENSES
The Fund bears all expenses of its operation other than those incurred by the
Adviser under its Advisory Agreement with the Trust. In particular, the Fund
pays: investment advisory fees, custodian fees and expenses, legal, accounting
and auditing fees, brokerage fees, taxes, expenses of preparing prospectuses
and shareholder reports for existing shareholders, registration fees and
expenses (including compensation of the Adviser's employees in relation to the
time spent on such matters), expenses of the transfer and dividend disbursing
agent, the compensation and expenses of Trustees who are not otherwise
affiliated with the Trust, the Adviser or Sub-Adviser or any of their
affiliates, and any extraordinary expenses. Expenses incurred jointly by the
Fund and other series of the Trust are allocated among the Fund and such other
series in a manner determined by the Trustees to be fair and equitable. Under
the Advisory Agreement, the Adviser provides the Fund with office space,
facilities and simple business equipment and provides the services of
executive and clerical personnel for administering the affairs of the Fund.
The Adviser compensates Trustees of the Trust if such persons are employees or
affiliates of the Adviser or Sub-Adviser or their affiliates. The Adviser
will, pursuant to the Advisory Agreement, require the Fund to reimburse it for
its costs for trading portfolio securities and maintaining books and records
of the Fund, including general ledger and daily net asset value accounting.
The organizational expenses which were initially paid by the Adviser, were
reimbursed to the Adviser by the Fund and are being amortized by the Fund over
sixty successive equal monthly installments.
HOW TO BUY SHARES
Shares of the Fund are offered only for purchase by separate accounts of
insurance companies as an investment medium for Contracts.
Van Eck Securities Corporation (the "Distributor"), located at 99 Park Avenue,
New York, New York 10016, a wholly-owned subsidiary of Van Eck Associates
Corporation, has entered into a Distribution Agreement with the Trust. The
Distributor receives no compensation in connection with the sale of shares of
the Fund.
Shares of the Fund are sold at the public offering price which is net asset
value next computed after receipt of a purchase order, provided that the
purchase order is received by the Trust or the insurance company before 4:00
p.m. Eastern time. The net asset value for the Fund is computed as of the
close of business on the New York Stock Exchange which is normally 4:00 p.m.
Monday through Friday, exclusive of national business holidays. The assets of
the Fund are valued at market value or, if market value is not ascertainable,
at fair market value as determined in good faith by the Board of Trustees.
The Fund may invest in securities or futures contracts listed on foreign
exchanges which trade on Saturdays or other customary United States national
business holidays (i.e., days on which the Fund is not open for business).
Consequently, since the Fund will compute its net asset value only Monday
through Friday, exclusive of national business holidays, the net asset value
of shares of the Fund may be significantly affected on days when an investor
has no access to the Fund.
The sale of shares will be suspended during any period when the determination
of net asset value is suspended and may be suspended by the Board of Trustees
whenever the Board judges it in the Fund's best interest to do so.
Certificates for shares of the Fund will not be issued.
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<PAGE>
DIVIDENDS AND DISTRIBUTIONS
The Fund intends to distribute its net investment income in July and January
and any net realized capital gains resulting from the investment activity
annually in January.
All dividends and capital gains distributions paid on shares of the Fund are
automatically reinvested in additional shares of the Fund on the dividend
payable date at the net asset value determined at the close of business on the
reinvestment price date. The fiscal year of the Fund has ended on April 30;
however, in August 1996 the Board of Trustees changed the Fund's fiscal year
to December 31 beginning with December 31, 1996.
HOW TO REDEEM SHARES
Shares of the Fund are redeemed at their net asset value next determined after
receipt of the order to redeem without the imposition of any sales commission
or redemption charge. However, certain deferred sales charges and other
charges may apply under the terms of the Contracts, which charges are
described in the Contract prospectus. Payment for the redemption of shares is
made by the Fund to the separate account in cash within seven days after
tender in proper form, except under unusual circumstances as determined by the
SEC. The redemption price will be the net asset value next determined after
the receipt by the Trust or insurance company of a request in proper form
provided the request is received prior to 4:00 p.m. Eastern time. The market
value of the securities in the Fund is subject to daily fluctuations and the
net asset value of the Fund's shares will fluctuate accordingly. Therefore,
the redemption value may be more or less than the original purchase price for
such shares.
FEDERAL TAXATION
The Fund intends to qualify as a "regulated investment company" ("RIC") under
the Internal Revenue Code (the "Code") and will not pay federal income tax to
the extent that it distributes its net taxable investment income and capital
gains.
Section 817(h) of the Code provides that certain variable contracts, based
upon one or more segregated asset accounts of a life insurance company, will
not be treated as annuity, endowment or life insurance contracts for any
period during which the investments made by such accounts are not adequately
diversified. The regulations promulgated under Section 817(h) of the Code
specify various investment diversification requirements. In addition, the
regulations provide that an investment by a segregated asset account of a life
insurance company in a qualifying RIC is not treated as a single investment.
Instead, a pro rata portion of each asset of the RIC is treated as an asset of
the segregated asset account. The Fund intends to invest so as to enable the
Contracts to satisfy the diversification requirements imposed by Section
817(h) of the Code and the applicable regulations.
The tax treatment of payments made by a separate account to a Contract holder
is described in the Contract prospectus.
DESCRIPTION OF THE TRUST
Van Eck Worldwide Insurance Trust (the "Trust") is an open-end management
investment company organized as a "business trust" under the laws of the
Commonwealth of Massachusetts on January 7, 1987. The Trust commenced
operations on September 7, 1989. Effective April 12, 1995, Van Eck Investment
Trust changed its name to Van Eck Worldwide Insurance Trust.
The Trustees of the Trust have authority to issue an unlimited number of
shares of beneficial interest of the Fund, $.001 par value. To date, five
series or funds of the Trust have been authorized, which shares constitute the
interests in the Gold and Natural Resources Fund, Worldwide Emerging Markets
Fund, Worldwide Hard Assets Fund and Worldwide Bond Fund, as well as Worldwide
Balanced Fund, described herein.
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The Fund and the Gold and Natural Resources Fund are classified as diversified
funds and the Worldwide Balanced Fund, Worldwide Hard Assets Fund and
Worldwide Bond Fund are classified as non-diversified funds under the Act. A
diversified fund is a fund which meets the following requirements: At least
75% of the value of its total assets is represented by cash and cash items
(including receivables), Government securities, securities of other investment
companies and other securities for the purpose of this calculation limited in
respect of any one issuer to an amount not greater than 5% of the value of the
fund's total assets and to not more than 10% of the outstanding voting
securities of such issuer. A non-diversified fund is any fund other than a
diversified fund. A "series" is a separate pool of assets of the Trust which
is separately managed and which may have different investment objectives from
those of another series. The Trustees have the authority, without the
necessity of a shareholder vote, to create any number of new series.
Each share of the Fund has equal dividend, redemption and liquidation rights
and when issued is fully paid and non-assessable by the Trust. Under the
Trust's Master Trust Agreement, no annual or regular meeting of shareholders
is required. Thus, there will ordinarily be no shareholder meetings unless
required by the Act. The Trust held an initial meeting of shareholders on
April 1, 1991, at which shareholders elected the Board of Trustees, approved
the Advisory Agreement and ratified the selection of the Trust's independent
accountants.The Trustees are a self-perpetuating body unless and until fewer
than 50% of the Trustees, then serving as Trustees, are Trustees who were
elected by shareholders. At that time another meeting of shareholders will be
called to elect additional Trustees. On any matter submitted to the
shareholders, the holder of each Trust share is entitled to one vote per share
(with proportionate voting for fractional shares). Under the Master Trust
Agreement, any Trustee may be removed by vote of two-thirds of the outstanding
Trust shares; and holders of ten percent or more of the outstanding shares of
the Trust can require Trustees to call a meeting of shareholders for purposes
of voting on the removal of one or more Trustees. Shareholders of all series
are entitled to vote on matters affecting all of the series (such as the
elections of Trustees and ratification of the selection of the Trust's
independent accountants). On matters affecting an individual series, a
separate vote of that series is required. Shareholders of the Fund are not
entitled to vote on any matter not affecting the Fund but require a separate
vote of one of the other series. In accordance with the Act, under certain
circumstances the Trust will assist shareholders in communicating with other
shareholders in connection with calling a special meeting of shareholders. The
insurance company separate accounts, as the sole shareholders of the Fund,
have the right to vote Fund shares at any meeting of shareholders. However,
the Contracts may provide that the separate accounts will vote Fund shares in
accordance with instructions received from Contract holders. See the
applicable Contract prospectus for information regarding Contract holders'
voting rights.
Under Massachusetts law, the shareholders of the Trust could, under certain
circumstances, be held personally liable for the obligations of the Trust.
However, the Master Trust Agreement of the Trust disclaims shareholder
liability for acts or obligations of the Trust and requires that notice of
such disclaimer be given in each agreement, obligation or instrument entered
into or executed by the Trust or the Trustees. The Master Trust Agreement
provides for indemnification out of the Trust's property for all losses and
expenses of any shareholder held personally liable for the obligations of the
Trust. Thus, the risk of a shareholder incurring financial loss on account of
shareholder liability is limited to circumstances in which the Trust itself
would be unable to meet its obligations. The Fund's Adviser believes that, in
view of the above, the risk of personal liability to shareholders is remote.
ADDITIONAL INFORMATION
ADVERTISING
From time to time the Fund may use various media to advertise performance.
Past performance is not necessarily indicative of future performance.
The Fund may advertise performance in terms of average annual total return,
which is computed by finding the average annual compounded rates of return
over a period that would equate the initial amount invested to the ending
redeemable value. The calculation assumes the maximum sales charge (currently,
the Fund does not impose a sales charge on investments) is deducted from the
initial $1,000 payment and assumes all dividends and distributions by the Fund
are reinvested on the
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reinvestment dates during the period, and includes all recurring fees that are
charged to all shareholder accounts. In addition, the Fund may advertise
aggregate total return for a special period of time which is determined by
ascertaining the percentage change in the net asset value of shares of the
Fund initially purchased assuming reinvestment of dividends and capital gains
distribution on such shares without giving effect to the length of time of the
investment. Sales loads and other non-recurring expenses may be excluded from
the calculation of rates of return with the result that such rates may be
higher than if such expenses and sales loads were included. All other fees
will be included in the calculation of rates of return.
The Fund may quote performance results from recognized services and
publications which monitor the performance of mutual funds and the Fund may
compare its performance to various published historical indices. Micropal,
Ltd., a worldwide mutual fund performance evaluation service, is one such
rating agency. Lipper Analytical Services is another such rating agency. The
Lipper performance analysis assumes reinvestment of capital gains and
distributions, but does not give effect to sales charges or taxes. The Fund
may be compared to indices such as I.F.C. Investable Index and the following
Morgan Stanley Capital International Indices: World Index, World Index Free,
Kokusai Index, Emerging Markets Global Index and Emerging Markets Free Index.
For a further discussion of advertising see "Performance" in the Statement of
Additional Information.
For further information about the Fund, please call or write to your insurance
company or call toll free (800) 221-2220 (in New York call (212) 687-5200 or
write to the Fund at the cover page address.
CUSTODIAN
The Custodian of the assets of the Trust is The Chase Manhattan Bank, N.A.,
Chase Metrotech Center, Brooklyn, New York 11245.
TRANSFER AGENT
Van Eck Associates Corporation, 99 Park Avenue, New York, New York 10016,
serves as the Fund's transfer agent.
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P., 1301 Avenue of the Americas, New York, New York
10019, provides audit services, consultation and advice with respect to
financial information in the Trust's filings with the SEC, consults with the
Trust on accounting and financial report matters and prepares the Trust's tax
return.
COUNSEL
Goodwin, Procter & Hoar, One Exchange Place, Boston, Massachusetts serves as
Counsel for the Trust.
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VAN ECK WORLDWIDE
INSURANCE TRUST
---------------------------
Worldwide Emerging Markets Fund
Shares of the Fund are offered only to separate accounts of various insurance
companies to fund the benefits of variable life policies and variable annuity
policies. This Prospectus sets forth concisely information about the Trust and
Fund that you should know before investing. It should be read in conjunction
with the prospectus for the Contract which accompanies this Prospectus and
should be retained for future reference. The Contracts involve certain expenses
not described in this Prospectus and also may involve certain restrictions or
limitations on the allocation of purchase payments or Contract values to the
Fund. In particular, the Fund may not be available in connection with a
particular Contract or in a particular state. See the applicable Contract
prospectus for information regarding expenses of the Contract and any applicable
restrictions or limitations with respect to the Fund.
Van Eck Worldwide Insurance Trust
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99 Park Avenue, New York, NY 10016
[LOGO]VAN ECK GLOBAL
THE UNUSUAL FUNDS(SM)
Van Eck Worldwide Insurance Trust . Van Eck Worldwide Insurance Trust
September 3, 1996
VAN ECK
WORLDWIDE
INSURANCE TRUST
PROSPECTUS
Worldwide
Emerging Markets Fund
[LOGO]VAN ECK GLOBAL
THE UNUSUAL FUNDS(SM)
