<PAGE>
PROSPECTUS September 3, 1996
VAN ECK WORLDWIDE INSURANCE TRUST
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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 (the "Funds"), each of
which has a specific investment objective. Shares of the Funds 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 this Fund.
WORLDWIDE BALANCED FUND--seeks long term capital appreciation together with
current income. Fiduciary International, Inc. ("Fll" or "Sub-Adviser") serves
as sub-investment adviser to this Fund.
WORLDWIDE HARD ASSETS FUND--seeks long-term capital appreciation by investing
globally, primarily in "Hard Asset Securities." Income is a secondary
consideration.
GOLD AND NATURAL RESOURCES FUND--seeks long-term capital appreciation by
investing in equity and debt securities of companies engaged in the
exploration, development, production and distribution of gold and other
natural resources, such as strategic and other metals, minerals, forest
products, oil, natural gas and coal. Current income is not an investment
objective.
WORLDWIDE BOND FUND--seeks high total return through a flexible policy of
investing globally, primarily in debt securities.
Worldwide Emerging Markets Fund, Gold and Natural Resources Fund, Worldwide
Bond Fund and Worldwide Hard Assets Fund are 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 Funds' shares.
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This Prospectus sets forth concisely information about the Trust and Funds
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 Funds,
please call the Funds 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 one or more Funds. In particular,
certain Funds 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 Funds.
Shares of the Funds 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 Funds, has been filed with the Securities and Exchange
Commission and is incorporated herein by reference. It is available without
charge upon request to the Funds, 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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<TABLE>
<S> <C>
The Trust................................................................... 3
Financial Highlights........................................................ 3
Investment Objectives and Policies of the Funds............................. 5
Risk Factors................................................................ 13
Limiting Investment Risks................................................... 24
Management.................................................................. 24
How to Buy Shares........................................................... 27
Dividends and Distributions................................................. 27
How to Redeem Shares........................................................ 28
Federal Taxation............................................................ 28
Description of the Trust.................................................... 28
Additional Information...................................................... 30
</TABLE>
2
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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 and Gold and Natural Resources Fund are classified as diversified funds
under the Investment Company Act of 1940, as amended, (the "Act"). Worldwide
Bond Fund, Worldwide Hard Assets Fund and Worldwide Balanced Fund are non-
diversified funds. (See "Description of the Trust.")
FINANCIAL HIGHLIGHTS
The Financial Highlights below give selected information for a share of each
Fund outstanding for the year or period indicated. The Financial Highlights
presented have been audited by Deloitte & Touche LLP, independent accountants,
for all years from commencement of operations through April 30, 1992. For all
other fiscal years, the Financial Highlights presented have been audited by
Coopers & Lybrand L.L.P., independent accountants, whose reports thereon
appear in the Funds' Annual Reports. This information should be read in
conjunction with the financial statements and related notes that also appear
in the Funds' Annual Reports. The Annual Reports also contain additional
performance information that are available upon request and without charge.
WORLDWIDE HARD ASSETS FUND
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
FOR THE PERIOD
AUGUST 21, 1995(a)
TO APRIL 30, 1996
------------------
<S> <C>
Net Asset Value, Beginning of Period......................... $ 10.00
-------
Income From Investment Operations:
Net Investment Income (b)................................ 0.11
Net Gains on Securities (both realized and unrealized)... 2.33
-------
Total From Investment Operations......................... 2.44
-------
Net Asset Value, End of Period............................... $ 12.44
=======
Total Return (c)............................................. 24.40%
Ratios/Supplementary Data
Net Assets, End of Period (000).............................. $ 1,551
Ratio of Expenses to Average Net Assets (d).................. 0.00%
Ratio of Net Income to Average Net Assets (e)................ 1.45%
Portfolio Turnover Rate...................................... 119.54%
Average Commission Rate Paid................................. $0.0385
</TABLE>
WORLDWIDE EMERGING MARKETS FUND
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
FOR THE PERIOD
DECEMBER 21, 1995(a)
TO APRIL 30, 1996
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<S> <C>
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
-------
Total From Investment Operations...................... 0.95
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Net Asset Value, End of Period............................ $ 10.95
=======
Total Return (c).......................................... 9.50%
Ratios/Supplementary Data
Net Assets, End of Period (000)........................... $ 597
Ratio of Expenses to Average Net Assets (f)............... 0.00%
Ratio of Net Income to Average Net Assets (e)............. 1.89%
Portfolio Turnover Rate................................... 45.89%
Average Commission Rate Paid.............................. $0.0124
</TABLE>
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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 Advisor not reimbursed expenses and had there been no custodian
fee arrangement, the expense ratio for the period August 21, 1995
(commencement of operations) to April 30, 1996 would have been 2.51%.
(e) Annualized.
(f) Had the Advisor 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%.
3
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<TABLE>
<CAPTION>
GOLD AND NATURAL RESOURCES FUND WORLDWIDE BOND FUND
----------------------------------------------------------------- -----------------------------------
YEAR ENDED APRIL 30,
-------------------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992 1991 1990+ 1996 1995 1994
-------- -------- ------- ------- ------ ------ ------ -------- -------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of
Period.......... $ 13.49 $ 13.11 $ 10.61 $ 8.25 $ 8.85 $ 9.51 $10.00 $ 11.46 $ 10.05 $ 10.62
-------- -------- ------- ------- ------ ------ ------ -------- -------- -------
INCOME FROM
INVESTMENT
OPERATIONS:
Net Investment
Income.......... 0.12 0.08 0.07 0.01 0.04 0.16 0.08 0.58 0.68(e) 0.63
Net Gains or
Losses on
Securities (both
realized and
unrealized)..... 3.44 0.37 2.47 2.39 (0.53) (0.69) (0.57) (0.34) 0.77 (0.37)
-------- -------- ------- ------- ------ ------ ------ -------- -------- -------
Total From
Investment
Operations...... 3.56 0.45 2.54 2.40 (0.49) (0.53) (0.49) 0.24 1.45 0.26
-------- -------- ------- ------- ------ ------ ------ -------- -------- -------
LESS
DISTRIBUTIONS:
Dividends (from
net investment
income)......... (0.13) (0.07) (0.04) (0.04) (0.11) (0.13) -- (0.82) (0.04) (0.72)
Distributions
(from capital
gains).......... -- -- -- -- -- -- -- -- -- (0.11)
-------- -------- ------- ------- ------ ------ ------ -------- -------- -------
Total
Distributions... 0.13 (0.07) (0.04) (0.04) (0.11) (0.13) 0.00 (0.82) (0.04) (0.83)
-------- -------- ------- ------- ------ ------ ------ -------- -------- -------
Net Asset Value,
End of Period... 16.92 $ 13.49 $ 13.11 $ 10.61 $ 8.25 $ 8.85 $ 9.51 $ 10.88 $ 11.46 $ 10.05
======== ======== ======= ======= ====== ====== ====== ======== ======== =======
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Total Return(a). 26.66% 3.43% 23.96% 29.19% (5.62%) (5.67%) (4.90%) 2.07% 14.51% 2.49%
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Ratios/Supplementary
Data:
Net Assets, End
of Period (000's
omitted)........ $186,370 $127,320 $81,248 $30,896 $9,836 $6,936 $3,660 $107,541 $113,466 $80,908
Ratio of
Expenses to
Average Net
Assets(b)....... 1.08%(f) 0.96% 0.96% 1.61% 1.32% 0.52% -- 1.08%(c) 0.98%(c) 0.93%
Ratio of Net
Income to
Average Net
Assets.......... 0.81% 0.71% 0.64% 0.25% 0.60% 2.10% 2.46%* 5.26% 6.24% 6.47%
Portfolio
Turnover Rate... 26.37% 23.30% 15.84% 14.61% 0.48% 21.86% 5.09%* 208.05% 265.87% 37.59%
Average
Commission Rate
Paid............ $0.0310
</TABLE>
<TABLE>
<CAPTION>
WORLDWIDE BOND FUND WORLDWIDE BALANCED FUND
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YEAR ENDED APRIL 30,
---------------------------------- FOR THE PERIOD FROM
YEAR ENDED DECEMBER 23, 1994 o
1993 1992 1991 1990+ APRIL 30, 1996 TO APRIL 30, 1995
------- ------- ------- ------ -------------- ---------------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of
Period.......... $ 11.57 $ 10.82 $ 10.10 $10.00 $10.00 $10.00
------- ------- ------- ------ ------- ------
INCOME FROM
INVESTMENT
OPERATIONS:
Net Investment
Income.......... 0.81 0.62 1.03 0.26 0.04(e) --
Net Gains or
Losses on
Securities (both
realized and
unrealized)..... (0.75) 0.67 0.19 (0.16) 0.25 --
------- ------- ------- ------ ------- ------
Total From
Investment
Operations...... 0.06 1.29 1.22 0.10 0.29 0.00
------- ------- ------- ------ ------- ------
LESS
DISTRIBUTIONS:
Dividends (from
net investment
income)......... (0.83) (0.53) (0.50) -- -- --
Distributions
(from capital
gains).......... (0.18) (0.01) -- -- -- --
------- ------- ------- ------ ------- ------
Total
Distributions... (1.01) (0.54) (0.50) 0.00 0.00 0.00
------- ------- ------- ------ ------- ------
Net Asset Value,
End of Period... $ 10.62 $ 11.57 $ 10.82 $10.10 $ 10.29 $10.00
======= ======= ======= ====== ======= ======
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Total Return(a). 0.38% 12.21% 12.37% 1.00% 2.90% 0.00%
- ---------------------------
Ratios/Supplementary
Data:
Net Assets, End
of Period (000's
omitted)........ $66,035 $40,930 $15,046 $2,237 $ 608 .14
Ratio of
Expenses to
Average Net
Assets(b)....... 1.01% 1.05% 0.50% -- 0.00%(d) 0.00%(d)
Ratio of Net
Income to
Average Net
Assets.......... 8.47% 8.55% 9.75% 9.22%* 0.42% 0.00%
Portfolio
Turnover Rate... 248.21% 231.34% 341.01% 12.23%* 0.00% 0.00%
Average
Commission Rate
Paid............ $0.0422
</TABLE>
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(a) Total return is calculated assuming an initial investment made at the net
asset value at the beginning of the period, reinvestment of dividends and
distribution of capital gains at net asset value during the year and a
redemption on the last day of the period. Total return for the period
ended April 30, 1990 for Gold and Natural Resources Fund and Worldwide
Bond Fund and the period ended April 30, 1995 for Worldwide Balanced Fund
were not annualized.
(b) Had the Adviser not reimbursed expenses, the expense ratios for the year
ended April 30, 1991 and for the period September 1, 1989 (commencement of
operations) to April 30, 1990 would have been 1.21% and 1.87%,
respectively, for Gold and Natural Resources Fund and 1.14% and 2.80%,
respectively for Worldwide Bond Fund. With respect to Gold and Natural
Resources Fund and Worldwide Bond Fund, as of September 29, 1995 the
effective rate of the Adviser's management fee is 1.0%. Prior to September
29, 1995, the effective rate of the management fee was 0.75%.
(c) Ratio would have been 1.10% and 0.99%, respectively, had there not been
directed brokerage and custodian fee arrangements.
(d) Had the Adviser not reimbursed expenses, and had the Fund not had a
custodian fee arrangement, the expense ratios would have been 12.61% and
78.40%, respectively.
(e) Based on average shares outstanding.
(f) The ratio was not impacted by the directed brokerage and custodian fee
arrangements.
o Commencement of operations.
* Annualized
+ From September 1, 1989 (commencement of operations) to April 30, 1990.
4
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INVESTMENT OBJECTIVES AND POLICIES OF THE FUNDS
A description of the investment objectives and policies of the Funds is set
forth below. The investment objective of a Fund may not be changed without the
affirmative vote of a majority of the outstanding voting securities of that
Fund, as defined in the Act. As a result of the market risk inherent in any
investment, there is no assurance that the Funds will achieve their
objectives. For further information about a Fund's investment policies, see
"Investment Objectives and Policies" in the Statement of Additional
Information.
WORLDWIDE EMERGING MARKETS FUND
OBJECTIVE:
Worldwide Emerging Markets 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.
5
<PAGE>
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
6
<PAGE>
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.
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.
WORLDWIDE BALANCED FUND
OBJECTIVE:
Worldwide Balanced Fund seeks long-term capital appreciation together with
current income.
POLICIES:
The Fund intends to achieve its investment objective by investing its assets
in the United States and other countries throughout the world, and by
allocating its assets among equity securities, fixed-income securities and
short-term instruments.
The Adviser believes that through diversification, both on an international
basis and across various asset classes, the Fund can attempt to take advantage
of the best investment opportunities worldwide. The Adviser believes that
allocation of assets into many countries and across asset classes can, over
the long-term, provide higher returns than portfolios invested solely in bonds
with lower risk (or volatility, as measured by standard deviation of monthly
returns) or than portfolios invested entirely in stocks. Thus, the "risk-
adjusted return" of a diversified portfolio has the potential to be more
attractive than some other, more concentrated portfolios. In addition, the
balanced approach reduces the risk where events in any one country, including
the United States, may adversely affect the entire portfolio. Investors should
be aware that although the Fund diversifies across more investment types than
most mutual funds, no one mutual fund can provide a complete investment
program for all investors. There can be no assurance that allocation of assets
both globally and across asset classes will reduce these risks or that the
Fund will achieve its investment objective.
While FII does not currently serve as sub-investment adviser to the Fund, it
is expected to do so when the Fund's assets reach a level at which it is
appropriate to utilize the sub investment adviser's services. FII is a wholly-
owned subsidiary of Fiduciary Investment Corporation, which, in turn, is a
wholly-owned subsidiary of Fiduciary Trust Company International. Fiduciary
Trust Company International has more than 30 years of experience in managing
funds that invest in the international markets. The Adviser believes FII has
unique knowledge and experience in global investing.
The Fund seeks investment opportunities in the world's major stock, bond and
money markets. The Fund may invest in securities issued anywhere in the world
including the United States. Under normal conditions, the Fund will invest its
assets in at least three countries including the United States. There is no
limitation or restriction on the amount of assets to be invested in any one
asset class or country. Over the long-term, the Fund will attempt to invest a
minimum of 25% of its assets in the United States, with the balance outside
the United States and the Fund will attempt to maintain an asset allocation of
60% in equity securities and 40% in fixed-income securities and short-term
instruments. However, subsequent to the initial investment period, at least
25% of the Fund's total assets will always be invested in fixed-income senior
securities and at least 25% of the Fund's total assets will always be invested
in equities. The Adviser or FII will determine when geographic or asset class
reallocations should occur. These reallocations are not expected to be sudden,
rather such reallocations will be made gradually over time. The Fund may also
allocate a portion of its assets to gold.
7
<PAGE>
The Fund will not invest more than 10% of its assets in the securities of
developing countries with emerging economies or securities markets. The Fund
may invest in asset-backed securities such as collateralized mortgage
obligations and other mortgage and non-mortgage asset-backed securities.
The average maturity of the debt securities in the Fund's portfolio will be
based on the judgment of the Adviser or FII as to future interest rate
changes. Normally, the average maturity will be shorter when interest rates
are expected to rise and longer when interest rates are expected to fall. The
assets of the Fund invested in fixed income securities will consist of
securities which are believed by FII to be high grade, that is, rated A or
better by S&P or Moody's, Fitch-1 by Fitch or Duff-1 by D&P or if unrated, to
be of comparable high quality in the judgment of FII, subject to the
supervision of the Adviser and the Board of Trustees. The assets of the Fund
invested in short-term instruments will consist primarily of securities rated
in the highest category (for example, commercial paper rated "Prime-1" or "A-
1" by Moody's and S&P, respectively) or if unrated, in instruments that are
determined to be of comparable quality or are insured by foreign or U.S.
governments, their agencies or instrumentalities as to payment of principal
and interest.
The Adviser or FII will determine the amount of the Fund's assets to be
invested in domestic and foreign securities and the allocations to each asset
class abroad will be based on its assessment of where opportunities for long-
term capital appreciation and current income are expected to be most
attractive. When making this determination, the Adviser or FII will evaluate
the political and economic risks of the principal countries of the world, the
relationship of their currencies to the U.S. dollar, the outlook for their
interest rates, credit quality, GNP growth, inflation trends, yield
relationships between markets, sectors, and issues, demand and supply for
funds, and a variety of other factors. In managing the Fund, a "top down"
assessment approach of countries, regions and currencies and a "bottom up"
assessment approach of securities within selected sectors is used. FII's
global economic analysis is conducted in over 30 markets worldwide.
During periods of adverse or unusual economic and/or market conditions, the
Fund may, for temporary defensive purposes, make substantial investments in
obligations of the U.S. Government, debt obligations of one or more foreign
governments, certificates of deposit, bankers' acceptances, high grade
commercial paper and repurchase agreements. For temporary defensive purposes,
the Fund can have all of its assets invested in any one country or currency.
The Adviser or FII will determine if market conditions warrant this strategy.
The Fund may invest up to 5% of its net assets in options on equity securities
and up to 5% of its net assets in warrants, including options and warrants
traded in over-the-counter markets. The Fund may buy and sell financial
futures contracts and options on financial futures contracts. The Fund may
write, purchase or sell puts and calls on foreign currencies and securities,
and invest in "when-issued" securities, "partly paid" securities (securities
paid for over a period of time), and securities of foreign issuers. The Fund
may lend its portfolio securities and borrow money for investment purposes
(i.e., leverage its portfolio). For a further discussion of these investments,
see "Risk Factors."
WORLDWIDE HARD ASSETS FUND
OBJECTIVE:
The Fund seeks long-term capital appreciation by investing globally, primarily
in "Hard Asset Securities." Income is a secondary consideration.
POLICIES:
The Adviser believes "Hard Asset Securities" (as defined below) offer an
opportunity to achieve long-term capital appreciation and to protect wealth
against eroding monetary values during periods of cyclical economic
expansions. Since the market action of Hard Asset Securities may move against
or independently of the market trend of industrial shares, the addition of
such
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securities to an overall portfolio may increase the return and reduce the
price fluctuations of such a portfolio. There can be no assurance that an
increased rate of return or a reduction in price fluctuations of a portfolio
will be achieved. An investment in the Fund's shares should be considered part
of an overall investment program rather than a complete investment program.
The Fund will, under normal market conditions, invest at least 65% of its
total assets in Hard Asset Securities. Hard Asset Securities include equity
securities of "Hard Asset Companies" and securities, including structured
notes, whose value is linked to the price of a Hard Asset commodity or a
commodity index. Indexed securities and structured notes are more fully
described on page 11 under "Factors Affecting Worldwide Hard Assets Fund." The
term "Hard Asset Companies" includes companies that are directly or indirectly
(whether through supplier relationships, servicing agreements or otherwise)
engaged to a significant extent in the exploration, development, production or
distribution of one or more of the following (together "Hard Assets"): (i)
precious metals, (ii) ferrous and non-ferrous metals, (iii) gas, petroleum,
petrochemicals or other hydrocarbons, (iv) forest products, (v) real estate
and (vi) other basic non-agricultural commodities which, historically, have
been produced and marketed profitably during periods of significant inflation.
Under normal market conditions, the Fund will invest at least 5% of its assets
in each of the first five sectors listed above.
The Fund has a fundamental policy of concentrating in such industries and up
to 50% of the Fund's assets may be invested in any one of the above sectors.
Since the Fund may so concentrate, it may be subject to greater risks and
market fluctuations than other investment companies with more diversified
portfolios. The production and marketing of Hard Assets may be affected by
actions and changes in governments. In addition, Hard Assets and securities of
Hard Asset Companies may be cyclical in nature. During periods of economic or
financial instability, the securities of some Hard Asset Companies may be
subject to broad price fluctuations, reflecting volatility of energy and basic
materials prices and possible instability of supply of various Hard Assets. In
addition, some Hard Asset Companies may also be subject to the risks generally
associated with extraction of natural resources, such as the risks of mining
and oil drilling, and the risks of the hazards associated with natural
resources, such as fire, drought, increased regulatory and environmental
costs, and others. Securities of Hard Asset Companies may also experience
greater price fluctuations than the relevant Hard Asset. In periods of rising
Hard Asset prices, such securities may rise at a faster rate, and, conversely,
in time of falling Hard Asset prices, such securities may suffer a greater
price decline.
The Adviser believes the Fund may offer a hedge against inflation,
particularly commodity price driven inflation. However, there is no assurance
that rising commodity (or other hard asset) prices will result in higher
earnings or share prices for the Hard Asset Companies in the Fund. Hard Asset
Company equities are affected by many factors, including movements in the
overall stock market. Inflation may cause a decline in the overall stock
market, including the stocks of Hard Asset Companies.
The Fund seeks investment opportunities in the world's major stock, bond and
commodity markets. The Fund may invest in securities issued anywhere in the
world, including the United States. Under normal conditions, the Fund will
invest its assets in at least three countries including the United States.
There is no limitation or restriction on the amount of assets to be invested
in any one country. There is no limitation on the amount the Fund can invest
in emerging markets. The Fund may purchase securities in any foreign country,
developed or underdeveloped. 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 investments. Global investing involves economic and
political considerations not typically applicable to the U.S. markets. See
"Risk Factors--Foreign Securities" and "Risk Factors--Emerging Markets
Securities" below.
The 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
incorporated entities or enterprises; 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 the U.S. or foreign 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. The Fund may, as described below in "Risk Factors" on
pages 13-23, invest in derivatives. Derivatives are instruments whose value is
"derived" from an underlying asset. Derivatives in which the Fund may invest
include futures contracts, forward contracts, options, swaps and structured
notes and other similar securities as may become available in the market.
These instruments offer certain opportunities and are subject to
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additional risks that are described below. The Fund may invest up to 10% of
its net assets, taken at market value at the time of investment, in precious
metals, whether in bullion or coins. In addition, the Fund may invest in
futures and forward contracts and options on precious metals and other Hard
Assets.
The Fund may invest up to 5% of its net assets in premiums for options on
equity securities and equity indexes and up to 5% of its net assets in
warrants, including options and warrants traded in over-the-counter markets.
Warrants received as dividends on securities held by the Fund and warrants
acquired in units or attached to securities are not included in this
restriction. The Fund may buy and sell financial futures contracts and options
in financial futures contracts. The Fund may purchase or sell puts and calls
on foreign currencies and securities; invest in "when-issued" securities,
"partly paid" securities (securities paid for over a period of time) and
securities of foreign issuers; and may lend its portfolio securities and
borrow money for investment purposes.
The Fund may invest up to 35% of its total assets in debt securities whose
value is not linked to the value of a Hard Asset or of Hard Asset Companies
and other issuers and equity securities of companies which are not Hard Asset
Companies. Non-Hard Asset debt securities include high grade, liquid debt
securities of foreign companies, foreign governments and the U.S. Government
and their respective agencies, instrumentalities, political subdivisions and
authorities, as well as money market instruments denominated in U.S. dollars
or a foreign currency. The average maturity of the debt securities in the
Fund's portfolio will be based on the Adviser's judgment as to future interest
rate changes. Normally, the average maturity will be shorter when interest
rates are expected to rise and longer when interest rates are expected to
fall.
The assets of the Fund invested in fixed income securities, excluding fixed
income securities whose value is not linked to the value of a Hard Asset and
of Hard Asset Companies, will consist of securities which are believed by the
Adviser to be high grade, that is rated A or better by S&P or Moody's, Fitch-1
by Fitch or Duff-1 by D&P or if unrated, to be of comparable quality in the
judgment of the Adviser, subject to the supervision of the Board of Trustees.
The assets of the Fund invested in short-term instruments will consist
primarily of securities rated in the highest category (for example, commercial
paper rated "Prime-1" or "A-1" by Moody's and S&P, respectively) or if
unrated, in instruments that are determined to be of comparable quality in the
judgment of the Adviser, subject to the supervision of the Board of Trustees,
or are insured by foreign or U.S. governments, their agencies or
instrumentalities as to payment of principal and interest. The Fund may invest
up to 10% of its assets in asset-backed securities such as collateralized
mortgage obligations and other mortgage and non-mortgage asset-backed
securities. Asset-backed securities backed by Hard Assets and whose value is
expected to be linked to the underlying Hard Asset are excluded from the 10%
limitation.
During periods when the Adviser expects adverse or unusual economic and/or
market conditions, the Fund may, for temporary defensive purposes, make
substantial investments in obligations of the U.S. Government, debt
obligations of one or more foreign governments, certificates of deposit,
bankers' acceptances, high grade commercial paper and repurchase agreements.
For a discussion of other investments and risks associated with investing in
the Fund, see "Factors Affecting Worldwide Hard Assets Fund" and "Risk
Factors".
Real Estate Securities. Although the Fund will not invest in real estate
directly, it may invest up to 50% of its assets in equity securities of real
estate investment trusts ("REITS") and other real estate industry companies or
companies with substantial real estate investments, and therefore, the Fund
may be subject to certain risks associated with direct ownership of real
estate and with the real estate industry in general. These risks include,
among others: possible declines in the value of real estate; possible lack of
availability of mortgage funds; extended vacancies of properties; risks
related to general and local economic conditions; overbuilding; increases in
competition, property taxes and operating expenses; changes in zoning laws;
costs resulting from the clean-up of, and liability to third parties for
damages resulting from, environmental problems; casualty or condemnation
losses; uninsured damages from floods, earthquakes or other natural disasters;
limitations on and variations in rents; and changes in interest rates. For a
further discussion of these investments, see "Risk Factors."
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FACTORS AFFECTING WORLDWIDE HARD ASSETS FUND:
Investors should be aware that some of the securities in which the Fund may
invest, such as structured or indexed notes, swaps and foreign securities,
pose additional risks. These instruments may be subject to periods of extreme
volatility and illiquidity and may be difficult to value. Despite these risks,
these instruments may offer unique investment opportunities.
INDEXED SECURITIES AND STRUCTURED NOTES:
The Fund may invest in indexed securities whose value is linked to one or more
currencies, interest rates, commodities, or financial or commodity indices. An
indexed security enables the investor to purchase a note whose coupons and/or
principal redemption are linked to the performance of an underlying asset.
Indexed securities may be positively or negatively indexed (i.e., their value
may increase or decrease if the underlying instrument appreciates). Indexed
securities may have return characteristics similar to direct investments in
the underlying instrument or to one or more options on the underlying
instrument. Indexed securities may be more volatile than the underlying
instrument itself, and present many of the same risks as investing in futures
and options. Indexed securities are also subject to credit risks associated
with the issuer of the security with respect to both principal and interest.
Only securities linked to one or more non-agricultural commodities or
commodity indices will be considered a Hard Asset security.
Indexed securities may be publicly traded or may be two-party contracts (such
two-party agreements are referred to here collectively as structured notes).
When the Fund purchases a structured note, a type of derivative, it will make
a payment of principal to the counterparty. Some structured notes have a
guaranteed repayment of principal while others place a portion (or all) of the
principal at risk. The Fund will purchase structured notes only from
counterparties rated A or better by S&P, Moody's or another nationally
recognized statistical rating organization. The Adviser will monitor the
liquidity of structured notes under the supervision of the Board of Trustees,
and notes determined to be illiquid will be aggregated with other illiquid
securities and limited to 15% of the total net assets of the Fund.
GOLD AND NATURAL RESOURCES FUND
OBJECTIVE:
Gold and Natural Resources Fund seeks long-term capital appreciation by
investing in equity and debt securities of companies engaged in the
exploration, development, production and distribution of gold and other
natural resources such as strategic and other metals, minerals, forest
products, oil, natural gas and coal. Current income is not an investment
objective.
POLICIES:
During normal market conditions, the Fund will have at least 65% of its total
assets invested in securities of companies engaged in gold mining and natural
resources activities. The Fund may also invest in equity and debt securities
of companies which themselves invest in companies engaged in these activities.
The Fund also has the right to invest up to 35% of its assets in the
securities of non-precious metals and natural resources companies.
The Adviser believes that securities of precious metals companies and certain
other natural resources companies offer an opportunity to protect wealth
against eroding monetary values. Recent history indicates that the policies of
many governments seeking economic growth, particularly persistent budget
deficits and high rates of growth of monetary reserves and money supply, have
had long-term inflationary consequences. During periods of accelerating
inflationary policies, the prices of many precious metals equity securities
have risen cyclically, and the Adviser believes that they may continue to do
so in the future. The Adviser anticipates that inflation and the price of gold
will continue on a long-term upward trend with alternating cycles as credit is
over-expanded and subsequently tightened. The price of gold decreases when
inflation is not perceived as a risk. Since the market action of gold mining
shares may move against or independently of the market trend of industrial
shares, the addition of such shares to an overall portfolio may increase the
return and reduce the fluctuations of such portfolio. There can be no
assurance that an increased rate of return or a reduction in fluctuations of a
portfolio will be achieved. Thus, an investment in the Fund should be
considered part of an overall investment program rather than a complete
investment program.
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The five largest gold producing countries are the Republic of South Africa,
the United States, Australia, CIS (the former U.S.S.R.) and Canada. During
normal market conditions, the Fund expects to invest at least 25% of its
assets in securities of companies in Canada, the United States, Australia and
South Africa, whose value is tied, linked or dependent upon the actual or
anticipated price of gold, such as companies which are primarily engaged in
gold mining. It is uncertain under current federal tax law the extent to which
the Fund may concentrate its investments in gold and gold related securities
without adversely affecting the federal tax status of the underlying
Contracts. Accordingly, the Fund reserves the right to alter its policy with
respect to concentration in such securities if and when such uncertainty is
resolved. This limitation is not a fundamental policy of the Fund and may be
changed at any time by the Board of Trustees without a vote of shareholders.
The Fund may invest in conglomerates whose main activity is not mining.
The Fund may invest up to 35% of the value of its total assets in: (a)
securities of companies not in the gold mining/natural resources areas; (b)
high grade corporate debt securities; and (c) obligations issued or guaranteed
by the U.S. or foreign governments and repurchase agreements. The Fund may
invest up to 5% of its assets at the time of purchase in warrants. The Fund
may also invest up to 5% of its assets at the time of purchase in preferred
stocks and preferred stocks which may be converted into common stock. The Fund
may purchase and sell financial futures and commodity futures contracts and
options on financial futures and commodity futures contracts and may write,
purchase or sell puts and calls on foreign currencies, securities, commodities
and commodity indices. The Fund may invest in "when-issued" securities and
securities of foreign issuers. For a further discussion of these investments,
see "Risk Factors."
The Fund has reserved the right to invest up to 10% of its net assets, taken
at market value at the time of investment, in gold bullion and coins.
Since the Fund may invest substantially all of its assets in securities of
companies engaged in gold mining and natural resources activities, the Fund
may be subject to greater risks and market fluctuations than other investment
companies with less concentrated portfolios. The Fund has no restrictions on
the amount of its assets that may be invested in securities of foreign issuers
and thus the relative amount of such investments will change from time to
time. Investments by the Fund in securities of gold mining shares, coins and
gold bullion, foreign issuers, foreign currencies, and options and futures may
involve particular investment risks. In addition, the Fund may lend its
portfolio securities and borrow money for investment purposes (i.e., leverage
its portfolio). See "Risk Factors."
Although the Fund will not invest in real estate directly, it may invest a
portion of its assets not invested in the gold, precious and non-precious
metals and natural resources sectors in equity securities of real estate
investment trusts ("REITs") and other real estate industry companies or
companies with substantial real estate investments. The Fund may therefore be
subject to certain risks associated with direct ownership of real estate and
with the real estate industry in general. See "Risk Factors."
WORLDWIDE BOND FUND
OBJECTIVE:
Worldwide Bond Fund seeks high total return through a flexible policy of
investing globally, primarily in debt securities.
POLICIES:
Total return is comprised of current income and capital appreciation. The Fund
attempts to achieve its investment objective by taking advantage of investment
opportunities in the United States as well as in other countries throughout
the world where opportunities may be more rewarding and may emphasize either
component of total return. Capital appreciation will result during times of
declining interest rates and, with respect to investing globally, as a result
of foreign currency fluctuations relative to a declining dollar. Normally, the
Fund will have at least 65% of its total assets invested in bonds of varying
maturities.
The Adviser believes that diversification of assets on an international basis
may reduce the risk that events in any one country, including the United
States, may adversely affect the entire portfolio. There can be no assurance
that diversification of assets
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will reduce this risk. The Adviser will determine the amount of the Fund's
assets to be invested in corporate and government securities in the United
States and the amount to be invested in each country abroad based on its
assessment of where opportunities for total return are expected to be most
attractive. When making this determination, the Adviser will evaluate the
political and economic risks of the principal countries of the world,
prospects for the relationship of their currencies to the U.S. dollar, the
outlook for their interest rates, credit quality and other factors. In some
countries, yields of comparable quality securities denominated in foreign
currencies may either be higher than in the United States, or may be expected
to decline faster (leading to higher bond prices), or such currencies may be
expected to appreciate against the U.S. dollar. The long-term assets of the
Fund will consist primarily of securities which are believed by the Adviser to
be high grade, that is, rated A or better by S&P or Moody's or if unrated, to
be of comparable quality in the judgment of the Adviser. For a further
discussion of debt securities see "Risk Factors."
During normal market conditions, the Fund expects to invest in debt
securities, such as obligations issued or guaranteed by a government or any of
its political subdivisions, agencies or instrumentalities, or by a
supranational organization such as the World Bank or European Economic
Community (or other organizations which are chartered to promote economic
development and are supported by various governments and government entities),
bonds, debentures, notes, commercial paper, time deposits, certificates of
deposit and repurchase agreements, as well as debt obligations which may have
a call on a common stock or commodity by means of a conversion privilege or
attached warrants. The Fund may invest in debt instruments of the U.S.
Government and its agencies having varied maturities, consisting of
obligations issued or guaranteed as to both principal and interest by the U.S.
Government or backed by the "full faith and credit" of the United States. In
addition to direct obligations of the U.S. Treasury such as Treasury bonds,
notes and bills, these include securities issued or guaranteed by different
agencies such as the Federal Housing Administration, the Government National
Mortgage Association and the Small Business Administration.
The average maturity of the debt securities in the Fund's portfolio will be
based on the Adviser's judgment as to future interest rate changes. Normally,
the average maturity will be shorter when interest rates are expected to rise
and longer when rates are expected to fall. The Adviser expects the average
maturity to be between three and ten years. In addition, when the Adviser
determines that a temporary defensive strategy is warranted, the Fund may
invest in securities maturing in 13 months or less, and most or all of its
investments may be in the United States or another country.
The Fund may invest up to 5% of its assets at the time of purchase in
warrants. The Fund may invest up to 5% of its assets at the time of purchase
in preferred stocks and preferred stocks which may be convertible into common
stock. The Fund may invest in collateralized mortgage obligations. The Fund
may buy and sell financial futures contracts and options on financial futures
contracts and may write, purchase or sell puts and calls on foreign currencies
and securities. The Fund may invest in "when-issued" securities and securities
of foreign issuers. In addition, the Fund may lend its portfolio securities
and borrow money for investment purposes (i.e., leverage its portfolio). For a
further discussion of these investments, see "Risk Factors."
There is no limit on the amount the Fund may invest in any one country or in
securities denominated in the currency of any one country. Normally the Fund
will invest in three countries besides the United States. However, the Fund
may invest solely in the securities of one country such as the United States
when economic conditions warrant, such as an extreme undervaluation of the
currency and exceptionally high returns of that country's currency relative to
other currencies.
RISK FACTORS
Assets of the Funds are subject to market fluctuations and risks inherent in
all securities. In addition, assets of the Funds may be subject to other
special considerations, such as those listed below.
FOREIGN SECURITIES
The Funds 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
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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.
Gold and Natural Resources Fund and Worldwide Hard Assets Fund may invest in
South African issuers and Worldwide Emerging Markets Fund may invest in
Russian issuers. Political and social conditions in South Africa and Russia,
due to the unsettled political conditions which could recur in South Africa,
Russia or their neighboring countries, as well as the fact that settlement
procedures in Russia are not fully formalized, may pose certain risks to the
Funds' investments. If aggravated by local or international developments, such
risks could have an adverse effect on investments in those countries,
including the Funds' investments and, under certain conditions, on the
liquidity of the Funds' portfolios and their ability to meet shareholder
redemption requests. The ability of the Funds to invest or hold their
investments in South African or Russian companies may be further affected by
changes in United States, South African or Russian laws or regulations.
In addition to investing directly in the securities of United States and
foreign issuers, the Funds 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.
EMERGING MARKETS SECURITIES
Investments of the Funds 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.
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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 Funds, 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
Funds were to purchase foreign shares at a time when there is a premium and
sell when there is a lower or no premium, the Funds 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 Funds were to own local shares and could not participate
in a stock, warrant or other distribution, the Funds could suffer material
dilution of their interest in that issuer and the value of their holdings
could decline dramatically, causing a loss on their investment. Generally, it
is expected that the Funds will hold foreign shares. However, because of their
limited number, foreign shares may, at times, not be available for purchase by
the Funds 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 Funds may deem it advisable to purchase local shares, which
may expose the Funds to the additional risks described above. The Funds 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 Funds. Where permitted by local law, the
Funds 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 Funds will be able to convert their 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. A Fund's ability to participate fully in the markets may be
limited by its investment policy of investing not more than 15% of its total
net assets in illiquid securities. In addition, limited liquidity may impair a
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 a 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 a Fund in particular securities.
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PRECIOUS METALS
Gold and Natural Resources Fund and Worldwide Hard Assets Fund may invest in
precious metal coins (including gold, silver, platinum and palladium) which
have no numismatic value. The value of such coins moves correspondingly with
the price of bullion in that the value of the coins is based primarily on
their precious metal content. Since such investments do not generate any
investment income, the sole source of return from such investments would be
from gains realized on sales of the coins or bullion, and a negative return
would be realized to the extent such coins or bullion are sold at a loss. The
Funds incur additional costs in storing gold bullion and coins. These storage
costs are generally higher than custodial costs for securities. Although
subject to substantial fluctuations in value, management believes such
investments could be beneficial to the investment performance of the Funds and
could be a potential hedge against inflation, as well as an investment with
possible growth potential. In addition, at the appropriate time, investments
in precious metal coins or bullion could help to moderate fluctuations in the
Funds' portfolio value, as at times the prices of precious metals have tended
not to fluctuate as widely as shares of issuers engaged in the mining of such
precious metals.
In view of the established world market for precious metals, the daily value
of such coins is readily ascertainable and their liquidity is assured since
they are readily saleable to dealers which maintain markets in such coins. The
Funds will maintain their precious metal coins and bullion with Wilmington
Trust Company.
Precious metal trading is a speculative activity. Prices of precious metals
are affected by factors such as cyclical economic conditions, political events
and monetary policies of various countries. Gold and other precious metals are
also subject to governmental action for political reasons. Markets are,
therefore, at times volatile and there may be sharp fluctuations in prices
even during periods of rising prices. Under current U.S. tax law, the Funds
may not receive more than 10% of their respective yearly income from gains
resulting from the sale of precious metals or any other physical commodity.
The Funds may be required, therefore, to hold their precious metals or sell
them at a loss, or to sell their portfolio securities at a gain, when they
would not otherwise do so for investment reasons.
FOREIGN CURRENCY AND FOREIGN CURRENCY TRANSACTIONS
Since some foreign securities in which the Funds may invest may be denominated
in foreign currencies, and since these Funds may temporarily hold foreign
currencies, the value of the assets of the Funds (and thus their net asset
values) may be affected by changes in currency exchange rates. The Funds'
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 Funds may invest in a variety of derivatives.
The Funds may purchase and sell put and call options on, or enter into futures
contracts or forward contracts to purchase or sell, foreign currencies. The
Funds may use foreign currency contracts to hedge the U.S. dollar value of a
security which they already own or anticipate purchasing. A forward currency
contract may thus help reduce a Fund's losses on a security when a foreign
currency's value changes. The Funds will enter into forward contracts to
duplicate a cash market transaction. However, the Funds will invest in
securities, including short-term obligations, denominated in a range of
foreign currencies and the value of the Funds will be affected by changes in
currency exchange rates. The Funds will not purchase or sell foreign currency
as an investment except that Worldwide Emerging Markets Fund, Worldwide Hard
Assets Fund and Worldwide Balanced 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
Worldwide Emerging Markets Fund, Worldwide Balanced Fund and Worldwide Hard
Assets 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, a 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
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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. Worldwide Hard Assets may also enter into other asset swaps.
Asset swaps are similar to currency swaps in that the performance of a Hard
Asset (e.g., gold) may be "swapped" for another (e.g., energy).
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 and Hard Assets values, 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), each
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 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, a 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 Funds 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 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 Funds may invest in options which are either listed on a domestic
securities exchange or traded on a recognized foreign exchange. In addition,
the Funds 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 10% of total net assets of a Fund,
except that Worldwide Emerging Markets Fund, Worldwide Hard Assets Fund and
Worldwide Balanced Fund will be limited to 15% of total net assets.
FUTURES CONTRACTS
The Funds 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. The Gold and Natural Resources Fund and
Worldwide Hard Assets Fund may also buy and sell commodity futures contracts,
which may include futures contracts on gold and other natural resources and on
gold and other natural resources indices. A security or interest-rate futures
contract is an agreement between
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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. A commodity futures contract is an agreement to
take or make delivery of a specified amount of a commodity, such as gold, at a
set price on a future date.
Worldwide Hard Assets Fund and Gold and Natural Resources Fund may invest in
commodity futures contracts and in options on commodity futures contracts
(collectively, "commodity interests"). Trading in commodity interests involves
numerous risks such as leverage, illiquidity, governmental intervention
designed to influence commodity prices and the possibility of delivery of the
commodity interests' underlying commodities. Commodity markets are highly
volatile. In the event that a Fund is required to take delivery of a
commodity, such commodity will be deemed to be illiquid and the Fund will bear
the cost of storing the commodity until such commodity is sold and may incur
substantial costs in its disposition. The Funds will not use commodity futures
contracts for leveraging purposes in excess of applicable limitations.
When a 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. A
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 with respect to Worldwide Emerging Markets Fund, Worldwide
Balanced Fund, and Worldwide Hard Assets Fund, 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 Funds may write, purchase or sell put and call options on financial
futures contracts and, in addition, the Gold and Natural Resources Fund and
Worldwide Hard Assets Fund may write, purchase or sell put and call options on
commodity futures contracts. The Funds 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.
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. Certain exchanges do not permit trading in particular commodities at
prices in excess of daily price fluctuation limits set by the exchange, and
thus the Gold and Natural Resources Fund and Worldwide Hard Assets Fund could
be prevented from liquidating their positions and thus be subjected to losses.
Trading in futures contracts traded on foreign commodity exchanges may be
subject to the same or similar risks as trading in foreign securities. See
"Risk Factors--Foreign Securities."
SHORT SALES
The Worldwide Emerging Markets Fund and Worldwide Hard Assets Fund may make
short sales of equity securities. A short sale occurs when the Funds sells a
security which it does not own by borrowing it from a broker. Following the
short sale, the Funds must deposit collateral with the broker. In the event
that the value of the security that the Funds sold short declines, the Funds
will gain as it repurchases the security in the market at the lower price. If
the price of the security increases, the Funds 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 Worldwide Emerging Markets Fund and Worldwide Hard Assets 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
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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 Funds' net assets. The
Funds' ability to engage in short sales may be limited by the requirements of
current U.S. tax law that the Funds 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 Funds as part of various
hedging techniques and strategies.
When the Funds intend to acquire securities (or gold bullion or coins in the
case of the Gold and Natural Resources Fund and Worldwide Hard Assets Fund)
for their portfolios, they may use call options or futures contracts as a
means of fixing the price of the security (or gold) they intend 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
Funds in purchasing a large block of securities that would be more difficult
to acquire by direct market purchases. If the Funds hold a call option rather
than the underlying security itself, the Funds are 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 Funds would
experience a loss as if they had owned the underlying security.
To protect against anticipated declines in the value of the Funds' investment
holdings, the Funds may use options, forward and futures contracts, structured
notes (Worldwide Hard Assets Fund and Worldwide Emerging Markets Fund), 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 Funds may hedge against changes in the value of the U.S. dollar in
relation to a foreign currency in which portfolio securities of the Funds may
be denominated. A Fund may employ hedging strategies with options and futures
contracts on foreign 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 Funds use 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 Funds 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
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not be available to the Funds and the Funds 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, each of the Funds
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 Funds 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 Funds 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 a
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, a
Fund may incur a loss on its investment, may not achieve the hedging
protection it anticipated and/or incur a loss greater than if 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 10% of
total net assets of a Fund, except that Worldwide Hard Assets Fund, Worldwide
Emerging Markets Fund and Worldwide Balanced Fund are limited to 15% of total
net assets.
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, 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 Funds
may invest. For example, because the Gold and Natural Resources Fund invests
in securities whose value is related to the price of gold or other natural
resources, it may use options or futures contracts on gold or other natural
resources or an index as hedging instruments. 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
Funds on their investments in the hedging positions.
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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 Funds.
REPURCHASE AGREEMENTS
The Funds may engage in repurchase agreement transactions. Under the terms of
a typical repurchase agreement, a 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 Funds 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
a 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 Funds enter into
repurchase agreements to evaluate these risks. See "Repurchase Agreements" in
the Statement of Additional Information.
DEBT SECURITIES
The Funds may invest in debt securities. The market value of debt securities
generally varies in response to changes in interest rates, the financial
condition of each issuer and the value of a Hard Asset if linked to the value
of a Hard Asset. 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 Funds will not accrue any income on these securities prior to delivery.
The Funds will maintain in a segregated account with their Custodian an amount
of cash or high quality debt securities equal (on a daily marked-to-market
basis) to the amount of its commitment to purchase the when-issued securities.
LOW RATED OR UNRATED DEBT SECURITIES
Worldwide Emerging Markets Fund and Worldwide Hard Assets 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
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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 Worldwide Emerging Markets Fund and Worldwide Hard
Assets Fund will not invest more than 25% of its assets in debt securities
rated below BBB by S&P or Baa by Moody's.
REAL ESTATE SECURITIES
Although Gold and Natural Resources Fund and Worldwide Hard Assets Fund will
not invest in real estate directly, each of these Funds may invest a
percentage of its assets in equity securities of REITs and other real estate
industry companies or companies with substantial real estate investments.
Worldwide Hard Assets Fund may invest up to 50% of its assets in such
securities. Gold and Natural Resources Fund and Worldwide Hard Assets Fund are
therefore subject to certain risks associated with direct ownership of real
estate and with the real estate industry in general. These risks include,
among others: possible declines in the value of real estate; possible lack of
availability of mortgage funds; extended vacancies of properties; risks
related to general and local economic conditions; overbuilding; increases in
competition, property taxes and operating expenses; changes in zoning laws;
costs resulting from the clean-up of, and liability to third parties for
damages resulting from, environmental problems; casualty or condemnation
losses; uninsured damages from floods, earthquakes or other natural disasters;
limitations on and variations in rents; and changes in interest rates.
REITs are pooled investment vehicles which invest primarily in income
producing real estate or real estate related loans or interests. REITs are
generally classified as equity REITs, mortgage REITs or hybrid REITs. Equity
REITs invest the majority of their assets directly in real property and derive
income primarily from the collection of rents. Equity REITs can also realize
capital gains by selling properties that have appreciated in value. Mortgage
REITs invest the majority of their assets in real estate mortgages and derive
income from the collection of interest payments. REITs are not taxed on income
distributed to shareholders provided they comply with several requirements of
the Internal Revenue Code of 1986, as amended (the "Code").
Investing in REITs involves certain unique risks in addition to those risk
associated with investing in the real estate industry in general. Equity REITs
may be affected by changes in the value of the underlying property owned by
the REITs, while mortgage REITs may be affected by the quality of any credit
extended. REITs are dependent upon management skills, are not diversified, and
are subject to the risks of financing projects. REITs are subject to heavy
cash flow dependency, default by borrowers, self-liquidation and the
possibilities of failing to qualify for the exemption from tax for distributed
income under the Code. REITs (especially mortgage REITs) are also subject to
interest rate risk (i.e., as interest rated rise, the value of the REIT may
decline).
ASSET-BACKED SECURITIES
Worldwide Emerging Markets Fund, Worldwide Balanced Fund, Worldwide Hard
Assets Fund and Worldwide Bond 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 Funds (except Gold and Natural Resources 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
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supported by various forms of insurance or guarantees issued by U.S.
Government agencies, private issuers and the mortgage poolers. The Funds 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 Funds will be subject to certain limitations under the 1940
Act.
LOANS OF PORTFOLIO SECURITIES
The Funds 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 Funds may terminate the loans at any time and obtain the return of
the securities loaned within one business day. The Funds 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 Funds might
experience risk of loss if the broker-dealer with which it has engaged in a
portfolio loan transaction breaches its agreement with the Funds.
BORROWING
The Funds may borrow up to 30% of the value of their net assets to increase
their holdings of portfolio securities. Under the Act, each 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 exaggerate the effect of any
increase or decrease in the value of portfolio securities on a 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
Worldwide Emerging Markets Fund, Worldwide Hard Assets Fund and Worldwide
Balanced 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
Worldwide Emerging Markets Fund, Worldwide Hard Assets Fund and Worldwide
Balanced Fund may invest up to 10% of their total assets in direct
investments; however, the Funds do not currently intend to invest more than 5%
of their 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 Funds
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.
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LIMITING INVESTMENT RISKS
While an investment in any of the Funds is not without risk, each 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. A Fund will not invest more than 10% 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), except that Worldwide Emerging Markets Fund,
Worldwide Hard Assets Fund and Worldwide Balanced Fund will not invest
more than 15% of the value of their total net assets in such securities.
2. A 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 Worldwide Emerging Markets Fund, Worldwide Hard Assets Fund
and Worldwide Balanced Fund may purchase more than 10% of any non-voting
class of securities and Worldwide Balanced Fund and Worldwide Bond Fund
will not invest more than 25% of the value of their total assets in
securities of any one industry.
3. A 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 Funds' investment
policies and restrictions is provided in the Statement of Additional
Information.
MANAGEMENT
TRUSTEES
The management of the Funds' business and affairs is the responsibility of the
Board of Trustees. For information on the Trustees and Officers of the Funds,
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 Gold and Natural
Resources Fund, Worldwide Emerging Markets Fund, Worldwide Hard Assets Fund,
Worldwide Balanced Fund and Worldwide Bond Fund pursuant to an Advisory
Agreement with the Trust. The Adviser manages the investment operations of the
Funds and furnishes the Funds with a continuous investment program which
includes determining which securities should be bought, sold or held.
Madis Senner--Portfolio Manager of Worldwide Bond Fund is responsible for
managing the Fund's portfolio of investments. Before joining Van Eck, Mr.
Senner was a global bond manager with Chase Manhattan Private Bank. Prior to
that, he was President of Sunray Securities, Inc., an investment management
firm that he founded, and, before that, was a global fixed income manager with
Clemente Capital, Inc. in New York City. Mr. Senner has 12 years experience in
the investment business.
Derek S. van Eck--Portfolio Manager of Worldwide Hard Assets Fund and Gold and
National Resources Fund is responsible for managing each Fund's portfolio of
investments. He is Director of Global Investments and Executive Vice President
of the Adviser and an officer and portfolio manager of other mutual funds
advised by the Adviser.
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 Worldwide Emerging Markets Fund pursuant to a Sub-Investment
Advisory Agreement with the Adviser. PAM manages the investment operations of
the Worldwide Emerging Markets 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
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<PAGE>
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
Worldwide Emerging Markets 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.
Fiduciary International Inc. ("FII"), located at Two World Trade Center, New
York, New York 10048, is expected to serve as sub-investment adviser to the
Worldwide Balanced Fund pursuant to a Sub-Investment Advisory Agreement with
the Trust, when the Fund's assets reach a level at which it is appropriate to
utilize the sub-investment adviser's services. FII is expected to manage the
investment operations of the Worldwide Balanced Fund and furnish 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, FII will be paid a
monthly fee at an annual rate of .50% of average daily net assets by the
Adviser from the advisory fee it receives from the Fund. FII serves as an
investment adviser to other registered investment companies.
FII is an indirect subsidiary of Fiduciary Trust Company International
("FTCI"). FTCI is a New York State chartered bank specializing in investment
and administration of assets for pensions and other institutional accounts
including individuals and families. FII has access to all of FTCI's investment
infrastructure. FTCI began investing globally in the 1960's and serves its
worldwide investment management and custody clients from offices in New York,
Los Angeles, Miami, Washington, D.C., London, Geneva and Hong Kong. FTCI has
over 60 investment professionals. FTCI has over 30 years of experience in
global management with over $16 billion managed under the global balanced
discipline. As of June 30, 1996, total assets under management by FII, its
parent organization FTCI and its subsidiaries, on behalf of all clients,
amounted to over $36 billion.
FII is expected to assign a team of managers led by a global strategist, which
includes a global equity manager and a global fixed-income manager, to manage
the Fund's portfolio of investments. The team is expected to consult with the
FTCI research department, which includes international analysts who specialize
in the equity markets of Japan, Europe, the Pacific Basin and Latin America,
when making investment decisions. FII's two primary portfolio managers, who
are expected to serve the Worldwide Balanced Fund (the "Fund"), are listed
below:
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Anne M. Tatlock--FII's Global Strategist of the Fund. Ms. Tatlock joined FTCI
in 1984 and is currently President of the company where she is responsible for
managing institutional investment management. Ms. Tatlock is head of the
Institutional Investment Department and a member of the Board of Directors,
the Global Investment Committee and the Investment Policy Committee at FTCI.
Steven J. Miller--FII's Portfolio Manager of the Fund. Mr. Miller joined FTCI
in 1994 after working for seven years with Vital Forsikring and Heller
Financial, Inc. Mr. Miller is responsible for managing institutional and
international portfolios. He is Vice President of FTCI as well as a member of
the Global Investment Committee and the Investment Policy Committee at FTCI.
Gold and Natural Resources Fund and Worldwide Bond Fund each pays the Adviser
a monthly fee at the annual rate of 1% of the first $500 million of the
average daily net assets of the Fund, .90 of 1% of the next $250 million of
the average daily net assets and .70 of 1% of the average daily net assets in
excess of $750 million. The Worldwide Balanced Fund pays the Adviser a monthly
fee at the annual rate of .75 of 1% of average daily net assets. Worldwide
Hard Assets Fund and Worldwide Emerging Markets Fund each 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. Van Eck Associates Corporation also performs accounting and
administrative services for the Worldwide Balanced Fund and is paid a fee at
an annual rate of .25 of 1% of the Fund's average daily net assets. The
advisory fees paid to the Adviser with respect to the Funds are higher than
the fees paid by most investment companies because of the complexities of
managing these types of funds (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 Funds, 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 Funds. This has the effect of increasing the yield and
total return of the Funds during this period.
The Adviser also acts as investment adviser or sub-investment adviser to other
mutual funds registered with 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.
The Funds sell their shares to various insurance company variable annuity and
variable life insurance separate accounts as a funding vehicle for such
separate accounts. The Funds currently do not foresee any disadvantages to
variable annuity and variable life contract owners arising out of the fact
that the Funds offer their 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 one
or more Funds and shares of another fund may be substituted. This might force
a Fund to sell securities at disadvantageous prices. In addition, the Board of
Trustees may refuse to sell shares of a Fund to any separate account or may
suspend or terminate the offering of shares of a Fund if such action is
required by law or regulatory authority or is in the best interests of the
shareholders of a Fund.
EXPENSES
Each Fund bears all expenses of its operation other than those incurred by the
Adviser under its Advisory Agreement with the Trust. In particular, the Funds
pay: 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
26
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the Trust, the Adviser or Sub-Adviser or any of their affiliates, and any
extraordinary expenses. Expenses incurred jointly by the Funds are allocated
among the Funds in a manner determined by the Trustees to be fair and
equitable. Under the Advisory Agreement, the Adviser provides the Funds with
office space, facilities and simple business equipment and provides the
services of executive and clerical personnel for administering the affairs of
the Funds. The Adviser or Sub-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 each Fund to reimburse it for its costs for trading portfolio
securities and maintaining books and records of each 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 Funds and are being amortized by the Funds
over sixty successive equal monthly installments.
HOW TO BUY SHARES
Shares of the Funds 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
any Fund.
Shares of the Funds 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 each 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 Funds 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 Funds 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 Funds are not open for business).
Consequently, since the Funds will compute their net asset values only Monday
through Friday, exclusive of national business holidays, the net asset values
of shares of the Funds may be significantly affected on days when an investor
has no access to the Funds.
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 a Fund's best interest to do so. Certificates
for shares of the Funds will not be issued.
DIVIDENDS AND DISTRIBUTIONS
The Funds intend to distribute their 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 Funds are
automatically reinvested in additional shares of that 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 each of the Funds has ended on
April 30; however, in August 1996 the Board of Trustees changed the Funds'
fiscal year to December 31 beginning with December 31, 1996.
27
<PAGE>
HOW TO REDEEM SHARES
Shares of the Funds 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 Funds is subject to daily fluctuations and the
net asset value of the Funds' shares will fluctuate accordingly. Therefore,
the redemption value may be more or less than the original purchase price for
such shares.
FEDERAL TAXATION
Each 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. Each 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 each 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 Bond Fund,
Worldwide Emerging Markets Fund, Worldwide Hard Assets Fund and Worldwide
Balanced Fund, described herein.
The Worldwide Emerging Markets Fund and Gold and Natural Resources Fund are
classified as diversified funds and Worldwide Bond Fund, Worldwide Hard Assets
Fund and Worldwide Balanced 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.
28
<PAGE>
Each share of a 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 Funds
are entitled to vote on matters affecting all of the Funds (such as the
elections of Trustees and ratification of the selection of the Trust's
independent accountants). On matters affecting an individual Fund, a separate
vote of that Fund is required. Shareholders of a Fund are not entitled to vote
on any matter not affecting that Fund but require a separate vote of one of
the other Funds. 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 Funds, 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 Funds' Adviser believes that, in
view of the above, the risk of personal liability to shareholders is remote.
29
<PAGE>
ADDITIONAL INFORMATION
ADVERTISING
From time to time the Funds may use various media to advertise performance.
Past performance is not necessarily indicative of future performance.
Worldwide Bond Fund may advertise performance in terms of 30-day yield, which
is computed by dividing the net investment income per share earned during the
30 days by the offering price per share on the last day of the period. Yield
of the Fund is a function of the kind and quality of the instruments in the
Fund's portfolio, maturity, operating expenses and market conditions.
The Funds 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 Funds do not impose a sales charge on investments) is deducted from the
initial $1,000 payment and assumes all dividends and distributions by the
Funds are reinvested on the reinvestment dates during the period, and includes
all recurring fees that are charged to all shareholder accounts. In addition,
the Funds 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 a 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 Funds may quote performance results from recognized services and
publications which monitor the performance of mutual funds and the Funds may
compare their 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. Gold and
Natural Resources Fund is rated in the "Gold Oriented Funds" category,
Worldwide Bond Fund in the "World Income Funds" category and Worldwide
Balanced Fund is rated in the "Balanced Funds" category. The Worldwide
Emerging Markets 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. The Morgan Stanley Capital International Indices
and the Salomon Brothers World Global Bond Index are two such indices to which
the Worldwide Bond Fund and Worldwide Balanced Fund may be compared, and the
Gold and Natural Resources Fund may be compared to indices such as the
historical price of gold, the Standard & Poor's 500 or the Morgan Stanley Gold
Mines Index. For a further discussion of advertising see "Performance" in the
Statement of Additional Information.
For further information about the Funds, 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 Funds 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 Funds' 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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<PAGE>
GOLD AND NATURAL RESOURCES FUND
- ---------------------------------
WORLDWIDE BOND FUND
- ---------------------------------
WORLDWIDE EMERGING MARKETS FUND
- ---------------------------------
WORLDWIDE HARD ASSETS FUND
- ---------------------------------
WORLDWIDE BALANCED FUND
Shares of the Funds 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
Funds 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 one or
more Funds. In particular, certain Funds 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 Funds.
VAN ECK WORLDWIDE INSURANCE TRUST
-----------------------------------
99 Park Avenue, New York, NY 10016
[LOGO] VAN ECK GLOBAL
THE UNUSUAL FUNDS
[LOGO] Van Eck Insurance Trust
September 3, 1996
VAN ECK
WORLDWIDE
INSURANCE TRUST
PROSPECTUS
Gold and Natural Resources Fund
Worldwide Bond Fund
Worldwide Emerging Markets Fund
Worldwide Hard Assets Fund
Worldwide Balanced Fund
[LOGO] VAN ECK GLOBAL
THE UNUSUAL FUNDS
<PAGE>
VAN ECK WORLDWIDE INSURANCE TRUST
99 PARK AVENUE, NEW YORK, N.Y. 10016
(212) 687-5200
Van Eck Worldwide Insurance Trust (the "Trust") is an open-end management
investment company currently consisting of five separate series: Gold and
Natural Resources Fund, Worldwide Bond Fund, Worldwide Emerging Markets Fund,
Worldwide Hard Assets Fund and Worldwide Balanced Fund (the "Funds"). Shares of
the Funds are offered only to separate accounts of various insurance companies
to fund the benefits of variable life insurance and variable annuity policies
("Contracts"). Each Fund has specific investment objectives.
TABLE OF CONTENTS
<TABLE>
<S> <C>
General Information..................................................... 2
Investment Objectives and Policies of the Funds......................... 2
Risk Factors............................................................ 6
Foreign Securities.................................................. 6
Foreign Currency Transactions....................................... 8
Futures and Options Transactions.................................... 9
Repurchase Agreements............................................... 10
Mortgage-Backed Securities.......................................... 11
Real Estate Securities.............................................. 11
Commercial Paper.................................................... 12
Direct Investments.................................................. 12
Investment Restrictions................................................. 13
Investment Advisory Services............................................ 16
The Distributor......................................................... 18
Portfolio Transactions and Brokerage.................................... 19
Trustees and Officers................................................... 21
Principal Shareholders.................................................. 25
Valuation of Shares..................................................... 26
Taxes................................................................... 27
Redemptions in Kind..................................................... 27
Performance............................................................. 27
Additional Information.................................................. 29
Financial Statements.................................................... 30
Appendix................................................................ 31
</TABLE>
This Statement of Additional Information is not a prospectus and should be read
in conjunction with the Trust's current Prospectus, dated September 3, 1996 (the
"Prospectus"), which is available at no charge upon written or telephone request
to the Trust at the address or telephone numbers set forth at the top of this
page.
Shareholders are advised to read and retain this Statement
of Additional Information for future reference
STATEMENT OF ADDITIONAL INFORMATION
September 3, 1996
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GENERAL INFORMATION
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 as Van Eck Variable Insurance
Products Trust. The Board of Trustees has authority to create additional series
or funds, each of which may issue a separate class of shares. There are
currently five series of the Trust: Gold and Natural Resources Fund, Worldwide
Bond Fund, Worldwide Emerging Markets Fund, Worldwide Hard Assets Fund and
Worldwide Balanced Fund (the "Funds"). The Worldwide Emerging Markets Fund and
Gold and Natural Resources Fund are classified as diversified funds and
Worldwide Bond Fund, Worldwide Balanced Fund and Worldwide Hard Assets Fund are
classified as non- diversified funds under the Investment Company Act of 1940,
as amended (the "1940 Act").
INVESTMENT OBJECTIVES AND POLICIES OF THE FUNDS
WORLDWIDE EMERGING MARKETS FUND
The Worldwide Emerging Markets Fund seeks long-term capital appreciation by
investing primarily in equity securities in emerging markets around the world.
Under normal conditions, at least 65% of the Fund's total assets will be
invested in Emerging Country and emerging market equity securities. An
"emerging market" or "Emerging Country" is any country that the World Bank, the
International Finance Corporation or the United Nations or its authorities has
determined to have a low or middle income economy. Emerging Countries can be
found in regions such as Asia, Latin America, Africa and Eastern Europe. The
countries that will not be considered Emerging Countries include the United
States, Australia, Canada, Japan, New Zealand and most countries located in
Western Europe such as Austria, Belgium, Denmark, Finland, France, Germany,
Great Britain, Ireland, Italy, the Netherlands, Norway, Spain, Sweden and
Switzerland.
The Fund considers emerging market securities to include securities which are
(i) principally traded in the capital markets of an emerging market country;
(ii) securities of companies that derive at least 50% of their total revenues
from either goods produced or services performed in Emerging Countries or from
sales made in Emerging Countries, regardless of where the securities of such
companies are principally traded; (iii) securities of companies organized under
the laws of, and with a principal office in an Emerging Country; (iv) securities
of investment companies (such as country funds) that principally invest in
emerging market securities; and (v) American Depositary Receipts (ADRs),
American Depositary Shares (ADSs), European Depositary Receipts (EDRs) and
Global Depositary Receipts (GDRs) with respect to the securities of such
companies.
Equity securities in which the Fund may invest include common stocks; preferred
stocks (either convertible or non-convertible); rights; warrants; direct equity
interests in trusts, partnerships, joint ventures and other unincorporated
entities or enterprises; convertible debt instruments; and special classes of
shares available only to foreign persons in those markets that restrict
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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.
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 or private issuers.
The Fund may, for temporary defensive purposes, invest more than 35% of its
total assets in securities which are not emerging market securities, such as
high grade, liquid debt securities of foreign and United States companies,
foreign governments and the U.S. Government, and their respective agencies,
instrumentalities, political subdivisions and authorities, as well as in money
market instruments denominated in U.S. dollars or a foreign currency. These
money market instruments include, but are not limited to, negotiable or short-
term deposits with domestic or foreign banks with total surplus and undivided
profits of at least $50 million; high quality commercial paper; and repurchase
agreements maturing within seven days with domestic or foreign dealers, banks
and other financial institutions deemed to be creditworthy under guidelines
approved by the Board of Trustees of the Fund. The commercial paper in which
the Fund may invest will, at the time of purchase, be rated P-1 or better by
Moody's Investors Service, Inc. ("Moody's"); A-1 or better by Standard & Poor's
Corporation ("S&P"); Fitch-1 by Fitch; Duff-1 by Duff & Phelps ("D&P"), or if
unrated, will be of comparable high qualify as determined by the Adviser.
WORLDWIDE HARD ASSETS FUND
The Fund will, under normal market conditions, invest at least 65% of its total
assets in "Hard Asset Securities." Hard Assets Securities include equity
securities of "Hard Asset Companies" and securities, including structured notes,
whose value is linked to the price of a commodity or a commodity index. The
term "Hard Asset Companies" includes companies that are directly or indirectly
(whether through supplier relationships, servicing agreements or otherwise)
engaged to a significant extent in the exploration, development, production or
distribution of one or more of the following: (i) precious metals, (ii) ferrous
and non-ferrous metals, (iii) gas, petroleum, petrochemicals or other
hydrocarbons, (iv) forest products, (v) real estate and (vi) other basic non-
agricultural commodities which, historically, have been produced and marketed
profitably during periods of significant inflation. Under normal market
conditions, the Fund will invest at least 5% of its assets in each of the first
five sectors listed above. The Fund has a fundamental policy of concentrating
in such industries and up to 50% of the Fund's assets may be invested in any one
of the above sectors. Precious metal and natural resource securities are at
times volatile and there may be sharp fluctuations in prices even during periods
of rising prices.
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The Fund may invest in equity securities. Equity securities include common and
preferred stocks; equity and equity index swap agreements; direct equity
interests in trusts, partnerships, joint ventures and other unincorporated
entities or enterprises; special classes of shares available only to foreign
persons in such markets that restrict the ownership of certain classes of equity
to nationals or residents of the country; convertible preferred stocks and
convertible debt instruments. The Fund may also invest in fixed-income
securities which include obligations issued or guaranteed by a government or any
political subdivisions, agencies, instrumentalities, or by a supranational
organization such as the World Bank or European Economic Community (or other
organizations which are chartered to promote economic development and are
supported by various governments and government entities), adjustable-rate
preferred stock, interest rate swaps, corporate bonds, debentures, notes,
commercial paper, certificates of deposit, time deposits, repurchase agreements,
and debt obligations which may have a call on a common stock or commodity by
means of a conversion privilege or attached warrants. The Fund may invest in
debt instruments of the U.S. Government and its agencies having varied
maturities.
The Fund may purchase securities, including structured notes, whose value is
linked to the price of a commodity or a commodity index. The Fund may purchase
and sell financial futures and commodity futures contracts and may also write,
purchase or sell put or call options on securities, foreign currencies,
commodities and commodity indices. The Fund may invest in asset-backed
securities such as collateralized mortgage obligations and other mortgage and
non-mortgage asset-backed securities. The Fund may also lend its portfolio
securities and borrow money for investment purposes (i.e. leverage its
portfolio).
The Fund may also invest in "when-issued" securities and "partly paid"
securities. The Appendix to this Statement of Additional Information contains
an explanation of the rating categories of Moody's and S&P relating to the
fixed-income securities and preferred stocks in which the Funds may invest,
including a description of the risks associated with each category. Although
the Fund will not invest in real estate directly, it may invest up to 50% of
its assets in equity securities of real estate investment trusts ("REITs") and
other real estate industry companies or companies with substantial real estate
investments. The Fund may therefore be subject to certain risks associated with
direct ownership of real estate and with the real estate industry in general.
WORLDWIDE BALANCED FUND
Worldwide Balanced Fund seeks long-term capital appreciation together with
current income.
Worldwide Balanced Fund may invest in equity securities. Equity securities
include common and preferred stocks; equity and equity index swap agreements;
direct equity interests in trusts, partnerships, joint ventures and other
unincorporated entities or enterprises; special classes of shares available only
to foreign persons in such markets that restrict the ownership of certain
classes of equity to nationals or residents of the country; convertible
preferred stocks and convertible debt instruments; financial futures contracts
and options on financial futures contracts; forward currency contracts and put
and call options on securities, securities indices and foreign currencies and
foreign currency swaps.
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The Fund may also invest in fixed-income securities which include obligations
issued or guaranteed by a government or any of its political subdivisions,
agencies, instrumentalities, or by a supranational organization such as the
World Bank or European Economic Community (or other organizations which are
chartered to promote economic development and are supported by various
governments and government entities), adjustable-rate preferred stock, interest
rate swaps, corporate bonds, debentures, notes, commercial paper, certificates
of deposit, time deposits, repurchase agreements, and debt obligations which may
have a call on a common stock or commodity by means of a conversion privilege or
attached warrants. The Fund may invest in debt instruments of the U.S.
government and its agencies having varied maturities. The Fund may invest in
asset-backed securities such as collateralized mortgage obligations and other
mortgage and non-mortgage asset-backed securities. The Fund may also lend its
portfolio securities and borrow money for investment purposes (i.e. leverage its
portfolio).
GOLD AND NATURAL RESOURCES FUND
Gold and Natural Resources Fund seeks long-term capital appreciation by
investing in equity and debt securities of companies engaged in the exploration,
development, production and distribution of gold and other natural resources
such as strategic and other metals, minerals, forest products, oil, natural gas
and coal. Current income is not an investment objective.
The Gold and Natural Resources Fund may invest in debt and equity securities of
companies engaged in the exploration, development, production of gold and other
natural resources. Gold, other precious metals and natural resources securities
are at times volatile and there may be sharp fluctuations in prices even during
periods of rising prices.
The Fund may invest in any type of security including, but not limited to,
common stocks and equivalents (such as convertible debt securities and
warrants), preferred stocks and bonds and debt obligations of domestic and
foreign companies, governments (including their political subdivisions) and
international organizations. The Fund may invest in South African issuers. The
Fund may purchase and sell financial and commodity futures contracts and options
on financial futures and commodity futures contracts and may also write,
purchase or sell put or call options on securities, foreign currencies,
commodities and commodity indices.
Although the Fund will not invest in real estate directly, it may invest a
portion of its assets not invested in the gold, precious and non precious metals
and natural resources sector in equity securities of REITs and other real estate
industry companies or companies with substantial real estate investments. The
Fund may therefore be subject to certain risks associated with direct ownership
of real estate and with the real estate industry in general.
WORLDWIDE BOND FUND
Worldwide Bond Fund seeks high total return through a flexible policy of
investing globally, primarily in debt securities.
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Total return is comprised of current income and capital appreciation. The Fund
attempts to achieve its objective by taking advantage of investment
opportunities in the United States as well as in other countries throughout the
world where opportunities may be more rewarding and may emphasize either
component of total return. Normally, the Fund will have at least 65% of its
total assets invested in bonds of varying maturities.
The Fund may invest in any type of security including, but not limited to,
common stocks and equivalents (such as convertible debt securities and
warrants), preferred stocks and bonds and debt obligations of domestic and
foreign companies, governments (including their political subdivisions) and
international organizations. The Fund may buy and sell financial futures
contracts and options on financial futures contracts, which may include bond and
stock index futures contracts and foreign currency futures contracts. The Fund
may write, purchase or sell put or call options on securities and foreign
currencies. In addition, the Fund may lend its portfolio securities and borrow
money for investment purposes (i.e. leverage its portfolio).
The Fund may invest in "when-issued" securities and collateralized mortgage
obligations. The Appendix to this Statement of Additional Information contains
an explanation of the rating categories of Moody's and S&P relating to the
fixed-income securities and preferred stocks in which the Fund may invest,
including a description of the risks associated with each category.
RISK FACTORS
FOREIGN SECURITIES
Investors should recognize that investing in foreign securities involves certain
special considerations which are not typically associated with investing in
United States securities. Since investments in foreign companies will
frequently involve currencies of foreign countries, and since the Funds may hold
securities and funds in foreign currencies, the Funds may be affected favorably
or unfavorably by changes in currency rates and in exchange control regulations,
if any, and may incur costs in connection with conversions between various
currencies. Most foreign stock markets, while growing in volume of trading
activity, have less volume than the New York Stock Exchange ("NYSE"), and
securities of some foreign companies are less liquid and more volatile than
securities of comparable domestic companies. Similarly, volume and liquidity in
most foreign bond markets are less than in the United States and at times,
volatility of price can be greater than in the United States. Fixed commissions
on foreign securities exchanges are generally higher than negotiated commissions
on United States exchanges, although the Funds endeavor to achieve the most
favorable net results on their portfolio transactions. There is generally less
government supervision and regulation of securities exchanges, brokers and
listed companies in foreign countries than in the United States. In addition,
with respect to certain foreign countries, there is the possibility of exchange
control restrictions, expropriation or confiscatory taxation, political,
economic or social instability, which could affect investments in those
countries. Foreign securities such as those purchased by the Funds may be
subject to foreign government taxes, higher custodian fees and dividend
collection fees which could reduce the yield on such securities.
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Investments may be made from time to time by Worldwide Balanced Fund, Worldwide
Emerging Markets Fund and Worldwide Hard Assets Fund in companies in developing
countries as well as in developed countries. Worldwide Hard Assets Fund and
Worldwide Emerging Markets Fund may have a substantial portion of their assets
in developing countries. Although there is no universally accepted definition,
a developing country is generally considered by the Adviser (or Sub-Adviser) to
be a country which is in the initial stages of industrialization. Shareholders
should be aware that investing in the equity and fixed income markets of
developing countries involves exposure to unstable governments, economies based
on only a few industries, and securities markets which trade a small number of
securities. Securities markets of developing countries tend to be more volatile
than the markets of developed countries; however, such markets have in the past
provided the opportunity for higher rates of return to investors.
The value and liquidity of investments in developing countries may be affected
favorably or unfavorably by political, economic, fiscal, regulatory or other
developments in the particular countries or neighboring regions. The extent of
economic development, political stability and market depth of different
countries varies widely. Certain countries in the Asia region, including
Cambodia, China, Laos, Indonesia, Malaysia, the Philippines, Thailand and
Vietnam are either comparatively underdeveloped or are in the process of
becoming developed. Investments typically involve greater potential for gain or
loss than investments in securities of issuers in developed countries.
The securities markets in developing countries are substantially smaller, less
liquid and more volatile than the major securities markets in the United States.
A high proportion of the shares of many issuers may be held by a limited number
of persons and financial institutions, which may limit the number of shares
available for investment by the portfolio. Similarly, volume and liquidity in
the bond markets in developing countries are less than in the United States and,
at times, price volatility can be greater than in the United States. A limited
number of issuers in developing countries' securities markets may represent a
disproportionately large percentage of market capitalization and trading value.
The limited liquidity of securities markets in developing countries may also
affect the Fund's ability to acquire or dispose of securities at the price and
time it wishes to do so. Accordingly, during periods of rising securities
prices in the more illiquid securities markets, the Fund's ability to
participate fully in such price increases may be limited by its investment
policy of investing not more than 15% of its total net assets in illiquid
securities. Conversely, the Fund's inability to dispose fully and promptly of
positions in declining markets will cause the Fund's net asset value to decline
as the value of the unsold positions is marked to lower prices. In addition,
securities markets in developing countries are susceptible to being influenced
by large investors trading significant blocks of securities.
Political and economic structures in many of such countries may be undergoing
significant evolution and rapid development, and such countries may lack the
social, political and economic stability characteristic of the United States.
Certain of such countries have in the past failed to recognize private property
rights and have at times nationalized or expropriated the assets of private
companies. As a result, the risks described above, including the risks of
nationalization or expropriation of assets, may be heightened. In addition,
unanticipated political or social
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developments may affect the value of the Funds' investments in those countries
and the availability to the Funds of additional investments in those countries.
Economies of developing countries may differ favorably or unfavorably from the
United States economy in such respects as rate of growth of gross national
product, rate of inflation, capital reinvestment, resource self-sufficiency and
balance of payments position. As export-driven economies, the economies of
countries in the Asia Region are affected by developments in the economies of
their principal trading partners. Hong Kong, Japan and Taiwan have limited
natural resources, resulting in dependence on foreign sources for certain raw
materials and economic vulnerability to global fluctuations of price and supply.
Certain developing countries do not have comprehensive systems of laws, although
substantial changes have occurred in many such countries in this regard in
recent years. Laws regarding fiduciary duties of officers and directors and the
protection of shareholders may not be well developed. Even where adequate law
exists in such 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.
Trading in futures contracts traded on foreign commodity exchanges may be
subject to the same or similar risks as trading in foreign securities.
FOREIGN CURRENCY TRANSACTIONS
Under normal circumstances, consideration of the prospects for currency exchange
rates will be incorporated into the long-term investment decisions made for the
Funds, with regard to overall diversification strategies. Although the Funds
value their assets daily in terms of U.S. dollars, they do not intend physically
to convert their holdings of foreign currencies into U.S. dollars on a daily
basis. The Funds will do so from time to time, and investors should be aware of
the costs of currency conversion. Although foreign exchange dealers do not
charge a fee for conversion, they do realize a profit based on the difference
(the "spread") between the prices at which they are buying and selling various
currencies. Thus, a dealer may offer to sell a foreign currency to the Funds at
one rate, while offering a lesser rate of exchange should the Funds desire to
resell that currency to the dealer. The Funds will use forward contracts, along
with futures contracts and put and call options, to "lock in" the U.S. dollar
price of a security bought or sold and as part of their overall hedging
strategy. The Funds will conduct their foreign currency exchange transactions,
either on a spot (i.e., cash) basis at the spot rate prevailing in the foreign
currency exchange market, or through purchasing put and call options on, or
entering into futures contracts or forward contracts to purchase or sell foreign
currencies. See "Futures and Options Transactions."
A forward foreign currency contract, like a futures contract, involves an
obligation to purchase or sell a specific amount of currency at a future date,
which may be any fixed number of days from the date of the contract agreed upon
by the parties, at a price set at the time of the contract. Unlike foreign
currency futures contracts which are standardized exchange-traded contracts,
forward currency contracts are usually traded in the interbank market conducted
directly between
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currency traders (usually large commercial banks) and their customers. A forward
contract generally has no deposit requirement, and no commissions are charged at
any stage for such trades.
The Adviser will not commit any Fund to deliver under forward contracts an
amount of foreign currency in excess of the value of the Fund's portfolio
securities or other assets or obligations denominated in that currency. The
Funds' Custodian will place the securities being hedged, cash or U.S. Government
securities or debt securities into a segregated account of the Fund in an amount
equal to the value of the Fund's total assets committed to the consummation of
forward foreign currency contracts to ensure that the Fund is not leveraged
beyond applicable limits. If the value of the securities placed in the
segregated account declines, additional cash or securities will be placed in the
account on a daily basis so that the value of the account will equal the amount
of the Funds' commitments with respect to such contracts. At the maturity of a
forward contract, the Funds may either sell the portfolio security and make
delivery of the foreign currency, or they may retain the security and terminate
their contractual obligation to deliver the foreign currency prior to maturity
by purchasing an "offsetting" contract with the same currency trader obligating
it to purchase, on the same maturity date, the same amount of the foreign
currency. There can be no assurance, however, that the Funds will be able to
effect such a closing purchase transaction.
It is impossible to forecast the market value of a particular portfolio security
at the expiration of the contract. Accordingly, it may be necessary for the
Funds to purchase additional foreign currency on the spot market (and bear the
expense of such purchase) if the market value of the security is less than the
amount of foreign currency that the Funds are obligated to deliver and if a
decision is made to sell the security and make delivery of the foreign currency.
If the Funds retain the portfolio security and engage in an offsetting
transaction, the Funds will incur a gain or a loss to the extent that there has
been movement in forward contract prices. Additionally, although such contracts
tend to minimize the risk of loss due to a decline in the value of the hedged
currency, at the same time they tend to limit any potential gain which might
result should the value of such currency increase.
FUTURES AND OPTIONS TRANSACTIONS
The Funds may invest in options on futures contracts. Compared to the purchase
or sale of futures contracts, the purchase and sale of options on futures
contracts involves less potential risk to the Funds because the maximum exposure
is the amount of the premiums paid for the options.
The use of financial futures contracts and commodity futures contracts (Gold and
Natural Resources Fund and Worldwide Hard Assets Fund) options on such futures
contracts and commodities (Gold and Natural Resources Fund and Worldwide Hard
Assets Fund), may reduce a Fund's exposure to fluctuations in the prices of
portfolio securities and may prevent losses if the prices of such securities
decline. Similarly, such investments may protect a Fund against fluctuation in
the value of securities in which a Fund is about to invest. Because the
financial markets in the developing countries are not as developed in the United
States, these financial
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investments may not be available to the Funds and the Funds may be unable to
hedge certain risks.
The use of financial futures and commodity futures (Gold and Natural Resources
Fund and Worldwide Hard Assets Fund) contracts and options on such futures
contracts and commodities (Gold and Natural Resources Fund and Worldwide Hard
Assets Fund), as hedging instruments involves several risks. First, there can
be no assurance that the prices of the futures contracts or options and the
hedged security or the cash market position will move as anticipated. If prices
do not move as anticipated, the Funds may incur a loss on their investment, may
not achieve the hedging protection anticipated and/or incur a loss greater than
if it had entered into a cash market position. Second, investments in options,
futures contracts and options on futures contracts may reduce the gains which
would otherwise be realized from the sale of the underlying securities or assets
which are being hedged. Third, positions in futures contracts and options can
be closed out only on an exchange that provides a market for those instruments.
There can be no assurances that such a market will exist for a particular
futures contract or option. If 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.
It is the policy of the Funds to meet the requirements of the Internal Revenue
Code of 1986, as amended (the "Code"), to qualify as a regulated investment
company to prevent double taxation of the Funds and their shareholders. One of
these requirements is that less than 30% of a Fund's gross income must be
derived from gains from the sale or other disposition of securities held for
less than three months. Another test requires that at least 90% of a Fund's
gross income be derived from dividends, interest, payment with respect to
securities loans and gains from the sale or other disposition of stocks or other
securities. Gains from commodity futures contracts do not currently qualify as
income for purposes of the 90% test. The extent to which the Funds may engage
in options and futures contracts transactions may be materially limited by these
tests.
REPURCHASE AGREEMENTS
The Funds will not enter into a repurchase agreement with a maturity of more
than seven business days if, as a result, more than 10% of the value of a Fund's
total net assets would then be invested in such repurchase agreements and other
illiquid securities, except that Worldwide Emerging Markets Fund, Worldwide Hard
Assets Fund and Worldwide Balanced Fund will be limited to 15% of total net
assets. A Fund will only enter into a repurchase agreement where (i) the
underlying securities are of the type which the Fund's investment policies would
allow it to purchase directly, (ii) the market value of the underlying security,
including accrued interest, will be at all times equal to or exceed the value of
the repurchase agreement, and (iii) payment for the underlying securities is
made only upon physical delivery or evidence of book-entry transfer to the
account of the custodian or a bank acting as agent.
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MORTGAGE-BACKED SECURITIES
The Funds (except Gold and Natural Resources Fund) may invest in mortgage-backed
securities. A mortgage-backed security may be an obligation of the issuer
backed by a mortgage or pool of mortgages or a direct interest in an underlying
pool of mortgages. The value of mortgage-backed securities may change due to
shifts in the market's perception of issuers. In addition, regulatory or tax
changes may adversely affect the mortgage securities market as a whole. Stripped
mortgage-backed securities are created when a U.S. governmental agency or a
financial institution separates the interest and principal components of a
mortgage-backed security and sells them as individual securities. The holder of
the "principal-only" security ("PO") receives the principal payments made by the
underlying mortgage-backed security, while the holder of the "interest-only"
security ("IO") receives interest payments from the same underlying security.
The prices of stripped mortgage-backed securities may be particularly affected
by change in interest rates. As interest rates fall, prepayment rates tend to
increase, which tends to reduce the price of IOs and increase prices of POs.
Rising interest rates can have the opposite effect. Changes in interest rates
may also affect the liquidity of IOs and POs.
REAL ESTATE SECURITIES
Although Gold and Natural Resources Fund and Worldwide Hard Assets Fund will not
invest in real estate directly, each of these Funds may invest a percentage of
its assets in equity securities of REITs and other real estate industry
companies or companies with substantial real estate investments. Worldwide Hard
Assets Fund may invest up to 50% of its assets in such securities. Gold and
Natural Resources Fund and Worldwide Hard Assets Fund are therefore subject to
certain risks associated with direct ownership of real estate and with the real
estate industry in general. These risks include, among others: possible declines
in the value of real estate; possible lack of availability of mortgage funds;
extended vacancies of properties; risks related to general and local economic
conditions; overbuilding; increases in competition, property taxes and operating
expenses; changes in zoning laws; costs resulting from the clean-up of, and
liability to third parties for damages resulting from, environmental problems;
casualty or condemnation losses; uninsured damages from floods, earthquakes or
other natural disasters; limitations on and variations in rents; and changes in
interest rates.
REITs are pooled investment vehicles which invest primarily in income producing
real estate or real estate related loans or interests. REITs are generally
classified as equity REITs, mortgage REITs or hybrid REITs. Equity REITs invest
the majority of their assets directly in real property and derive income
primarily from the collection of rents. Equity REITs can also realize capital
gains by selling properties that have appreciated in value. Mortgage REITs
invest the majority of their assets in real estate mortgages and derive income
from the collection of interest payments. REITs are not taxed on income
distributed to shareholders provided they comply with several requirements of
the Code.
Investing in REITs involves certain unique risks in addition to those risks
associated with investing in the real estate industry in general. Equity REITs
may be affected by changes in the value of the underlying property owned by the
REITs, while mortgage REITs may be affected by
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the quality of any credit extended. REITs are dependent upon management skills,
are not diversified, and are subject to the risks of financing projects. REITs
are subject to heavy cash flow dependency, default by borrowers, self-
liquidation and the possibilities of failing to qualify for the exemption from
tax for distributed income under the Code. REITs (especially mortgage REITs) are
also subject to interest rate risk (i.e., as interest rates rise, the value of
the REIT may decline).
COMMERCIAL PAPER
Worldwide Emerging Markets Fund, Worldwide Balanced Fund, Worldwide Hard Assets
Fund and Worldwide Bond Fund may invest in commercial paper which is indexed to
certain specific foreign currency exchange rates. The terms of such commercial
paper provide that its principal amount is adjusted upwards or downwards (but
not below zero) at maturity to reflect changes in the exchange rate between two
currencies while the obligation is outstanding. The Funds will purchase such
commercial paper with the currency in which it is denominated and, at maturity,
will receive interest and principal payments thereon in that currency, but the
amount or principal payable by the issuer at maturity will change in proportion
to the change (if any) in the exchange rate between two specified currencies
between the date the instrument is issued and the date the instrument matures.
While such commercial paper entails the risk of loss of principal, the potential
for realizing gains as a result of changes in foreign currency exchange rate
enables the Funds to hedge or cross-hedge against a decline in the U.S. dollar
value of investments denominated in foreign currencies while providing an
attractive money market rate of return. The Funds will purchase such commercial
paper for hedging purposes only, not for speculation. The staff of the
Securities and Exchange Commission is currently considering whether the purchase
of this type of commercial paper would result in the issuance of a "senior
security" within the meaning of the 1940 Act. The Funds believe that such
investments do not involve the creation of such a senior security, but
nevertheless will establish a segregated account with respect to its investments
in this type of commercial paper and to maintain in such account cash not
available for investment or U.S. Government securities or other liquid high
quality debt securities having a value equal to the aggregate principal amount
of outstanding commercial paper of this type.
DIRECT INVESTMENTS
Worldwide Emerging Markets Fund, Worldwide Hard Assets Fund and Worldwide
Balanced Fund may invest up to 10% of their total assets in direct investments.
Direct investments include (i) the private purchase from an enterprise of an
equity interest in the enterprise in the form of shares of common stock or
equity interests in trusts, partnerships, joint ventures or similar enterprises,
and (ii) the purchase of such an equity interest in an enterprise from a
principal investor in the enterprise. In each case the Funds will, at the time
of making the investment, enter into a shareholder or similar agreement with the
enterprise and one or more other holders of equity interests in the enterprise.
The Sub-Adviser anticipates that these agreements will, in appropriate
circumstances, provide the Funds with the ability to appoint a representative to
the board of directors or similar body of the enterprise and for eventual
disposition of the Funds' investment in the enterprise. Such a representative
of the Funds will be expected to provide the
12
<PAGE>
Funds with the ability to monitor its investment and protect its rights in the
investment and will not be appointed for the purpose of exercising management or
control of the enterprise.
Certain of the Funds' direct investments will include investments in smaller,
less seasoned companies. These companies may have limited product lines,
markets or financial resources, or they may be dependent on a limited management
group. The Funds do not anticipate making direct investments in start-up
operations, although it is expected that in some cases the Funds' direct
investments will fund new operations for an enterprise which itself is engaged
in similar operations or is affiliated with an organization that is engaged in
similar operations.
Direct investments may involve a high degree of business and financial risk that
can result in substantial losses. Because of the absence of any public trading
market for these investments, the Funds may take longer to liquidate these
positions than would be the case for publicly traded securities. Although these
securities may be resold in privately negotiated transactions, the prices on
these sales could be less than those originally paid by the Funds. Furthermore,
issuers whose securities are not publicly traded may not be subject to public
disclosure and other investor protection requirements applicable to publicly
traded securities. If such securities are required to be registered under the
securities laws of one or more jurisdictions before being resold, the Funds may
be required to bear the expense of the registration. In addition, in the event
the Funds sell unlisted foreign securities, any capital gains realized on such
transactions may be subject to higher rates of taxation than taxes payable on
the sale of listed securities. Direct investments are generally considered
illiquid and will be aggregated with other illiquid investments for purposes of
the limitation on illiquid investments.
INVESTMENT RESTRICTIONS
The following restrictions are fundamental policies which cannot be changed
without the approval of the holders of a majority of a Funds' outstanding
shares. Such majority is defined by the 1940 Act as the vote of the lesser of
(i) 67% or more of the outstanding shares present at a meeting, if the holders
of more than 50% of the outstanding shares are present in person or by proxy or
(ii) more than 50% of a Fund's outstanding shares.
A Fund may not:
1. Purchase or sell real estate, although the Funds may purchase securities of
companies which deal in real estate, including securities of real estate
investment trusts, and may purchase securities which are secured by
interests in real estate;
2. Purchase or sell commodities or commodity futures contracts (for the
purpose of this restriction, forward foreign exchange contracts are not
deemed to be a commodity or commodity contract) except that the Worldwide
Emerging Markets Fund may, for hedging and other purposes, and the
Worldwide Hard Assets Fund, Worldwide Balanced Fund, Gold and Natural
Resources Fund and Worldwide Bond Fund may, for hedging purposes only, buy
and sell financial futures contracts which may include stock and bond index
futures contracts and foreign currency futures contracts. The Gold and
Natural
13
<PAGE>
Resources Fund and Worldwide Hard Assets Fund may, for hedging purposes
only, buy and sell commodity futures contracts on gold and other natural
resources or on an index thereon. A Fund may not commit more than 5% of its
total assets to initial margin deposits on futures contracts not used for
hedging purposes (except that with respect to Worldwide Emerging Markets
Fund, Worldwide Hard Assets Fund and Worldwide Balanced Fund, margin
deposits for futures positions entered into for bona fide hedging purposes
are excluded from the 5% limitation). In addition, Gold and Natural
Resources Fund and Worldwide Hard Assets Fund may invest in gold bullion
and coins;
3. Make loans, except by (i) purchase of marketable bonds, debentures,
commercial paper and similar marketable evidences of indebtedness (such as
structured notes, indexed securities and swaps with respect to Worldwide
Hard Assets Fund) and (ii) repurchase agreements. The Funds may lend to
broker-dealers portfolio securities with an aggregate market value up to
one-third of its total assets;
4. As to 75% of the total assets of the Gold and Natural Resources Fund and
Worldwide Emerging Markets Fund purchase securities of any issuer, if
immediately thereafter (i) more than 5% of a Fund's total assets (taken at
market value) would be invested in the securities of such issuer, or (ii)
with respect to the Gold and Natural Resource Fund, more than 10% of the
outstanding securities of any class of such issuer would be held by a Fund;
and in the case of Worldwide Emerging Markets Fund more than 10% of the
outstanding voting securities of such issuer would be held by a Fund
(provided that these limitations do not apply to obligations of the United
States Government, its agencies or instrumentalities). This limitation
does not apply to the Worldwide Bond Fund, Worldwide Hard Assets Fund and
Worldwide Balanced Fund;
5. Underwrite any issue of securities (except to the extent that a Fund may be
deemed to be an underwriter within the meaning of the Securities Act of
1933, as amended, in the disposition of restricted securities);
6. Borrow money, except that each of the Funds may borrow up to 30% of the
value of its net assets to increase its holding of portfolio securities;
7. Issue senior securities except insofar as a Fund may be deemed to have
issued a senior security by reason of (i) borrowing money in accordance
with restrictions described above; (ii) entering into forward foreign
currency contracts; (iii) financial futures contracts purchased on margin
(iv) commodity futures contracts purchased on margin (Gold and Natural
Resources Fund) and; (v) foreign currency swaps (Worldwide Emerging Markets
Fund, Worldwide Hard Assets Fund, Worldwide Balanced Fund);
8 Invest more than 25 percent of the value of a Fund's total assets in the
securities of issuers having their principal business activities in the
same industry, except the Gold and Natural Resources Fund, Worldwide
Emerging Markets Fund and Worldwide Hard Assets Fund, and provided that
this limitation does not apply to obligations issued or guaranteed by the
United States Government, its agencies or instrumentalities;
14
<PAGE>
9. Make investments for the purpose of exercising control or management;
10. Invest in real estate limited partnerships or in oil, gas or other mineral
leases.
The following policies have been adopted by the Board of Trustees with respect
to each Fund and may be changed without shareholder approval.
A Fund may not:
11. Exclusive of Worldwide Balanced Fund, Worldwide Emerging Markets Fund and
Worldwide Hard Assets Fund, purchase securities of other open-end
investment companies except as part of a merger, consolidation,
reorganization or acquisition of Assets; (i) purchase more than 3% of the
total outstanding voting stock of any investment company, (ii) invest more
than 5% of any of the Fund's total assets in securities of any one
investment company or (iii) invest more than 10% of such value in
investment companies in general. In addition, the Fund may not invest in
the securities of closed-end investment companies, except by purchase in
the open market involving only customary broker's commissions.
12. Invest in securities which are (i) subject to legal or contractual
restrictions on resale ("restricted securities"), or in securities for
which there is no readily available market quotation or engage in a
repurchase agreement maturing in more than seven days with respect to any
security, if as a result, more than 10% of its total net assets would be
invested in such securities, except that Worldwide Emerging Markets Fund,
Worldwide Hard Assets Fund and Worldwide Balanced Fund will not invest more
than 15% of the value of their total net assets in such securities and;
(ii) with respect to Worldwide Emerging Markets Fund, Worldwide Hard Assets
Fund and Worldwide Balanced Fund are "illiquid" securities, including
repurchase agreements maturing in more than 7 days and options traded over-
the-counter if the result is that more than 15% of its total net assets
would be invested in such securities;
13. Invest more than 5 percent of the value of its total assets in securities
of companies having together with their predecessors, a record of less than
three years of continuous operation (this restriction does not apply to the
Worldwide Emerging Markets Fund, Worldwide Hard Assets Fund and Worldwide
Balanced Fund);
14. Write, purchase or sell puts, calls, straddles, spreads or combinations
thereof, except that the Funds may purchase or sell puts and calls on
foreign currencies and on securities as described under "Futures and
Options Transactions" herein and in the Prospectus and that these Funds may
write, purchase or sell put and call options on financial futures
contracts, which include bond and stock index futures contracts and Gold
and Natural Resources Fund and Worldwide Hard Assets Fund may write,
purchase, or sell put and call options on gold or other natural resources
or an index thereon and on commodity futures contracts on gold or other
natural resources or an index thereon;
15
<PAGE>
15. Purchase participations or other interests (other than equity stock
interests) in oil, gas or other mineral exploration or development
programs;
16. Invest more than 5% of its total assets in warrants, whether or not the
warrants are listed on the New York or American Stock Exchanges or more
than 2% of the value of the assets of a Fund (except Worldwide Balanced
Fund, Worldwide Emerging Markets Fund and Worldwide Hard Assets Fund) in
warrants which are not listed. Warrants acquired in units or attached to
securities are not included in this restriction;
17. Mortgage, pledge or otherwise encumber its assets except to secure
borrowings effected within the limitations set forth in restriction (6);
18. Except for Worldwide Emerging Markets Fund and Worldwide Hard Assets Fund,
make short sales of securities, except that the Worldwide Balanced Fund,
Gold and Natural Resources Fund and Worldwide Bond Fund may engage in the
transactions specified in restrictions (1), (2) and (14);
19. Purchase any security on margin, except that it may obtain such short-term
credits as are necessary for clearance of securities transactions and, may
make initial or maintenance margin payments in connection with options and
futures contracts and related options and borrowing effected within the
limitations set forth in restriction (6);
20. Participate on a joint or joint and several basis in any trading account in
securities, although transactions for the Funds and any other account under
common or affiliated management may be combined or allocated between the
Funds and such account;
21. Purchase or retain a security of any issuer if any of the officers,
directors or Trustees of a Fund or its investment adviser owns beneficially
more than 1/2 of 1% of the securities of such issuer, or if such persons
taken together own more than 5% of the securities of such issuer.
If a percentage restriction is adhered to at the time of investment, a later
increase or decrease in percentage resulting from a change in values of
portfolio securities or amount of net assets will not be considered a violation
of any of the foregoing restrictions.
INVESTMENT ADVISORY SERVICES
The investment adviser and manager of the Funds is Van Eck Associates
Corporation (the "Adviser"), a Delaware corporation, pursuant to an Advisory
Agreement with the Trust dated as of August 30, 1989. The Adviser furnishes an
investment program for the Funds and determines, subject to the overall
supervision and review of the Board of Trustees, what investments should be
purchased, sold or held.
16
<PAGE>
Fiduciary International, Inc. ("FII"), a New York Corporation, is expected to
serve as sub-adviser to the Worldwide Balanced Fund pursuant to a Sub-Investment
Advisory Agreement with the trust dated May 31, 1994, when the Fund's assets
reach a level at which it is appropriate to utilize the sub-investment adviser's
services. Peregrine Asset Management (Hong Kong) Limited ("PAM"), a Hong Kong
Corporation, is sub-adviser to the Worldwide Emerging Markets Fund pursuant to a
Sub-Investment Advisory Agreement dated October 9, 1995.
The Adviser (and Sub-Adviser) provides the Funds with office space, facilities
and simple business equipment and provides the services of consultants,
executive and clerical personnel for administering the affairs of the Funds.
Except as provided for in the Advisory Agreement or Sub-Investment Advisory
Agreement, the Adviser (and Sub-Adviser) compensates all executive and clerical
personnel and Trustees of the Trust if such persons are employees or affiliates
of the Adviser or its affiliates. The advisory fee is computed daily and paid
monthly.
The Advisory and Sub-Advisory Agreements provide that they shall each continue
in effect from year to year with respect to a Fund as long as it is approved at
least annually both (i) by a vote of a majority of the outstanding voting
securities of the Fund (as defined in the 1940 Act) or by the Trustees of the
Trust, and (ii) in either event a vote of a majority of the Trustees who are not
parties to the Advisory Agreement or "interested persons" of any party thereto,
cast in person at a meeting called for the purpose of voting on such approval.
The Advisory and Sub-Advisory Agreements may be terminated on 60 days' written
notice by either party and will terminate automatically if it is assigned within
the meaning of the 1940 Act. The Advisory Agreements for each of the Funds and
the Sub-Advisory Agreement for Worldwide Balanced Fund were reapproved by the
Board of Trustees on April 23, 1996. The Sub-Advisory Agreement for Worldwide
Emerging Markets Fund was approved by the Board of Trustees on July 18, 1995.
The expenses borne by each of the Funds include the charges and expenses of the
transfer and dividend disbursing agent, custodian fees and expenses, legal,
auditors' fees and expenses, brokerage commissions for portfolio transactions,
taxes, (if any), the advisory and administrative fees, extraordinary expenses
(as determined by the Trustees of the Trust), expenses of shareholder and
Trustee meetings and of preparing, printing and mailing proxy statements,
reports and other communications to shareholders, expenses of preparing and
setting in type prospectuses and periodic reports and expenses of mailing them
to current shareholders, legal and accounting expenses, expenses of registering
and qualifying shares for sale (including compensation of the Adviser's
employees in relation to the time spent on such matters), fees of Trustees who
are not "interested persons" of the Adviser, membership dues of the Investment
Company Institute, fidelity bond and errors and omissions insurance premiums,
cost of maintaining the books and records of each Fund, and any other charges
and fees not specifically enumerated as an obligation of the Distributor or
Adviser.
The management fee for each of Gold and Natural Resources Fund and Worldwide
Bond Fund is based on an annual rate of 1% of the first $500 million of average
daily net assets, .90 of 1% on the next $250 million and .70 of 1% in excess of
$750 million. Prior to September 29, 1995, the management fee for each of Gold
and Natural Resources Fund and Worldwide Bond Fund was based on an annual rate
of .75 of 1% of the first $500 million of average daily net assets, .65 of 1% on
the next $250 million and .50 of 1% in excess of $750 million. Worldwide
Balanced Fund
17
<PAGE>
pays the Adviser a fee of .75 of 1% of average daily net assets. From this fee
the Adviser pays the Sub-Adviser a fee of .50 of 1% of average daily net assets.
The management fee for the Worldwide Hard Assets Fund and the Worldwide Emerging
Markets Fund are computed daily and paid monthly at an annual rate of 1% of
average daily net assets, which includes the fee paid to the Adviser for
accounting and administrative services. From the fee paid by the Worldwide
Emerging Markets Fund, the Adviser pays the Sub-Adviser a fee of .50 of 1% of
average daily net assets.
For the fiscal years ended April 30, 1994, April 30, 1995 and April 30, 1996,
the Adviser earned fees with respect to Gold and Natural Resources Fund, of
$466,722, $837,780 and $1,251,773, respectively. The Adviser earned fees for
the same periods with respect to Worldwide Bond Fund of $582,521, $641,065 and
$985,741, respectively. There were no fee waivers or expense reimbursements
with respect to these Funds for this period. Both the Adviser and Sub-Adviser of
Worldwide Balanced Fund waived advisory fees from the date of the Fund's
commencement of operations (December 23, 1994) to April 30, 1995 and for the
fiscal year ended April 30, 1996. In addition, during the same time periods the
Adviser assumed the operating expenses of Worldwide Balanced Fund. The Adviser
waived advisory fees from Worldwide Hard Assets Fund from the date of the Fund's
commencement of operations (August 21, 1995) to April 30, 1996 and assumed
Worldwide Hard Assets Fund's operating expenses. Both the Adviser and Sub-
Adviser of Worldwide Emerging Markets Fund waived advisory fees from the date of
the Fund's commencement of operations (December 21, 1995) to April 30, 1996. In
addition, during the same time period the Adviser assumed the operating expenses
of Worldwide Emerging Markets Fund.
The Adviser also performs accounting and administrative services for Worldwide
Balanced Fund pursuant to a written agreement. For these accounting and
administrative services, Worldwide Balanced Fund pays .25 of 1% of its
respective average daily net assets.
Under the Advisory Agreement and the Administrative Services Agreement, the
Adviser determines the net asset value per share and maintains the accounting
records of the Funds. For these services the agreements provide for
reimbursement to the Adviser.
Mr. John C. van Eck is Chairman of the Board of Directors of the Adviser as well
as President and Trustee of the Trust.
THE DISTRIBUTOR
Shares of the Funds are offered on a continuous basis and are distributed
through Van Eck Securities Corporation, 99 Park Avenue, New York, New York (the
"Distributor"), a wholly-owned subsidiary of Van Eck Associates Corporation. The
Trustees of the Trust have approved a Distribution Agreement appointing the
Distributor as distributor of shares of the Funds. The Distribution Agreements
for each of the Funds were reapproved by action of the Trustees on April 23,
1996.
18
<PAGE>
The Distribution Agreement provides that the Distributor will pay all fees and
expenses in connection with printing and distributing prospectuses and reports
for use in offering and selling shares of the Funds and preparing, printing and
distributing advertising or promotional materials. The Funds will pay all fees
and expenses in connection with registering and qualifying their shares under
federal and state securities laws.
PORTFOLIO TRANSACTIONS AND BROKERAGE
The Adviser (or Sub-Adviser) is responsible for decisions to buy and sell
securities and other investments for the Funds, the selection of brokers and
dealers to effect the transactions and the negotiation of brokerage commissions,
if any. In transactions on stock and commodity exchanges in the United States,
these commissions are negotiated, whereas on foreign stock and commodity
exchanges these commissions are generally fixed and are generally higher than
brokerage commissions in the United States. In the case of securities traded on
the over-the-counter markets, there is generally no stated commission, but the
price usually includes an undisclosed commission or markup. In underwritten
offerings, the price includes a disclosed, fixed commission or discount. Most
short term obligations are normally traded on a "principal" rather than agency
basis. This may be done through a dealer (e.g., securities firm or bank) who
buys or sells for its own account rather than as an agent for another client, or
directly with the issuer. A dealer's profit, if any, is the difference, or
spread, between the dealer's purchase and sale price for the obligation.
In purchasing and selling the Funds' portfolio investments, it is the Adviser's
(or Sub-Adviser's) policy to obtain quality execution at the most favorable
prices through responsible broker-dealers. In selecting broker-dealers, the
Adviser (or Sub-Adviser) will consider various relevant factors, including, but
not limited to, the size and type of the transaction; the nature and character
of the markets for the security or asset to be purchased or sold; the execution
efficiency, settlement capability, and financial condition of the broker-
dealer's firm; the broker-dealer's execution services rendered on a continuing
basis; and the reasonableness of any commissions.
The Adviser (or Sub-Adviser) may cause the Funds to pay a broker-dealer who
furnishes brokerage and/or research services a commission that is in excess of
the commission another broker-dealer would have received for executing the
transaction if it is determined that such commission is reasonable in relation
to the value of the brokerage and/or research services as defined in Section
28(e) of the Securities Exchange Act of 1934, as amended, which have been
provided. Such research services may include, among other things, analyses and
reports concerning issuers, industries, securities, economic factors and trends
and portfolio strategy. Any such research and other information provided by
brokers to the Adviser (or Sub-Adviser) is considered to be in addition to and
not in lieu of services required to be performed by the Adviser (or Sub-Adviser)
under its Advisory Agreement or Sub-Advisory Agreement with the Trust. The
research services provided by broker-dealers can be useful to the Adviser (or
Sub-Adviser) in serving its other clients or clients of the Adviser's (or Sub-
Adviser's) affiliates.
19
<PAGE>
The Trustees periodically review the Adviser's (or Sub-Adviser's) performance of
its responsibilities in connection with the placement of portfolio transactions
on behalf of the Funds and review the commissions paid by the Funds over
representative periods of time to determine if they are reasonable in relation
to the benefits to the Funds.
Investment decisions for the Funds are made independently from those of the
other investment accounts managed by the Adviser (or Sub-Adviser) or affiliated
companies. Occasions may arise, however, when the same investment decision is
made for more than one client's account. It is the practice of the Adviser (or
Sub-Adviser) to allocate such purchases or sales insofar as feasible among its
several clients or the clients of its affiliates in a manner it deems equitable.
The principal factors which the Adviser (or Sub-Adviser) considers in making
such allocations are the relative investment objectives of the clients, the
relative size of the portfolio holdings of the same or comparable securities and
the then availability in the particular account of funds for investment.
Portfolio securities held by one client of the Adviser (or Sub-Adviser) may also
be held by one or more of its other clients or by clients of its affiliates.
When two or more of its clients or clients of its affiliates are engaged in the
simultaneous sale or purchase of securities, transactions are allocated as to
amount in accordance with formulae deemed to be equitable as to each client.
There may be circumstances when purchases or sales of portfolio securities for
one or more clients will have an adverse effect on other clients.
While it is the policy of the Funds generally not to engage in trading for
short-term gains, the Funds will effect portfolio transactions without regard to
the holding period if, in the judgment of the Adviser (or Sub-Adviser), such
transactions are advisable in light of a change in circumstances of a particular
company, within a particular industry or country, or in general market, economic
or political conditions. The portfolio turnover rates of all the Funds may vary
greatly from year to year.
The Gold and Natural Resources Fund, Worldwide Balanced Fund, Worldwide Hard
Assets Fund and Worldwide Emerging Markets Fund anticipate that their annual
portfolio turnover rates will not exceed 100%. For fiscal years ended April 30,
1994, April 30, 1995 and April 30, 1996, the portfolio turnover rates for Gold
and Natural Resources Fund were 15.84%, 23.30%, and 26.37%, respectively. For
the period from commencement of operations (December 23, 1994) to April 30, 1995
and for the fiscal year ended April 30, 1996, the portfolio rates for Worldwide
Balanced Fund were 0% and 0%, respectively. For the period from commencement of
operations (August 21, 1995) to April 30, 1996, the portfolio turnover rate for
Worldwide Hard Assets Fund was 119.54%. For the period from commencement of
operations (December 21, 1995) to April 30, 1996, the portfolio turnover rate
for Worldwide Emerging Markets Fund was 45.89%.
The annual portfolio turnover rate of the Worldwide Bond Fund may exceed 100%.
For fiscal years ended April 30, 1994, April 30, 1995 and April 30, 1996, the
portfolio turnover rates were 37.59%, 265.87% and 208.05%, respectively, and the
Adviser anticipates the turnover rate for the current fiscal year will also
exceed 100%. Due to the high rate of turnover, the Fund will pay a greater
amount in brokerage commissions than a similar size fund with a lower turnover
rate, though commissions are not generally charged in fixed-income transactions.
In addition, since
20
<PAGE>
the Fund may have a high rate of portfolio turnover, the Fund may realize
capital gains or losses. Capital gains will be distributed annually to the
shareholders. Capital losses cannot be distributed to shareholders but may be
used to offset capital gains at the Fund level. See "Taxes" in the Prospectus
and the Statement of Additional Information.
The Adviser does not consider sales of shares of the Funds as a factor in the
selection of broker-dealers to execute portfolio transactions for the Funds.
For the fiscal year ended April 30, 1994, Gold and Natural Resources Fund paid
$187,464 and Worldwide Bond Fund paid $8,640 in brokerage commissions. For the
fiscal year or period ended April 30, 1995, Gold and Natural Resources Fund paid
$250,357, Worldwide Bond Fund paid $24,354 and Worldwide Balanced Fund did not
pay any brokerage commissions. For the fiscal year or period ended April 30,
1996, Gold and Natural Resources Fund paid $217,800, Worldwide Bond Fund paid
$7,340, Worldwide Balanced Fund paid $194, Worldwide Hard Assets Fund paid
$5,625 and Worldwide Emerging Markets Fund paid $2,920 in brokerage
commissions.
TRUSTEES AND OFFICERS
The Trustees and Officers of the Trust, their addresses, positions with the
Trust, age and principal occupations during the past five years are set forth
below.
Trustees of the Trust:
/@/*JOHN C. van ECK, C.F.A. (80) - Chairman of the Board and President
- -------------------------
270 River Road, Briarcliff Manor, New York 10510; Chairman of the Board and
President of another investment company advised by the Adviser; Chairman, Van
Eck Associates Corporation (investment adviser) and Van Eck Securities
Corporation (broker-dealer); Director, Eclipse Financial Asset Trust (mutual
fund); Former President of the Adviser and its affiliated companies; Former
Director (1992-1995), Abex Inc. (aerospace); Former Director (1983-1986), The
Signal Companies, Inc. (high technology and engineering); Former Director
(1982-1984), Pullman Transportation Co., Inc. (transportation equipment);
Former Director (1986-1992) The Henley Group, Inc. (technology and health).
/@/#+JEREMY H. BIGGS (61) - Trustee
- ------------------
1220 Park Avenue, New York, New York 10128; Trustee of another investment
company advised by the Adviser; Vice Chairman, Director and Chief Investment
Officer, Fiduciary Trust Company International (investment manager), parent
company of Fiduciary International, Inc., which has entered into a sub-
advisory agreement with the Trust as to the Worldwide Balanced Fund; Chairman
of the Board to all funds of Davis Fund Group (mutual fund management
company); Former Director, International Investors Incorporated (1990-1991).
21
<PAGE>
#+RICHARD C. COWELL (69) - Trustee
- -------------------
240 El Vedado Way, Palm Beach, Florida 33480; Trustee of another investment
company advised by the Adviser; Private Investor; Director, West Indies &
Caribbean Development Ltd. (real estate); Former Director, Compo Industries,
Inc. (machinery manufacturer); Former Director International Investors
Incorporated (1957-1991); Former Director (1978-1981), American Eagle
Petroleums, Ltd. (oil and gas exploration); Former President and Director
(1968-1976), Minerals and Industries, Inc. (petroleum products); Former
Director (1978-1983), Duncan Gold Resources Inc. (oil exploration and gold
mining); Former Director (1981-1984), Crested Butte Silver Mining Co.; Former
Chairman and Member of Executive Committee (1974-1981), Allerton Resources,
Inc. (oil and gas exploration); Former Director (1976-1982), Western World
Insurance Co.
#+WESLEY G. McCAIN (54) - Trustee
- ------------------
144 East 30th Street, New York, New York 10016; Trustee of two other
investment companies advised or administered by the Adviser; Chairman,
Towneley Capital Management, Inc., (investment adviser); Chairman, Eclipse
Financial Asset Trust (mutual fund); General Partner, Pharoah Partners, L.P.;
President, Millbrook Associates, Inc.; Trustee, Libre Group Trust; Chairman,
Eclipse Financial Services, Inc.; Trustee, Peregrine Funds; Former Director,
International Investors Incorporated; and Former Secretary and Treasurer,
Millbrook Advisers, Inc. (investment adviser) Former Chairman, Finacor, Inc.
(financial services).
#DAVID J. OLDERMAN (62) - Trustee
- ------------------
40 East 52nd Street, New York, New York 10022; Trustee of another investment
company advised by the Adviser; Chairman of the Board, Chief Executive Officer
and Owner, Carret & Company, Inc. (since 1988); Chairman of the Board,
American Copy Equipment Co. (1991-present); Chairman of the Board, Brighton
Partners, Inc. (1993-present); Principal, Olderman & Raborn, Inc., (investment
advisers-1984-1988); Chairman of the Board, Railoc, Inc., (farm equipment
manufacturing-1979- 1984); Head of Corporate Finance, Halsey Stuart
(investment banking-1974-1975); Vice Chairman of the Board, Stone and Webster
Securities Corp. (investment banking, retail sales and investment advisory
divisions-1964 to 1974).
#*RALPH F. PETERS (67) - Trustee
- -----------------
25 Strimples Mill Road, Stockton, New Jersey 08559; Trustee of another
investment company advised by the Adviser; Former Chairman of the Board,
Former Chairman of the Executive Committee and Chief Executive Officer of
Discount Corporation of New York (dealer in U.S. Treasury and Federal Agency
Securities) (1981-1988); Director, Sun Life Insurance and Annuity Company of
New York; Director, U.S. Life Income Fund Inc., New York; Former Director,
International Investors Incorporated.
22
<PAGE>
#RICHARD D. STAMBERGER (37) - Trustee
- ------------------
888 17th Street, N.W., Washington, D.C. 20006; Trustee of two other investment
companies advised or administered by the Adviser; Principal, National
Strategies, Inc., a public policy firm in Washington, D.C.; Partner and Co-
founder, Quest Partners, Inc. (management consulting firm/since 1988);
Executive Vice President, Chief Operating Officer, and a Director of NuCable
Resources Corporation (technology firm/since 1988); associated with Anderson
Benjamin & Reed, a regulatory consulting firm based in Washington, D.C. (1985-
1986); White House Fellow-Office of Vice President (1984-1985); Director of
Special Projects, National Cable Television Association (1983-1984).
/@/**FRED M. van ECK (77) - Trustee
- ------------------
99 Park Avenue, New York, New York 10016; Trustee of another investment
company advised by the Adviser; Private Investor; Director, Van Eck Associates
Corporation; Director, Van Eck Securities Corporation; Former General Partner
(1950-1976), J. H. Whitney & Co. (venture capital).
Officers of the Trust:
HENRY J. BINGHAM (65) - Executive Vice President
- ----------------
99 Park Avenue, New York, New York 10016; Executive Vice President of another
investment company advised by the Adviser; Executive Managing Director of Van
Eck Associates Corporation and Executive Vice President of Van Eck Securities
Corporation.
MADIS SENNER (43) - Executive Vice President
- ------------
99 Park Avenue, New York, New York 10016; President of the Worldwide Bond Fund
series of Van Eck Worldwide Insurance Trust and the Global Income Fund series
of Van Eck Funds; Executive Vice President of another investment company
advised by the Adviser; Director, Global Fixed Income of Van Eck Associates
Corporation; Former Global Bond Manager, Chase Manhattan Private Bank (1992-
1994); Former President and founder, Sunray Securities, Inc. (1989-1992).
DEREK van ECK (31) - Executive Vice President
- ----------------
99 Park Avenue, New York, New York 10016; President of the Gold and Natural
Resources Fund and Worldwide Hard Assets Fund series of Van Eck Worldwide
Insurance Trust and the Global Hard Assets Fund series of Van Eck Funds;
currently, has primary responsibility for the Global Balanced Fund series of
Van Eck Worldwide Insurance Trust, in consultation with Fiduciary
International Inc.; Vice President of another investment company advised by
the Adviser; Executive Vice President, Director, Global Investments and
Director of Van Eck Associates Corporation and Executive Vice President and
Director of Van Eck Securities Corporation and other affiliated companies.
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BRUCE J. SMITH (41) - Vice President and Treasurer
- --------------
99 Park Avenue, New York, New York 10016; Officer of two other investment
companies advised or administered by the Adviser; Senior Managing Director,
Portfolio Accounting of Van Eck Associates Corporation and Senior Managing
Director of Van Eck Securities Corporation.
THADDEUS M. LESZCZYNSKI (49) - Vice President and Secretary
- -----------------------
99 Park Avenue, New York, New York 10016; Vice President and/or Secretary of
three other investment companies advised or administered by the Adviser; Vice
President, Secretary and General Counsel of Van Eck Associates Corporation,
Van Eck Securities Corporation and other affiliated companies.
JOSEPH P. DiMAGGIO (39) - Controller
- ------------------
99 Park Avenue, New York, New York 10016; Controller of another investment
company advised by the Adviser; Director of Portfolio Accounting of Van Eck
Associates Corporation (since 1993); Former Accounting Manager with Alliance
Capital Management (1985-1993).
CHARLES CAMERON (36) - Vice President
- ---------------
99 Park Avenue, New York, New York 10016; Vice President of another investment
company advised by the Adviser; Director of Trading of Van Eck Securities
Corporation.
MICHAEL G. DOORLEY (40) - Vice President
- ------------------
99 Park Avenue, New York, New York 10016; Vice President of another investment
company advised by the Adviser; Senior Vice President and Chief Financial
Officer of Van Eck Associates Corporation, Van Eck Securities Corporation and
other affiliated companies.
STEPHEN ILNITZKI (35) - Vice President
- ----------------
99 Park Avenue, New York, NY 10016; Vice President of another investment
company advised by the Adviser; Chief Operationg Officer of Van Eck Associates
Corporation; Former Vice President at Bankers Trust (1991-1994).
SUSAN C. LASHLEY (41) - Vice President
- ----------------
99 Park Avenue New York, New York 10016; Vice President of another investment
company advised by the Adviser; Managing Director, Mutual Fund Operations of
Van Eck Securities Corporation.
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WILLIAM A. TREBILCOCK (59) - Vice President
- ---------------------
99 Park Avenue, New York, New York 10016; Vice President of another investment
company advised by the Adviser; Director, Mining Research of Van Eck
Associates Corporation.
KEVIN REID (34) - Vice President of the Worldwide Hard Assets Fund series
- ----------
99 Park Avenue, New York, New York 10016; Vice President of the Global Hard
Assets Fund series of Van Eck Funds; Director, Real Estate Research, of Van
Eck Associates Corporation; Former Chief Financial Officer of E.P. Reid, Inc.
(construction-1993 to 1994); Former Vice President and portfolio manager of
Tramell Crow Company (real estate-1988 to 1993).
PAUL A. DiPERNA (38) - Assistant Vice President
- ---------------
99 Park Avenue, New York, New York 10016; President of the U.S. Government
Money Fund series of Van Eck Funds; Assistant Vice President of another
investment company advised by the Adviser; Associate Manager, Trading, of Van
Eck Associates Corporation.
BARBARA J. ALLEN (39) - Assistant Secretary
- ----------------
99 Park Avenue, New York, New York 10016; Assistant Secretary of another
investment company advised by the Adviser; Compliance Officer of Van Eck
Associates Corporation and Van Eck Securities Corporation.
- -----------------------------
/@/ An "interested person" as defined in the Act.
* Member of Executive Committee - exercises general powers of Board of
Trustees between meetings of the Board.
** Brother of Mr. John C. van Eck.
# Member of the Nominating Committee
+ Member of Audit Committee - reviews fees, services, procedures, conclusions
and recommendations of independent auditors.
PRINCIPAL SHAREHOLDERS
As of June 30, 1996, the outstanding shares of the Funds were owned of record as
follows: Approximately 97.8% of Gold and Natural Resources Fund and
approximately 93.5% of Worldwide Bond Fund, respectively, was owned by The Best
of America IV, a separate account offered by Nationwide Life Insurance Company,
One Nationwide Plaza, Columbus, Ohio 43216 to fund the benefits of the separate
account's variable annuity contractowners; approximately 87.6% of Worldwide
Balanced Fund was owned by Security Life of Denver, Security Life Center, 1290
Broadway, Denver, Colorado 80203-5699; approximately 67.8% of Worldwide Emerging
Markets Fund was owned by Van Eck Associates Corporation, 99 Park Avenue, New
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York, New York 10016, and approximately 28.5% of Worldwide Emerging Markets
Fund was owned by Provident Mutual Life Insurance Company - Variable Life, 1050
West Lakes Drive, Berwyn, Pennsylvania 19312; and approximately 64.0% of
Worldwide Hard Assets Fund was owned by Great American Reserve, 11815 N.
Pennsylvania Street, Carmel, Indiana 46032-4951, and approximately 36.0% was
owned by Van Eck Associates Corporation.
VALUATION OF SHARES
The net asset value per share of each of the Funds is computed by dividing the
value of all of a Fund's securities plus cash and other assets, less
liabilities, by the number of shares outstanding. The net asset value per share
is computed as of the close of the New York Stock Exchange, Monday through
Friday, exclusive of national business holidays. The Funds will be closed on
the following national business holidays: New Year's Day, Presidents' Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas (or the days on which these holidays are observed).
Shares of the Funds are sold at the public offering price which is determined
once each day the Funds are open for business and is the net asset value per
share.
The net asset values need not be computed on a day in which no orders to
purchase, sell or redeem shares of the Funds have been received.
The value of a financial futures or commodity futures contract equals the
unrealized gain or loss on the contract that is determined by marking it to the
current settlement price for a like contract acquired on the day on which the
commodity futures contract is being valued. A settlement price may not be used
if the market makes a limit move with respect to a particular commodity.
Securities or futures contracts for which market quotations are readily
available are valued at market value, which is currently determined using the
last reported sale price. If no sales are reported as in the case of most
securities traded over-the-counter, securities are valued at the mean of their
bid and asked prices at the close of trading on the NYSE. In cases where
securities are traded on more than one exchange, the securities are valued on
the exchange designated by or under the authority of the Board of Trustees as
the primary market. Short-term investments having a maturity of 60 days or less
are valued at amortized cost, which approximates market. Options are valued at
the last sales price unless the last sales price does not fall within the bid
and ask prices at the close of the market, at which time the mean of the bid and
ask prices is used. All other securities are valued at their fair value as
determined in good faith by the Trustees. Foreign securities or futures
contracts quoted in foreign currencies are valued at appropriately translated
foreign market closing prices or as the Board of Trustees may prescribe.
Generally, trading in foreign securities and futures contracts, as well as
corporate bonds, United States Government securities and money market
instruments, is substantially completed each day at various times prior to the
close of the NYSE. The values of such securities used in determining the net
asset value of the shares of the Funds may be computed as of such times. Foreign
currency exchange rates are also generally determined prior to the close of the
NYSE.
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<PAGE>
Occasionally, events affecting the value of such securities and such exchange
rates may occur between such times and the close of the NYSE which will not be
reflected in the computation of the Fund's net asset values. If events
materially affecting the value of such securities occur during such period, then
these securities will be valued at their fair value as determined in good faith
by the Trustees.
TAXES
Each Fund intends to qualify and elect to be treated each taxable year as a
"regulated investment company" under Subchapter M of the Code. To so qualify, a
Fund must, among other things, (a) derive at least 90% of its gross income from
dividends, interest, payments with respect to securities loans, gains from the
sale or other disposition of stock, securities or foreign currencies, or other
income (including gains from options, futures or forward contracts) derived with
respect to its business of investing in such stock, securities or currencies;
(b) derive less than 30% of its gross income from the sale or other disposition
of any of the following which was held less than three months (the "30% test"):
(i) stock or securities; (ii) options, futures or forward contracts (other than
on foreign currencies) or (iii) foreign currencies (or options, futures or
forward contracts on foreign currencies) but only if such currencies (or
options, futures or forward contracts) are not directly related to the Fund's
principal business of investing in stock or securities; and (c) satisfy certain
diversification requirements.
As a regulated investment company, a Fund will not be subject to federal income
tax on its net investment income and capital gain net income (capital gains in
excess of its capital losses) that it distributes to shareholders if at least
90% of its investment company taxable income for the taxable year is
distributed. However, if for any taxable year a Fund does not satisfy the
requirements of Subchapter M of the Code, all of its taxable income will be
subject to tax at regular corporate rates without any deduction for distribution
to shareholders, and such distributions will be taxable to shareholders as
ordinary income to the extent of the Fund's current or accumulated earnings or
profits.
REDEMPTIONS IN KIND
The Worldwide Emerging Markets Fund elects to have the ability to redeem its
shares in kind, committing itself to pay in cash all requests for redemption by
any shareholder of record limited in amount with respect to each shareholder of
record during any ninety-day period in the lesser of (i) $250,000 or (ii) 1% of
the net asset value of such company at the beginning of such period.
PERFORMANCE
The Funds may advertise performance in terms of average annual total return for
1, 5 and 10 year periods, or for such lesser periods as any of such Funds have
been in existence. Average annual total return is computed by finding the
average annual compounded rates of return over the
27
<PAGE>
periods that would equate the initial amount invested to the ending redeemable
value, according to the following formula:
P(1+T)/to the nth power/ = ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years
ERV = ending redeemable value of a hypothetical $1,000 payment
made at the beginning of the 1, 5, or 10 year periods at
the end of the year or period;
The calculation assumes the maximum sales load (or other charges deducted from
payments) is deducted from the initial $1,000 payment and assumes all dividends
and distributions by the fund are reinvested at the price stated in the
prospectus on the reinvestment dates during the period, and includes all
recurring fees that are charged to all shareholder accounts.
Average annual total returns for the Funds for various periods ended April 30,
1996 are as follows:
Gold and Natural Resources Fund
- -------------------------------
One Year: 26.66% Five Years: 14.64%
Three Years: 17.54% Since Inception: 9.01%
Worldwide Bond Fund
- -------------------
One Year: 2.07% Five Years: 6.17%
Three Years: 6.20% Since Inception: 6.61%
Worldwide Balanced Fund
- -----------------------
One Year: 2.9% Since Inception: 2.12%
Worldwide Emerging Markets Fund
- -------------------------------
Since Inception: 9.50%
Worldwide Hard Assets Fund
- --------------------------
Since Inception: 24.40%
The Funds may advertise performance in terms of a 30-day yield quotation. The
30-day yield quotation is computed by dividing the net investment income per
share earned during the period
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<PAGE>
by the maximum offering price per share on the last day of the period,
according to the following formula:
YIELD = 2[(A-B/CD + 1)/to the sixth power/-1]
Where: A = dividends and interest earned during the period
B = expenses accrued for the period (net of reimbursement)
C = the average daily number of shares outstanding during the
period that were entitled to receive dividends
D = the maximum offering price per share on the last day of the
period after adjustment for payment of dividends within 30
days thereafter
The Funds may also advertise performance in terms of aggregate total return.
Aggregate total return for a specified period of time is determined by
ascertaining the percentage change in the net asset value of shares of the Fund
initially acquired assuming reinvestment of dividends and distributions and
without giving effect to the length of time of the investment according to the
following formula:
[(B-A)/A](100)=ATR
Where: A = initial investment
B = value at end of period
ATR = aggregate total return
The calculation assumes the maximum sales charge is deducted from the initial
payment and assumes all distributions by the Funds are reinvested at the price
stated in the Prospectus on the reinvestment dates during the period, and
includes all recurring fees that are charged to all shareholder accounts.
Performance figures of a Fund are not useful for comparison purposes because
they do not reflect the charges and deductions at the separate account level.
ADDITIONAL INFORMATION
Custodian. The Chase Manhattan Bank, N.A., Chase Metrotech Center, Brooklyn,
- ---------
New York 11245, serves as the custodian of the Trust's portfolio securities and
cash. The Custodian is authorized, upon the approval of the Trust, to establish
credits or debits in dollars or foreign currencies with, and to cause portfolio
securities of a Fund to be held by its overseas branches or subsidiaries, and
foreign banks and foreign securities depositories which qualify as eligible
foreign custodians under the rules adopted by the Securities and Exchange
Commission.
Transfer Agent. Van Eck Associates Corporation, 99 Park Avenue, New York, New
- ---------------
York 10016, serves as the Funds' transfer agent.
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<PAGE>
Independent Accountants. Coopers & Lybrand L.L.P., 1301 Avenue of the Americas,
- -----------------------
New York, New York 10019, serves as the Trust's independent accountants.
Counsel. Goodwin, Procter & Hoar, Exchange Place, Boston, Massachusetts 02109,
- -------
serves as counsel to the Trust.
FINANCIAL STATEMENTS
The financial statements of Worldwide Bond Fund, Gold and Natural Resources
Fund, Worldwide Emerging Markets Fund, Worldwide Hard Assets Fund and Worldwide
Balanced Fund for the fiscal year or period ended April 30, 1996 are
incorporated by reference from the Funds' Annual Reports to Shareholders which
are available at no charge upon written or telephone request to the Trust at the
address or telephone number set forth on the first page of this Statement of
Additional Information.
APPENDIX
CORPORATE BOND RATINGS
- ----------------------
Description of Moody's Investors Service, Inc. Corporate Bond Ratings:
Aaa--Bonds which are rated Aaa are judged to be the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt-
edge". Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
Aa--Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be greater or there may be other elements present which make the long-term
risks appear somewhat larger than in Aaa securities.
A--Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors given security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment sometime in the future.
Baa--Bonds which are rated Baa are considered as medium grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba--Bonds which are rated Ba are judged to have speculative elements. Their
future cannot be considered as well assured. Often the protection of interest
and principal payments may be very moderate and thereby not well safeguarded
during both good and bad times over the future. Uncertainty of position
characterizes bonds in this class.
B--Bonds which are rated B generally lack the characteristics of the desirable
investment. Assurance of interest and principal payments or maintenance of
other terms of the contract over any long period of time may be small.
Caa-Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Moody's applies the numerical modifiers 1, 2 and 3 to each generic rating
classification from Aa through B. The modifier 1 indicates that the security
ranks in the higher end of its generic rating category; the modifier 2 indicates
a mid-range ranking; and the modifier 3 indicates that the issue ranks in the
lower end of its generic rating category.
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Description of Standard & Poor's Corporation Corporate Bond Ratings:
AAA -- Bonds rated AAA have the highest rating assigned by S&P to a debt
obligation. Capacity to pay interest and repay principal is extremely strong.
AA -- Bonds rated AA have a very strong capacity to pay interest and repay
principal and differ from the higher rated issues only in small degree.
A -- Bonds rated A have a strong capacity to pay interest and repay principal
although they are somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than bonds in higher rated categories.
BBB -- Bonds rated BBB are regarding as having an adequate capacity to pay
interest and repay principal. Whereas they normally exhibit adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
bonds in this category than for bonds in higher rated categories.
BB--Bonds rated BB have less near-term vulnerability to default than other
speculative issues. However, they face major ongoing uncertainties or exposure
to adverse business, financial or economic conditions which could lead to
inadequate capacity to meet timely interest and principal payments.
B--Bonds rated B have a greater vulnerability to default but currently have the
capacity to meet interest payments and principal repayments. Adverse business,
financial or economic conditions will likely impair capacity or willingness to
pay interest and repay principal. The B rating is also used for debt
subordinated to senior debt that is assigned an actual or implied BB rating.
CCC--Bonds rated CCC have a current identifiable vulnerability to default, and
are dependent upon favorable business, financial and economic conditions to meet
timely payment of interest and repayment of principal. In the event of adverse
business, financial or economic conditions, they are not likely to have the
capacity to pay interest and repay principal.
The ratings from AA to CCC may be modified by the addition of a plus or minus to
show relative standing within the major rating categories.
PREFERRED STOCK RATINGS
- -----------------------
Description of Moody's Investors Service, Inc. Preferred Stock Ratings:
aaa - An issue which is rated aaa is considered to be a top-quality preferred
stock. This rating indicates good asset protection and the least risk of
dividend impairment within the universe of convertible preferred stocks.
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<PAGE>
aa - An issue which is rated aa is considered a high-grade preferred stock. This
rating indicates that there is reasonable assurance that earnings and asset
protection will remain relatively well maintained in the foreseeable future.
a - An issue which is rated a is considered to be an upper-medium grade
preferred stock. While risks are judged to be somewhat greater than in the aaa
and aa classifications, earnings and asset protection are, nevertheless,
expected to be maintained at adequate levels.
baa - An issue which is rated baa is considered to be medium-grade, neither
highly protected nor poorly secured. Earnings and asset protection appear
adequate at present but may be questionable over any great length of time.
ba - An issue which is rated ba is considered to have speculative elements, and
its future cannot be considered well assured. Earnings and asset protection may
be very moderate and not well safe-guarded during adverse periods. Uncertainty
of position characterizes preferred stocks in this class.
b - An issue which is rated b generally lacks the characteristics of a desirable
investment. Assurance of dividend payments and maintenance of other terms of
the issue over any long period of time may be small.
caa - An issue which is rated caa is likely to be in arrears on dividend
payments. This rating designation does not purport to indicate the future
status of payment.
ca - An issue which is rated ca is speculative in a high degree and is likely to
be in arrears on dividends with little likelihood of eventual payment.
c - This is the lowest rated class of preferred or preference stock. Issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
Description of Standard & Poor's Corporation Preferred Stock Ratings:
AAA - This is the highest rating that may be assigned by Standard & Poor's to a
preferred stock issue and indicates an extremely strong capacity to pay the
preferred stock obligations.
AA - A preferred stock issue rated AA also qualifies as a high-quality fixed
income security. The capacity to pay preferred stock obligations is very
strong, although not as overwhelming as for issues rated AAA.
A - An issue rated A is backed by a sound capacity to pay the preferred stock
obligations, although it is somewhat more susceptible to the adverse effect of
changes in circumstances and economic conditions.
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BBB - An issue rated BBB is regarded as backed by an adequate capacity to pay
the preferred stock obligations. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing circumstances are
more likely to lead to a weakened capacity to make payments for a preferred
stock in this category than for issues in the A category.
BB, B, CCC - Preferred stocks rated BB, B and CCC are regarded, on balance, as
predominantly speculative with respect to the issuer's capacity to pay preferred
stock obligations. BB indicates the lowest degree of speculation and CCC the
highest degree of speculation. While such issues will likely have some quality
and protective characteristics, these are outweighed by large uncertainties or
major risk exposures to adverse conditions.
SHORT TERM DEBT RATINGS
- -----------------------
Description of Moody's Investors Service, Inc. Short-Term Debt Ratings:
Prime-1--Issuers rated Prime-1 (or supporting institutions) have a superior
ability for repayment of senior short-term debt obligations. Prime-1 repayment
ability will often be evidenced by many of the following characteristics:
leading market positions in well-established industries, higher rates of return
of funds employed, conservative capitalization structure with moderate reliance
on debt and ample asset protection, broad margins in earnings coverage of fixed
financial charges and high internal cash generation and well-established access
to range of financial markets and assured sources of alternate liquidity.
Prime-2--Issuers rated Prime-2 (or supporting institutions) have a strong
ability for repayment of senior short-term debt obligations. This will normally
be evidenced by many of the characteristics cited above but to a lesser degree.
Earnings trends and coverage ratios, while sound, may be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
Prime-3--Issuers rated Prime-3 (or supporting institutions) have an acceptable
ability for repayment of senior short-term obligations. The effect of industry
characteristics and market compositions may be more pronounced. Variability in
earnings and profitability may result in changes in the level of debt protection
measurements and may require relatively high financial leverage. Adequate
alternate liquidity is maintained.
33
