<PAGE>
================================================================================
Van Eck Chubb Funds
================================================================================
[GRAPHIC]
PROSPECTUS
May 1, 1999
Capital Appreciation Fund
Global Income Fund
Government Securities Fund
Growth and Income Fund
Tax-Exempt Fund
Total Return Fund
These securities have not been approved or disapproved either by the Securities
and Exchange Commission (SEC) or by any State Securities Commission. Neither the
SEC nor any State Commission has endorsed the accuracy or adequacy of this
prospectus. Any claim to the contrary is against the law.
THE VAN ECK PARTNERSHIP SERIES
================================================================================
YOUR INVESTMENT DEALER IS:
For more detailed information, see the Statement of Additional Information
(SAI), which is incorporated by reference into this prospectus.
For free copies of SAIs, annual or semi-annual reports or other inquiries...
o Call Van Eck at 1-800-826-1115, or visit the Van Eck website at
www.vaneck.com.
o Go to the Public Reference Room of the Securities and Exchange Commission.
o Call the SEC at 1-800-SEC-0330, or write to them at the Public Reference
Room, Washington, D.C. 20549-6009, and ask them to send you a copy. There
is a duplicating fee for this service.
o Download documents from the SEC's website at www.sec.gov
o The Funds' annual report includes a discussion of market conditions and
investment strategies that significantly affected the Funds' performance
last year.
[LOGO] Van Eck Global
Transfer Agent: DST Systems, Inc.
P.O. Box 418407
Kansas City, Missouri 64141
1-800-544-4653
SEC REGISTRATION NUMBER: 811-04297
VEM 507043
<PAGE>
================================================================================
Table of Contents
================================================================================
I. THE FUNDS 2
INCLUDES A PROFILE OF EACH FUND; ITS INVESTMENT STYLE AND PRINCIPAL
RISKS; HISTORIC PERFORMANCE; PERFORMANCE MEASURED AGAINST A RELEVANT
BENCHMARK; HIGHEST AND LOWEST PERFORMING QUARTERS; AND EXPENSES.
CAPITAL APPRECIATION FUND 2
GLOBAL INCOME FUND 5
GOVERNMENT SECURITIES FUND 8
GROWTH AND INCOME FUND 11
TAX-EXEMPT FUND 14
TOTAL RETURN FUND 17
II. ADDITIONAL INVESTMENT STRATEGIES 20
OTHER INVESTMENTS, INVESTMENT POLICIES, INVESTMENT TECHNIQUES AND RISKS.
III. SHAREHOLDER INFORMATION 25
HOW TO BUY, SELL, EXCHANGE, OR TRANSFER SHARES; AUTOMATIC SERVICES;
MINIMUM PURCHASE AND ACCOUNT SIZE; HOW TO CHOOSE A CLASS OF SHARES;
YOUR PRICE PER SHARE; SALES CHARGES; RETIREMENT PLANS; DIVIDENDS AND
CAPITAL GAINS; TAXES; AND MANAGEMENT OF THE FUNDS.
IV. FINANCIAL HIGHLIGHTS 38
TABLES THAT SHOW PER SHARE EARNINGS, EXPENSES, AND PERFORMANCE OF
EACH FUND.
<PAGE>
================================================================================
I. The Funds
================================================================================
INCLUDES A PROFILE OF EACH FUND, ITS INVESTMENT STYLE AND PRINCIPAL RISKS;
HISTORIC PERFORMANCE; PERFORMANCE MEASURED AGAINST A RELEVANT BENCHMARK; HIGHEST
AND LOWEST PERFORMING QUARTERS; AND EXPENSES.
1. VAN ECK/CHUBB CAPITAL APPRECIATION FUND PROFILE
OBJECTIVE
The Capital Appreciation Fund seeks long-term appreciation by investing
primarily in equity securities of companies that the Adviser believes will have
long-term capital appreciation.
PRINCIPAL STRATEGIES
The Fund intends to invest at least 80% of assets in common stocks and other
equity securities, including preferred stocks and securities convertible into
common stock. The Fund intends to invest at least 65% of assets in companies
with market capitalizations between $500 million and $2.5 billion ("small- to
mid-cap" companies). The Fund's Adviser uses a value strategy to look for high
quality bonds and for stocks with appreciation potential and low price to
earnings ratio.
The Fund primarily invests in domestic securities, and it may invest as much as
20% of assets in equity and high quality debt securities of foreign issuers,
either exchange-traded or traded over the counter.
PRINCIPAL RISKS
Small- and mid-cap stocks carry greater risk of price fluctuation and are
sensitive to market factors. The Fund is subject to market risk, interest rate
risk, credit rate risk and foreign risk. An investment in the Fund may result in
the loss of principal. Foreign securities are subject to political, economic and
currency risks.
2 VAN ECK/CHUBB FUNDS PROSPECTUS
<PAGE>
I. THE FUNDS / CAPITAL APPRECIATION
================================================================================
Van Eck/Chubb Capital Appreciation Fund Performance
================================================================================
This chart illustrates the historic variability of risk of the Fund from year to
year for a share of Van Eck/Chubb Capital Appreciation Fund (before sales
charges) since Fund inception on 9/1/95. Sales loads or account fees are not
reflected, if these amounts were reflected, returns would be less than those
shown. This chart describes past performance only, and should not be understood
as a prediction for future results.
During the period covered, the Fund's highest performing quarter (ended
12/31/98) was 20.25%. The lowest performing quarter (ended 9/30/98) was
- -31.83%.
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Van Eck/Chubb Capital Appreciation Fund
Class A Shares Annual Total Returns (%)
As of December 31, 1998
<S> <C>
1996 27.53
1997 27.79
1998 -12.76
- --------------------------------------------------------------------------------
</TABLE>
Fund performance is shown with sales charges subtracted. This chart compares the
Fund's performance with a broad measure of market performance. Past performance
does not guarantee or predict future results.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Van Eck/Chubb Capital Appreciation Fund
1-Year and Life-of-Fund Performance
Plus a Comparison to the S&P 400 Midcap Index*
As of December 31, 1998
1 Year Life-of-Fund+
<S> <C> <C>
Class A Shares -16.92% 11.02%
S&P 400 Midcap Index 19.07% 22.28%
- --------------------------------------------------------------------------------
</TABLE>
* The S&P 400 Midcap Index consists of 400 domestic stocks chosen for market
size (median market capitalization of $676 million), liquidity and industry
group representation. It is a market-value weighted index (stock price
times shares outstanding), with each stock affecting the index in
proportion to its market value. This index, calculated by Standard &
Poor's, is a total return index with dividends reinvested.
+ Inception date 9/1/95.
VAN ECK/CHUBB FUNDS PROSPECTUS 3
<PAGE>
================================================================================
Van Eck/Chubb Capital Appreciation Fund
================================================================================
This table shows certain fees and expenses you will incur as a Fund investor,
either directly or indirectly if you buy and hold shares.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Van Eck/Chubb Capital Appreciation Fund
Shareholder Expenses (fees paid directly from your investment)
CLASS A CLASS B
<S> <C> <C>
Maximum Sales Charge (imposed on purchases as
a percentage of offering price) 5.75% 0.00%
Maximum Deferred Sales Charge
(as a percentage) 0.00% 5.00%
Annual Fund Operating Expenses (Expenses that
are deducted from Fund assets)
Management 0.20% 0.65%
Administration Fees 0.45% 0.45%
Distribution (12b-1 Fees) 0.50% 1.00%
Other Expenses 0.47% 19.04%
Total Annual Fund Operating Expenses* 1.62% 20.69%
- --------------------------------------------------------------------------------
</TABLE>
* After fee waiver, Total Annual Fund Operating Expenses for A shares would
have been 1.25% and 1.75% for Class B shares. These fee waivers are not
contractual and may be discontinued at the discretion of the Adviser.
The adjacent table shows the expenses you would pay on a hypothetical $10,000
investment. The example presumes an average annual return of 5% with redemption
at the end of each time period. This illustration is hypothetical and assumes
that expenses remain the same and you reinvest dividends and distributions. In
a real investment, your actual expenses may be higher or lower than those shown.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Expense Example
What a $10,000 investment would actually cost
1 YEAR 3 YEAR 5 YEAR 10 YEAR
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A $ 730 $ 1,057 $ 1,406 $ 2,386
Class B $ 2,407 $ 5,270 $ 7,176 $ 9,947
- --------------------------------------------------------------------------------
</TABLE>
4 VAN ECK/CHUBB FUNDS PROSPECTUS
<PAGE>
I. THE FUNDS / GLOBAL INCOME FUND
================================================================================
================================================================================
2. VAN ECK/CHUBB GLOBAL INCOME FUND PROFILE
OBJECTIVE
The Global Income Fund seeks high current income and capital appreciation by
investing primarily in debt securities (bonds) of domestic and foreign issuers.
PRINCIPAL STRATEGIES
The Fund intends to invest at least 65% of assets in bonds and debentures issued
by domestic and foreign governments (and their agencies and subdivisions),
supranational entities like the World Bank, the Asian Development Bank, the
European Investment Bank, and the European Community. At least 75% of the Fund's
debt securities will be rated investment grade or higher by Standard & Poor's
Corporation (S&P) or Moody's Investor's Service, Inc. (Moody's). The Fund may
invest in unrated bonds that, in the opinion of the Adviser, are comparable to
investment grade bonds. The Fund will invest no more than 25% of assets in bonds
rated lower than investment grade (junk bonds).
The Fund will invest in three areas: The United States, developed foreign
countries, and emerging markets (all countries except the U.S., Canada, Japan,
Australia, New Zealand, and most countries in Western Europe). Under normal
conditions, the Fund will invest at least 65% of assets in at least three
different countries, including the U.S. The Adviser seeks to invest in bonds
with high value relative to the quality and yield of the bonds.
The average maturity of debt securities in the Fund will fluctuate according to
the Adviser's best judgment.
PRINCIPAL RISKS
The Fund is classified as "non-diversified" under the Act. Non-diversified Funds
may concentrate large portions of their assets in a few issuers and are subject
to greater volatility than diversified Funds. At times, the Fund may invest
substantially all its assets in one or two countries, for example. Fund shares
may be more volatile than the shares of a diversified bond fund. The Fund is
subject to credit risk, interest rate risk, foreign risk and the risks of
investment in undeveloped (emerging market) countries. As a non-diversified Fund
it is permitted a greater concentration in its investments which may make the
Fund more volatile than diversified Funds. An investment in the Fund may result
in the loss of principal.
VAN ECK/CHUBB FUNDS PROSPECTUS 5
<PAGE>
================================================================================
Van Eck/Chubb Global Income Fund Performance
================================================================================
This chart illustrates the historic variability of risk of the Fund from year to
year for a share of Van Eck/Chubb Global Income Fund (before sales charges).
Sales loads or account fees are not reflected, if these amounts were reflected,
returns would be less than those shown. This chart describes past performance
only, and should not be understood as a prediction for future results.
During the period covered, the Fund's highest performing quarter (ended 9/30/98)
was 8.34%. The lowest performing quarter (ended 3/31/97) was -3.25%.
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Van Eck/Chubb Global Income Fund
Class A Shares Annual Total Returns (%)
As of December 31, 1998
<S> <C>
1996 5.97
1997 0.01
1998 15.00
- --------------------------------------------------------------------------------
</TABLE>
Fund performance is shown with sales charges subtracted. This chart compares the
Fund's performance with a broad measure of market performance. Past performance
does not guarantee or predict future results.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Van Eck/Chubb Global Income Fund
1-Year and Life-of-Fund Performance
Plus a Comparison to the SSB World Government Bond Index*
As of December 31, 1998
1 Year Life-of-Fund+
<S> <C> <C>
Class A Shares 9.54% 5.59%
SSB World Gov't. Bond Index 15.31% 7.19%
- --------------------------------------------------------------------------------
</TABLE>
* The Salomon Smith Barney (SSB) World Government Bond Index is a market
capitalization weighted benchmark that tracks the performance of 18 world
government bond markets. Each has a total market capitalization of eligible
issues of at least US$20billion and Euro15billion. The issues are fixed
rate, greater than one-year maturity and subject to a minimum amount
outstanding that varies by local currency. Bonds must be sovereign debt
issued in the domestic market in local currency.
+ Inception date 9/1/95.
6 VAN ECK/CHUBB FUNDS PROSPECTUS
<PAGE>
I. THE FUNDS / GLOBAL INCOME
================================================================================
VAN ECK/CHUBB GLOBAL INCOME FUND EXPENSES
================================================================================
This table shows certain expenses you will incur as a Fund investor, either
directly or indirectly.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Van Eck/Chubb Global Income Fund
Shareholder Expenses (fees paid directly from your investment)
CLASS A CLASS B
<S> <C> <C>
Maximum Sales Charge (imposed on purchases as
a percentage of offering price) 4.75% 0.00%
Maximum Deferred Sales Charge
(as a percentage) 0.00% 5.00%
Annual Fund Operating Expenses (Expenses that
are deducted from Fund assets)
Management 0.20% 0.20%
Administration Fees 0.45% 0.45%
Distribution (12b-1 Fees) 0.50% 1.00%
Other Expenses 0.41% 127.44%
Total Annual Fund Operating Expenses* 1.56% 129.09%
- --------------------------------------------------------------------------------
</TABLE>
* Without this waiver, Total Fund Operating Expenses for A shares would have
been 1.35% and 1.85% for Class B shares. These fee waivers are not
contractual and may be discontinued at the discretion of the Adviser.
The adjacent table shows the expenses you would pay on a hypothetical $10,000
investment. The example presumes an average annual return of 5% with redemption
at the end of each time period. This illustration is hypothetical and assumes
that expenses remain the same and you reinvest dividends and distributions. In a
real investment, your actual expenses may be higher or lower than those shown.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Expense Example
What a $10,000 investment would actually cost
1 Year 3 year 5 year 10 year
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A $626 $944 $1,285 $2,243
Class B $10,000 $10,000** $10,000** $10,000**
- --------------------------------------------------------------------------------
</TABLE>
** Expenses would exceed the value of the investment due to the high level of
expenses if the Adviser does not maintain the fee waiver.
VAN ECK/CHUBB FUNDS PROSPECTUS 7
<PAGE>
================================================================================
================================================================================
3. VAN ECK/CHUBB GOVERNMENT SECURITIES FUND PROFILE
OBJECTIVE
The Government Securities Fund seeks as high a level of high current income as
is possible while maintaining the safety of principal.
PRINCIPAL STRATEGIES
The Fund invests in U.S. Treasury bills, notes and bonds, plus a number of high
quality debt obligations issued by agencies or instrumentalities of the U.S.
Government. These include 1) Government National Mortgage Association
mortgage-backed pass-through certificates ("Ginnie Maes"); 2) mortgage-backed
pass-through securities of the Federal Home Loan Mortgage Corporation; 3) debt
of each of the Federal Home Loan Banks; 4) pass-through debt certificates issued
by the Federal National Mortgage Association ("Fannie Maes"); and other types of
mortgage-backed securities issued by Government entities. The Fund attempts to
set the average maturity of its portfolios to match its market outlook. When the
Adviser expects interest rates to rise it shortens its average maturity and it
lengthens its maturity as interest rates are expected to decline.
PRINCIPAL RISKS
The value of the debt securities held by the Fund will drop as interest rates go
up or as mortgage-backed securities are pre-paid. While the United States
Government currently provides financial support to government-sponsored agencies
and instrumentalities, there is no guarantee that it will continue to do so, and
it is not required to by law. Accordingly the risk is that these agencies become
liable to meet their obligations.
8 VAN ECK/CHUBB FUNDS PROSPECTUS
<PAGE>
I. THE FUNDS / GOVERNMENT SECURITIES
================================================================================
Van Eck/Chubb Government Securities Fund Performance
================================================================================
This chart illustrates the historic variability of risk of the Fund from year to
year for a share of Van Eck/Chubb Government Securities Fund (before sales
charges). Sales loads or account fees are not reflected, if these amounts were
reflected, returns would be less than those shown. This chart describes past
performance only, and should not be understood as a prediction for future
results.
During the period covered, the Fund's highest performing quarter (ended 6/30/89)
was 7.50%. The lowest performing quarter (ended 3/31/92) was -3.24%.
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Van Eck/Chubb Government Securities Fund
Class A Shares Annual Total Returns (%)
As of December 31, 1998
<S> <C>
1989 14.47
1990 8.90
1991 15.97
1992 7.44
1993 9.29
1994 -3.34
1995 17.50
1996 3.19
1997 9.43
1998 7.40
- --------------------------------------------------------------------------------
</TABLE>
Fund performance is shown with sales charges subtracted. This chart compares the
Fund's performance with a broad measure of market performance. Past performance
does not guarantee or predict future results.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Van Eck/Chubb Government Securities Fund
1-Year, 5-Year and 10-Year Performance
Plus a Comparison to the Lehman Brothers Government Bond Index*
As of December 31, 1998
1 Year 5 Year 10 Year
<S> <C> <C> <C>
Class A Shares 2.30% 5.59% 8.34%
Lehman Brothers Gov't. Bond Index 9.85% 7.18% 9.17%
- --------------------------------------------------------------------------------
</TABLE>
* The Lehman Brothers Government Bond Index includes all public obligations
of the U.S. Treasury, excluding flower bonds and foreign-targeted issues,
all publicly issued debt of U.S. Government agencies and quasi-federal
corporations, and corporate debt guaranteed by the U.S. Government. All
issues have at least one year to maturity and an outstanding par value of
at least $100 million. Price, coupon and total return are reported on a
month-end to month-end basis. All returns are market value weighted
inclusive of accrued interest.
VAN ECK/CHUBB FUNDS PROSPECTUS 9
<PAGE>
================================================================================
Van Eck/Chubb Government Securities Fund Expenses
================================================================================
This table shows certain expenses you will incur as a Fund investor, either
directly or indirectly if you buy and hold your shares.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Van Eck/Chubb Government Securities Fund
Shareholder Expenses (fees paid directly from your investment)
CLASS A CLASS B
<S> <C> <C>
Maximum Sales Charge (imposed on purchases as
a percentage of offering price) 4.75% 0.00%
Maximum Deferred Sales Charge
(as a percentage) 0.00% 5.00%
Annual Fund Operating Expenses (Expenses that
are deducted from Fund assets)
Management 0.20% 0.20%
Administration Fees 0.45% 0.45%
Distribution (12b-1 Fees) 0.50% 1.00%
Other Expenses 0.46% 2.40%
Total Annual Fund Operating Expenses* 1.61% 4.05%
- --------------------------------------------------------------------------------
</TABLE>
* After fee waiver. Total Annual Fund Operating Expenses for A shares would
have been 1.00% and 1.50% for Class B shares. These fee waivers are not
contractual and may be discontinued at the discretion of the Adviser.
The adjacent table shows the expenses you would pay on a hypothetical $10,000
investment. The example presumes an average annual return of 5% with redemption
at the end of each time period. This illustration is hypothetical and assumes
that expenses remain the same and you reinvest your dividends and distributions.
In a real investment, your actual expenses may be higher or lower than those
shown.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Expense Example
What a $10,000 investment would actually cost
1 Year 3 year 5 year 10 year
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A $631 $959 $1,309 $2,295
Class B $907 $1,632 $2,274 $4,248
- --------------------------------------------------------------------------------
</TABLE>
10 VAN ECK/CHUBB FUNDS PROSPECTUS
<PAGE>
I. THE FUNDS / GROWTH AND INCOME
================================================================================
================================================================================
4. VAN ECK/CHUBB GROWTH AND INCOME FUND PROFILE
OBJECTIVE
The Growth and Income Fund seeks long-term growth by investing in a wide range
of equity securities (stocks) that will appreciate in value and generate a
reasonable level of current income.
PRINCIPAL STRATEGIES
The Fund intends to invest at least 80% of assets in common stocks and other
equity securities, including preferred stocks and securities convertible into
common stock. The Adviser uses a value strategy primarily looking for stocks
with the potential for capital growth, based upon low price to earnings ratio
and low price to net asset value. The Adviser intends to invest at least 60% of
Fund assets in securities that have paid interest or dividends in the past 12
months.
The Fund invests primarily in the United States. The Fund may sometimes invest
up to 20% of its assets in foreign equity and investment grade debt securities,
including exchange-traded and over-the counter foreign issues, American
Depositary Receipts (ADRs), European Depositary Receipts (EDRs), and Global
Depositary Receipts (GDRs). The maturity of any debt issue is set to take
advantage of capital appreciation opportunities and income. Any of these
securities may be traded either in the U.S. or in foreign markets.
PRINCIPAL RISKS
The prices of the securities in the Growth and Income Fund tend to go down more
than the prices of securities in other Funds in this prospectus. The Fund's
share price, therefore, may swing more, both short- and long-term, than the
share prices of the other Funds. The Fund is subject to interest rate risk,
credit risk, and the political, economic and currency risks of investment in
foreign securities. An investment in the Fund may lose money.
VAN ECK/CHUBB FUNDS PROSPECTUS 11
<PAGE>
================================================================================
Van Eck/Chubb Growth and Income Fund Performance
================================================================================
This chart illustrates the historic variability of risk of the Fund from year to
year for a share of Van Eck/Chubb Growth and Income Fund (before sales charges).
Sales loads or account fees are not reflected, if these amounts were reflected,
returns would be less than those shown. This chart describes past performance
only, and should not be understood as a prediction for future results.
During the period covered, the Fund's highest performing quarter (ended
12/31/98) was 18.71%. The lowest performing quarter (ended 9/30/98) was -24.75%.
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Van Eck/Chubb Growth and Income Fund
Class A Shares Annual Total Returns (%)
As of December 31, 1998
<S> <C>
1989 32.08
1990 -3.36
1991 33.48
1992 6.84
1993 15.29
1994 -4.26
1995 35.52
1996 22.50
1997 25.85
1998 -0.19
- --------------------------------------------------------------------------------
</TABLE>
Fund performance is shown with sales charges subtracted. This chart compares the
Fund's performance with a broad measure of market performance. Past performance
does not guarantee or predict future results.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Van Eck/Chubb Growth and Income Fund
1-Year, 5-Year and 10-Year Fund Performance
Plus a Comparison to the S&P 500 Index*
As of December 31, 1998
1 Year 5 Year 10 Year
<S> <C> <C> <C>
Class A Shares -4.91% 13.70% 14.86%
S&P 500 Index 28.57% 24.05% 19.19%
- --------------------------------------------------------------------------------
</TABLE>
* The S&P 500 Index consists of 500 widely held common stocks, covering four
broad sectors (industrials, utilities, financial, and transportation). It
is a market-value weighted index (stock price times shares outstanding),
with each stock affecting the index in proportion to its market value.
Construction of the S&P 500 index proceeds from industry group to the
whole. Since some industries are characterized by companies of relatively
small stock capitalization, the index is not comprised of the 500 largest
companies on the New York Stock Exchange. This index, calculated by
Standard & Poor's, is a total return index with dividends reinvested.
12 VAN ECK/CHUBB FUNDS PROSPECTUS
<PAGE>
I. THE FUNDS / GROWTH AND INCOME
================================================================================
Van Eck/Chubb Growth and Income Fund Expenses
================================================================================
This table shows certain fees and expenses you will incur as a Fund investor,
either directly or indirectly if you buy and hold shares.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Van Eck/Chubb Growth and Income Fund
Shareholder Expenses (fees paid directly from your investment)
CLASS A CLASS B
<S> <C> <C>
Maximum Sales Charge (imposed on purchases as
a percentage of offering price) 5.75% 0.00%
Maximum Deferred Sales Charge
(as a percentage) 0.00% 5.00%
Annual Fund Operating Expenses (Expenses that
are deducted from Fund assets)
Management 0.20% 0.20%
Administration Fees 0.45% 0.45%
Distribution (12b-1 Fees) 0.50% 1.00%
Other Expenses 0.42% 0.83%
Total Annual Fund Operating Expenses* 1.57% 2.48%
- --------------------------------------------------------------------------------
</TABLE>
* After fee waiver. Total Annual Fund Operating Expenses for A shares would
have been 1.25% and 1.75% for Class B shares. These fee waivers are not
contractual and may be discontinued at the discretion of the Adviser.
The adjacent table shows the expenses you would pay on a hypothetical $10,000
investment. The example presumes an average annual return of 5% with redemption
at the end of each time period. This illustration is hypothetical and assumes
that expenses remain the same and you reinvest your dividends and distributions.
In a real investment, your actual expenses may be higher or lower than those
shown.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Expense Example
What a $10,000 investment would actually cost
1 Year 3 year 5 year 10 year
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A $726 $1,042 $1,381 $2,335
Class B $751 $1,173 $1,521 $2,816
- --------------------------------------------------------------------------------
</TABLE>
VAN ECK/CHUBB FUNDS PROSPECTUS 13
<PAGE>
================================================================================
================================================================================
5. VAN ECK/CHUBB TAX-EXEMPT FUND PROFILE
OBJECTIVE
The Tax-Exempt Fund seeks a stable level of current income which is exempt from
Federal income taxes, while seeking to preserve capital through investing
primarily in investment-grade tax-exempt securities.
PRINCIPAL STRATEGIES
The Fund intends to invest at least 80% of assets in tax-exempt securities,
under normal market conditions. Obligations on which interest is treated as an
item of tax preference for purposes of the alternative minimum tax are not
counted as "tax-exempt securities," and are not part of the 80% tax-exempt part
of the Fund's portfolio. The Fund invests primarily in municipal bonds or notes
rated in the four highest categories by Moody's and S&P, and in short-term
tax-exempt instruments rated in the three highest categories by Moody's or S&P.
The Fund may also invest in unrated obligations that the Adviser considers of
equal quality to these ratings. The Fund seeks to optimize total return by
selecting maturites which maximizes total return given the existing yield curve.
Of the Fund's assets invested in tax-exempts, under most normal circumstances,
at least 65% will be rated in the top three categories by Moody's or S&P or
another ratings agency, or will be of comparable quality.
PRINCIPAL RISKS
Fund distributions of income from taxable securities and capital gains, if any,
are taxable. All Fund distributions are subject to State or local taxes, if
applicable. Fund shares may fall in value when interest rates rise. An
investment in the Fund may lose money.
14 VAN ECK/CHUBB FUNDS PROSPECTUS
<PAGE>
I. THE FUNDS / TAX-EXEMPT
================================================================================
Van Eck/Chubb Tax-Exempt Fund Performance
================================================================================
This chart illustrates the historic variability of risk of the Fund from year to
year for a share of Van Eck/Chubb Tax-Exempt Fund (before sales charges). Sales
loads or account fees are not reflected, if these amounts were reflected,
returns would be less than those shown. This chart describes past performance
only, and should not be understood as a prediction for future results.
During the period covered, the Fund's highest performing quarter (ended to
6/30/89) was 8.29%. The lowest performing quarter (ended 3/31/94) was -4.89%.
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Van Eck/Chubb Tax-Exempt Fund
Class A Shares Annual Total Returns (%)
As of December 31, 1998
<S> <C>
1989 11.58
1990 5.10
1991 10.71
1992 9.19
1993 12.42
1994 -5.97
1995 15.88
1996 4.01
1997 8.73
1998 6.00
- --------------------------------------------------------------------------------
</TABLE>
Fund performance is shown with sales charges subtracted. This chart compares the
Fund's performance with a broad measure of market performance. Past performance
does not guarantee or predict future results.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Van Eck/Chubb Tax-Exempt Fund
1-, 5-, and 10-Year Performance
Plus a Comparison to the Lehman Brothers Municipal Bond Index*
As of December 31, 1998
1 Year 5 Year 10 Year
<S> <C> <C> <C>
Class A Shares 0.94% 4.46% 7.09%
Lehman Bros. Municipal Bond Index 6.48% 6.23% 8.22%
- --------------------------------------------------------------------------------
</TABLE>
* The Lehman Brothers Municipal Bond Index is an unmanaged total return
performance benchmark of munipal bonds selected to represent the overall
municipal market. The bonds in the index are investment grade and
geographically unrestricted.
VAN ECK/CHUBB FUNDS PROSPECTUS 15
<PAGE>
================================================================================
Van Eck/Chubb Tax-Exempt Fund Expenses
================================================================================
This table shows certain expenses you will incur as a Fund investor, either
directly or indirectly if you buy and hold shares.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Van Eck/Chubb Tax-Exempt Fund
Shareholder Expenses (fees that are deducted from your investment)
CLASS A CLASS B
<S> <C> <C>
Maximum Sales Charge (imposed on purchases as
a percentage of offering price) 4.75% 0.00%
Maximum Deferred Sales Charge
(as a percentage) 0.00% 5.00%
Annual Fund Operating Expenses (Expenses that
are deducted from Fund assets)
Management 0.20% 0.20%
Administration Fees 0.45% 0.45%
Distribution (12b-1 Fees) 0.50% 1.00%
Other Expenses 0.48% 116.19%
Total Annual Fund Operating Expenses* 1.63% 117.84%
- --------------------------------------------------------------------------------
</TABLE>
* After fee waiver. Total Fund Operating Expenses for A shares would have
been 1.00% and 1.50% for Class B shares.
The adjacent table shows the expenses you would pay on a hypothetical $10,000
investment. The example presumes an average annual return of 5% with redemption
at the end of each time period. This illustration is hypothetical and assumes
that expenses remain the same and you reinvest your dividends and distributions.
In a real investment, your actual expenses may be higher or lower than those
shown.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Expense Example
What a $10,000 investment would actually cost
1 Year 3 year 5 year 10 year
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A $633 $965 $1,319 $2,316
Class B $10,000 $10,000** $10,000** $10,000**
- --------------------------------------------------------------------------------
</TABLE>
** Expenses would exceed the value of the investment due to the high level of
expenses if the Adviser does not maintain the fee waiver.
16 VAN ECK/CHUBB FUNDS PROSPECTUS
<PAGE>
I. THE FUNDS / TOTAL RETURN
================================================================================
================================================================================
6. VAN ECK/CHUBB TOTAL RETURN FUND PROFILE
OBJECTIVE
The Total Return Fund seeks to produce high total return from income and capital
appreciation, consistent with reasonable risk, by investing in income-producing
equity and debt securities.
PRINCIPAL STRATEGIES
The Fund intends to invest between 30% and 70% of assets in equity securities
and in bonds, notes, warrants, or preferred stocks that can be exchanged for or
converted into common stocks. The rest of the portfolio will normally be
invested in U.S. Government and corporate bonds.
The Fund's Adviser primarily looks for stocks and debt securities with the
potential for capital growth, emphasizing low price to earnings ratio and low
price to net asset value. The Fund invests only in corporate bonds rated Baa or
BBB by Moody's, S&P or other ratings agencies, or in unrated bonds of equal
quality, in the Adviser's opinion. The Adviser expects that the average maturity
of the Fund's bond portfolio will not exceed 15 years. The Fund seeks to reduce
volatility and principal risk by blending equity and debt investments, but
overall Fund performance will depend on the Adviser's ability to time the
investment mix and to react to changing market conditions.
The Fund invests primarily in the United States. The Fund may sometimes invest
up to 20% of its assets in foreign equity and debt securities, including
exchange-traded and over-the counter foreign issues, American Depositary
Receipts (ADRs), European Depositary Receipts (EDRs), and Global Depositary
Receipts (GDRs). Any of these securities may be traded either in the U.S. or in
foreign markets.
PRINCIPAL RISKS
Fund shares are subject to ordinary market risk, and you may expect their price
to fall. The Fund's bond portfolio will tend to fall in value when interest
rates rise. The Fund is subject to credit risk, and the political, economic and
currency risks of investment in foreign securities. An investment in the Fund
may lose money.
VAN ECK/CHUBB FUNDS PROSPECTUS 17
<PAGE>
================================================================================
Van Eck/Chubb Total Return Fund Performance
================================================================================
This chart illustrates the historic variability of risk of the Fund from year to
year for a share of Van Eck/Chubb Total Return Fund (before sales charges).
Sales loads or account fees are not reflected, if these amounts were reflected,
returns would be less than those shown. This chart describes past perform-ance
only, and should not be understood as a prediction for future results.
During the period covered, the Fund's highest performing quarter (ended 6/30/97)
was 13.29%. The lowest perform-ing quarter (ended 9/30/98) was -14.11%.
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Van Eck/Chubb Total Return Fund
Class A Shares Annual Total Returns (%)
As of December 31, 1998
<S> <C>
1989 25.47
1990 -0.51
1991 29.23
1992 7.11
1993 14.04
1994 -4.21
1995 30.13
1996 17.04
1997 24.09
1998 2.73
- --------------------------------------------------------------------------------
</TABLE>
Fund performance is shown with sales charges subtracted. This chart compares the
Fund's performance with a broad measure of market performance. Past performance
does not guarantee or predict future results.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Van Eck/Chubb Total Return Fund
1-, 5-, and 10-Year Performance
Plus a Comparison to the S&P 500 Index*
As of December 31, 1998
1 Year 5 Year 10 Year
<S> <C> <C> <C>
Class A Shares -2.16% 12.10% 13.33%
S&P 500 Index 28.57% 24.05% 19.19%
- --------------------------------------------------------------------------------
</TABLE>
* The S&P 500 Index consists of 500 widely held common stocks, covering four
broad sectors (industrials, utilities, financial, and transportation). It
is a market-value weighted index (stock price times shares outstanding),
with each stock affecting the index in proportion to its market value.
Construction of the S&P 500 index proceeds from industry group to the
whole. Since some industries are characterized by companies of relatively
small stock capitalization, the index is not comprised of the 500 largest
companies on the New York Stock Exchange. This index, calculated by
Standard & Poor's, is a total return index with dividends reinvested.
18 VAN ECK/CHUBB FUNDS PROSPECTUS
<PAGE>
THE FUNDS / TOTAL RETURN
================================================================================
Van Eck/Chubb Total Return Fund Expenses
================================================================================
This table shows certain expenses you will incur as a Fund investor, either
directly or indirectly if you buy and hold shares.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Van Eck/Chubb Total Return Fund
Shareholder Expenses (fees that are deducted from your investment)
CLASS A CLASS B
<S> <C> <C>
Maximum Sales Charge (imposed on purchases as
a percentage of offering price) 5.75% 0.00%
Maximum Deferred Sales Charge
(as a percentage) 0.00% 5.00%
Annual Fund Operating Expenses (Expenses that
are deducted from Fund assets)
Management 0.20% 0.20%
Administration Fees 0.45% 0.45%
Distribution (12b-1 Fees) 0.50% 1.00%
Other Expenses 0.46% 1.31%
Total Annual Fund Operating Expenses* 1.61% 2.96%
- --------------------------------------------------------------------------------
</TABLE>
* After fee waiver. Total Fund Operating Expenses for A shares would have
been 1.25% and 1.75% for Class B shares.
The adjacent table shows the expenses you would pay on a hypothetical $10,000
investment. The example presumes an average annual return of 5% with redemption
at the end of each time period. This illustration is hypothetical and assumes
that expenses remain the same and you reinvest your dividends and distributions.
In a real investment, your actual expenses may be higher or lower than those
shown.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Expense Example
What a $10,000 investment would actually cost
1 Year 3 year 5 year 10 year
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Class A $729 $1,054 $1,401 $2,376
Class B $799 $1,315 $1,757 $3,280
- --------------------------------------------------------------------------------
</TABLE>
VAN ECK/CHUBB FUNDS PROSPECTUS 19
<PAGE>
================================================================================
II. Additional Investment Strategies
================================================================================
OTHER INVESTMENTS, INVESTMENT POLICIES, INVESTMENT TECHNIQUES AND RISKS.
MARKET RISK
An investment in any of the Funds involves "market risk"--the risk that
securities prices may go up or down.
OTHER INVESTMENT TECHNIQUES AND RISK
ASSET BACKED SECURITIES
Funds All
Definition These are securities backed by pools of consumer loans
unrelated to mortgages.
Risk Principal and interest depend on payment of the underlying
loans, though issuers may support creditworthiness with
letters of credit and other instruments.
COLLATERALIZED MORTGAGE OBLIGATIONS (CMOs)
Funds All
Definition These are securities backed by a group of mortgages. CMOs
are fixed-income securities, rated by agencies like other
fixed-income securities; the Funds invest in CMOs rated A or
better by S&P and Moody's. CMOs "pass through" payments made
by individual mortgage holders. represent pools of consumer
loans unrelated to mortgages.
Risk Mortgage holders often refinance when interest rates fall;
reinvestment of prepayments at lower rates can reduce the
yield of the CMO. Reduced CMO yields can adversely affect
the overall yield of the Fund.
CREDIT RISK
Funds Capital Appreciation Fund, Global Income Fund, Growth &
Income Fund, and Total Return Fund.
Risk The chance that an issuer will fail to repay interest and
principal in a timely manner.
20 VAN ECK/CHUBB FUNDS PROSPECTUS
<PAGE>
INVESTMENT POLICIES AND RISKS
================================================================================
================================================================================
EQUITY SECURITIES
Funds Capital Appreciation Fund, Global Income Fund, Growth and
Income Fund, Total Return Fund
Definition Equity securities (usually, "stocks") represent shares of
ownership in companies.
Risk Equity securities of small- and mid-size companies may
fluctuate more in price than equities of large companies,
because small companies may have limited product lines, or
may depend on the expertise of a few people, or may have
limited financial resources. Conversely, such securities can
offer the opportunity for greater growth than large-company
stocks.
DERIVATIVES
Funds All
Definition A derivative is a security that derives its current value
from the current value of another security. It can also
derive its value from a commodity, a currency, or a
securities index. The Funds use derivatives, either on their
own, or in combination with other derivatives, to offset
other investments with the aim of reducing risk-- that is
called "hedging." The Funds also invest in derivatives for
their investment value.
Risks Derivatives bear special risks, by their very nature. First,
the Fund Advisers must correctly predict the price
movements, during the life of a derivative, of the
underlying asset in order to realize the desired results
from the investment. Second, the price swings of an
underlying security tend to be magnified in the price swing
of its derivative. If a Fund invests in a derivative with
"leverage"--by borrowing--an unanticipated price move might
result in the Fund losing more than its original investment.
Derivatives may not move in concert with the underlying
security.
For a complete discussion of the kinds of derivatives the
Funds use, and of their risks, please see the SAI.
VAN ECK/CHUBB FUNDS PROSPECTUS 21
<PAGE>
================================================================================
================================================================================
FOREIGN SECURITIES, DEPOSITARY RECEIPTS
Funds Capital Appreciation Fund, Global Income Fund, Growth and
Income Fund, Total Return Fund
Definition Securities issued by foreign companies, traded in foreign
currencies, or issued by companies with most of their
business interests in foreign countries. Depositary
Receipts--obligations traded on more established exchanges,
denominated in larger currencies, representing foreign
issues--are considered foreign securities.
Risk Foreign investing involves exchange rate fluctuations and
exchange controls; less publicly available information; more
volatile or less liquid securities markets; and the
possibility of expropriation, confiscatory taxation, or
political, economic or social instability. Foreign
accounting can be less revealing--than American accounting
practice. Foreign regulation may be inadequate or irregular.
Some of these risks may be reduced when Funds invest
indirectly in foreign issues via American Depositary
Receipts (ADRs), European Depositary Receipts (EDRs),
American Depositary Shares (ADSs), Global Depositary Shares
(GDSs), and otherwise which are traded on larger, recognized
exchanges and in stronger, more recognized currencies.
INTEREST RATE RISK
Funds All
Risk The chance that bond prices will decline due to rising
interest rates.
22 VAN ECK/CHUBB FUNDS PROSPECTUS
<PAGE>
INVESTMENT POLICIES AND RISKS
================================================================================
================================================================================
NON-DIVERSIFICATION
Funds Global Income Fund
Definition The Investment Company Act defines a non-diversified Fund as
one without a percentage restriction on investing its
assets. This permits a Fund to concentrate its assets in far
fewer issuers and in larger proportions than non-diversified
Fund.
Risk Greater concentration in fewer issuers will cause a Fund's
share value to be more closely linked with the market
volatility of a few of the Fund's portfolio holdings.
LOANS OF PORTFOLIO SECURITIES
Funds Global Income Fund
Definition The Funds may lend their securities, up to one-third of the
value of their portfolios, to broker-dealers. Broker-dealers
must collateralize (secure) these borrowings in full with
cash, U.S. Government securities, or high-quality letters of
credit.
Risk If a broker-dealer breaches its agreement either to pay for
the loan, to pay for the securities, or to return the
securities, the Fund may lose money.
LOW RATED DEBT SECURITIES
Funds Global Income Fund
Definition Debt securities, foreign and domestic, rated "below
investment grade" by ratings services.
Risk Prices can swing widely in response to the health of their
issuers and to changes in interest rates. They have a risk
of untimely payments. By definition, they involve more risk
of default than do higher-rated issues. The Fund may invest
up to 25% of its assets in these securities.
Year 2000
The Adviser's computer systems or the systems of other service providers could
have difficulties processing and calculating date-related information from and
after January 1, 2000. This is commonly known as the "Year 2000 Problem." The
Adviser is taking steps that it believes are reasonably designed to address the
problem in its own computers and to obtain assurances that comparable steps are
being taken by the Fund's service providers. However, there can be no assurance
that these steps will avoid any adverse impact on the Funds.The Fund is unable
to determine with certainty how the Year 2000 problem will affect its
investments in foreign securities and dealings with foreign exchanges.
Similarly, the companies in which the Funds invest could be adversely affected
by this issue. The ability of the company to respond successfully to the issue
requires both technological sophistication and diligence, and there can be no
assurance that any steps taken will be sufficient to avoid an adverse impact on
the Funds.
VAN ECK/CHUBB FUNDS PROSPECTUS 23
<PAGE>
================================================================================
================================================================================
RESTRICTED SECURITIES
Funds All
Definition Securities with restrictions on resale because they are not
registered under the Securities Act of 1933, ("the Act"), or
because they are sold only to "qualified institutional
buyers" under Rule 144A under the Act ("Rule 144A
securities").
Risk Because these securities are not registered or priced via
regular exchanges, a Fund may not be able to sell them when
it wants to, or may have to sell them for a reduced price.
REVERSE REPURCHASE AGREEMENTS
Funds Global Income Fund
Definition The Fund sells portfolio securities and agrees to repurchase
them at a certain price on a certain date. At the same time,
the Fund opens an account with the Custodian containing cash
or securities equal in value to the securities in the
reverse repurchase agreement.
Risk The securities set aside to collateralize the reverse
repurchase agreement may decline in value during the time of
the agreement. The counterparty to the repurchase agreement
may go bankrupt or become insolvent, which would delay
closing the agreement and tie up money in the interim.
24 VAN ECK/CHUBB FUNDS PROSPECTUS
<PAGE>
================================================================================
III. SHAREHOLDER INFORMATION
================================================================================
HOW TO BUY, SELL, EXCHANGE, OR TRANSFER SHARES; AUTOMATIC SERVICES; MINIMUM
PURCHASE AND ACCOUNT SIZE, HOW TO CHOOSE A CLASS OF SHARES; YOUR PRICE PER
SHARE; SALES CHARGES; RETIREMENT PLANS; DIVIDENDS AND CAPITAL GAINS; TAXES; AND
MANAGEMENT OF THE FUNDS. (SEE THE SAI FOR ADDITIONAL INFORMATION.)
1. HOW TO BUY, SELL, EXCHANGE OR TRANSFER SHARES
Through a broker or agent
We recommend that you use a broker or agent to buy, sell, exchange, or transfer
shares for you. The applicable sales charge will be the same, whether you buy
indirectly through a broker or agent or directly through the transfer agent.
Contact your broker or agent for details.
Through the Transfer Agent, DST Systems, Inc. (DST)
You may buy (purchase), sell (redeem), exchange, or transfer ownership of shares
directly through DST by mail or telephone, as stated below.
The Funds' mailing address at DST is:
Van Eck Global
P.O. Box 418407
Kansas City, MO 64141
For overnight delivery:
Van Eck Global
210 W. 10th St., 8th Fl.
Kansas City, MO 64105
To telephone the Funds at DST, call Van Eck's Account Assistance at
1-800-544-4653.
PURCHASE BY MAIL
To make an initial purchase, complete the Van Eck Account Application and mail
it with your check made payable to Van Eck/Chubb Funds. Subsequent purchases can
be made by check with the remittance stub of your account statement. You cannot
make a purchase by telephone. We cannot accept third party checks, checks drawn
on a foreign bank, or checks not in U.S. Dollars. There are separate
applications for Van Eck retirement accounts (see "Retirement Plans" for
details). For further details, see the application or call Account Assistance.
TELEPHONE REDEMPTION--PROCEEDS BY CHECK
1-800-345-8506
If your account has the optional Telephone Redemption Privilege, you can redeem
up to $50,000 per day. The redemption check must be payable to the registered
owner(s) at the address of record (which cannot have been changed within the
past 30 days). You automatically get the Telephone Redemption Privilege (for
eligible accounts) unless you specifically refuse it on your Account
Application, on broker/agent settlement instructions, or by written notice to
DST. All accounts are eligible for the privilege except those registered in
street, nominee, or corporate name and custodial accounts held by a financial
institution, including Van Eck sponsored retirement plans.
VAN ECK/CHUBB FUNDS PROSPECTUS 25
<PAGE>
================================================================================
================================================================================
EXPEDITED REDEMPTION--PROCEEDS BY WIRE
1-800-345-8506
If your account has the optional Expedited Redemption Privilege, you can redeem
a minimum of $1,000 or more per day by telephone or written request with the
proceeds wired to your designated bank account. This privilege must be
established in advance by Application. For further details, see the Application
or call Account Assistance.
WRITTEN REDEMPTIONS
Your written redemption (sale) request must include:
o Fund and account number
o Number of shares or dollar amount to be redeemed, or a request to sell
"all shares"
o Signatures of all registered account holders, exactly as those names appear
on the account registration, including any additional documents concerning
authority and related matters in the case of estates, trusts,
guardianships, custodianships, partnerships and corporations, as requested
by DST
o Special instructions, including bank wire information or special payee or
address
A signature guarantee for each account holder will be required if:
o The redemption is for $50,000 or more
o The redemption amount is wired
o The redemption amount is paid to someone other than the registered owner
o The redemption amount is sent to an address other than the address of
record
o The address of record has been changed within the past 30 days
Institutions eligible to provide signature guarantees include banks, brokerages,
trust companies, and some credit unions.
CHECK WRITING
If your account has the optional Redemption by Check Privilege, you can write
checks against your account for a minimum of $250 and a maximum of $5 million.
This privilege is only available to Tax-Exempt Fund-A, Government Securities
Fund-A, and Global Income Fund-A shareholders and must be established in advance
by Application. For further details, see the Application or call Account
Assistance.
TELEPHONE EXCHANGE 1-800-345-8506
If your account has the optional Telephone Exchange Privilege, you can exchange
between Van Eck/Chubb Funds and Van Eck Funds of the same Class without any
additional sales charge. (Shares originally purchased into the Van Eck U.S.
Government Money Fund, which paid no sales charge, may pay an initial sales
charge the first time they are exchanged into another Class A fund.)
Exchanges of Class B shares are exempt from the redemption sales charge. All
accounts are eligible except for those registered in street name and certain
custodial retirement accounts held by a financial institution other than Van
Eck. For further details regarding exchanges, please see the application,
"Market Timing Limits" and "Unauthorized Telephone Requests" below, or call
Account Assistance.
26 VAN ECK/CHUBB FUNDS PROSPECTUS
<PAGE>
III. SHAREHOLDER INFORMATION
================================================================================
================================================================================
WRITTEN EXCHANGES
Written requests for exchange must include:
o The fund and account number to be exchanged out of
o The fund to be exchanged into
o Directions to exchange "all shares" or a specific number of shares or
dollar amount
o Signatures of all registered account holders, exactly as those names appear
on the account registration, including any additional documents concerning
authority and related matters in the case of estates, trusts,
guardianships, custodianships, partnerships and corporations, as requested
by DST
For further details regarding exchanges, please see the applicable information
in "Telephone Exchange" on the preceding page.
TRANSFER OF OWNERSHIP
Requests must be in writing and provide the same information and legal
documentation necessary to redeem and establish an account, including the social
security or tax identification number of the new owner.
LIMITS AND RESTRICTIONS
Market Timing Limits
Van Eck has a policy of discouraging short-term trading, particularly by
market-timers, and may limit or reject purchase orders and exchanges at its
discretion. Shareholders are limited to six exchanges per calendar year.
Although not generally imposed, each Fund has the ability to redeem its shares
"in kind" by making payment in securities instead of dollars. For further
details, contact Account Assistance.
Unauthorized Telephone Requests
Like most financial organizations, Van Eck, the Funds
and DST may only be liable for losses resulting from unauthorized transactions
if reasonable procedures designed to verify the caller's identity and authority
to act on the account are not followed.
If you do not want to authorize the Telephone Exchange or Redemption privilege
on your eligible account, you must refuse it on the Account Application,
broker/agent settlement instructions, or by written notice to DST. Van Eck, the
Funds, and DST reserve the right to reject a telephone redemption, exchange, or
other request without prior notice either during or after the call. For further
details, contact Account Assistance.
VAN ECK/CHUBB FUNDS PROSPECTUS 27
<PAGE>
================================================================================
================================================================================
Automatic Services
Automatic Investment Plan
You may authorize DST to periodically withdraw a specified dollar amount from
your bank account and buy shares in your Fund account. For further details and
to request an Application, contact Account Assistance.
Automatic Exchange Plan
You may authorize DST to periodically exchange a specified dollar amount for
your account from one Fund to another Fund. The Plan is available to Class A
shares only. For further details and to request an Application, contact Account
Assistance.
Automatic Withdrawal Plan
You may authorize DST to periodically withdraw (redeem) a specified dollar
amount from your Fund account and mail a check to you for the proceeds. Your
Fund account must be valued at $10,000 or more at current offering price to
establish the Plan. The Plan is available to Class A shares only. For further
details and to request an Application, contact Account Assistance.
Minimum purchase and account size
An initial purchase of $1,000 and subsequent purchases of $100 dollars or more
are required for non-retirement accounts. There are no minimums for any
retirement or pension plan account, for any account using the Automatic
Investment Plan, or for any other periodic purchase program.
If the size of your account falls below 50 shares after the initial purchase,
each Fund reserves the right to redeem your shares after 30 days notice to you.
This does not apply to accounts exempt from purchase minimums as described
above.
How Fund shares are priced
The Funds buy or sell their shares at their net asset value, or NAV, per share.
The Funds calculate NAV every day the New York Stock Exchange (NYSE) is open, as
of the close of the NYSE, which is normally 4:00 p.m. Eastern Time. There are
some exceptions, including these:
o You may enter a buy or sell order when the NYSE is closed for weekends or
holidays. If that happens, your price will be the NAV calculated on the
next available open day of the NYSE.
o The Funds have certain securities which are listed on foreign exchanges
that trade on weekends or other days when the Fund does not price its
shares, as a result, the net asset value of the Fund shares may change on
days when shareholders will not be able to purchase or redeem.
The Funds value their assets at fair market value, when price quotes are
available. Otherwise, the Funds' Board of Directors determines fair market value
in good faith.
2. HOW TO CHOOSE A SHARE CLASS
The Funds offer Class A and Class B Shares. Separate share classes allow you to
choose the type of sales charge and 12b-1 fee schedule that is best for you.
Class B Shares automatically convert to Class A Shares eight years after each
individual purchase. You, with your broker or agent, should review "Sales
Charges," "Plan of Distribution (12b-1 Plan)," and the Fund's per share expenses
in "I. The Funds" and "IV. Financial Highlights" in this prospectus before
choosing a share class.
o Class A Initial sales charge at time of purchase.
o Class B Contingent Deferred Sales Charge (CDSC) at time of redemption. The
CDSC decreases yearly until it becomes zero in the seventh year.
28 VAN ECK/CHUBB FUNDS PROSPECTUS
<PAGE>
================================================================================
================================================================================
This Page Intentionally
Left Blank.
<PAGE>
================================================================================
================================================================================
3. SALES CHARGES
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
Class A Shares Sales Charges
Capital Appreciation Fund, Growth and Income Fund and Total Return Fund
Sales Charge as a Percentage of
Dollar Amount of Purchase Offering Price Net Amount Invested Percentage to Brokers or Agents*
<S> <C> <C> <C>
Less than $25,000 5.75% 6.10% 5.00%
$25,000 to $50,000 5.00% 5.30% 4.25%
$50,000 to $100,000 4.50% 4.70% 3.90%
$100,000 to $250,000 3.00% 3.10% 2.60%
$250,000 to $500,000 2.50% 2.60% 2.20%
$500,000 to $1,000,000 2.00% 2.00% 1.75%
$1,000,000 and over None**
- --------------------------------------------------------------------------------------------------------------
</TABLE>
* Brokers or Agents who receive substantially all of the sales charge for
shares they sell may be deemed to be statutory underwriters.
** For any single purchase of $1 Million or more of Class A shares, the
Distributor may pay a finder's fee to eligible brokers and agents. For
details, contact the Distributor.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
Class A Shares Sales Charges
Global Income Fund, Government Securities Fund and Tax-Exempt Fund
Sales Charge as a Percentage of
Dollar Amount of Purchase Offering Price Net Amount Invested Percentage to Brokers or Agents*
<S> <C> <C> <C>
Less than $100,000 4.75% 5.00% 4.00%
$100,000 to $250,000 3.75% 3.90% 3.15%
$250,000 to $500,000 2.50% 2.60% 2.00%
$500,000 to $1,000,000 2.00% 2.00% 1.65%
$1,000,000 and over None**
- --------------------------------------------------------------------------------------------------------------
</TABLE>
* Brokers or Agents who receive substantially all of the sales charge for
shares they sell may be deemed to be statutory underwriters.
** For any single purchase of $1 Million or more of Class A shares, the
Distributor may pay a finder's fee to eligible brokers and agents. For
details, contact the Distributor.
30 VAN ECK/CHUBB FUNDS PROSPECTUS
<PAGE>
III. SHAREHOLDER INFORMATION
================================================================================
================================================================================
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Class B Shares Sales Charges
Capital Appreciation Fund, Global Income Fund, Government Securities Fund,
Growth and Income Fund, Tax-Exempt Fund and Total Return Fund
Shareholders time of redemption Contingent Deferred Sales Charge (CDSC)+
<S> <C>
During Year One 5.0% of the lesser of NAV or purchase price
During Year Two 4.0% of the lesser of NAV or purchase price
During Year Three 4.0% of the lesser of NAV or purchase price
During Year Four 3.0% of the lesser of NAV or purchase price
During Year Five 2.0% of the lesser of NAV or purchase price
During Year Six 1.0% of the lesser of NAV or purchase price
Thereafter None
- --------------------------------------------------------------------------------
</TABLE>
Class B Broker/Agent Compensation: 4% of the amount purchased at time of
investment.
+ Shares will be redeemed in the following order: (1) shares not subject to
the CDSC (dividend reinvestment, etc.) (2) first in first out.
VAN ECK/CHUBB FUNDS PROSPECTUS 31
<PAGE>
================================================================================
================================================================================
Reduced or Waived Sales Charges
You may qualify for a reduced or waived sales charge as stated below, or under
other appropriate circumstances. You (or your broker or agent) must notify DST
or Van Eck at the time of each purchase or redemption whenever a reduced or
waived sales charge is applicable. The term "purchase" refers to a single
purchase by an individual (including spouse and children under age 21),
corporation, partnership, trustee, or other fiduciary for a single trust,
estate, or fiduciary account. The value of shares owned by an individual in
Class A, B and C of each of the Van Eck/Chubb Funds and Van Eck Funds (except
for the Van Eck U.S. Government Money Fund) may be combined for a reduced sales
charge in Class A shares only.
FOR CLASS A SHARES
Right of accumulation When you buy shares, the amount you purchase will be
combined with the value, at current offering price, of any existing Fund shares
you own. This total will determine the sales charge level you qualify for.
Combined purchases The combined amounts of your multiple purchases in the Funds
on a single day determines the sales charge level you qualify for.
Letter of intent If you plan to make purchases in the Funds within a 13 month
period that total an amount equal to a reduced sales charge level, you can
establish a Letter of Intent (LOI) for that amount. Under the LOI, your initial
and subsequent purchases during that period receive the sales charge level
applicable to that total amount. For escrow provisions and details, see the
Application.
Group purchases If you are a member of a "qualified group," you may purchase
shares of the Funds at the reduced sales charge applicable to the group as a
whole. A qualified group (1) has more than 10 members, (2) has existed over six
months, (3) has a purpose other than acquiring fund shares at a discount, (4)
and has satisfied certain other criteria, including the use of the Automatic
Investment Plan. For details, contact the Distributor.
Persons affiliated with Van Eck Trustees, officers, and full-time employees (and
their families) of the Funds, Adviser or Distributor may buy without a sales
charge. Also, employees (and their spouses and children under age 21) of a
brokerage firm or bank that has a selling agreement with Van Eck, and other
affiliates and agents, may buy without a sales charge.
Investment Advisers, financial planners and bank trust departments Investment
advisers, financial planners and bank trust departments that meet certain
requirements and are compensated by asset-based fees may buy without a sales
charge on behalf of their clients.
Foreign financial institutions Certain foreign financial institutions that have
agreements with Van Eck may buy shares with a reduced or waived sales charge for
their omnibus accounts on behalf of foreign investors.
Institutional retirement programs Certain financial institutions who have
agreements with Van Eck may buy shares without a sales charge for their omnibus
accounts on behalf of investors in retirement plans and deferred compensation
plans other than IRAs.
Buy-back privilege You have the one-time right to reinvest proceeds of a
redemption from a Class A Fund into that Fund or another Class A Fund within 30
days without a sales charge, excluding the Van Eck U.S. Government Money Fund.
Reinvestment into the same Fund within 30 days is considered a "wash sale" by
the IRS and cannot be declared as a capital loss or gain for tax purposes.
Moving assets from another mutual fund group
You may purchase shares without a sales charge with the proceeds of a redemption
made within three months from another mutual fund group not managed by Van Eck
or its affiliates. The shares redeemed must have paid an initial sales charge in
a Class A fund. Also, the financial representative of record must be the same on
the Van Eck/Chubb Fund account as for the other mutual fund redeemed.
32 VAN ECK/CHUBB FUNDS PROSPECTUS
<PAGE>
III. SHAREHOLDER INFORMATION
================================================================================
================================================================================
FOR CLASS B SHARES
Death or disability The redemption sales charge may be waived upon (1) death or
(2) disability as defined by the Internal Revenue Code.
Certain retirement distributions The redemption sales charge may be waived for
lump sum or other distributions from IRA, Keogh, and 403(b) accounts following
retirement or at age 70 1/2. It is also waived for distributions from qualified
pension or profit sharing plans after termination of employment after age 55. In
addition, it is waived for shares redeemed as a tax-free return of an excess
contribution.
4. RETIREMENT PLANS
Fund shares may be invested in tax-advantaged retirement plans sponsored by Van
Eck or other financial organizations. Retirement plans sponsored by Van Eck use
Investors Fiduciary Trust Company ("IFTC") as custodian and must receive
investments directly by check or wire using the appropriate Van Eck retirement
plan application. Confirmed trades through a broker or agent cannot be accepted.
To obtain applications and helpful information on Van Eck retirement plans,
contact your broker or agent or Account Assistance.
Retirement Plans Sponsored by Van Eck:
IRA
Roth IRA
Education IRA
SEP IRA
403(b)(7)
Qualified (Pension and Profit Sharing) Plans
5. TAXES
TAXATION OF DIVIDEND OR CAPITAL GAIN DISTRIBUTIONS YOU RECEIVE
For tax-reportable accounts, distributions are normally taxable even if they are
reinvested. Distributions of dividends and short-term capital gains are taxed as
ordinary income. Distributions of long-term capital gains are taxed at capital
gain rates.
TAXATION OF SHARES YOU SELL
For tax-reportable accounts, when you redeem your shares you may incur a capital
gain or loss on the proceeds. The amount of gain or loss, if any, is the
difference between the amount you paid for your shares (including reinvested
distributions) and the amount you receive from your redemption. Be sure to keep
your regular statements; they contain the information necessary to calculate the
capital gain or loss. If you redeem shares from an eligible account, you will
receive an Average Cost Statement in February to assist you in your tax
preparations.
An exchange of shares from one Fund to another will be treated as a sale of Fund
shares. It is, therefore, a taxable event.
NON-RESIDENT ALIENS
Distributions of dividends and short-term capital gains, if any, made to
non-resident aliens are subject to a 30% withholding tax (or lower tax treaty
rates for certain countries). The Internal Revenue Service considers these
distributions U.S. source income. Currently, the Funds are not required to
withhold tax from long-term capital gains or redemption proceeds.
TAXATION OF DISTRIBUTIONS FROM THE TAX-EXEMPT FUND
Van Eck expects that substantially all of the dividends paid by the Tax-Exempt
Fund will be exempt from Federal Income taxes. Dividend distributions may be
subject to state and local taxes. Some distributions of income or capital gains
from taxable securities may be taxable; investors who are residents of certain
states may also be subject to Alternative Minimum Tax on these distributions.
Van Eck will notify you with your 1099-DIV tax form after the end of the year
regarding the tax character of your Tax-Exempt Fund distributions.
VAN ECK/CHUBB FUNDS PROSPECTUS 33
<PAGE>
================================================================================
================================================================================
6. DIVIDENDS AND CAPITAL GAINS
If declared, dividend and capital gain distributions are generally paid on the
last business day of the month of declaration. Short-term capital gains are
treated like dividends and follow that schedule. Occasionally, a distribution
may be made outside of the normal schedule.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Dividend and Capital Gain Schedule
<S> <C> <C>
Fund Dividends and Short-Term Long-Term
Capital Gains Capital Gains
Capital Appreciation Fund December December
Global Income Fund Monthly December
Government Securities Fund Daily Accrual, paid monthly December
Growth and Income Fund December December
Tax-Exempt Fund Monthly December
Total Return Fund March/June/September/December December
- --------------------------------------------------------------------------------
</TABLE>
Dividend and Capital Gain Reinvestment Plan
Dividends and/or capital gains are automatically reinvested into your account
without a sales charge, unless you elect a cash payment. You may elect cash
payment either on your original Account Application, or by calling Account
Assistance at 1-800-544-4653.
Divmove You can have your cash dividends from a Class A Fund automatically
invested in another Class A fund. Dividends are invested on the payable date,
without a sales charge. For details and an Application, call Account
Assistance.
34 VAN ECK/CHUBB FUNDS PROSPECTUS
<PAGE>
III. SHAREHOLDER INFORMATION
================================================================================
================================================================================
7. MANAGEMENT OF THE FUNDS
==============================
ADMINISTRATOR
Van Eck Associates
Corporation, Park Avenue, New
York, NY 10016, serves as
administrator to each of the
Funds, under an Administration
Agreement with Van Eck/Chubb
Funds, Inc.
==============================
==============================
INVESTMENT ADVISER
Chubb Asset Managers, Inc., 15
Mountain View Road, Warren, NJ
07059, a wholly owned
subsidiary of The Chubb
Corporation, serves as
investment adviser to the
Funds. The Adviser works under
the supervision of the Board
of Directors.
==============================
==============================
INDEPENDENT ACCOUNTANTS
==============================
Ernst & Young LLP, 787 Seventh THE COMPANY
Avenue, New York, NY 10019,
provides audit services, "The Company" is incorporated
consultation and advice with in the state of Maryland and
respect to financial consists of the Van Eck/Chubb
information in the Company's Funds, Inc. listed in this
filings with the SEC, consults prospectus ("Funds"). The
with the Company on accounting Board of Directors manages the
and financial reporting Funds' business and affairs.
matters, and prepares the ==============================
Company's tax returns.
==============================
============================== ==============================
DISTRIBUTOR TRANSFER AGENT
Van Eck Securities DST Systems, Inc., 210 West
Corporation, 99 Park Ave., New 10th Street, 8th Floor, Kansas
York, NY 10016 distributes the City, MO 64105, serves as the
Funds and is wholly owned by Funds' transfer agent.
the Administrator. ==============================
==============================
==============================
CUSTODIAN
Citibank, N.A., 111 Wall
Street, New York, NY 10043,
holds Fund securities and
settles trades.
==============================
VAN ECK/CHUBB FUNDS PROSPECTUS 35
<PAGE>
================================================================================
================================================================================
INFORMATION ABOUT FUND MANAGEMENT
INVESTMENT ADVISER
Chubb Asset Managers, Inc., is a wholly owned subsidiary of The Chubb
Corporation, which ranks as one of the nation's top 15 Stock/Insurance
companies, with assets exceeding $19.6 billion. The principals of the Adviser
are investment personnel of Chubb & Son, a division of an affiliate of Chubb
Corporation. They provide investment advice and supervision to the portfolios of
The Chubb Corporation and its affiliates. Certain employees of the Adviser also
provide investment services to portfolios not affiliated with Chubb.
Fees paid to the Adviser Currently, each Fund pays a monthly advisory fee at the
annual rate of 0.20% of the first $200 million of average daily net assets,
0.19% of the next $1.1 billion, and 0.18% of assets in excess of $1.3 billion.
Portfolio managers
Capital Appreciation Fund:
Robert Witkoff, Senior Vice President
Mr. Witkoff has worked for the Adviser since 1988. He has 16 years of experience
in investment management as a portfolio manager and analyst.
Global Income Fund:
Marjorie Raines, Senior Vice President; Roger Brookhouse, Senior Vice President;
Emma Fishwick, Vice President
Ms. Raines has worked for the Adviser since inception in 1987. She has 26 years
of experience in investment management. Mr. Brookhouse has worked for the
Adviser since 1995. He has over 20 years of experience in investment management
as a portfolio manager and analyst. Ms. Fishwick has worked for the Adviser
since 1997. She has 12 years of experience in investment management as a
portfolio manager and analyst.
Government Securities Fund:
Ned I. Gerstman, Senior Vice President;
Paul Geyer, Vice President
Mr. Gerstman has worked for the Adviser since inception in 1987. He has 20 years
of experience in investment management as a portfolio manager and analyst. Mr.
Geyer has worked for the Adviser since 1992. He has 10 years of experience in
investment management as a portfolio manager and analyst.
Growth and Income Fund and Total Return Fund:
Michael O'Reilly, President;
Robert Witkoff, Senior Vice President
Mr. O'Reilly has worked for the Adviser since inception in 1987. He has over 30
years of experience in investment management as a portfolio manager and analyst.
Mr. Witkoff has worked for the Adviser since 1988. He has 16 years of experience
in investment management as a portfolio manager and analyst.
Tax-Exempt Fund:
Frederick Gaertner, Senior Vice President;
Thomas J. Swartz, III, Vice President
Mr. Gaertner has worked for the Adviser since 1989. He has 20 years of
experience in investment management as a portfolio manager and analyst. Mr.
Swartz has worked for the Adviser since 1988. He has 20 years of experience in
investment management as a portfolio manager and analyst.
ADMINISTRATOR
Van Eck Associates Corporation, 99 Park Avenue, New York, NY 10016 serves as
Administrator to each of the Funds. The Administrator performs accounting and
administrative services for the Funds. For these services, each Fund pays the
Administrator a monthly fee at the rate of 0.45% per year of the average daily
net assets on the first $200 million of assets, 0.41% of the next $1.1 billion
of assets, and 0.37% of assets in excess of $1.3 billion.
36 VAN ECK/CHUBB FUNDS PROSPECTUS
<PAGE>
III. SHAREHOLDER INFORMATION
================================================================================
================================================================================
Plan of Distribution (12b-1 Plan)
Each of the Funds has adopted a Plan of Distribution pursuant to Rule 12b-1
under the Act. The Board of Directors has determined that 0.25% per year of the
net assets of each Fund's Class A shares or 0.75% of the net assets of each
Fund's Class B shares will be used to finance sales or promotional activities,
and will be considered an asset-based sales charge. Further, 0.25% per year of
the net assets of each Fund will be paid to securities dealers and others as a
service fee. Because these fees are paid out of the Fund's assets on an ongoing
basis over time these fees may cost you more than paying other types of sales
charges.
For a complete description of the Plan of Distribution, please see "Plan of
Distribution" in the SAI.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Van Eck/Chubb Funds Annual 12b-1 Schedule
expressed in basis points (bps)*
FUND FEE PAYMENT
TO DEALER
<S> <C> <C>
Capital Appreciation Fund-A 50 bps 25 bps
Capital Appreciation Fund-B 100 bps 25 bps
Global Income Fund-A 50 bps 25 bps
Global Income Fund-B 100 bps 25 bps
Government Securities Fund-A 50 bps 25 bps
Government Securities Fund-B 100 bps 25 bps
Growth and Income Fund-A 50 bps 25 bps
Growth and Income Fund-B 100 bps 25 bps
Tax-Exempt Fund-A 50 bps 25 bps
Tax-Exempt Fund-B 100 bps 25 bps
Total Return Fund-A 50 bps 25 bps
Total Return Fund-B 100 bps 25 bps
- --------------------------------------------------------------------------------
</TABLE>
* A basis point (bp) is a unit of measure in the financial industry. One bp
equals .01 of 1% (1% = 100 bps).
The Company
For more information on the Company, the Directors and the Officers of the
Company, see "The Company" and "Directors and Officers" in the SAI.
Expenses Each Fund bears all expenses of its operations other than those
incurred by the Adviser or its affiliate under the Advisory Agreement with the
Company. Many of these expenses are shown in tables in Chapter I, "The Funds,"
or in Chapter IV, "Financial Highlights." For a more complete description of
Fund expenses, please see "Expenses" in the SAI.
VAN ECK/CHUBB FUNDS PROSPECTUS 37
<PAGE>
IV. FINANCIAL HIGHLIGHTS
THE FINANCIAL HIGHLIGHTS TABLES ARE INTENDED TO HELP YOU
UNDERSTAND THE FUNDS FINANCIAL PERFORMANCE FOR THE PAST FIVE
YEARS. CERTAIN INFORMATION REFLECTS FINANCIAL RESULTS FOR A
SINGLE FUND SHARE. THE TOTAL RETURNS IN THE TABLE REPRESENT THE
RATE THAT AN INVESTOR WOULD HAVE EARNED OR LOST ON AN INVESTMENT
IN THE FUND (ASSUMING REINVESTMENT OF ALL DIVIDENDS AND
DISTRIBUTIONS). THIS INFORMATION HAS BEEN AUDITED BY ERNST &
YOUNG LLP, WHOSE REPORT, ALONG WITH THE FUNDIS FINANCIAL
STATEMENTS ARE INCLUDED IN THE FUNDIS ANNUAL REPORT WHICH IS
AVAILABLE UPON REQUEST.
1. VAN ECK/CHUBB CAPITAL APPRECIATION FUND
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Financial Highlights
For a share outstanding throughout each period:
Class B
Class A Period From Period From
Year Ended December 31, Sept.1, 1995- (d) Apr.29, 1998 (d)
1998 1997 1996 Dec. 31, 1995 Dec.31, 1998
----------------------------------------------------------------- ----------------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $15.59 $12.99 $10.40 $10.00 $17.68
====================================================================================================================================
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income (0.034) 0.005 0.067 0.037 (0.026)
Net Gains (Losses) on
Securities (both realized and unrealized) (1.956) 3.565 2.796 0.422 (4.094)
====================================================================================================================================
Total from Investment Operations (1.990) 3.570 2.863 0.459 (4.120)
====================================================================================================================================
LESS DISTRIBUTIONS TO SHAREHOLDERS
Dividends from
Net Investment Income -- (0.005) (0.067) (0.037) --
Dividends in Excess
of Net Investment Income -- (0.005) -- -- --
Distributions from
Net Realized Gains (0.690) (0.960) (0.206) (0.022) (0.690)
Distributions in Excess of Net
Realized Gains -- -- -- -- --
====================================================================================================================================
Total Distributions (0.690) (0.970) (0.273) (0.059) (0.690)
====================================================================================================================================
Net Asset Value,
End of Period $12.91 $15.59 $12.99 $10.40 $12.87
====================================================================================================================================
Total Return (a) (12.76%) 27.79% 27.53% 4.60 (23.32%)
====================================================================================================================================
RATIOS TO AVERAGE NET ASSETS
Gross Expenses (b) 1.62% 1.52% 1.81% 2.50%(c) 20.69%(c)
Net Expenses 1.25% 1.25% 1.13% 1.25%(c) 1.75%(c)
Net Investment Income (Loss) (0.22%) 0.08% 0.86% 1.38%(c) (0.60%)(c)
Portfolio Turnover Rate 20.94% 50.67% 41.97% 2.73% 20.94%
Net Assets at End of Period $33,172,563 $41,482,081 $6,440,571 $1,596,254 $10,524
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Total return assumes reinvestment of all distributions during the period
and does not reflect deduction of sales charge. Investment returns and
principal values will fluctuate and shares, when redeemed, may be worth
more or less than the original cost. Total returns for periods of less than
one year are not annualized.
(b) Had fees not been waived and expenses not been assumed.
(c) Annualized.
(d) Commencement of operations.
38 VAN ECK/CHUBB FUNDS PROSPECTUS
<PAGE>
IV. FINANCIAL HIGHLIGHTS
2. VAN ECK/CHUBB GLOBAL INCOME FUND
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Financial Highlights
For a share outstanding throughout each period:
Period From
Class A Period From Class B
Year Ended December 31, Sept.1, 1995 (c)- Apr.29, 1998 (c)-
1998 1997 1996 Dec. 31, 1995 Dec.31, 1998
--------------------------------------------------------------------- -----------------
<S> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $9.64 $10.24 $10.21 $10.00 $9.87
====================================================================================================================================
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.421 0.471 0.551 0.116 0.254
Net Gains (Losses) on
Securities (both realized and unrealized) 0.994 (0.476) 0.030 0.210 0.810
====================================================================================================================================
Total from Investment Operations 1.415 (0.005) 0.581 0.326 1.064
====================================================================================================================================
LESS DISTRIBUTIONS TO SHAREHOLDERS
Dividends from
Net Investment Income (0.445) (0.398) (0.485) (0.116) (0.294)
Dividends in Excess
of Net Investment Income -- -- (0.066) -- --
Distributions from
Net Realized Gains (0.290) (0.084) -- -- (0.290)
Distributions in Excess
of Net Realized Gains -- (0.040) -- -- --
Tax Returns of Capital -- (0.073) -- -- --
====================================================================================================================================
Total Distributions (0.735) (0.595) (0.551) (0.116) (0.584)
====================================================================================================================================
Net Asset Value,
End of Period $10.32 $9.64 $10.24 $10.21 $10.35
====================================================================================================================================
Total Return (a) 15.00% 0.02% 5.95% 3.27% 10.96%
====================================================================================================================================
RATIOS TO AVERAGE NET ASSETS
Gross Expenses (d) 1.56% 1.56% 1.68% 2.14%(b) 129.09%(b)
Net Expenses 1.35% 1.35% 1.23% 1.75%(b) 1.85%(b)
Net Investment Income 4.24% 4.62% 5.49% 4.48%(b) 4.00%(b)
Portfolio Turnover Rate 99.31% 185.95% 80.70% 14.16% 99.31%
Net Assets at End of Period $91,209,649 $52,087,567 $12,226,878 $10,705,562 $3,602
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Total return assumes reinvestment of all distributions during the period
and does not reflect deduction of sales charge. Investment returns and
principal values will fluctuate and shares, when redeemed, may be worth
more or less than the original cost. Total returns for periods of less than
one year are not annualized.
(b) Annualized.
(c) Commencement of operations.
(d) Had fees not been waived and expenses not been assumed.
VAN ECK/CHUBB FUNDS PROSPECTUS 39
<PAGE>
THE FINANCIAL HIGHLIGHTS TABLES ARE INTENDED TO HELP YOU
UNDERSTAND THE FUNDS FINANCIAL PERFORMANCE FOR THE PAST FIVE
YEARS. CERTAIN INFORMATION REFLECTS FINANCIAL RESULTS FOR A
SINGLE FUND SHARE. THE TOTAL RETURNS IN THE TABLE REPRESENT THE
RATE THAT AN INVESTOR WOULD HAVE EARNED OR LOST ON AN INVESTMENT
IN THE FUND (ASSUMING REINVESTMENT OF ALL DIVIDENDS AND
DISTRIBUTIONS). THIS INFORMATION HAS BEEN AUDITED BY ERNST &
YOUNG LLP, WHOSE REPORT, ALONG WITH THE FUNDIS FINANCIAL
STATEMENTS ARE INCLUDED IN THE FUNDIS ANNUAL REPORT WHICH IS
AVAILABLE UPON REQUEST.
3. VAN ECK/CHUBB GOVERNMENT SECURITIES FUND
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Financial Highlights
For a share outstanding throughout each period:
Class B
Class A Period From
Year Ended December 31, Apr.29, 1998 (b)
1998 1997 1996 1995 1994 Dec.31, 1998
---------------------------------------------------------------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $10.82 $10.48 $10.78 $9.75 $10.71 $10.79
====================================================================================================================================
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.583 0.616 0.623 0.636 0.607 0.372
Net Gains (Losses) on
Securities (both realized and unrealized) 0.200 0.340 (0.300) 1.030 (0.960) 0.230
====================================================================================================================================
Total from Investment Operations 0.783 0.956 0.323 1.666 (0.353) 0.602
====================================================================================================================================
LESS DISTRIBUTIONS TO SHAREHOLDERS
Dividends from
Net Investment Income (0.583) (0.616) (0.623) (0.636) (0.607) (0.372)
Distributions from
Net Realized Gains -- -- -- -- -- --
Distributions in Excess
of Net Realized Gains -- -- -- -- -- --
====================================================================================================================================
Total Distributions (0.583) (0.616) (0.623) (0.636) (0.607) (0.372)
====================================================================================================================================
Net Asset Value,
End of Period $11.02 $10.82 $10.48 $10.78 $9.75 $11.02
====================================================================================================================================
Total Return (a) 7.40% 9.44% 3.19% 17.50% (3.34% ) 5.62%
====================================================================================================================================
RATIOS TO AVERAGE NET ASSETS
Gross Expenses (d) 1.61% 1.55% 1.60% 1.70% 1.71% 4.05%(c)
Net Expenses 1.00% 1.00% 0.93% 1.00% 1.00% 1.50%(c)
Net Investment Income 5.32% 5.78% 5.94% 6.16% 5.96% 4.63%(c)
Portfolio Turnover Rate 14.10% 39.86% 140.94% 276.56% 113.36% 14.10%
Net Assets at End of Period $32,729,708 $31,738,990 $12,818,450 $13,886,478 $12,534,640 $154,220
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Total return assumes reinvestment of all distributions during the period
and does not reflect deduction of sales charge. Investment returns and
principal values will fluctuate and shares, when redeemed, may be worth
more or less than the original cost. Total returns for periods of less than
one year are not annualized.
(b) Commencement of operations.
(c) Annualized.
(d) Had fees not been waived and expenses not been assumed.
40 VAN ECK/CHUBB FUNDS PROSPECTUS
<PAGE>
IV. FINANCIAL HIGHLIGHTS
4. VAN ECK/CHUBB GROWTH AND INCOME FUND
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Financial Highlights
For a share outstanding throughout each period:
Class B
Class A Period From
Year Ended December 31, Apr.29, 1998 (c)
1998 1997 1996 1995 1994 Dec.31, 1998
--------------------------------------------------------------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $24.56 $21.04 $18.58 $14.77 $16.70 $27.94
====================================================================================================================================
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.110 0.096 0.250 0.204 0.247 0.021
Net Gains (Losses) on
Securities (both realized and unrealized) (0.156) 5.286 3.931 5.042 (0.954) (3.517)
====================================================================================================================================
Total from Investment Operations (0.046) 5.382 4.181 5.246 (0.707) (3.496)
====================================================================================================================================
LESS DISTRIBUTIONS TO SHAREHOLDERS
Dividends from
Net Investment Income (0.111) (0.096) (0.250) (0.204) (0.247) (0.111)
Dividends in Excess
of Net Investment Income -- (0.004) -- -- -- --
Distributions from
Net Realized Gains (0.443) (1.762) (1.471) (0.885) (0.976) (0.443)
Distributions in Excess
of Net Realized Gains -- -- -- (0.346) -- --
Tax Return of Capital -- -- -- (0.001) -- --
====================================================================================================================================
Total Distributions (0.554) (1.862) (1.721) (1.436) (1.223) (0.554)
====================================================================================================================================
Net Asset Value,
End of Period $23.96 $24.56 $21.04 $18.58 $14.77 $23.89
====================================================================================================================================
Total Return (a) (0.18)% 25.85% 22.50% 35.52% (4.26%) (12.51%)
====================================================================================================================================
RATIOS TO AVERAGE NET ASSETS
Gross Expenses (b) 1.57% 1.49% 1.58% 1.69% 1.71% 2.48%(d)
Net Expenses 1.25% 1.25% 1.06% 1.08% 1.00% 1.75%(d)
Net Investment Income 0.44% 0.49% 1.29% 1.20% 1.66% 0.27%(d)
Portfolio Turnover Rate 43.42% 21.02% 44.50% 37.59% 46.17% 43.42%
Net Assets at End of Period $67,477,768 $66,762,320 $40,281,849 $29,144,161 $18,679,228 $594,545
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Total return assumes reinvestment of all distributions during the period
and does not reflect deduction of sales charge. Investment returns and
principal values will fluctuate and shares, when redeemed, may be worth
more or less than the original cost. Total returns for periods of less than
one year are not annualized.
(b) Had fees not been waived and expenses not been assumed.
(c) Commencement of operations.
(d) Annualized.
VAN ECK/CHUBB FUNDS PROSPECTUS 41
<PAGE>
THE FINANCIAL HIGHLIGHTS TABLES ARE INTENDED TO HELP YOU
UNDERSTAND THE FUNDS FINANCIAL PERFORMANCE FOR THE PAST FIVE
YEARS. CERTAIN INFORMATION REFLECTS FINANCIAL RESULTS FOR A
SINGLE FUND SHARE. THE TOTAL RETURNS IN THE TABLE REPRESENT THE
RATE THAT AN INVESTOR WOULD HAVE EARNED OR LOST ON AN INVESTMENT
IN THE FUND (ASSUMING REINVESTMENT OF ALL DIVIDENDS AND
DISTRIBUTIONS). THIS INFORMATION HAS BEEN AUDITED BY ERNST &
YOUNG LLP, WHOSE REPORT, ALONG WITH THE FUNDIS FINANCIAL
STATEMENTS ARE INCLUDED IN THE FUNDIS ANNUAL REPORT WHICH IS
AVAILABLE UPON REQUEST.
5. VAN ECK/CHUBB TAX-EXEMPT FUND
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Financial Highlights
For a share outstanding throughout each period:
Class B
Class A Period From
Year Ended December 31, Apr.29, 1998 (c)
1998 1997 1996 1995 1994 Dec.31, 1998
------------------------------------------------------------------------ ----------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $12.56 $12.15 $12.33 $11.22 $12.58 $12.46
====================================================================================================================================
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.537 0.581 0.611 0.621 0.618 0.289
Net Gains (Losses) on
Securities (both realized and unrealized) 0.202 0.450 (0.137) 1.132 (1.360) 0.341
====================================================================================================================================
Total from Investment Operations 0.739 1.031 0.474 1.753 (0.742) 0.630
====================================================================================================================================
LESS DISTRIBUTIONS TO SHAREHOLDERS
Dividends from
Net Investment Income (0.539) (0.581) (0.611) (0.621) (0.618) (0.320)
Distributions from
Net Realized Gains (0.020) (0.036) (0.043) (0.010) -- (0.020)
Distributions in Excess
of Net Realized Gains -- (0.004) -- (0.012) -- --
====================================================================================================================================
Total Distributions (0.559) (0.621) (0.654) (0.643) (0.618) (0.340)
====================================================================================================================================
Net Asset Value,
End of Period $12.74 $12.56 $12.15 $12.33 $11.22 $12.75
====================================================================================================================================
Total Return (a) 6.01% 8.73% 4.00% 15.88% (5.97%) 5.10%
====================================================================================================================================
RATIOS TO AVERAGE NET ASSETS
Gross Expenses (d) 1.63% 1.56% 1.65% 1.79% 1.80% 117.84%(b)
Net Expenses 1.00% 1.00% 0.98% 1.00% 1.00% 1.50%(b)
Net Investment Income 4.23% 4.74% 5.00% 5.20% 5.21% 4.30%(b)
Portfolio Turnover Rate 2.50% 12.78% 16.29% 7.39% 8.37% 2.50%
Net Assets at End of Period $31,679,540 $31,288,493 $15,061,382 $15.259,349 $13,937,939 $29,208
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Total return assumes reinvestment of all distributions during the period
and does not reflect deduction of sales charge. Investment returns and
principal values will fluctuate and shares, when redeemed, may be worth
more or less than the original cost. Total returns for periods of less than
one year are not annualized.
(b) Annualized.
(c) Commencement of operations.
(d) Had fees not been waived and expenses not been assumed.
42 VAN ECK/CHUBB FUNDS PROSPECTUS
<PAGE>
IV. FINANCIAL HIGHLIGHTS
6. VAN ECK/CHUBB TOTAL RETURN FUND
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
Financial Highlights
For a share outstanding throughout each period:
Class B
Class A Period From
Year Ended December 31, Apr.29, 1998 (c)
1998 1997 1996 1995 1994 Dec.31, 1998
--------------------------------------------------------------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Net Asset Value,
Beginning of Period $20.22 $17.41 $15.96 $13.23 $15.01 $21.94
====================================================================================================================================
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.393 0.365 0.370 0.373 0.373 0.215
Net Gains (Losses) on
Securities (both realized and unrealized) 0.158 3.778 2.321 3.586 (0.994) (1.534)
====================================================================================================================================
Total from Investment Operations 0.551 4.143 2.691 3.959 (0.621) (1.319)
====================================================================================================================================
LESS DISTRIBUTIONS TO SHAREHOLDERS
Dividends from
Net Investment Income (0.390) (0.365) (0.370) (0.373) (0.373) (0.270)
Dividends in Excess
of Net Investment Income -- (0.004) -- -- -- --
Distributions from
Capital Gains (1.111) (0.964) (0.871) (0.692) (0.786) (1.111)
Tax Returns of Capital -- -- -- (0.164) -- --
====================================================================================================================================
Total Distributions (1.501) (1.333) (1.241) (1.229) (1.159) (1.381)
====================================================================================================================================
Net Asset Value,
End of Period $19.27 $20.22 $17.41 $15.96 $13.23 $19.24
====================================================================================================================================
Total Return (a) 2.73% 24.09% 17.04% 30.13% (4.21%) (5.96%)
====================================================================================================================================
RATIOS TO AVERAGE NET ASSETS
Gross Expenses (b) 1.61% 1.51% 1.59% 1.70% 1.73% 2.96%(d)
Net Expenses 1.25% 1.25% 1.08% 1.08% 1.00% 1.75%(d)
Net Investment Income 1.87% 1.92% 2.26% 2.45% 2.66% 1.57%(d)
Portfolio Turnover Rate 15.78% 15.80% 27.01% 57.62% 37.53% 15.78%
Net Assets at End of Period $42,524,175 $49,933,635 $31,064.099 $22,171,326 $16,431,195 $330,398
- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Total return assumes reinvestment of all distributions during the period
and does not reflect deduction of sales charge. Investment returns and
principal values will fluctuate and shares, when redeemed, may be worth
more or less than the original cost. Total returns for periods of less than
one year are not annualized.
(b) Had fees not been waived and expenses not been assumed.
(c) Commencement of operations.
(d) Annualized.
VAN ECK/CHUBB FUNDS PROSPECTUS 43
<PAGE>
VAN ECK/CHUBB FUNDS, INC.
99 Park Avenue, New York, New York 10016
Shareholder Services: Toll Free (800) 544-4653
www.vaneck.com
Van Eck/Chubb Funds, Inc. (the "Company") is a mutual fund consisting of
six series: Van Eck/Chubb Capital Appreciation Fund (Class A and Class B), Van
Eck/Chubb Global Income Fund (Class A and Class B), Van Eck/Chubb Government
Securities Fund (Class A and Class B), Van Eck/Chubb Growth and Income Fund
(Class A and Class B), Van Eck/Chubb Tax-Exempt Fund (Class A and Class B) and
Van Eck/Chubb Total Return Fund (Class A and Class B).
This Statement of Additional Information ("SAI") is not a prospectus but
supplements and should be read in conjunction with the Company's prospectus
dated May 1, 1999 (the "Prospectus"). This Statement of Additional Information
is incorporated by reference into the Prospectus. The Company's annual report is
incorporated by reference into the SAI. A copy of the Prospectus and/or annual
report is available at no charge upon written or telephone request to the
Company at the address or telephone number above. Shareholders are advised to
read and retain this Statement of Additional Information for future reference.
<TABLE>
<CAPTION>
TABLE OF CONTENTS Page
- ----------------- ----
<S> <C>
General Information................................................................................. 2
Investment Objectives and Policies of The Funds..................................................... 2
Bank Obligations................................................................................ 2
Commercial Paper................................................................................ 2
Repurchase Agreements........................................................................... 3
Reverse Repurchase Agreements................................................................... 3
Lending of Portfolio Securities................................................................. 4
Restricted Securities........................................................................... 4
Loan Participations and Other Direct Indebtedness............................................... 4
Derivatives..................................................................................... 5
When-Issued and Delayed Delivery Securities & Forward Commitments............................... 10
Foreign Securities.............................................................................. 10
Foreign Currency Transactions................................................................... 11
Depositary Receipts............................................................................. 11
Mortgage-Related Securities..................................................................... 12
Warrants........................................................................................ 13
Low Rated or Unrated Debt Securities............................................................ 13
Investment Companies............................................................................ 14
Portfolio Turnover.............................................................................. 14
Investment Restrictions............................................................................. 14
Investment Advisory Services........................................................................ 16
The Distributor..................................................................................... 17
Portfolio Transactions and Brokerage................................................................ 19
Directors and Officers.............................................................................. 21
Purchase of Shares.................................................................................. 25
Valuation of Shares................................................................................. 26
Exchange Privilege.................................................................................. 27
Tax-Sheltered Retirement Plans...................................................................... 28
Investment Programs................................................................................. 30
Taxes............................................................................................... 31
Redemptions In Kind................................................................................. 33
Performance......................................................................................... 34
Description of the Company.......................................................................... 36
Additional Information.............................................................................. 37
Financial Statements................................................................................ 38
Appendix............................................................................................ 39
</TABLE>
Statement of Additional Information - May 1, 1999
<PAGE>
GENERAL INFORMATION
Van Eck/Chubb Funds, Inc., (the "Company") is comprised of six separate
portfolios (the "Funds"). The Company had no business history prior to its
formation. Until September 30, 1997, the name of the Company was Chubb
Investment Funds, Inc. Class A shares are denoted with the suffix-A, and Class B
shares with the suffix-B.
Van Eck/Chubb Capital Appreciation, Van Eck/Chubb Government Securities Fund,
Van Eck/Chubb Growth and Income Fund, Van Eck/Chubb Tax-Exempt Fun and Van
Eck/Chubb Total Return Fund are classified with diversified as defined in the
Investment Company Act of 1940, as amended (the "Act"). This means that with
respect to 75% of each Fund's assets, the Fund may not invest more than 5% of
its total assets in any issuer or invest more than 10% of the outstanding voting
securities of any issuer. Van Eck/Chubb Global Income Fund is classified as
non-diversified, which means that the proportion of the Fund's assets that may
be invested in the securities of a single issuer is not limited to the Act.
However, to meet other requirements, the Fund at the close of each quarter of
its taxable year must, in general, limit its investments so that (i) no more
that 25% of its assets are invested in the securities of a single issuer, (ii)
with respect to 50% of the Fund's assets, no more than 5% of its assets at the
time or purchase are invested in a single issuer and (iii) the Fund will not own
more than 10% of the outstanding voting securities of any one issuer.
INVESTMENT OBJECTIVES AND POLICIES OF THE FUNDS
The investment objectives and policies of each Fund are described in the
Company's Prospectus under the heading "Investment Objectives and Policies" with
each Fund's policies being described specifically under its own sub-heading.
The following information supplements the discussion of investment objectives
and policies for each Fund contained in the Company's Prospectus. Unless
otherwise specified, the investment policies and restrictions of each Fund are
not fundamental policies and may be changed by the Company's Board of Directors
without shareholder approval. Shareholders will be notified prior to any
material change. The investment objectives of each Fund are fundamental policies
and may be changed only with shareholder approval.
BANK OBLIGATIONS
All of the Funds may acquire obligations of banks with total assets of at least
$500,000,000. These include certificates of deposit, bankers' acceptances, and
time deposits, all of which are normally limited to $100,000 per Fund from any
one bank. Certificates of deposit are generally short-term, interest-bearing
negotiable certificates issued by commercial banks or savings and loan
associations against funds deposited in the issuing institution. Bankers'
acceptances are time drafts drawn on a commercial bank by a borrower, usually in
connection with an international commercial transaction (to finance the import,
export, transfer or storage of goods). With a bankers' acceptance, the borrower
is liable for payment as is the bank, which unconditionally guarantees to pay
the draft at its face amount on the maturity date. Most bankers' acceptances
have maturities of six months or less and are traded in secondary markets prior
to maturity. Time deposits are generally short-term, interest-bearing negotiable
obligations issued by commercial banks against funds deposited in the issuing
institutions. None of the Funds will invest in time deposits maturing in more
than seven days.
COMMERCIAL PAPER
All the Funds may invest in commercial paper. Commercial paper involves an
unsecured promissory note issued by a corporation. It is usually sold on a
discount basis and has a maturity at the time of issuance of 9 months or less.
The Funds may invest in commercial paper rated within the three highest
categories by Moody's Investors Services, Inc. ("Moody's"), Standard & Poor's
Corporation ("Standard & Poor's") or other nationally recognized statistical
rating organizations ("NRSROs") or, if not rated, which are of equivalent
investment quality in the judgment of the Adviser.
<PAGE>
REPURCHASE AGREEMENTS
All of the Funds may invest in repurchase agreements. A repurchase agreement
customarily obligates the seller, at the time it sells securities to a Fund, to
repurchase the securities at a mutually agreed upon time and price. The total
amount received on repurchase would be calculated to exceed the price paid by
the Fund, reflecting an agreed upon market rate of interest for the period from
the time of the repurchase agreement to the settlement date, and would not
necessarily be related to the interest rate on the underlying securities. The
differences between the total amount to be received upon repurchase of the
securities and the price which was paid by the Fund upon their acquisition is
accrued as interest and is included in the Fund's net income declared as
dividends. The underlying securities will consist of high-quality liquid
securities. The Fund has the right to sell securities subject to repurchase
agreements but would be required to deliver identical securities upon maturity
of the repurchase agreements unless the seller fails to pay the repurchase
price. It is each Fund's intention not to sell securities subject to repurchase
agreements prior to the agreement's maturity.
During the holding period of a repurchase agreement, the seller must "mark to
market" the collateral on a daily basis and must provide additional collateral
if the market value of the obligation falls below the repurchase price. If a
Fund acquires a repurchase agreement and then the seller defaults at a time when
the value of the underlying securities is less than the obligation of the
seller, the Company could incur a loss. If the seller defaults or becomes
insolvent, a Fund could realize delays, costs, or a loss in asserting its rights
to the collateral in satisfaction of the seller's repurchase agreement.
Repurchase agreements involve certain risks not associated with direct
investment in securities, including the risk that the original seller will
default on its obligations to repurchase, as a result of bankruptcy or
otherwise. The Fund will enter into repurchase agreements only with sellers who
are believed by the Adviser to present minimal credit risks and whose
creditworthiness has been evaluated by the Adviser in accordance with certain
guidelines and is subject to periodic review by the Board of Directors of the
Company. Currently, these guidelines require sellers who are broker-dealers to
have a net worth of at least $25,000,000, although this requirement may be
waived by the Board of Directors of the Company on the recommendation of the
Adviser, and sellers who are banks to have assets of at least $1,000,000,000.
The underlying security, held as collateral, will be marked to market on a daily
basis, and must be of high-quality. The seller must provide additional
collateral if the market value of the obligation falls below the repurchase
price. In the event that the other party to the agreement fails to repurchase
the securities subject to the agreement, a Fund could suffer a loss to the
extent proceeds from the sale of the underlying securities held as collateral
was less than the price specified in the repurchase agreement. The seller also
must be considered by the Adviser to be an institution of impeccable reputation
and integrity, and the Adviser must be acquainted with and satisfied with the
individuals at the seller with whom it deals.
REVERSE REPURCHASE AGREEMENTS
In order to generate additional income the Global Income Fund may engage in
reverse repurchase agreement transactions with banks, broker-dealers and other
financial intermediaries. Under a reverse purchase agreement, the Fund would
sell portfolio securities and agree to repurchase them at a particular price at
a future date. At the time the Fund enters into the reverse repurchase
agreement it will establish and maintain a segregated amount with the custodian
containing cash or liquid securities having a value not less than the repurchase
price, including interest. Reverse repurchase agreements involve risk that the
market value of the securities retained in lieu of the sale may decline below
the price the securities the Fund has sold but is obligated to repurchase. In
the event the buyer of the securities files for bankruptcy or becomes insolvent,
such buyer or its trustee or receiver may receive an extension of time to
determine whether to enforce the Fund's obligation to repurchase the securities
and the Fund's use of the proceeds of the reverse repurchase agreement may
effectively be restricted pending such decision. Reverse repurchase agreements
will be treated as borrowings for purpose of calculating the Fund's borrowing
limitations. Reverse repurchase agreements are the same as repurchase
agreements except that the Fund assumes the role of seller/borrower in the
transaction. The Fund will invest the proceeds in other money market
instruments or repurchase agreements maturing not later than the expiration of
the reverse repurchase agreement. Reverse repurchase agreements involve the risk
that the market value of the securities sold by the Fund may decline below the
repurchase price of the securities.
3
<PAGE>
LENDING OF PORTFOLIO SECURITIES
The Global Income Fund may seek to increase its income by lending portfolio
securities. Under present regulatory policies such loans may be made to
institutions such as broker dealers, and are required to be secured continuously
be collateral in cash, cash equivalents or U.S. Government securities maintained
on a current basis in an amount at least equal to the market value of the
securities loaned. It is intended that the value of securities loaned would not
exceed 30% of the value of the total assets of the Fund.
RESTRICTED SECURITIES
Subject to a Fund's limitations on investments in illiquid investments, a Fund
may also invest in restricted securities that may not be sold under Rule 144A,
which presents certain risks. As a result, a Fund might not sell these
securities when the Adviser wishes to do so, or might have to sell them at less
than fair value. In addition, market quotations are less readily available.
Therefore, judgment may at times play a greater role in valuing these securities
than in the case of unrestricted securities.
LOAN PARTICIPATIONS AND OTHER DIRECT INDEBTEDNESS
The Funds may purchase loan participations and other direct indebtedness. In
purchasing a loan participation, the Fund acquires some or all of the interest
of a bank or other lending institution in a loan to a corporate borrower. Many
such loans are secured, although some may be unsecured. Such loans may be in
default at the time of purchase. Loans and other direct indebtedness that are
fully secured offer the Fund more protection than an unsecured loan in the event
non-payment of scheduled interest or principal. However, there is no assurance
that liquidation of collateral from a secured loan or other direct indebtedness
would satisfy the corporate borrower's obligation, or that collateral can be
liquidated.
These loans and other direct indebtedness are made generally to finance internal
growth, mergers, acquisitions, stock repurchases, leveraged buy-outs and other
corporate activities. Such loans and other direct indebtedness loans are
generally made by a syndicate of lending institutions, represented by an agent
lending institution, which has negotiated and structured the loan and is
responsible for collecting interest, principal and other amounts due on its own
behalf and on behalf of the others in the syndicate, and for enforcing its and
their other rights against the borrower. Alternatively such loans and other
direct indebtedness may be structured as a novation, pursuant to which the Fund
would assume all of the rights of the lending institution in a loan, or as an
assignment, pursuant to which the Fund would purchase an assignment of a portion
of a lender's interest in a loan or other direct indebtedness either directly
from the lender or through an intermediary. The Fund may also purchase trade or
other claims against companies, which generally represent money owed by the
company to a supplier of goods or services. These claims may also be purchased
at a time when the company is in default.
Certain of the loan participations and other direct indebtedness acquired by the
Fund may involve revolving credit facilities or other standby financing
commitments which obligate the Fund to pay additional cash on a certain date or
on demand. These commitments may have the effect of requiring the Fund to
increase its investment in a company when the Fund might not otherwise decide to
do so (including at a time when the company's financial condition makes it
unlikely that such amounts will be repaid). To the extent that the Fund is
committed to advance additional funds, it will at all times hold and maintain in
a segregated account cash of high grade debt obligations in an amount sufficient
to meet such commitments.
The Fund's ability to receive payment of principal, interest and other amounts
due in connection with these investments will depend primarily on the financial
condition of the borrower. In selecting the loan participations and other direct
indebtedness which the Fund will purchase, the Investment Manager will rely upon
its own (and not upon the original lending institution's) credit analysis of the
borrower. As the Fund may be required to rely upon another institution to
collect and pass on to the Fund amounts payable with respect to the loan and
other direct indebtedness, an insolvency, bankruptcy or reorganization of the
lending institution may delay or prevent the Fund from receiving such amounts.
In such cases the Fund will evaluate as well the creditworthiness of the lending
institution and will treat both the borrower and the
4
<PAGE>
lending institution as an "issuer" of the loan participation for purposes of the
certain investment restrictions pertaining to the diversification of the Fund's
portfolio investments. The highly leveraged nature of many such loans and other
direct indebtedness may make such loans especially vulnerable to adverse changes
in economic or market conditions. Investments in such loans and other direct
indebtedness may involve additional risk to the Fund. For example, if a loan or
other direct indebtedness is foreclosed, the Fund could become part owner of any
collateral, and would bear the costs and liabilities associated with owning and
disposing of the collateral. In addition, it is conceivable that under emerging
legal theories of lender liability, the Fund could be held liable as a co-
lender. It is unclear whether loans and other forms of direct indebtedness offer
securities law protections against fraud and misrepresentation. In the absence
of definitive regulatory guidance, the Fund relies on the Adviser's research in
an attempt to avoid situations where fraud and misrepresentation could adversely
affect the Fund. In addition, loan participations and other direct investments
may not be in the form of securities or may be subject to restrictions on
transfer, and only limited opportunities may exist to resell such investments.
As a result, the Fund may be unable to sell such investments at an opportune
time or may have to resell them at less than fair market value. To the extent
that the Adviser determines that such investments are illiquid, the Fund will
include them in the investment limitations above.
DERIVATIVES
A derivative is a security that derives its current value from the current value
of another security. Kinds of derivatives include, but are not limited to:
forward contracts, futures contracts, options and swaps. The Funds will not
commit more 5% of assets to initial margin deposits on futures contracts and
premiums on options for futures contracts (leverage). Hedging, as defined by the
Commodity Exchange Act, is excluded from this 5% limit.
CALL OPTIONS. All the Funds may write (sell) covered call options which are
traded on national and international securities exchanges to enhance investment
performance or for hedging purposes. A call option is a contract that gives the
holder (buyer) of the option the right to buy (in return for a premium paid),
and the writer of the option (in return for a premium received) the obligation
to sell, the underlying security at a specified price (the exercise price) at
any time before the option expires. A covered call option is a call in which the
writer of the option, for example, owns the underlying security throughout the
option period or has deposited in a separate account with the Company's
custodian liquid high-grade obligations or cash equal in value to the exercise
price of the option.
A Fund will write covered call options both to reduce the risks associated with
certain of its investments and to increase total investment return through the
receipt of premiums. In return for the premium income, the Fund will give up the
opportunity to profit from an increase in the market price of the underlying
security above the exercise price so long as its obligations under the contract
continue, except insofar as the premium represents a profit. Moreover, in
writing the call option, the Fund will retain the risk of loss should the price
of the security decline. The premium is intended to offset that loss in whole or
in part. Unlike the situation in which the Fund owns securities not subject to a
call option, the Fund, in writing call options, must assume that the call may be
exercised at any time prior to the expiration of its obligation as a seller, and
that in such circumstances the net proceeds realized from the sale of the
underlying securities pursuant to the call may be substantially below the
prevailing market price, although it must be at the previously agreed to
exercise price.
A Fund may protect itself from loss due to a decline in value of the underlying
security or from the loss of appreciation due to its rise in value by buying an
identical option, in which case the purchase cost of such option may offset the
premium received for the option previously written. In order to do this, the
Fund makes a "closing purchase transaction" on the purchase of a call option on
the same security with the same exercise price and expiration date as the
covered call option that it has previously written. The Fund will realize a gain
or loss from a closing purchase transaction if the amount paid to purchase a
call option is less or more than the amount received from the sale of the
corresponding call option. Also, because increases in the market price of a call
option will generally reflect increases in the market price of the underlying
security, any loss resulting from the exercise or closing out of a call option
is likely to be offset in whole or in part by unrealized appreciation of the
underlying security owned by the Fund.
There is no assurance that a liquid market will exist for any particular option,
at any particular time, and for some options no market may exist. If a Fund is
unable to effect a closing purchase transaction, a Fund will not sell the
underlying security until the option expires or the Fund delivers the underlying
security upon exercise.
5
<PAGE>
PUT OPTIONS. All the Funds may purchase put options and the Global Income Fund
may also sell covered put options. A Fund may purchase put options on securities
to protect its holdings in an underlying or related security against an
anticipated decline in market value. Such hedge protection is provided only
during the life of the put option. Securities are considered related if their
price movements generally correlate with one another. The purchase of put
options on securities held by a Fund or related to such securities will enable a
Fund to preserve, at least partially, unrealized gains in an appreciated
security in its portfolio without actually selling the security. In addition, a
Fund will continue to receive interest or dividend income on the security. A
Fund may also sell put options it has previously purchased, which could result
in a net gain or loss depending on whether the amount received on the sale is
more or less than the premium and other transaction costs paid on the put option
which was bought.
OPTIONS ON INDEXES. All the Funds may write covered call options and may
purchase put options on appropriate securities indexes for the purpose of
hedging against the risk of unfavorable price movements adversely affecting the
value of a Fund's securities or to enhance income. Unlike a stock option, which
gives the holder the right to purchase or sell a specified stock at a specified
price, an option on a securities index gives the holder the right to receive a
cash settlement amount based upon price movements in the stock market generally
(or in a particular industry or segment of the market represented by the index)
rather than the price movements in individual stocks.
The value of a securities index fluctuates with changes in the market values of
the securities which are contained in the index. For example, some securities
index options are based on a broad market index such as the Standard & Poor's
500 or the NYSE Composite Index, or a narrower market index such as the Standard
& Poor's 100. Indexes may also be based on an industry or market segment such as
the AMEX Oil and Gas Index or the Computer and Business Equipment Index. Options
on stock indexes are traded on exchanges or traded over-the-counter ("OTC
options"). Listed options are third-party contracts (i.e., performance of the
obligations of the purchaser and seller is guaranteed by the exchange or
clearing corporation) and have standardized strike prices and expiration dates.
OTC options are two-party contracts with negotiated strike prices and expiration
dates.
The effectiveness of hedging through the purchase or sale of securities index
options will depend upon the extent to which price movements in the portion of
the securities portfolio being hedged correlate with price movements in the
selected securities index. Perfect correlation is not possible because the
securities held or to be acquired by a Fund will not exactly match the
composition of the securities indexes on which options are purchased or written.
In the purchase of securities index options, the principal risk is that the
premium and transaction costs paid by a Fund in purchasing an option will be
lost as a result of unanticipated movements in the price of the securities
comprising the securities index for which the option has been purchased. In
writing securities index options, the principal risks are the inability to
effect closing transactions at favorable prices and the inability to participate
in the appreciation of the underlying securities.
FUTURES TRANSACTIONS. A futures contract is an agreement to buy or sell a
security (or deliver a final cash settlement price, in the case of a contract
relating to an index or otherwise not calling for physical delivery at the end
of trading in the contracts) for a set price in the future. Futures exchanges
and trading in futures is regulated under the Commodity Exchange Act by the
Commodity Futures Trading Commission ("CFTC").
Positions taken in the futures markets are not normally held until delivery or
cash settlement is required, but are instead liquidated through offsetting
transactions which may result in a gain or a loss. A clearing organization
associated with the exchange on which futures are traded assumes responsibility
for closing-out transactions and guarantees that, as between the clearing
members of an exchange, the sale and purchase obligations will be performed with
regard to all positions that remain open at the termination of the contract.
Upon entering into a futures contract, a Fund will be required to deposit with a
futures commission merchant a certain percentage (usually 1% to 5%) of the
futures contracts market value as initial margin. As a general matter, a Fund
may not commit in the aggregate more than 5% of the market value of its
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total assets to initial margin deposits on the Fund's existing futures contracts
and premium paid for options on unexpired futures contracts. Initial margin is
in the nature of a performance bond or good faith deposit on the contract which
is returned upon termination of the futures contract if all contractual
obligations have been satisfied. The initial margin in most cases will consist
of cash or United States Government securities. Subsequent payments, called
variation margin, may be made with the futures commission merchant as a result
of marking the contracts to market on a daily basis as the contract value
fluctuates.
First, there can be no assurance that the prices of such instruments and the
hedged security or the cash market position will move as anticipated. If prices
do not move as anticipated, the Fund may incur a loss on its investment, may not
achieve the hedging protection it anticipated and/or incur a loss greater than
if it had entered into a cash market position. Second, investments in such
instruments may reduce the gains which would otherwise be realized from the sale
of the underlying securities or assets which are being hedged. 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 contact 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.
FUTURES ON DEBT SECURITIES. A futures contract on a debt security is a binding
contractual commitment which, if held to maturity, will result in an obligation
to make or accept delivery, during a particular future month, of securities
having a standardized face value and rate of return. All of the Funds may buy
and sell futures contracts on debt securities. By purchasing futures on debt
securities -assuming a "long" position - a Fund will legally obligate itself to
accept the future delivery of the underlying security and pay the agreed price.
By selling futures on debt securities - assuming a "short" position - it will
legally obligate itself to make the future delivery of the security against
payment of the agreed price. Open future positions on debt securities will be
valued at the most recent settlement price, unless such price does not appear to
the Adviser to reflect the fair value of the contract, in which case the
positions will be valued by, or under the direction of, the Board of Directors.
The Funds by hedging through the use of futures on debt securities seek to
establish more certainty with respect to the effective rate of return on their
portfolio securities. A Fund may, for example, take a "short" position in the
futures market by selling contracts for the future delivery of debt securities
held by the Fund (or securities having characteristics similar to those held by
the Fund) in order to hedge against an anticipated rise in interest rates that
would adversely affect the value of the Fund's portfolio securities. When
hedging of this character is successful, any depreciation in the value of
portfolio securities will be substantially offset by appreciation in the value
of the futures position.
On other occasions, a Fund may take a "long" position by purchasing futures on
debt securities. This would be done, for example, when the Fund intends to
purchase particular debt securities, but expects the rate of return available in
the bond market at that time to be less favorable than rates currently available
in the futures markets. If the anticipated rise in the price of the debt
securities contracts should occur (with its concomitant reduction in yield), the
increased cost to the Fund of purchasing the debt securities will be offset, at
least to some extent, by the rise in the value of the futures position in debt
securities taken in anticipation of the subsequent purchase of such debt
securities.
The Fund could accomplish similar results by selling debt securities with long
maturities and investing in debt securities with short maturities when interest
rates are expected to increase or by buying debt securities with long maturities
and selling debt securities with short maturities when interest rates are
expected to decline. However, by using futures contracts as a risk management
technique (to reduce a Fund's exposure to interest rate fluctuations), given the
greater liquidity in the futures market than in the bond market, it might be
possible to accomplish the same result more effectively and perhaps at a lower
cost. See "Limitations on Purchase and Sale of Futures Contracts and Options on
Futures Contracts" below.
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INTEREST RATE AND CURRENCY FUTURES CONTRACTS. The Funds may enter into interest
rate or currency futures contracts, including futures contracts on indices of
debt securities, as a hedge against changes in prevailing levels of interest
rates or currency exchange rates in order to establish more definitely the
effective rate of return on securities or currencies held or intended to be
acquired. Hedging may include sales of futures as a hedge against the effect or
expected increases in interest rates or decreases in currency exchange rates,
and purchases of futures as an offset against the effect of expected declines in
interest rates or increases in currency exchange rates.
STOCK INDEX FUTURES CONTRACTS. A stock index futures contract does not require
the physical delivery of securities, but merely provides for profits and losses
resulting from changes in the market value of the futures contract to be
credited or debited at the close of each trading day to the respective accounts
of the parties to the contract. On the contract's expiration date, a final cash
settlement occurs and the futures positions are simply closed out. Changes in
the market value of a particular stock index futures contract reflect changes in
the specified index of equity securities on which the futures contract is based.
The Total Return Fund, the Growth and Income Fund, the Capital Appreciation Fund
and the Global Income Fund may buy and sell stock index futures contracts.
Stock index futures may be used to hedge the equity portion of a Fund's
securities portfolio with regard to market risk (involving the market's
assessment of over-all economic prospects), as distinguished from stock-specific
risk (involving the market's evaluation of the merits of the issuer of a
particular security). By establishing an appropriate "short" position in stock
index futures contracts, a Fund may seek to protect the value of its portfolio
against an overall decline in the market for equity securities. Alternatively,
in anticipation of a generally rising market, a Fund can seek to avoid losing
the benefit of apparently low current prices by establishing a "long" position
in stock index futures contracts and later liquidating that position as
particular equity securities are in fact acquired. To the extent that these
hedging strategies are successful, a Fund will be affected to a lesser degree by
adverse overall market price movements, unrelated to the merits of specific
portfolio equity securities, than would otherwise be the case. See "Limitations
on Purchase and Sale of Futures Contracts and Options on Futures Contracts"
below.
OPTIONS ON FUTURES CONTRACTS. For bona fide hedging purposes, all the Funds may
purchase and the Global Income Fund may sell put options and write call options
on futures contracts. These options are traded on exchanges that are licensed
and regulated by the CFTC for the purpose of options trading. A call option on a
futures contract gives the purchaser the right, in return for the premium paid,
to purchase a futures contract (assume a "long" position) at a specified
exercise price at any time before the option expires. A put option gives the
purchaser the right, in return for the premium paid, to sell a futures contract
(assume a "short" position) at a specified exercise price at any time before the
option expires. Upon the exercise of a call, the writer of the option is
obligated to sell the futures contract (to deliver a "long" position to the
option holder) at the option exercise price, which presumably will be lower than
the current market price of the contract in the futures market. Upon exercise of
a put, the writer of the option is obligated to purchase the futures contract
(to deliver a "short" position to the option holder) at the option exercise
price which presumably will be higher than the current market price of the
contract in the futures market.
When a Fund, as a purchaser of a put option on a futures contract, exercises
such option and assumes a short futures position, its gain will be credited to
its futures variation margin account. Any loss suffered by the writer of the
option of a futures contract will be debited to its futures variation margin
account. However, as with the trading of futures, most participants in the
options markets do not seek to realize their gains or losses by exercise of
their option rights. Instead, the holder of an option usually will realize a
gain or loss by buying or selling an offsetting option at a market price that
will reflect an increase or a decrease from the premium originally paid as
purchaser or required as a writer.
Options on futures contracts can be used by a Fund to hedge the same risks as
might be addressed by the direct purchase or sale of the underlying futures
contracts themselves. Depending on the pricing of the option, compared to either
the futures contract upon which it is based or upon the price of the underlying
securities themselves, it may or may not be less risky than direct ownership of
the futures contract or the underlying securities.
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In contrast to a futures transaction, in which only transaction costs are
involved, benefits received by a Fund as a purchaser in an option transaction
will be reduced by the amount of the premium paid as well as by transaction
costs. In the event of an adverse market movement, however, a Fund which
purchased an option will not be subject to a risk of loss on the option
transaction beyond the price of the premium it paid plus its transaction costs,
and may consequently benefit from a favorable movement in the value of its
portfolio securities that would have been more completely offset if the hedge
had been effected through the use of futures contracts.
If a Fund writes call options on futures contracts, the Fund will receive a
premium but will assume a risk of adverse movement in the price of the
underlying futures contract comparable to that involved in holding a futures
position. If the option is not exercised, the Fund will realize a gain in the
amount of the premium, which may partially offset unfavorable changes in the
value of securities held by, or to be acquired for, the Fund. If the option is
exercised, the Fund will incur a loss in the option transaction, which will be
reduced by the amount of the premium it has received, but which may be partially
offset by favorable changes in the value of its portfolio securities.
While the purchaser or writer of an option on a futures contract may normally
terminate its position by selling or purchasing an offsetting option of the same
series, a Fund's ability to establish and close out options positions at fairly
established prices will be subject to the existence of a liquid market. The
Funds will not purchase or write options on futures contracts unless, in the
Adviser's opinion, the market for such options has sufficient liquidity that the
risks associated with such options transactions are not at unacceptable levels.
FOREIGN CURRENCY EXCHANGE CONTRACTS AND OPTIONS ON FOREIGN CURRENCIES. In order
to hedge against foreign currency exchange rate risks, the Funds may enter into
forward currency exchange contracts ("forward currency contracts"), as well as
purchase put or call options on foreign currencies. A forward currency contract
is an obligation to purchase or sell a specific currency for an agreed price at
a future date which is individually negotiated and privately traded by currency
traders and their customers. In addition, for hedging purposes and to duplicate
a cash market transaction, the Global Income Fund may enter into foreign
currency futures contracts. The Global Income Fund may also conduct their
foreign currency exchange transactions on a spot (i.e., cash) basis at the spot
rate prevailing in the currency exchange market.
LIMITATIONS ON PURCHASE AND SALE OF FUTURES CONTRACTS AND OPTIONS ON FUTURES
CONTRACTS. The Funds will engage in transactions in futures contracts and
related options for bona fide hedging purposes and not for speculation. The
Global Income Fund may engage in futures, options and currency transactions for
investment purposes. The Funds may not purchase or sell futures contracts or
related options if immediately thereafter the sum of the amounts of initial
margin deposits on a Fund's existing futures contracts and premiums paid for
unexpired options on futures contracts would exceed 5% of the value of the
Fund's total assets; provided, however, that in the case of an option that is
"in-money" at the time of purchase, the "in-money" amount may be excluded in
calculating the 5% limitation. In instances involving the purchase or sale of
futures contracts or the writing of covered call options thereon by a Fund, such
positions will always be "covered", as appropriate, by, for example, (i) an
amount of cash and cash equivalents, equal to the market value of the futures
contracts purchased or sold and options written thereon (less any related margin
deposits), deposited in a segregated account with its custodian or (ii) by
owning the instruments underlying the futures contract sold (i.e., short futures
positions) or option written thereon or by holding a separate option permitting
the Fund to purchase or sell the same futures contract or option at the same
strike price or better.
Positions in futures contracts may be closed but only on an exchange or a board
of trade which provides the market for such futures. Although the Funds intend
to purchase or sell futures only on exchanges or boards of trade where there
appears to be an active market, there is no guarantee that such will exist for
any particular contract or at any particular time. If there is not a liquid
market at a particular time, it may not be possible to close a futures position
at such time, and, in the event of adverse price movements, a Fund would
continue to be required to make daily cash payments of variation margin.
Consequently, where a liquid secondary market does not exist, the Fund will be
unable to control losses from such
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futures contracts by closing out its positions.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES AND FORWARD COMMITMENTS
The Funds may make contracts to buy securities for a fixed price at a future
date beyond customary settlement time. When such transactions are negotiated,
the price is fixed at the time of commitment but delivery and payment for the
securities can take place up to three months after the date of commitment to
purchase. Such agreements involve a risk of loss if the value of the security to
be purchased declines prior to the settlement date, which risk is in addition to
the risk of decline in value of the Government Securities Fund, Tax-Exempt Fund
or Global Income Fund's other assets. Where such purchases are made through
dealers, the Fund relies on the dealer to consummate the sale. The dealer's
failure to do so may result in the loss to the Fund of an advantageous yield or
price. Although the Fund will generally enter into forward commitments with the
intention of acquiring securities for its portfolio or for delivery pursuant to
options contracts it has entered into, the Fund may dispose of a commitment
prior to settlement if the Adviser deems it appropriate to do so. The Fund
holds, and maintains until the settlement date in a segregated account, cash or
high-grade obligations in an amount sufficient to meet the purchase price of its
total commitments for forward commitment securities. The Fund may realize short-
term profits or losses upon the sale of such forward commitment contracts.
FOREIGN SECURITIES
The Growth and Income Fund, the Total Return Fund and the Capital Appreciation
Fund may invest in and hold securities of foreign issuers in an amount, which
together with investments in Depositary Receipts, American Depositary Receipts
("ADRs") European Depositary Receipts ("EDRs") and Global Depositary Receipts
("GDRs") will not exceed 20% of the Fund's total assets. The Global Income Fund
has an unlimited right to invest and hold foreign securities. For purposes
hereof, securities of foreign issuers means securities of issuers organized or
whose principal place of business is outside the United States, or whose
securities are principally traded in securities markets outside the United
States.
Although investment in foreign securities by the Capital Appreciation Fund,
Growth and Income Fund and Total Return Fund are intended to reduce risk by
providing further diversification, such investments, as well as those of the
Global Income Fund, involve certain additional risks, including the possibility
of : (1) adverse foreign political and economic developments, (2) less publicly
available information about foreign issuers, (3) less comprehensive accounting,
reporting and disclosure requirements, (4) less government regulation and
supervision of foreign stock exchanges, brokers and listed companies, (5)
expropriation or confiscatory taxation that could effect investments, (6)
currency blockages which would prevent cash from being brought back in the
United States, (7) generally higher brokerage and custodial costs than those of
domestic securities, (8) with respect to foreign securities denominated in
foreign currencies, the costs associated with the exchange of currencies and the
possibility of unfavorable changes in currency rates and exchange rate
regulations and (9) settlement of transactions being delayed beyond periods
customary in the United States.
Investment in foreign securities may involve the following special
considerations: with respect to foreign denominated securities, the risk of
fluctuating exchange rates; restrictions on and costs associated with the
exchange of currencies; the fact that foreign securities and markets are not as
liquid as their domestic counterparts; the imposition of exchange control
restrictions; and the possibility of economic or political instability. Also,
issuers of foreign securities are subject to different and, in some cases, less
comprehensive and non-uniform accounting, reporting and disclosure requirements
than domestic issuers, and settlement of transactions with respect to foreign
securities may be sometimes delayed beyond periods customary in the United
States. Foreign securities also generally have higher brokerage and custodial
costs than those of domestic securities. As a result, the selection of
investments in foreign issues may be more difficult and subject to greater risks
than investments in domestic issues. Since the Growth and Income Fund, the Total
Return Fund, the Capital Appreciation Fund and the Global Income Fund may invest
in businesses located in foreign nations, there is the possibility of
expropriation or confiscatory taxation, political or social instability or
diplomatic developments which could affect
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investments in those nations and there may be more difficulty in obtaining and
enforcing a court judgment abroad.
The Adviser will consider these and other factors before investing in particular
securities of foreign issuers and will not make such investments unless, in its
opinion, such investments will comply with the policies and meet the objectives
of the Growth and Income Fund, the Total Return Fund, the Capital Appreciation
Fund and the Global Income Fund. Also, the Board of Directors will monitor all
foreign custody arrangements to ensure compliance with the Act and the rules
thereunder, and will review and approve, at least annually, the continuance of
such arrangements as is consistent with the best interests of the Company and
its shareholders.
FOREIGN CURRENCY TRANSACTIONS
The Capital Appreciation Fund, Global Income Fund, Growth and Income Fund and
Total Return Fund may sell a particular security on either a spot (cash) basis
at the rate then prevailing in the currency exchange market or on a forward
basis by entering into a forward contract to purchase or sell currency, to hedge
against an anticipated decline in the U.S. dollar value of securities it intends
or has contracted to sell. This method of attempting to hedge the value of the
Fund's portfolio securities against a decline in the value of a currency does
not eliminate fluctuations in the underlying prices of the securities. None of
the Funds is obligated to engage in any such currency hedging operations, and
there can be no assurance as to the success of any hedging operations which a
Fund may implement. Although the strategy of engaging in foreign currency
transactions could reduce the risk of loss due to a decline in the value of the
hedged currency it could also limit the potential gain from an increase in the
value of the currency. When effecting currency exchange transactions, some
price spread (to cover service charges) will be incurred. No Fund, except the
Global Income Fund, intends to maintain a net exposure to such contracts where
the fulfillment of the Fund's certain provisions of the Internal Revenue Code of
1986 have the effect of limiting the extent to which the fund may enter into
forward contracts or futures contracts or engage in options transactions.
Although these investment practices will be used to generate additional income
or attempt to reduce the effect of any price decline in the security subject to
the option, they do involve certain risks that are different, in some respects,
from investment risks associated with similar funds which do not engage in such
activities. These risks include the following: writing covered call options-
the inability to effect closing transactions at favorable prices and the
inability to participate in the appreciation of the underlying securities above
the exercise price; and purchasing put options-possible loss of the entire
premium paid. In addition, the effectiveness of hedging through the purchase of
securities index options will depend upon the extent to which price movement in
the portion of the securities portfolios being hedged correlate with price
movements in the selected securities index. Perfect correlation may not be
possible because (i) the securities held or to be acquired by a Fund may not
exactly match the composition of the securities indexes on which options are
written or (ii) the price movements of the securities underlying the option may
not follow the price movements of the portfolio securities being hedged. If the
Adviser's forecasts regarding movements in securities prices or interest rates
or currency prices or economic factors are incorrect, the Fund's investment
results may have been better without the hedge.
DEPOSITARY RECEIPTS
The Growth and Income Fund, the Total Return Fund, the Capital Appreciation Fund
and the Global Income Fund may invest in "ADRs," "GDRs," and EDRs",(collectively
"Depositary Receipts") which, with the exception of the Global Income Fund,
together with investment in securities of foreign issuers, will not exceed 20%
of the Fund's total assets. ADRs are certificates issued by a United States bank
representing the right to receive securities of a foreign issuer deposited in a
foreign branch of a United States bank and traded on a United States exchange or
over-the-counter. There are no fees imposed on the purchase or sale of ADRs when
purchased from the issuing bank in the initial underwriting, although the
issuing bank may impose charges for the collection of dividends and the
conversion of ADRs into the underlying ordinary shares. Brokerage commissions
will be incurred if ADRs are purchased through brokers on the domestic stock
exchanges. Investments in ADRs have advantages over direct investments in the
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underlying foreign securities, including the following: they are more liquid
investments, they are United States dollar-denominated, they are easily
transferable, and market quotations for such securities are readily available.
The risks associated with ownership of Depositary Receipts are the same as those
associated with investments in foreign securities except there is no currency
risk. European Depositary Receipts ("EDRs") and Global Depositary Receipts
("GDRs") are typically issued by foreign banks or trust companies, although they
may be issued by US banks or trust companies, and also evidence ownership of
underlying securities issued by a foreign or U.S. securities market. Generally,
Depositary Receipts in registered form are designed for use in the U.S.
securities market and Depositary Receipts in bearer form are designed for use in
securities markets outside the United States. Depositary Receipts may not
necessarily be denominated in the same currency as the underlying securities
into which they may be converted. Brokerage commissions will be incurred if
ADRs are purchased through brokers on the U.S. stock exchange.
MORTGAGE-RELATED SECURITIES
Government National Mortgage Association ("GNMA") certificates are mortgage
pass-through securities representing part ownership of a pool of mortgage loans.
These loans, issued by lenders such as mortgage bankers, commercial banks, and
savings and loan associations, are either insured by the Federal Housing
Administration or guaranteed by the Veterans Administration. A "pool" or group
of such mortgages is assembled and, after being approved by GNMA, is offered to
investors through securities dealers. Once approved by GNMA, the timely payment
of interest and principal on each mortgage is guaranteed by GNMA and backed by
the full faith and credit of the United States Treasury. GNMA certificates
differ from bonds in that principal is paid back monthly by the borrower over
the term of the loan rather than returned in a lump sum at maturity. GNMA
certificates are called "pass-through" securities because both interest and
principal payments (including prepayments) are passed through to the holder of
the certificate.
In addition to GNMA certificates, the Government Securities Fund and Global
Income Fund may invest in mortgage pass-through securities issued by Federal
National Mortgage Association ("FNMA") and by Federal Home Loan Mortgage
Corporation ("FHLMC"). FNMA, a federally chartered and privately-owned
corporation, issues mortgage-backed pass-through securities which are guaranteed
as to timely payment of principal and interest by FNMA. FHLMC, a corporate
instrumentality of the United States whose stock is owned by the Federal Home
Loan Banks, issues two types of pass-through securities: mortgage participation
certificates ("PCs") and guaranteed mortgage certificates ("GMCs"). Both PCs and
GMCs represent an undivided interest in a pool of conventional mortgages from
FHLMC's portfolio. With respect to PCs, FHLMC guarantees the timely payment of
interest and the ultimate collection of principal. With respect to GMCs, FHLMC
guarantees that these securities will pay interest semi-annually and return
principal annually in a guaranteed minimum amount. Securities guaranteed by FNMA
and FHLMC are not backed by the full faith and credit of the United States
Treasury. If either fixed or variable rate pass-through securities issued by the
United States Government or its agencies or instrumentalities are developed in
the future, the Funds reserve the right to invest in them.
The Government Securities Fund and the Global Income Fund may also invest in
other types of mortgage-related securities issued by governmental entities.
These other instruments include collateralized mortgage obligations
("CMOs"),mortgage-backed bonds and real estate mortgage investment conduits
("REMICs"). However, the Government Securities Fund and the Global Income Fund
will not invest in residual interests of REMICs or CMOs due to the volatile
nature of such instruments. CMOs are obligations fully collateralized directly
or indirectly by a pool of mortgages on which payment of principal and interest
are passed through to the holders of CMOs on the same schedule as they are
received, although not necessarily on a pro rata basis.
Mortgage-backed bonds are direct obligations of their issuers, payable out of
the issuers' general funds and fully collateralized directly or indirectly by a
pool of mortgage loans. The mortgages serve as collateral for the issuer's
payment obligations on the mortgage-backed bonds, but interest and principal
payments on the mortgages are not passed through directly (as with GNMA
certificates and FNMA and FHLMC pass-through securities) or on a modified basis
(as with CMOs). Accordingly, a change in the rate
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of prepayments on the pool of mortgages could change the effective maturity of a
CMO but not the effective maturity of a mortgage-backed bond (although, like
many bonds, mortgage-backed bonds may be callable by the issuer prior to
maturity).
REMICs were created through provisions in the Tax Reform Act of 1986 in order to
clarify certain ambiguities concerning the tax treatment of mortgage related
securities. A REMIC is an entity that holds a fixed pool of mortgages and issues
multiple classes of interests. If an issuer elects to come under the REMIC
provisions, its sale of "REMIC securities" will be treated as the sale of the
mortgages for tax purposes, regardless of whether such securities are issued in
the form of pass-throughs or collateralized debt and regardless of the financial
accounting treatment used. Investors in REMICs may purchase two types of REMIC
securities: (i) "regular interests", which have the characteristics of pass-
throughs or CMOs (i.e., fixed interest and principal), or (ii) "residual
interests", the value of which are affected by mortgage prepayments or other
contingencies. Again, the Government Securities Fund and Global Income Fund will
not invest in any residual interests of REMICs or CMOs.
In reliance on an SEC interpretation of the Act, the Company's investments in
certain qualifying CMOs, including CMOs that have elected to be treated as
REMICs, are not subject to the Act's limitation on acquiring interests in other
investment companies. In order to be able to rely on the SEC's interpretation,
the CMOs and REMICs must be unmanaged, fixed-asset issuers that (i) invest
primarily in mortgage-related securities, (ii) do not issue redeemable
securities, (iii) operate under general exemptive orders exempting them from all
provisions of the Act, and (iv) are not registered or regulated under the Act as
investment companies. To the extent that a Fund selects CMOs or REMICs that do
not meet the above requirements, the Fund may not invest more than 10% of its
assets in all such entities and may not acquire more than 3% of the voting
securities of any single such entity.
Prepayment of mortgages underlying mortgage-backed securities may reduce their
current yield and total return. Mortgage-related securities may not be an
effective means of "locking-in" long-term interest rates because of the need to
invest and reinvest scheduled and unscheduled principal payments. At the time
principal payments or prepayments are received by the Fund and reinvested,
prevailing interest rates may be higher or lower than the Fund's current yield.
However, the Investment Manager intends to invest in these securities only when
the potential benefits to a Fund are deemed to outweigh the risks. Like other
bond investments, the value of mortgage-related securities will tend to rise
when interest rates fall, and fall when rates rise. Their value may also change
because of changes in the market's perception of the creditworthiness of the
organization that issued or guaranteed them or changes in the value of the
underlying mortgages. In addition, the mortgage securities market in general may
be adversely affected by changes in governmental regulation or tax policies.
WARRANTS
All the Funds may invest in warrants, which are rights to buy certain securities
at set prices during specified time periods. If, prior to the expiration date,
the Fund is not able to exercise a warrant at a cost lower than the underlying
securities, the Fund will suffer a loss of its entire investment in the warrant.
See investment restriction 18 for additional limitations on the use of warrants.
LOW RATED OR UNRATED DEBT SECURITIES
The existence of limited markets for particular high yield bonds or low rated
securities may diminish a Fund's ability to sell such securities at fair value
either to meet redemption requests or to respond to a specific economic event
such as a deterioration in creditworthiness of the issuer. Reduced secondary
market liquidity for certain low rated or unrated debt securities may also make
it more difficult for a Fund to obtain accurate market quotations for the
purpose of valuing the Fund's portfolio. Market quotations are generally
available on many low rated or unrated securities only from a limited number of
dealers and may not necessarily represent firm bids of such dealers or prices
for actual sales.
Adverse publicity and investor perceptions, whether or not based on fundamental
analysis, may decrease
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the values and liquidity of low rated securities, especially in a thinly traded
market. Analysis of the creditworthiness of issuers of debt securities that are
low rated securities may be more complex than for issuers of higher rated
securities, and the ability of the fund to achieve its investment objective may,
to the extent of investment in low rated securities, be more dependent upon such
creditworthiness analysis than would be the case if the fund were investing in
higher rated securities.
Low rated securities may be more susceptible to real or perceived adverse
economic and competitive industry conditions than investment grade securities.
The prices of low rated securities have been found to be less sensitive to
interest rate changes than higher rated investments, but more sensitive to
adverse economic downturns or individual corporate developments. If the issuer
of low rated securities defaults, the Fund may incur additional expenses to seek
recovery. The low rated bond market is relatively new, and many of the
outstanding low rated bonds have not endured a major business recession.
INVESTMENT COMPANIES
All the Funds may, subject to their respective investment restrictions, under
certain circumstances acquire the securities of other open-end and closed-end
investment companies. Such investments often result in duplicate fees and
expenses.
PORTFOLIO TURNOVER
Portfolio turnover for each Fund may vary from year to year or within a year
depending upon economic, market and business conditions. A Fund having a higher
portfolio turnover rate may realize larger amounts of gains or losses and more
brokerage commissions or other transaction related costs than it would with a
lower portfolio turnover rate. If there are gains, they are passed through to
the shareholders as capital gains distributions and, as such, are taxable to the
shareholders.
INVESTMENT RESTRICTIONS
Each Fund has adopted the following restrictions relating to the investments of
each Fund. The investment restrictions numbered 1 through 7, 10 and 13 are
fundamental policies of each Fund and may not be changed without approval of a
majority of the outstanding shares of each affected Fund. Each restriction
applies to each Fund of the Company, unless otherwise indicated. A change in
policy affecting only one Fund may be effected with the approval of a majority
of the outstanding shares of that Fund only. (As used in the Prospectus and this
Statement of Additional Information, the term "majority of the outstanding
voting shares" means the lesser of (1) 67% of the shares represented at a
meeting of which more than 50% of the outstanding share are represented or (2)
more than 50% of the outstanding shares.) All other investment restrictions are
operating policies and are subject to change by the Company's Board of Directors
without shareholder approval. No investment restriction which involves a maximum
percentage of securities or assets will be considered to be violated unless the
excess over the percentage occurs immediately after and is caused by an
acquisition or borrowing of securities or assets by the Fund. A Fund will not:
1. Issue securities senior to its common stock, except to the extent that
permissible borrowings may be so construed. For purposes hereof, writing covered
call options and entering into futures contracts, to the extent permitted by
restrictions 8 and 10 below, shall not involve the issuance of senior securities
or borrowings.
2. Buy securities on margin, except that it may: (a) obtain such short-term
credits as may be necessary for the clearance of purchases and sales of
securities, and (b) make margin deposits in connection with futures contracts,
subject to restrictions 10 and 11 below.
3 Borrow money, except each Fund may, as a temporary measure for
extraordinary or emergency purposes, including to cover net redemptions, and not
for investment purposes, borrow from banks and then only in amounts not
exceeding 5% of its total assets. In addition, no Fund may pledge, mortgage or
14
<PAGE>
hypothecate its assets except in connection with permissible borrowings and then
only in amounts not exceeding 10% of the value of its total assets. A Fund will
not pledge, mortgage or hypothecate its assets to the extent that at any time
the percentage of pledged assets plus the sales commission will exceed 10% of
the value of its total assets. This restriction will not prevent a Fund from (a)
purchasing securities on a "forward commitment", "delayed delivery" or "when-
issued" basis or (b) entering into futures contracts as set forth below in
restriction 10 or as regards the Global Income Fund entering into reverse
repurchase agreements, provided that a segregated account consisting of cash or
liquid high grade debt securities in an amount equal to the total value of the
securities underlying such agreement is established and maintained.
4. Act as an underwriter of securities of other issuers except to the
extent that it may be deemed to be an underwriter within the meaning of the
Securities Act of 1933 (a) in reselling securities, such as restricted
securities, acquired in private transactions and subsequently registered under
the Securities Act of 1933, and (b) in connection with the purchase of
government securities directly from the issuer, or (c) with respect to the
Capital Appreciation Fund and Global Income Fund, except to the extent that the
disposition of a security may technically cause it to be considered an
underwriter as that term is defined under the Securities Act of 1933.
5. Invest 25% or more of the value of the total assets of any Fund, except
the Global Income Fund, in securities of issuers having their principal business
activities in the same industry. This restriction also shall not apply to: (i)
securities issued or guaranteed by the United States Government, its agents or
instrumentalities and (ii) tax-exempt securities issued by governments or
political subdivisions of governments. For purposes of this restriction
industrial development bonds issued by non-governmental issuers will not be
considered to be tax-exempt securities.
6. Invest in real estate, although the Funds may buy securities of companies
which deal in real estate, and securities which are secured by readily
marketable interests in real estate, including interests in real estate
investment trusts, real estate limited partnerships, real estate investment
conduits or mortgage related instruments issued or backed by the United States
Government, its agencies or its instrumentalities.
7. Make loans, except the Funds may: (a) purchase bonds, debentures, notes
and other debt obligations customarily either publicly distributed or
distributed privately to institutional investors and within the limits imposed
on the acquisition of restricted securities set forth in restriction 11, and (b)
enter into repurchase agreements with respect to its portfolio securities.
8. Write options, except that all the Funds may write covered call options,
and the Global Income Fund may write put options, provided that as a result of
such sale, a Fund's securities covering all call options or subject to put
options would not exceed 25% of the value of the Fund's total assets.
9. Purchase options, except that all the Funds may purchase put options and
the Global Income Fund may purchase put and call options provided that the
total premiums paid for such outstanding options owned by a Fund does not exceed
5% of its total assets. No Fund, except the Global Income Fund, may write put
options on securities other than to close out previously purchased put options.
10. Enter into commodity contracts, except that all the Funds may enter into
financial futures contracts and the Global Income Fund may also enter into
foreign currency hedging contracts and stock index futures contracts if,
immediately thereafter: (a) the total of the initial margin deposits required
with respect to all open futures positions at the time such positions were
established, plus the sum of the premiums paid for all unexpired options on
futures contracts would not exceed 5% of the value of a Fund's total assets, and
(b) a segregate account consisting of cash or liquid high-grade debt securities
in an amount equal to the total market value of any futures contract purchased
by a Fund, less the amount of any initial margin, is established.
11. Invest more than 10%, or in the case of the Global Income Fund and Capital
Appreciation Fund 15%, of the net asset value of any Fund in securities which
are not readily marketable, such as
15
<PAGE>
repurchase agreements having a maturity of more than 7 days, restricted
securities, time deposits with maturities of more than 7 days, and other
securities which are not otherwise readily marketable, provided, however, that
the Global Income Fund and Capital Appreciation Fund may invest without
limitation in restricted securities issued under Rule 144A of the Securities Act
of 1933 provided the Board of Directors or the Adviser under the direction of
the Board of Directors has determined that each such security is liquid.
12. Invest more than 10% of the value of its total assets in securities of
other open-end and closed
end investment companies, except by purchases in the open market involving only
customary broker's commissions or as part of a merger, consolidation, or
acquisition, or as otherwise permitted by the Act and rules thereunder.
13. Except with respect to the Global Income Fund, make an investment unless,
when considering all its other investments, 75% of the value of the Fund's total
assets would consist of cash, cash items, United States Government securities,
securities of other investment companies, and other securities. For purposes of
this restriction, the purchase of "other securities" is limited so that (a) no
more than 5% of the value of the Fund's total assets would be invested in any
one issuer and (b) no more than 10% of the issuer's outstanding voting
securities would be held by the Company. As a matter of operating policy, the
Company will not consider repurchase agreements to be subject to this 5%
limitation if all the collateral underlying the repurchase agreements are United
States Government Securities.
14. Enter into a repurchase agreement with Jefferson Pilot Financial
Insurance Company of America, ("Jefferson Pilot") The Chubb Corporation, or a
subsidiary of either such corporation.
15. 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 management may be combined or allocated between the Fund and such
account.
16. Invest in companies for the sole purpose of exercising control or
management.
17. Invest in interests, other than debentures or equity stock interests, in
oil and gas or other mineral exploration or development programs.
18. Invest more than 5% of the value of the total assets of the Fund in
warrants, whether or not the warrants are listed on the New York or American
Stock Exchanges. Warrants acquired in units or attached to securities are not
included in this restriction.
19. Invest in securities of foreign issuers, except that the Total Return
Fund, the Growth and Income Fund and the Capital Appreciation Fund may invest up
to 20% of the value of their total assets in securities of foreign issuers
including ADRs. The Global Income Fund may invest an unlimited percentage of its
assets in securities of foreign issuers, developed or undeveloped, or whether
listed on an exchange or unlisted.
20. Invest in securities of any issuer if the officers and directors of the
Company or the Adviser or Administrator own individually more than 1/2 of 1% of
such issuer's securities or together own more than 5% of such issuer's
securities.
21. Effect short sales of securities, except short sales against the box.
INVESTMENT ADVISORY SERVICES
Investment Management And Administration
- ----------------------------------------
The Company has entered into an Investment Management Agreement with respect to
each Fund with Chubb Asset Managers, Inc. (the "Adviser") and Jefferson Pilot
Investment Advisory Corporation, the
16
<PAGE>
investment administrator to the Funds prior to October 1, 1997 ("JPIAC"),
pursuant to which the Adviser serves as investment adviser to the Funds. Under
the terms of the agreements, the Adviser, subject to review by the Company's
Board of Directors, has the day-to-day responsibility for making decisions to
buy, sell, or hold any particular security for all the Funds. See "MANAGEMENT"
in the Prospectus.
The agreements for the Government Securities Fund, Growth and Income Fund, Tax-
Exempt Fund and Total Return Fund were approved by a majority of the
shareholders of the appropriate Fund at the meeting of shareholders held April
21, 1988. The agreements for the Capital Appreciation Fund and Global Income
Fund were approved by the appropriate Fund at a meeting of shareholders held
August 31, 1995. The term of each agreement is one year, but it will continue in
effect from year to year if approved at least annually by a vote of a majority
of the Board of Directors of the Company (including a majority of the directors
who are not parties to the contract or interested persons of any such parties)
cast in person at a meeting called for the purpose of voting on such renewal, or
by the vote of a majority of the outstanding shares of a Fund. The agreements
may be terminated, without the payment of any penalty, by any party, by the vote
of the Board of Directors, or by vote of a majority of the outstanding shares of
a Fund, on 60 days written notice to the Adviser, or automatically in the event
of an assignment.
The Company has entered into an Administration Agreement dated October 1, 1997
with respect to all of the Funds with Van Eck Associates Corporation (the
"Administrator"), pursuant to which the Administrator, subject to review by the
Company's Board of Directors, is responsible for providing administrative and
accounting functions to the Funds, including certain legal, accounting,
regulatory and compliance services, state registration services, corporate
secretary and board of directors administration, tax compliance services and
reporting. The agreement may be terminated, without the payment of any penalty,
by any party, by the vote of the Board of Directors, or by vote of a majority of
the outstanding shares of a Fund, on 60 days written notice to the
Administrator, or automatically in the event of an assignment.
For providing investment advisory, management, and administrative services to
the Fund, the Adviser and the Administrator are, and until September 30, 1997
JPIAC was, entitled to receive monthly compensation based on a percentage of the
average net asset value of each Fund as described more fully under "MANAGEMENT"
in the Prospectus. The fees paid to the Adviser and Administrator are set forth
below:
Adviser's Fees
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Fund 1996 1997 1998
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Government Securities Fund $ 0 $ 0 $ 0
- -------------------------------------------------------------------------------------------------------------
Total Return Fund $ 0 $ 0 $ 0
- -------------------------------------------------------------------------------------------------------------
Tax Exempt Fund $ 0 $ 0 $ 0
- -------------------------------------------------------------------------------------------------------------
Capital Appreciation Fund $ 0 $ 0 $ 0
- -------------------------------------------------------------------------------------------------------------
Growth and Income Fund $ 0 $ 0 $ 0
- -------------------------------------------------------------------------------------------------------------
Global Income $ 0 $ 0 $ 0
- -------------------------------------------------------------------------------------------------------------
Capital Appreciation Fund $ 0 $ 0 $ 0
- -------------------------------------------------------------------------------------------------------------
</TABLE>
Administrator's Fees
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
Fund 1996 1997 1998
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Government Securities Fund $ 33,818 $ 65,379 $ 16,297
- -------------------------------------------------------------------------------------------------------------
Total Return Fund $ 92,989 $230,030 $148,639
- -------------------------------------------------------------------------------------------------------------
Tax Exempt Fund $ 38,966 $ 68,675 $ 12,314
- -------------------------------------------------------------------------------------------------------------
Growth and Income Fund $120,560 $330,029 $250,547
- -------------------------------------------------------------------------------------------------------------
Global Income Fund $ 9,401 $ 99,129 $117,459
- -------------------------------------------------------------------------------------------------------------
Capital Appreciation Fund $ 51,455 $100,524 $361,208
- -------------------------------------------------------------------------------------------------------------
</TABLE>
Fees Paid to the Adviser
- ------------------------
An Expense Limitation Agreement dated January 25, 1991 implemented certain
expense limits between the Company, Chubb Life, the Adviser, Jefferson Pilot
Investment Advisory Corporation (formerly Chubb Investment Advisory Corporation,
"CIAC," the Fund's Investment Adviser until September 30, 1997) and Chubb
Securities Corporation ("CSC," the Fund's Distributor until September 30, 1997).
Under this agreement, one or more of the parties to the agreement waived fees or
assumed expenses for one or more of the Funds. For the fiscal year ended
December 31, 1996, CIAC accepted a reduced fee of 0.25% of the average daily net
assets of the Government Securities Fund, Tax-Exempt Fund and Capital
Appreciation Fund; a reduced fee of 0.35% of the average daily net assets of the
Total Return Fund and Growth and Income Fund; and a fee of 0.45% of the average
daily net assets of the Global Income Fund.
For the period from January 1, 1995 to August 31, 1995, CSC waived any amount of
its 12b-1 Plan fees in excess of 0.20% of the average daily net asset value of
the Total Return Fund, the Growth and Income Fund, the Government Securities
Fund and the Tax-Exempt Fund.
For the period September 1, 1995 through December 31, 1996, CSC waived its 12b-1
fees in excess of 0.25% of the average daily net assets of the Total Return
Fund, Growth and Income Fund, Capital Appreciation Fund and Global Income Fund,
and 0.20% of the average daily net assets of the Government Securities Fund and
Tax-Exempt Fund.
For the fiscal year ended December 31, 1996, Chubb Life assumed a portion of
certain additional expenses of the Company. For the year ended December 31,
1997, the rates of net expenses borne by the Fund were limited to 1.35% of the
average daily net assets of the Global Income Fund, 1.25% of the average daily
net assets of the Total Return Fund, Growth and Income Fund and Capital
Appreciation Fund, and 1.00% of the average daily net assets of the Government
Securities Fund and Tax-Exempt Fund. For the period, the Adviser, the
Administrator, the Distributor and Jefferson Pilot Securities Corporation and
Jefferson Pilot Investment Advisory Corporation, the former Distributor and
Administrator, waived all or a portion of their fees and assumed a portion of
all other expenses.
THE DISTRIBUTOR
Van Eck Securities Corporation (the "Distributor"), a wholly-owned subsidiary of
the Administrator, serves as distributor of the shares of each of the Funds
pursuant to a Distribution Agreement dated October 1, 1997, approved by action
of the Board of Directors at a meeting held on October 1, 1997. Prior to that
date, Chubb Securities Corporation ("CSC") was the distributor of the Funds'
shares.
Under the terms of the Distribution Agreement, the Distributor will use its best
efforts to distribute the Company's shares among investors and broker-dealers
with which it has contracted to sell the Company's shares. The shares are sold
only at the public offering price in effect at the time of the sale ("Offering
Price"), which is determined in the manner set forth in the Prospectus under
"PURCHASE OF
17
<PAGE>
SHARES". The Company will receive not less than the full net asset value of the
shares of each Fund sold, which amount is determined in the manner set forth in
this Statement of Additional Information under "DETERMINATION OF NET ASSET
VALUE." The amount between the Offering Price and the net asset value of each
Fund may be retained by the Distributor or it may be reallowed in whole or in
part to broker-dealers effecting sales of the Company's shares. See "PURCHASE OF
SHARES" in the Prospectus.
For the years ended December 31, 1996 and 1995, CSC retained $192,057 and
$102,066, respectively, of sales commissions after reallowance to authorized
persons of $741,540 and $348,575, respectively. For the year ended December 31,
1997, CSC and the Distributor retained $52,474 after reallowance to authorized
persons of $410,124. For the year ended December 31, 1998, CSC and the
Distributor retained $46,920 after reallowance to authorized persons of
$339,298.
The Company pays the costs and expenses incident to registering and qualifying
its shares for sale under the Federal securities laws and under the applicable
state Blue Sky laws of the jurisdictions in which the Distributor desires to
distribute such shares and, pursuant to the Distribution Plan, the costs of
preparing, printing, and distributing prospectuses, reports and other marketing
materials to prospective investors.
The Company has adopted a plan of distribution pursuant to Rule 12b-1 under the
Act as to each Class of its shares ("Distribution Plans"), which provide that
the Company may, directly or indirectly, engage in activities primarily intended
to result in the sale of the Company's shares.
The maximum expenditure the Company may make under the Distribution Plans will
be the lesser of (i) the actual expenses incurred in distribution related
activities permissible under the Distribution Plans ("Rule 12b-1 activities"),
as determined by the Board of Directors of the Company, or (ii) 0.50% per annum
of the net asset value of each Fund's Class A shares or 1.00% per annum of the
net asset value of each Fund's Class B shares. Payments under the Distribution
Plan will be accrued daily and paid quarterly in arrears.
The National Association of Securities Dealers, Inc. ("NASD") adopted amendments
to Article III, Section 26 of its Rules of Fair Practice which, among other
things, (i) impose certain limits on "asset based sales charges" paid to finance
sales or sales promotion expenses) in order to regulate such charges under the
maximum sales load limitations applicable to investment companies and (ii) treat
"service fees"; payments made for personal shareholder services and/or
maintenance of shareholder accounts) as distinguishable from asset based sales
charges and, therefore, outside the scope of the maximum sales load limitations.
The Company's Distribution Plans contemplate that activities to both (i) finance
the sale of Company shares and (ii) compensate persons who render shareholder
support services are Rule 12b-1 activities within the meaning of the
Distribution Plans.
In light of the NASD rule amendments, the Board of Directors, and separately a
majority of the non-interested directors, determined it would be appropriate and
in the best interest of the Company and its shareholders to clearly identify
that portion of the maximum expenditure under the Distribution Plan that should
be considered to be asset based sales charges and that portion should be
considered to be service fees. Consequently, it was determined that 0.25% per
annum of the average daily net asset value of each Fund be considered to be
asset based sales charges, as defined by Article III, Section 26 of the NASD's
Rules of Fair Practice, and 0.25% per annum of the average daily net asset value
of each Fund be considered to be service fees, as defined by Article III,
Section 26 of the NASD's Rules of Fair Practice. No payment of a service fee
will be made to a securities dealer unless that dealer has sold shares of the
Company that are then outstanding for a minimum of 12 months and that are valued
in excess of $1,000.
The Distribution Plans do not provide for any charges to the Company for excess
amounts expended by the Distributor and, if the Distribution Plans are
terminated in accordance with their terms, the obligation of the Company to make
payments to the Distributor pursuant to the Distribution Plans will cease. The
Distribution Plans do not provide for the reimbursement of the Distributor for
any expenses of the Distributor attributable to the Distributor's "overhead".
18
<PAGE>
For the years ended December 31, 1998, 1997, 1996 and 1995, $745,850, $367,198,
$261,904 and $186,402 was paid by the Company to the Distributor and/or CSC, as
the case may be, under the Class A Plan of Distribution. The Class B shares for
the year ended December 31, 1998 paid $836.
The Distribution Plan as to the Class A shares was approved on September 4, 1987
by the Board of Directors, and separately by all directors who are not
interested persons of the Company and who have no direct or indirect interest in
the Distribution Plan or related arrangements (the "Rule 12b-1 Directors"). That
Distribution Plan was approved by the shareholders of each Fund at the meeting
of shareholders held April 21, 1988. The Distribution Plan as to the Class B
shares was approved on October 1, 1997 by the Rule 12b-1 Directors. The
Distribution Plans will continue in effect from year to year if approved by the
votes of a majority of the Company's Board of Directors and the Rule 12b-1
Directors, cast in person at a meeting called for the purpose of voting on such
approval. All material amendments to the Distribution Plans must be likewise
approved by the Board of Directors and the Rule 12b-1 Directors. The
Distribution Plans may be terminated, without penalty, at any time by vote of a
majority of the Rule 12b-1 Directors or by vote of a majority of the outstanding
shares of the Company, on 60 days written notice. The Distribution Plans may not
be amended to increase materially the amount of expenditures under the
Distribution Plans unless such amendment is approved by a vote of the voting
securities of each Fund. A Plan will automatically terminate in the event of its
assignment (as defined in the Act). So long as the Plan is in effect, the
election and nomination of Directors who are not "interested persons" of the
Company shall be committed to the discretion of the Directors who are not
"interested persons." The Directors have determined that, in their judgment,
there is a reasonable likelihood that the Plans will benefit the Funds and their
shareholders. The Company will preserve copies of the Plans and any agreement
or report made pursuant to Rule 12b-1 under the Act, for a period of not less
than six years from the date of the Plan or such agreement or report, the first
two years in an easily accessible place. For additional information regarding
the Plans, see the Prospectus.
PORTFOLIO TRANSACTIONS AND BROKERAGE
Under the Investment Management Agreement, the Adviser has the day-to-day
responsibility for selecting broker-dealers through which securities are to be
purchased and sold.
The money market securities and other debt securities purchased by the
Government Securities Fund and the Tax-Exempt Fund usually will be purchased on
a principal basis directly from issuers, underwriters, or dealers. Accordingly,
no brokerage charges are expected to be paid on such transactions. However,
purchases from an underwriter on a principal basis generally include a
concession paid to the underwriter, and transactions with a dealer usually
include the dealer's "mark-up" or "mark-down".
Insofar as known to management, no director or officer of the Company, or of the
Adviser or any person affiliated with them has any material direct or indirect
interest in any broker employed by or on behalf of the Company except as
officers or directors of the Distributor.
In selecting broker-dealers to execute transactions with respect to each Fund,
the Adviser is obligated to use its best efforts to obtain for each Fund the
most favorable overall price and execution available, considering all the
circumstances. Such circumstances include the price of the security, the size of
the broker-dealer's "spread" or commission, the willingness of the broker-dealer
to position the trade, the reliability, financial strength and stability and
operational capabilities of the broker-dealer, the ability to effect the
transaction at all where a large block is involved, availability of the broker-
dealer to stand ready to execute possibly difficult transactions in the future,
and past experience as to qualified broker-dealers. Such considerations are
judgmental and are weighed by the Adviser in seeking the most favorable overall
economic result to the Company.
Subject to the foregoing standards, the Adviser has been authorized by the
Company's Board of Directors to allocate brokerage to broker-dealers who have
provided brokerage and research services, as such services are defined in
Section 28(e) of the Securities Exchange Act of 1934. Pursuant to that
authorization, the Adviser may cause each Fund to pay any broker- dealer a
commission in excess of the
19
<PAGE>
amount another broker-dealer would have charged for effecting the same
transaction if the Adviser determines in good faith that such amount of
commission is reasonable in relation to the value of the brokerage an research
services provided by such broker-dealer to the Adviser, viewed in terms of
either that particular transaction or the Adviser's overall responsibilities
with respect to the Company and other accounts as to which it exercises
investment discretion. Such brokerage and research services may include, among
other things, analyses and reports concerning issuers, industries, securities,
economic factors and trends, and strategies for the Funds. Such research
services may be used by the Adviser in connection with any other advisory
accounts managed by it. Conversely, research services to any other advisory
accounts may be used by the Adviser in managing the investments of the Company.
During the year ended December 31, 1998, 1997 and 1996 the Fund paid no
commissions to an affiliated broker/dealer and no commissions were contingent
upon the sale of Fund shares. As of December 31, 1998, the Growth and Income
Fund and Total Return Fund held 19,100 and 11,000 22,100 and 13,000 and 16,800
and 8,800 shares, respectively, of Merrill Lynch through their regular brokers.
In addition in 1996 the Capital Appreciation Fund held 6,500 shares of Lehman
Brothers Holding, Inc.
The Adviser will use its best efforts to recapture all available tender offer
solicitation fees and similar payments in connection with tenders of the
securities of the Company and to advise the Company of any fees or payments of
whatever type which it may be possible to obtain for the Company's benefit in
connection with the purchase or sale of the Company's securities.
The Adviser and its affiliates may provide investment advice to other clients,
including, but not limited to, mutual funds, individuals, pension funds and
institutional investors. In addition, persons employed by the Adviser, who are
also investment personnel of Chubb & Son, an affiliate of The Chubb Corporation,
currently provide investment advice to and supervision and monitoring of
investment portfolios for The Chubb Corporation and its affiliates, including
general accounts of the insurance affiliates of The Chubb Corporation. In
addition, certain investment personnel employed by the Adviser currently provide
advice to other investment portfolios of entities not affiliated with The Chubb
Corporation or its affiliates in their capacity as officers or directors of
certain registered investment advisers not related to the Adviser. Some of these
investment portfolios, as well as the portfolios of other clients, may have
investment objectives and investment programs similar to the Funds. Accordingly,
occasions may arise when the Adviser and investment personnel of Chubb & Son,
may select securities for purchase or sale by a Fund that are also held by other
advisory accounts, or that are currently being purchased or sold for other
advisory accounts. It is the practice of the Adviser and its investment
personnel, its affiliates, and the investment personnel of Chubb & Son, Inc. to
allocate such purchases or sales insofar as feasible, among their advisory
clients in a manner they deem equitable. It is the policy of the Adviser, its
affiliates and the investment personnel of Chubb & Son not to favor any one
account over the other.
On those occasions when such simultaneous investment decisions are made, the
Adviser, its affiliates, and the investment personnel of Chubb & Son, will
allocate purchase and sale transactions in an equitable manner according to
written procedures approved by the Company's Board of Directors. Specifically,
such written procedures provide that, in allocating purchase and sale
transactions made on a combined basis, the Adviser, its affiliates, and the
investment personnel of Chubb & Son, will seek to achieve the same average unit
price of securities for each advisory account and will seek to allocate, as
nearly as practicable, such transactions on a pro-rata basis substantially in
proportion to the amounts ordered to be purchased or sold by each advisory
account. Such procedures may, in certain instances, either advantageous or
disadvantageous to the Funds. While it is conceivable that in certain instances
this procedure could adversely affect the price or number of shares involved in
the Company's transaction, it is believed that the procedure generally
contributes to better overall execution of the Company's portfolio transactions.
Portfolio turnover for each Fund can vary significantly from year to year or
within a year. The Global Income Fund's turnover rate was 185.95% for 1997,
compared to 99.31% for 1998.
20
<PAGE>
DIRECTORS AND OFFICERS
The directors and officers of the Company, their addresses, their positions with
the Company, and their principal occupations for the past five years are set
forth below:
DIRECTORS AND OFFICERS
The directors and officers of the Company, their addresses, their positions with
the Company, and their principal occupations for the past five years are set
forth below:
<TABLE>
<S> <C> <C>
@* John C van Eck Chairman of the Board and Director Chairman of the Board and President of
575 Park Avenue other Investment Companies advised by
New York, NY the Administrator, Chairman, Van Eck
Associates Corporation (investment
adviser) and Van Eck Securities
Corporation (broker-dealer); Director,
Eclipse Financial Assets Trust (Mutual
Fund), Former President of the Adviser
and its affiliated companies, Former
director of Abex Inc. (aerospace)
- ---------------------------------------------------------------------------------------------------------------------
@* Michael O'Reilly President and Director Executive Vice President and Chief
15 Mountain View Road Investment Officer of The Chubb
Warren, New Jersey 07061 Corporation; Director, President and
Chief Operating Officer of the Adviser.
#+ Jeremy Biggs Director Trustee of other investment companies
1220 Park Avenue advised by the Administrator, Vice
New York, NY 10128 Chairman, Director, and Chief
Investment Officer of Fiduciary Trust
Company International (investment
manager), parent company of Fiduciary
International, Inc., Chairman of the
Davis Funds Group (mutual funds
management company) Treasurer and
Director of Royal Oak Foundation (the
UK National Trust); Director and
former Chairman of the Union
Settlement Association (the community
service organization); First Vice
President, Trustee and Chairman of
Finance Committee of the St. James
*#+ Wesley G. McCain Director Trustee of other investment companies
470 Park Avenue South advised by the Administrator; Chairman
New York, New York and Owner, Townley Capital Management,
Inc.; Chairman, Eclipse Funds;
Chairman and Owner, Eclipse Financial
Associates Inc.; General Partner,
Pharaoh Partners, L.P.; Principal,
Pharaoh Partners, (Cayman) LDC;
Trustee, Libre Group Trust; Director,
Libre Investments (Cayman) Ltd.
#+ David Olderman Director Trustee of other investment companies
40 East 52nd Street advised by the Administrator; Chairman
New York, New York of the Board, American Copy Equipment
Company (1991-present); Chairman of
the Board, Brighton Partners Inc.
Bruce Smith Vice President and Treasurer Officer of other investment companies
99 Park Avenue advised by the Administrator; Senior
New York, New York Managing Director, Portfolio
Accounting of Van Eck Associates
Corporation and Senior Managing
Director of Van Eck Securities.
Thomas Elwood Vice President and Secretary Officer of other investment companies
99 Park Avenue advised by the Administrator; Vice
New York, New York President, Secretary and General
Counsel of Van Eck Associates
Corporation and Van Eck Securities;
former Assistant Counsel Jefferson
Pilot Financial Insurance Company and
officer of other investment companies
advised by Jefferson Pilot Financial
Insurance and its affiliates.
Joseph DiMaggio Controller Officer of other investment companies
99 Park Avenue advised by the Administrator; Director
New York, New York of Portfolio Accounting of Van Eck
Associates Corporation.
Susan Lashley Vice President Officer of other investment companies
advised by the Administrator; Managing
Director, Mutual Fund Operations of
Van Eck Securities Corporation.
Susan Min Assistant Secretary Assistant Secretary of other
investment companies advised or
administered by the Adviser; Staff
Attorney of Van Eck Associates
Corporation.
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
- ----------------
@ An "interested person" as defined in the Act.
* Member of Executive Committee - exercises general powers of Board of
Directors between meetings of the Board.
# Member of the Nominating Committee.
+ Member of the Audit Committee - reviews fees, services, procedures,
conclusions and recommendations of independent auditors.
The Company pays no salaries or compensation to any of its officers, all of whom
are officers or employees of the Adviser or the Administrator. The Company pays
to each director who is not affiliated with the Adviser or the Administrator or
their affiliates an annual director's retainer of $2,000 and a payment of $750
plus expenses per Board and Committee meeting attended.
1998 Compensation Table
<TABLE>
<CAPTION>
Name of Aggregate Pension or Retirement Total Compensation From
Person Compensation Benefits Accrued As Part of Fund and Fund Complex (a)
Position From Fund Fund Expenses Paid to Directors
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
John Van Eck $ 0 $ 0 $ 0
Chairman
- -----------------------------------------------------------------------------------------------------
Michael $ 0 $ 0 $ 0
O'Reilly
Director
- -----------------------------------------------------------------------------------------------------
Jeremy Biggs $5,750 $5,750 $34,750
Director
- -----------------------------------------------------------------------------------------------------
Wesley McCain $5,750 $5,750 $34,750
Director
- -----------------------------------------------------------------------------------------------------
David Olderman $4,250 $4,250 $32,250
Director
- -----------------------------------------------------------------------------------------------------
</TABLE>
- ---------------
(a) The term "fund complex" refers to the funds of the Company, and of Van Eck
Funds and Van Eck Worldwide Insurance Trust, which are managed by the
Administrator. The directors are paid a fee for their services to the
Company. No other compensation, including pension or other retirement
benefits, is paid to the directors by the fund complex.
As of February 16, 1999, the directors and officers of the Company, as a group,
owned less than 1% of the outstanding shares of the Company and less than 1% of
any of the Funds individually.
As of February 16, 1999, the following persons owned 5% or more of the shares of
the Fund(s) indicated below:
22
<PAGE>
<TABLE>
<S> <C> <C> <C>
Capital Appreciation Fund Class A Growth & Income Fund Class A
- --------------------------------- ----------------------------
Federal Insurance Company 81.20% Federal Insurance Company 27.29%
c/o Chubb & Son Attn: Michael O'Reilly
Attn Investment Accounting 15 Mountain View Road
15 Mountain View Warren, NJ 07059
Warren, NJ 07059
Capital Appreciation Fund-Class B Growth & Income Fund-Class B
- --------------------------------- ----------------------------
Gail E. Thompson 43.23% Olde Discount
3302 Barge 751 Griswold Street
Yakima, WA 98902-2740 Detroit, MI 48226-3224 13.92%
PaineWebber 16.51% Olde Discount 10.20%
Ursula R. Mobilio Cust 751 Griswold Street
Paul R. Mobilio Detroit, MI 48226-3224
311 Watertown Road
Middlebury, CT 06762-1506
PaineWebber 16.51% PaineWebber 7.42%
John R. Mobilio Cust PaineWebber CDN FBO
Julie C. Mobilio Kenneth R. Snyder
311 Watertown Road P.O.Box 3321
Middlebury, CT 06762-1506 Weehawken, NJ 07087-8154
PaineWebber 16.51% Inv Fiduciary Trust Co. Cust 5.91%
John R. Mobilio Cust IRA A/C John A. Horgos
Mark R. Mobilio PO Box 117
311 Watertown Road Orestes, IN 46063-0117
Middlebury, CT 06762-1506
Inv. Fiduciary Trust Co. Trust 5.83% Glenn A. Barrett & 5.56%
IRA A/C Mark J. Lavery Mildred M. Barrett JT TEN
94 Longview Ave. 53 Flat Hills Road
Rocky Point, NY 11778-9117 Amherst, MA 01002-1211
Global Income Fund-Class A Tax-Exempt Fund-Class A
- -------------------------- -----------------------
Federal Insurance Company 50.51% Federal Insurance Company 68.20%
Attn: Michael O'Reilly Attn: Michael O'Reilly
15 Mountain View Road 15 Mountain View Road
Warren, NJ 07059 Warren, NJ 07059
Chubb Corporation 9.00% Tax-Exempt Fund-Class B
Attn Investment Department -----------------------
15 Mountain View Road MLPF&S for the Sole Benefit 51.52%
Warren, NJ 07059 of its Customers
Attn Fund Administration
Vigilant Insurance Company 5.62% 4800 Deer Lake Dr. East 3rd Fl.
Attn Investment Department Jacksonville, FL 32246-6484
c/o Chubb and Son Inc.
15 Mountain View Road
Warren, NJ 07059
</TABLE>
23
<PAGE>
<TABLE>
<S> <C> <C> <C>
Global Income Fund - Class B Tax-Exempt Fund-Class B
- ---------------------------- -----------------------
PaineWebber for the Benefit of 90.54% Thomas E. Brooks 24.60%
Charles O. Butner Trustee Julia E. Brooks JTWROS
Charles O. Butner Tr. 4515 Fern Avenue
U/A Oct 14 1977 Shreveport, LA 71105-3115
3116 SW Oxford Road
Topeka, KS 66614-4719 Fred S. Willis 23.47%
P.O. Box 369
Coushatta, LA 71019-0369
Government Securities Fund-Class A Total Return Fund -Class A
- ---------------------------------- --------------------------
Federal Insurance Company 68.64% Federal Insurance Company 39.23%
Attn: Michael O'Reilly Attn: Michael O'Reilly
15 Mountain View Road 15 Mountain View Road
Warren, NJ 07059 Warren, NJ 07059
The Chubb Corporation 7.96% Total Return Fund -Class B
Attn: Michael O'Reilly --------------------------
100 William Street
New York, New York 10038 Olde Dicsount 26.79%
751 Griswold Street
Detroit, MI 48226-3224
Government Securities Fund -Class B
- ----------------------------------- Inv. Fiduciary Trust Co. Trust 11.28%
IRA R/O Edmond L. Smith
Edward J. Calabrese & 31.53% 59222 Edna Road
Mary V. Calabrese JTWROS Mishawaka, IN 46544-6840
60 cherry Lane
Amherst, MA 01002-1521
Charles B. Miller Tr. 26.99% Inv. Fiduciary Trust Co. Trust 9.99%
FBO Charles B. Miller DMD INC PSP IRA A/C John A. Horgos
286 Old Sharon Road P.O. Box 117
Mercer, PA 16137-3018 Orestes, IN 46063-0117
Salomon Smith Barney Inc. 14.96% Inv. Fiduciary Trust Co. Trust 9.26%
00186962053 IRA A/C Kenneth R. Barnett
333 West 34th Street - 3rd Floor RR 5 Box 194A
New York, NY 10001-2483 Bloomfield, IN 47424-9751
Priscilla A. Ham & 7.01% Lou Ann Jacobson 8.04%
Jack A. Ham JT WROS 21619 Maple Glen Circle
2310 Pullen Street Edwardsburg, MI 49112-9751
Richland, WA 99352-3047
Everen Clearing Corp. 5.47% Steven E. Fults & 6.78%
A/C 5044-9297 Phyllis A. Fults JTWORS
Claude S. Lubin 1416 13th Street
111 East Kilbourn Avenue Bedford, IN 47421-3227
Milwaukee, WI 53202-6611
Inv. Fiduciary Trust Co. Cust. 6.52%
IRA R/O Richard C. Kletka
19620 Paxson Drive
South Bend, IN 46637-3254
</TABLE>
24
<PAGE>
PURCHASE OF SHARES
GROUP PURCHASES
An individual who is a member of a qualified group may purchase shares of the
Funds at the reduced commission applicable to the group taken as a whole. The
commission is based upon the aggregate dollar value, at the current offering
price, of shares owned by the group, plus the securities currently being
purchased. For example, if members of the group held $80,000, calculated at
current offering price, of Global Income Fund-A's shares and now were investing
$25,000, the sales charge would be 3.75%. Information concerning the current
sales charge applicable to a group may be obtained by contacting the
Distributor.
A "qualified group" is one which (i) has been in existence for more than six
months, (ii) has a purpose other than acquiring a Fund's shares at a discount
and (iii) satisfies uniform criteria which enables the Distributor to realize
economies of scale in its cost of distributing shares. A qualified group must
have more than 10 members, must be available to arrange for group meetings
between representatives of the Distributor and the members of the group, must
agree to include sales and other materials related to the Funds in its
publications and mailings to members at reduced or no cost to the Distributor,
and must seek to arrange the use of Automatic Investment Plan.
COMBINED PURCHASES
Shares of funds in the Van Eck Global Group of Funds (except the Van Eck U.S.
Government Money Fund series of Van Eck Funds) may be purchased at the initial
series charged applicable to the quantity purchased levels shown above by
combining concurrent purchases.
LETTER OF INTENT
Purchasers who anticipate that they will invest (other than through exchanges)
$100,000 or more in one or more of the funds in the Van Eck Global Group of
Funds (except the Van Eck. U.S. Government Money fund) within thirteen months
may execute a Letter of Intent on the form in the Application. the execution of
a Letter of Intent will result in the purchaser paying a lower initial sales
charge, at the appropriate quantity purchase level shown above, on all purchases
during a thirteen month period. A purchase not originally made pursuant to a
Letter of Intent may be included under a backdated Letter of Intent executed
within 90 days after such purchase.
RIGHT OF ACCUMULATION
The above scale of initial sales charges also applies to an investor's current
purchase of shares of any of the funds in the Van Eck Global Group of Funds
(except the Van Eck U.S. Government Money Fund) where the aggregate value of
those shares plus shares of the funds previously purchased and still owned,
determined at the current offering price, is more than $100,000, provided the
Distributor of DST is notified by the investor or the Broker or Agent each time
a purchase is made which would so qualify.
AVAILABILITY OF DISCOUNTS
An investor or the Broker or Agent must notify DST or the Distributor at the
time or purchase whenever a quantity discount or reduced sales charge is
applicable to a purchase. Quantity discounts described above may be modified or
terminated at any time without prior notice.
25
<PAGE>
VALUATION OF SHARES
The net asset value of the shares of each Fund of the Company is normally
determined immediately as of the close of trading on the New York Stock Exchange
(usually 4:00 p.m. New York Time) on each day during which the New York Stock
Exchange is open for trading and at such other times when both the degree of
trading in a Fund's portfolio securities would materially affect the net asset
value of that Fund's shares and shares of that Fund were tendered for redemption
or a repurchase order was received. The New York Stock Exchange is open from
Monday through Friday except on the following national holidays: New Years Day,
Martin Luther King Jr.'s Birthday, President's Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day, and Christmas Day.
Dividends paid by the Fund with respect to Class A and Class B shares will be
calculated in the same manner, at the same time and on the same day and will be
in the same amount, except that the higher distribution services fee and any
incremental transfer agency costs relating to Class B shares will be borne
exclusively by that Class. The directors have determined that currently no
conflict of interest exists between the Class A and Class B shares. On an
ongoing basis, the Board of Directors, pursuant to their fiduciary duties under
the Act and state laws, will seek to ensure that no such conflict arises.
Class A shares of the Funds are sold at the public offering price which is
determined once each day the Funds are open for business, which is the net asset
value per share plus a sales charge in accordance with the schedule set forth in
the Prospectus. Class B shares are sold with a contingent deferred sales charge.
In determining whether a contingent deferred sales charge is applicable to a
redemption of Class B shares, the calculation will be determined in the manner
that results in the lowest possible rate being charged. Therefore, it will be
assumed that the redemption is first of any Class A shares in the shareholder's
Fund account (unless a specific request is made to redeem a specific class of
shares), second of Class B shares held for over six years or shares attributable
to appreciation or shares acquired pursuant to reinvestment, and third of any
Class B held longest during the applicable period.
To provide an example, assume an investor purchased 100 Class B shares of Global
Income Fund at $10 per share (at a cost of $1,000) and in the second year after
purchase, the net asset value per share is $12 and, during such time, the
investor has acquired 10 additional shares upon dividend reinvestment. If at
such time the investor makes his or her first redemption of 50 shares (proceeds
$600), 10 shares or $120 will not be subject to charge because of dividend
reinvestment. With respect to the remaining 40 shares, the charge is not
applied to the $80 attributable to appreciation but is applied only to the
original cost of $10 per share and not to the increase in net asset value of $2
per share. Therefore, $200 of the $600 redemption proceeds will be charged at a
rate of 4% (the applicable rate in the second year after purchase
Portfolio securities which are traded on national securities exchanges are
valued at the last quoted sale price as of the close of business of the New York
Stock Exchange or, lacking any quoted sales, at the mean between the closing bid
and asked prices.
Securities traded in the over-the-counter market as part of the NASDAQ National
Market system are valued at the last quoted sale price (at the close of the New
York Stock Exchange) obtained from a readily available market quotation system
or securities pricing services. If no sale took place, such securities are
valued at the mean between the bid and asked prices.
Long-term U.S. Treasury securities and other obligations issued or guaranteed by
the United States Government, its agencies or instrumentalities are valued at
representative quoted prices from bond pricing services.
Long-term publicly traded corporate bonds are valued at prices obtained from a
bond pricing service when such prices are available or, when appropriate, from
over-the-counter exchange quotations or from broker-dealers who make a market in
that security.
26
<PAGE>
Foreign securities denominated in foreign currencies are valued at
representative quoted prices on the principal exchange of the country of origin
and are converted to United States dollar equivalents using that day's current
exchange rate (New York closing spot). Occasionally, events affecting the values
of such securities may occur between the times at which they are determined and
the close of the New York Stock Exchange, which events may not be reflected in
the computation of a Portfolio's net asset value. If, during such periods,
events occur which materially affect the value of the securities of a Portfolio,
and during such periods either shares are tendered for redemption or a purchase
or sale order is received by the Company, such securities will be valued at fair
value as determined in good faith by the Board.
All non-U.S. securities traded in the over-the-counter securities market are
valued at the last sale quote, if market quotations are available, or at the
mean between the closing bid and asked prices, if there is no active trading in
a particular security for a given day. Where market quotations are not readily
available for such non-U.S. over-the-counter securities, then such securities
will be valued in good faith by a method that the Board of Directors, or its
delegates, believes accurately reflects fair value.
Options and convertible preferred stocks listed on national securities exchanges
are valued as of their last sale price or, if there is no sale, at the mean
between the closing bid and asked prices.
Futures contracts are valued as of their last sale price or, if there is no
sale, at the mean between the closing bid and asked prices.
Securities and assets for which market quotations are not readily available are
valued at fair value as determined in good faith by the Board of Directors of
the Company using its best judgment.
EXCHANGE PRIVILEGE
Class A, and Class B shareholders of the Funds may exchange their shares for
shares of the same class of other of the funds in the Van Eck Global Group of
Funds. The Exchange Privilege will not be available if the proceeds from a
redemption of shares of a fund whose shares qualify are paid directly to the
shareholder. The Exchange Privilege is not available for shares which are not
on deposit with DST or Investors Fiduciary Trust Company ("IFTC"), or shares
which are held in escrow pursuant to a Letter of Intent. If certificates
representing shares of the Fund accompany a written exchange request, such
shares will be deposited into an account with the same registration as the
certificates upon receipt by DST.
The Fund reserves the right to (i) charge a fee of not more than $5.00 per
exchange payable to the Fund or charge a fee reasonably intended to cover the
costs incurred in connection with the exchange; (ii) establish a limit on the
number and amount of exchanges made pursuant to the Exchange Privilege and (iii)
terminate the Exchange Privilege without written notice. In the event of such
termination, shareholders who have acquired their shares pursuant to the
Exchange Privilege will be afforded the opportunity to re-exchange such shares
for shares of the fund originally purchased without sales charge, for a period
of not less than three (3) months.
By exercising the Exchange Privilege each shareholder whose shares are
subject to the Exchange Privilege will be deemed to have agreed to indemnify and
hold harmless the Trust and each of its funds, their investment adviser, sub-
investment adviser (if any), distributor, transfer agent, IFTC and the officers,
directors, employees and agents thereof against any liability, damage, claim or
loss, including reasonable costs and attorneys' fees, resulting from acceptance
of, or acting or failure to act upon, or acceptance of unauthorized instructions
or non-authentic telephone instructions given in connection with, the Exchange
Privilege, so long as reasonable procedures are employed to confirm the
authenticity of such communications. (For more information on the Exchange
Privilege, see the Prospectus).
27
<PAGE>
TAX-SHELTERED RETIREMENT PLANS
The Company offers several prototype tax-sheltered retirement plans through
which shares of the Funds may be purchased. These plans are more fully
described below. IFTC, P.O. Box 418407, Kansas City, Missouri acts as the
trustee and/or custodian (the "Trustee") under the retirement plans offered by
the Trust. Persons who wish to establish a tax-sheltered retirement plan should
consult their own tax advisors or attorneys regarding their eligibility to do so
and the laws applicable thereto, such as the fiduciary responsibility provisions
and diversification requirements and the reporting and disclosure obligations
under the Employee Retirement Income Security Act of 1974. The Company is not
responsible for compliance with such laws. Further information regarding the
retirement plans, including applications and fee schedules, may be obtained upon
request to the Fund.
Individual Retirement Account and Spousal Individual Retirement Account. The
- ------------------------------------------------------------------------
IRA is available to all individuals, including self-employed individuals, who
receive compensation for services rendered and wish to purchase shares of a
Fund. An IRA may also be established pursuant to a SEP. Spousal Individual
Retirement Accounts ("SPIRA") are available to individuals who are otherwise
eligible to establish an IRA for themselves and whose spouses are treated as
having no compensation of their own.
In general, the maximum deductible contribution to an IRA which may be made for
any one year is $2,000 or 100% of annual compensation includible in gross
income, whichever is less. If an individual establishes a SPIRA, after tax
years ending on December 31, 1996, the maximum deductible amount that the
individual may contribute annually is the lesser of $4000 or 100% of such
individual's compensation includible in his/her gross income for such year;
provided, however, that no more than $2,000 per year for either individual may
be contributed to either the IRA or SPIRA. Contributions to a SEP are excluded
from an employee's gross income and are subject to different limitations.
In the case of a taxpayer who is deemed to be an active participant in an
employer-sponsored retirement plan, no deduction is available for contributions
to an IRA or SPIRA if his or her adjusted gross income exceeds the following
levels: $35,000 for a single taxpayer, $50,000 for married taxpayers who file
joint returns, and $10,000 for married taxpayers who file separate tax returns.
(Married taxpayers who file joint tax returns will generally be deemed to be
active participants if either spouse is an active participant under an employer-
sponsored retirement plan.) All taxpayers, including those who are active
participants in employer-sponsored retirement plans, will be able to make fully
deductible IRA contributions at the same levels discussed above, if their
adjusted gross income is less than the following levels: $25,000 for single
taxpayers and $40,000 for married taxpayers who file joint returns.
In the case of taxpayers who are active participants in employer-sponsored
retirement plans and who have adjusted gross income which exceeds these
specified levels, deductible IRA contributions will be phased out on the basis
of adjusted gross income between $25,000 and $35,000 for single taxpayers,
adjusted gross income of $10,000 and under for married taxpayers who file
separate returns, and combined adjusted gross income between $40,000 and $50,000
for married taxpayers who file joint returns. The $2,000 IRA deduction is
reduced by $200 for each $1,000 of adjusted gross income in excess of the
following levels: $25,000 for single taxpayers, $40,000 for married taxpayers
who file joint returns, and $0 for married taxpayers who file separate returns.
In the case of a taxpayer who contributes to an IRA and a SPIRA, the $4000 IRA
deduction is reduced by $400 for each $1,000 of adjusted gross income in excess
of $40,000.
Individuals who are ineligible to make fully deductible contributions may make
nondeductible contributions up to an aggregate of $2,000 in the case of
contributions (deductible and nondeductible) to an IRA and up to an aggregate of
$4,000 in the case of contributions (deductible and nondeductible) to an IRA and
SPIRA and the income upon all such contributions will accumulate tax free until
distribution.
In addition, a separate IRA may be established by a "rollover" contribution,
which may permit the tax-free transfer of assets from qualified retirement plans
under specified circumstances. A "rollover contribution" includes a lump sum
distribution received by an individual, because of severance of employment, from
a qualified plan and paid into an individual retirement account within 60 days
after receipt.
28
<PAGE>
Dividends and capital gains earned on amounts invested in either an IRA or SPIRA
are automatically reinvested by the Trustee in shares of the Fund and accumulate
tax-free until distribution. Distributions from either an IRA or SPIRA prior to
age 59-1/2, unless made as a result of disability or death, may result in
adverse tax consequences and penalties. In addition, there is a penalty on
contributions in excess of the contribution limits and other penalties are
imposed on insufficient payouts after age 70-1/2.
Simplified Employee Pension Plan. A SEP may be utilized by employers to provide
- --------------------------------
retirement income to employees by making contributions to employee SEP IRAs.
Owners and partners may qualify as employees. The employee is always 100%
vested in contributions made under a SEP. The maximum contribution to a SEP-IRA
(an IRA established to receive SEP contributions) is the lesser of $30,000 or
15% of compensation, excluding contributions made pursuant to a salary reduction
arrangement. Subject to certain limitations, an employer may also make
contributions to a SEP-IRA under a salary reduction arrangement by which the
employee elects contributions to a SEP-IRA in lieu of immediate cash
compensation. After December 31, 1996, contributions under a salary reduction
arrangement are permitted only into SEP plans in existence on December 31, 1996.
Contributions by employers under a SEP arrangement up to the maximum permissible
amounts are deductible for federal income tax purposes. Contributions up to the
maximum permissible amounts are not includible in the gross income of the
employee. Dividends and capital gains on amounts invested in SEP-IRAs are
automatically reinvested by the Trustee in shares of the mutual fund that paid
such amounts and accumulate tax-free until distribution. Contributions in
excess of the maximum permissible amounts may be withdrawn by the employee from
the SEP-IRA no later than April 15 of the calendar year following the year in
which the contribution is made without tax penalties. Such amounts will,
however, be included in the employee's gross income. Withdrawals of such
amounts after April 15 of the year next following the year in which the excess
contributions is made and withdrawals of any other amounts prior to age 59 1/2,
unless made as a result of disability or death, may result in adverse tax
consequences.
Qualified Pension Plans. The Qualified Pension Plan can be utilized by self-
- ------------------------
employed individuals, partnerships and corporations (for this purpose called
"Employers") and their employees who wish to purchase shares of the Fund under a
retirement program.
The maximum contribution which may be made to a Qualified Pension Plan in any
one year on behalf of a participant is, depending on the benefit formula
selected by the Employer, up to the lesser of $30,000 or 25 percent of
compensation (net earned income in the case of a self-employed individual).
Contributions by Employers to Qualified Pension Plans up to the maximum
permissible amounts are deductible for federal income tax purposes.
Contributions in excess of permissible amounts will result in adverse tax
consequences and penalties to the Employer. Dividends and capital gains earned
on amounts invested in Qualified Pension Plans are automatically reinvested by
the Trustee in shares of the Fund and accumulate tax-free until distribution.
Withdrawals of contributions prior to age 59-1/2, unless made as a result of
disability, death or early retirement, may result in adverse tax consequences
and penalties.
403(b)(7) Program. The Tax-Deferred Annuity Program and Custodial Account
- ------------------
offered by the Fund (the "403(b)(7) Program") allows employees of certain tax
exempt organizations and schools to have a portion of their compensation set
aside for their retirement years in shares held in an investment company
custodial account.
In general, the maximum limit on annual contributions for each employee is the
lesser of $30,000 per year (as adjusted by the IRS for cost-of-living
increases), 25% of the employee's compensation or the employee's exclusion
allowance specified in Section 403(b) of the Code. However, an employee's
salary reduction contributions to a 403(b)(7) Program may not exceed $9,500 a
year (as adjusted for cost of living expenses). Contributions in excess of
permissible amounts may result in adverse tax consequences and penalties.
Dividends and capital gains on amounts invested in the 403(b)(7) Program are
automatically reinvested in shares of the Funds. It is intended that dividends
and capital gains on amounts invested in the 403(b)(7) Program will accumulate
tax-free until distribution.
Employees will receive distributions from their accounts under the 403(b)(7)
Program following
29
<PAGE>
termination of employment by retirement or at such other time as the employer
shall designate, but in no case later than an employee's reaching age 65.
Withdrawals of contributions prior to age 59-1/2, unless made as a result of
disability, death or early retirement, may result in adverse tax consequences
and penalties. Employees will also receive distributions from their accounts
under the 403(b)(7) Program in the event they become disabled.
INVESTMENT PROGRAMS
Dividend Reinvestment Plan. Reinvestments of dividends of the Funds will occur
- --------------------------
on a date selected by the Board of Directors.
Automatic Exchange Plan. Investors may arrange under the Exchange Plan to have
- -----------------------
DST collect a specified amount once a month or quarter from the investor's
account in one of the funds and purchase full and fractional shares of another
fund at the public offering price next computed after receipt of the proceeds.
Further details of the Automatic Exchange Plan are given in the application
which is available from DST or the Funds. This does not apply to Class B
shares.
An investor should realize that the Funds' securities are subject to market
fluctuations, and accordingly the Automatic Exchange Plan does not assure a
profit or protect against depreciation in declining markets. The Automatic
Exchange Plan contemplates the systematic purchase of securities at regular
intervals regardless of price levels.
The expenses of the Automatic Exchange Plan are general expenses of the Funds
and will not involve any direct charge to the participating shareholder. The
Automatic Exchange Plan is completely voluntary and may be terminated on fifteen
days notice to DST.
Automatic Investment Plan. Investors may arrange under the Automatic Investment
- -------------------------
Plan to have DST collect a specified amount once a month or quarter from the
investor's checking account and purchase full and fractional shares of the Funds
at the public offering price next computed after receipt of the proceeds.
Further details of the Automatic Investment Plan are given in the application
which is available from DST or the Fund.
An investor should realize that the Funds' securities are subject to market
fluctuations, and accordingly the Automatic Investment Plan does not assure a
profit or protect against depreciation in declining markets. The Automatic
Investment Plan contemplates the systematic purchase of securities at regular
intervals regardless of price levels.
The expenses of the Automatic Investment Plan are general expenses of the Funds
and will not involve any direct charge to the participating shareholder. The
Automatic Investment Plan is completely voluntary. The Automatic Investment
Plan may be terminated on thirty days notice to DST.
Automatic Withdrawal Plan. The Automatic Withdrawal Plan is designed to provide
- -------------------------
a convenient method of receiving fixed redemption proceeds at regular intervals
from shares of the Funds deposited by the investor under this Plan. This Plan is
not available to Class B shareholders. Further details of the Automatic
Withdrawal Plan are given in the application which is available from DST or the
Funds.
In order to open an Automatic Withdrawal Plan, the investor must complete the
Application and deposit, or purchase for deposit, with DST, agent for the
Automatic Withdrawal Plan, shares of Funds having a total value of not less than
$10,000 based on the offering price on the date the Application is accepted.
Income dividends and capital gains distributions on shares under an Automatic
Withdrawal Plan will be credited to the investor's Automatic Withdrawal Plan
account in full and fractional shares at the net asset value in effect on the
reinvestment date.
Periodic checks for a specified amount will be sent to the investor, or any
person designated by the
30
<PAGE>
investor, monthly or quarterly (January, April, July and October). The Funds
will bear the cost of administering the Automatic Withdrawal Plan.
Redemption of shares of the Funds deposited under the Automatic Withdrawal Plan
may deplete or possibly use up the initial investment plus income dividends and
distributions reinvested, particularly in the event of a market decline. In
addition, the amounts received by an investor cannot be considered as an actual
yield or income on the investment since part of such payments may be a return of
capital. The redemption of shares under the Automatic Withdrawal Plan may give
rise to a taxable event.
The maintenance of an Automatic Withdrawal Plan concurrently with purchases of
additional shares of the Funds would be disadvantageous because of the sales
charge payable with respect to such purchases. An investor may not have an
Automatic Withdrawal Plan in effect and at the same time have in effect an
Automatic Investment Plan or an Automatic Exchange Plan. If an investor has an
Automatic Investment Plan or an Automatic Exchange Plan, such service must be
terminated before an Automatic Withdrawal Plan may take effect.
The Automatic Withdrawal Plan may be terminated at any time (1) on 30 days
notice to DST or from DST to the investor, (2) upon receipt by DST of
appropriate evidence of the investor's death or (3) when all shares under the
Automatic Withdrawal Plan have been redeemed. Upon termination, unless
otherwise requested, certificates representing remaining full shares, if any,
will be delivered to the investor or his or her duly appointed legal
representatives.
TAXES
Taxation of the Fund - In General
- ---------------------------------
Each of the Funds intends to continue to continue to qualify and elect to be
treated each taxable year as a "regulated investment company" under Subchapter M
of the Code. To so qualify, each Fund must, among other things, (a) derive at
least 90% of its gross income from dividends, interest, payments with respect to
securities loans, gains from the sale or other disposition of stock, securities
or foreign currencies, or other income (including gains from options, futures or
forward contracts) derived with respect to its business of investing in such
stock, securities or currencies; and (b) satisfy certain diversification
requirements.
As a regulated investment company, a Fund will not be subject to federal income
tax on its net investment income and capital gain net income (capital gains in
excess of its capital losses) that it distributes to shareholders if at least
90% of its net investment income and short-term capital gains for the taxable
year are distributed. However, if for any taxable year a Fund does not satisfy
the requirements of Subchapter M of the Code, all of its taxable income will be
subject to tax at regular corporate rates without any deduction for distribution
to shareholders, and such distributions will be taxable to shareholders as
ordinary income to the extent of the Fund's current or accumulated earnings or
profits.
Each Fund will be liable for a nondeductible 4% excise tax on amounts not
distributed on a timely basis in accordance with a calendar year distribution
requirement. To avoid the tax, during each calendar year the Fund must
distribute, or be deemed to have distributed, (i) at least 98% of its ordinary
income (not taking into account any capital gains or losses) for the calendar
year, (ii) at least 98% of its capital gains in excess of its capital losses
(adjusted for certain ordinary losses) for the twelve month period ending on
October 31 (or December 31, if the Fund so elects), and (iii) all ordinary
income and capital gains for previous years that were not distributed during
such years. For this purpose, any income or gain retained by the Fund that is
subject to corporate tax will be considered to have been distributed by year-
end. The Funds intend to make sufficient distributions to avoid this 4% excise
tax.
Taxation of the Funds' Investments
- ----------------------------------
Original issue discount. For federal income tax purposes, debt securities
- -----------------------
purchased by the Funds may be treated as having an original issue discount.
Original issue discount represents interest for federal
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income tax purposes and can generally be defined as the excess of the stated
redemption price at maturity of a debt obligation over the issue price. Original
issue discount is treated for federal income tax purposes as income earned by
the Funds, whether or not any income is actually received, and therefore is
subject to the distribution requirements of the Code. Generally, the amount of
original issue discount included in the income of the Funds each year is
determined on the basis of a constant yield to maturity which takes into account
the compounding of accrued interest.
Debt securities may be purchased by the Funds at a discount which exceeds the
original issue discount remaining on the securities, if any, at the time the
Funds purchased the securities. This additional discount represents market
discount for income tax purposes. In the case of any debt security issued after
July 18, 1984, having a fixed maturity date of more than one year from the date
of issue and having market discount, the gain realized on disposition will be
treated as interest to the extent it does not exceed the accrued market discount
on the security (unless the Funds elect to include such accrued market discount
in income in the tax year to which it is attributable). Generally, market
discount is accrued on a daily basis. The Funds may be required to capitalize,
rather than deduct currently, part or all of any direct interest expense
incurred or continued to purchase or carry any debt security having market
discount, unless the it makes the election to include market discount currently.
Because the Funds must include original issue discount in income, it will be
more difficult for the Funds to make the distributions required for them to
maintain their status as a regulated investment company under Subchapter M of
the Code or to avoid the 4% excise tax described above.
Options and Futures Transactions. Certain of the Funds' investments may be
- ---------------------------------
subject to provisions of the Code that (i) require inclusion of unrealized gains
or losses in the Funds' income for purposes of the 90% test, the excise tax and
the distribution requirements applicable to regulated investment companies, (ii)
defer recognition of realized losses, and (iii) characterize both realized and
unrealized gain or loss as short-term or long-term gain or loss. Such provisions
generally apply to options and futures contracts. The extent to which the Funds
make such investments may be materially limited by these provisions of the Code.
Foreign Currency Transactions. Under Section 988 of the Code, special rules are
- -----------------------------
provided for certain foreign currency transactions. Foreign currency gains or
losses from foreign currency contracts (whether or not traded in the interbank
market), from futures contracts that are not "regulated futures contracts," and
from unlisted options are treated as ordinary income or loss under Section 988.
The Funds may elect to have foreign currency-related regulated futures contracts
and listed options subject to ordinary income or loss treatment under Section
988. In addition, in certain circumstances, the Funds may elect capital gain or
loss for foreign currency transactions. The rules under Section 988 may also
affect the timing of income recognized by the Funds.
Taxation of the Shareholders
- ----------------------------
Distributions of net investment income and the excess of net short-term capital
gain over net long-term capital loss are taxable as ordinary income to
shareholders. Distributions of net capital gain (the excess of net long-term
capital gain over net short-term capital loss) are taxable to shareholders as
long-term capital gain, regardless of the length of time the shares of the Fund
have been held by such shareholders. Any loss realized upon a taxable
disposition of shares within six months from the date of their purchase will be
treated as a long-term capital loss to the extent of any long-term capital gain
distributions received by shareholders during such period. In addition, any
loss realized upon a taxable disposition of shares of the Tax-Exempt Fund within
six months from the date of their purchase will be disallowed to the extent of
any tax-exempt dividends previously paid with respect to such shares.
Distributions of net investment income and capital gain net income will be
taxable as described above whether received in cash or reinvested in additional
shares. When distributions are received in the form of shares issued by the
Funds, the amount of the distribution deemed to have been received by
participating shareholders is the fair market value of the shares received
rather than the amount of cash which would otherwise have been received. In such
case, participating shareholders will have a basis for federal income tax
purposes in each share received from the Funds equal to the fair market value of
such share on the payment date.
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Distributions by the Funds result in a reduction in the net asset value of the
Funds' shares. Should a distribution reduce the net asset value below a
shareholder's cost basis, such distribution nevertheless would be taxable to the
shareholder as ordinary income or long-term capital gain as described above,
even though, from an investment standpoint, it may constitute a partial return
of capital. In particular, investors should be careful to consider the tax
implications of buying shares just prior to a distribution. The price of shares
purchased at that time includes the amount of any forthcoming distribution.
Those investors purchasing shares just prior to a distribution will then receive
a return of their investment upon distribution which will nevertheless be
taxable to them.
If a shareholder (i) incurs a sales load in acquiring shares in the Funds, and
(ii) by reason of incurring such charge or making such acquisition acquires the
right to acquire shares of one or more regulated investment companies without
the payment of a load or with the payment of a reduced load ("reinvestment
right"), and (iii) disposes of the shares before the 91st day after the date on
which the shares were acquired, and (iv) subsequently acquires shares in that
regulated investment company or in another regulated investment company and the
otherwise applicable load charge is reduced pursuant to the reinvestment right,
then the load charge will not be taken into account for purposes of determining
the shareholder's gain or loss. To the extent such charge is not taken into
account in determining the amount of gain or loss, the charge will be treated as
incurred in connection with the subsequently acquired shares and will have a
corresponding effect on the shareholder's basis in such shares.
Income received by the Funds may give rise to withholding and other taxes
imposed by foreign countries. If more than 50% of the value of the Funds'
assets at the close of a taxable year consists of securities of foreign
corporations, the Funds may make an election that will permit an investor to
take a credit (or, if more advantageous, a deduction) for foreign income taxes
paid by the Funds, subject to limitations contained in the Code. As an investor,
you would then include in gross income both dividends paid to you and the
foreign taxes paid by the Funds on their foreign investments.
The Funds cannot assure investors that they will be eligible for the foreign tax
credit. The Funds will advise shareholders annually of their share of any
creditable foreign taxes paid by the Funds.
The Funds may be required to withhold federal income tax at a rate of 31% from
dividends made to any shareholder who fails to furnish a certified taxpayer
identification number ("TIN") or who fails to certify that he or she is exempt
from such withholding or who the Internal Revenue Service notifies the Funds as
having provided the Funds with an incorrect TIN or failed to properly report for
federal income tax purposes. Any such withheld amount will be fully creditable
on each shareholder's individual federal income tax return.
The foregoing discussion is a general summary of certain of the current federal
income tax laws affecting the Funds and investors in the shares. The discussion
does not purport to deal with all of the federal income tax consequences
applicable to the Funds, or to all categories of investors, some of which may be
subject to special rules. Investors should consult their own advisors regarding
the tax consequences, including state and local tax consequences, to them of
investment in the Funds.
REDEMPTIONS IN KIND
The Company has elected to have the ability to redeem its shares in kind,
committing itself to pay in cash all requests for redemption by any shareholder
of record limited in amount with respect to each shareholder of record during
any ninety-day period to the lesser of (i) $250,000 or (ii) 1% of the net asset
value of such company at the beginning of such period.
33
<PAGE>
PERFORMANCE
From time to time, in reports and sale literature: (1) each Fund's performance
or P/E ratio may be compared to: (i) the Standard & Poor's 500 Composite Stock
Price Index ("S&P 500 Index") and Dow Jones Industrial Average so that the
investor may compare that Fund's results with those of a group of unmanaged
securities widely regarded by investors as representative of the United States
stock market in general; (ii) other groups of mutual funds tracked by: (A)
Lipper Analytical Services, Inc., a widely-used independent research firm which
ranks mutual funds by overall performance, investment objectives, and asset
size; (B) Forbes Magazine's Annual Mutual Funds Survey and Mutual Fund Honor
Roll; or (C) other financial or business publications, such as the Wall Street
Journal, Business Week, Money Magazine, and Barron's, which provide similar
information; (iii) indices of stocks comparable to those in which the particular
Fund invests; (2) the Consumer Price Index (measure for inflation) may be used
to assess the real rate of return from an investment in each Fund; (3) other
government statistics such as Gross Domestic Product, and net import and export
figures derived from governmental publications, e.g., The Survey of Current
Business, may be used to illustrate investment attributes of each Fund or the
general economic, business, investment, or financial environment in which each
Fund operates; and (4) the effect of tax-deferred compounding on the particular
Fund's investment returns, or on returns in general, may be illustrated by
graphs, charts, etc. where such graphs or charts would compare, at various
points in time, the return from an investment in the particular Fund (or returns
in general) on a tax-deferred basis (assuming reinvestment of capital gains and
dividends and assuming one or more tax rates) with the return on a taxable
basis.
From time to time advertisements and sales literature may refer to rankings and
ratings of the Adviser, Chubb Corporation and Chubb & Sons related to their
size, performance, management and/or service as prepared by various trade
publications, such as Dalbar, Pensions and Investments, SEI, CDA, Bests, and
others.
Each Fund's performance may also be compared to the performance of other mutual
funds by Morningstar, Inc., which ranks mutual funds on the basis of historical
risk and total return. Morningstar rankings are calculated using the mutual
fund's average annual returns for certain periods and a risk factor that
reflects the mutual fund's performance relative to three-month Treasury bill
monthly returns. Morningstar's rankings range from five stars (highest) to one
star (lowest) and represent Morningstar's assessment of the historical risk
level and total return of a mutual fund as a weighted average for 3, 5, and 10-
year periods. In each category, Morningstar limits its five star rankings to 10%
of the funds it follows and its four star rankings to 22.5% of the funds it
follows. Rankings are not absolute or necessarily predictive of future
performance.
When Lipper's rankings or performance results are used, a Fund will be compared
to Lipper's appropriate fund category by fund objective and portfolio holdings.
For instance, the Growth and Income Fund will be compared to funds within
Lipper's growth and income fund category; the Government Securities Fund will be
compared to funds within Lipper's income fund category; and so on. Rankings may
be listed among one or more of the asset-size classes as determined by Lipper.
Since the assets in the Funds may change, a Fund may be ranked within one Lipper
asset-sized class at one time and in another Lipper asset-size class at some
other time. The Lipper rankings and performance analysis ranks funds on the
basis of total return, assuming reinvestment of distribution, but does not take
sales charges or redemption fees into consideration and is prepared without
regard to tax consequences. Lipper also issues a monthly yield analysis for
fixed-income funds. Footnotes in advertisements and other marketing literature
will include the time period and Lipper asset-size class, as applicable, for the
ranking in question.
As noted above, the performance of a Fund may be compared, for example, to the
record of the S&P 500 Index, as well as the Russell 2000 Index, the S&P MidCap
400 Index, the Bear Stearns Foreign Bond Index, the NASDAQ Composite Index and
the Morgan Stanley Capital International's Europe Australia, Far Eastern
("EAFE") Index. The S&P 500 Index is a well known measure of the price
performance of 500 leading larger domestic stocks which represent approximately
80% of the market capitalization of the United States equity market. The Russell
2000 Index, the S&P MidCap 400 Index, the Bear Stearns Foreign Bond Index are
unmanaged indices, the NASDAQ Composite Index and the Morgan Stanley
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Capital International's Euro. The NASDAQ Composite Index is comprised of all
stocks on NASDAQ's National Market Systems, as well as other NASDAQ domestic
equity securities. The NASDAQ Composite Index has typically included smaller,
less mature companies representing 10% or 15% of the capitalization of the
entire domestic equity market. The EAFE Index is comprised of more than 900
companies in Europe, Australia and the Far East. All of these indices are
unmanaged and capitalization weighted. In general, the securities comprising the
NASDAQ Composite Index are more growth oriented and have a somewhat higher beta
and P/E ratio than those in the S&P 500 Index.
The total returns of all indices noted above will show the changes in prices for
the stocks in each index. However, only the performance data for the S&P 500
Index assumes reinvestment of all capital gains distributions and dividends paid
by the stocks in each data base. Tax consequences will not be included in such
illustration, nor will brokerage or other fees or expenses of investing be
reflected in the NASDAQ Composite, S&P 500, EAFE Index.
The yield for the 30-day period ended December 31, 1998 for Tax-Exempt Fund -
Class A and B, Government Securities Fund - Class A and B and the Global Income
Fund - Class A and B was 3.51% and 3.34%, 4.94% and 4.68% and 3.42% and 3.15%,
respectively. The tax equivalent yield for the Tax-Exempt Fund for the same
period assuming federal tax brackets of 36%, and 39.6% was 5.48% for Class A and
5.22% for Class B shares and 5.81% for Class A and 5.53% for Class B shares,
respectively. These figures reflect a portion of fees and other expenses of the
Company which were waived or assumed during the stated period. Absent any waiver
or assumption of fees and expenses, the yields the Tax-Exempt Fund, Government
Securities Fund and the Global Income Fund would have been 2.88% for Class A and
0% for Class B shares, 4.33% for Class A and 0.63% for Class B Shares and 3.21%
for Class A and 0% for Class B shares respectively, and the tax equivalent
yields for the Tax-Exempt Fund of 36% and 39.6% tax brackets would have been
4.50% for Class A and 0% for Class B shares, and 4.77% for Class A and 0% for
Class B shares., respectively.
This yield figure represents the net annualized yield based on a specified 30-
day (or one month) period assuming a reinvestment and semiannual compounding of
income. Yield is calculated by dividing the average daily net investment income
per share earned during the specified period by the maximum offering price per
share on the last day of the period, according to the following formula:
YIELD = 2[(A-B/CD + 1)/to the 6th 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
A tax equivalent yield is calculated by dividing that portion of the 30-day
yield figure which is tax-exempt by one minus the effective federal income tax
rate and adding the product to that portion, if any, of the yield of the Fund
that is not tax-exempt.
The average annual total return quotations for the Class A shares of the
Government Securities Fund, the Total Return Fund, the Tax-Exempt Fund, the
Growth and Income Fund, the Capital Appreciation Fund and the Global Income Fund
(after maximum sales charge) for the 12 months ended December 31, 1998 were
2.30%, (2.16)%, 0.94%, (4.91)%, (16.92)% and 9.54%, respectively. The average
annual total return quotations for the Government Securities Fund, the Total
Return Fund, the Tax-Exempt Fund, the Growth & Income Fund, the Capital
Appreciation Fund and the Global Income Fund for the 3 years ended December 31,
1998 were 4.92%, 12.42%, 4.53%, 13.59%, 10.63% and 5.09%, respectively. The
average annual total return quotations for the Government Securities Fund, the
Total Return Fund, the Tax-Exempt Fund and the Growth & Income Fund, for the 5
years ended December 31, 1998 were 5.59%, 12.10%, 4.46%, and 13.70%,
respectively. The average annual total return quotations for the
35
<PAGE>
Government Securities Fund, the Total Return Fund, the Tax-Exempt Fund and the
Growth & Income Fund, for the 10 years ended December 31, 1998 were 8.34%,
13.33%, 7.09% and 14.86%, respectively. The average annual total return
quotations for these Funds since the Company's inception on December 1, 1987
through December 31, 1998 were 8.34%, 12.99%, 7.77% and 14.34%, respectively.
Additionally the Capital Appreciation Fund and the Global Income Fund's average
total return since inception on September 1, 1995 through December 31, 1998 were
11.02% and 5.59%, respectively. These figures reflect a portion of fees and
other expenses of the Company which were waived or assumed during the stated
period. The average annual total return quotations for the Class B shares of
Capital Appreciation Fund, the Global Income Fund, the Government Securities
Fund, the Growth and Income Fund, the Tax-Exempt Fund and the Total return Fund
since its inception on April 29, 1998 through December 31, 1998 were (27.15)%,
5.96%, 0.62%, (16.87)%, 0.10% and (10.66)%.
These average annual total return figures represent the average annual compound
rate of return for the %, tated period. Average annual total return quotations
reflect the percentage change between the beginning value of a static account in
the specified Fund at the maximum public offering price and the ending value of
that account measured by the then current net asset value of that Fund assuming
that all dividends and capital gains distributions during the stated period were
reinvested in shares of the Fund when paid. Total return is calculated by
finding the average annual compound rates of return of a hypothetical investment
that would compare the initial amount to the ending redeemable value of such
investment 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 Funds also may advertise non-standardized total return quotations,
calculated in the same manner as the quotations stated above, except that the
initial value used is the net asset value. Under this total return calculation,
the average annual total return quotations for the Government Securities Fund,
the Total Return Fund, the Tax-Exempt Fund, the Growth and Income Fund, the
Capital Appreciation Fund and the Global Income Fund for the 12 months ended
December 31, 1998 were 7.40%, 2.73%, 6.01%, (0.18)%, (12.76)% and 15.00%,
respectively. Under this same calculation, the average annual total return
quotations for the Government Securities Fund, the Total Return Fund, the Tax-
Exempt Fund and the Growth & Income Fund for the 5 years ended December 31, 1998
were 6.61%, 13.20%, 5.49%, and 14.81%, respectively. Under this same
calculation, the average annual total return quotations for these Funds for the
10 years ended December 31, 1998 were 8.86%, 13.87%, 7.61%, and 15.42%,
respectively. In addition under the same calculation the average annual total
return for the Capital Appreciation Fund and the Global Income Fund since their
inception September 1, 1995 through December 31, 1998 are 12.65% and 7.15%,
respectively.
DESCRIPTION OF THE COMPANY
The Company was incorporated in Maryland on April 27, 1987. Prior to October 1,
1997, the Company's name was Chubb Investment Funds, Inc. The Company is
composed of six funds, five are open-end diversified management investment
companies and one is a non-diversified company. The six funds are the Capital
Appreciation Fund, Global Income Fund, Government Securities Fund, Growth and
Income Fund, Tax-Exempt Fund and Total Return Fund. The Company issues a
separate series of capital stock for each Fund. In the future, the Company may
establish additional funds. Each share of capital stock
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<PAGE>
when issued will be fully paid and non-assessable. Each share of capital stock
issued with respect to a Fund has a pro rata interest in the assets of the Fund
and is entitled to such dividends and distributions of income belonging to that
Fund as are declared by the Board of Directors. Each share of capital stock is
entitled to one vote on all matters submitted to a vote of all shareholders of
the Company, and fractional shares are entitled to a corresponding fractional
vote. Shares of a particular Fund will be voted separately from shares of the
other Funds on matters affecting only that Fund, including approval of the
investment management agreements and changes in the fundamental investment
objectives or restrictions of that Fund. The underlying assets of each Fund are
required to be segregated on the books of account, and are charged with the
liabilities of that particular Fund and a proportionate share of the general
liabilities of the Company based on the average net asset value of the
respective Funds for each quarter. Shareholders of the Company will not be
entitled to preemptive rights or cumulative voting rights. All shares may be
redeemed at any time by the Company.
As a Maryland corporate entity, the Company is not required to hold regular
annual shareholder meetings and, in the normal course, does not expect to hold
such meetings. The Company is, however, required to hold shareholder meetings
for such purposes as, for example: (i) approving certain agreements as required
by the Act; (ii) changing fundamental investment objectives and restrictions of
the Funds; and (iii) filling vacancies on the Board of Directors in the event
that less than a majority of the directors were elected by shareholders. The
Company expects that there will be no meetings of shareholders for the purpose
of electing directors unless and until such time as less than a majority of the
directors holding office have been elected by shareholders. At such time, the
directors then in office will call a shareholder meeting for the election of
directors. In addition, holders of record of not less than two-thirds of the
outstanding shares of the Company may remove a director.
ADDITIONAL INFORMATION
Custodian. Citibank, N.A., 111 Wall Street, New York City, New York 10043, acts
- ---------
as custodian of the Company's assets. Citibank is responsible for holding all
securities and cash of each Fund, receiving and paying for securities purchased,
delivering against payment securities sold, receiving and collecting income from
investments, making all payments covering expenses of the Company and performing
other administrative duties, all as directed by persons authorized by the
Company. Citibank does not exercise any supervisory function in such matters as
the purchase and sale of portfolio securities, payment of dividends, or payment
of expenses of the Company. The Company, with respect to each Fund, may also
appoint from time to time, with the approval of the Company's Board of
Directors, qualified domestic sub-custodians for all the Funds and foreign sub-
custodians qualified under Rule 17f-5 of the Act with respect to certain foreign
securities which may be purchased by the Funds.
Independent Auditors. Ernst & Young L.L.P., 787 Seventh Avenue, New York, NY
- --------------------
10019, has been selected as the independent auditors of the Company.
Counsel. Goodwin, Procter & Hoar, LLP, Exchange Place, Boston, Massachusetts
- -------
02109, serves as counsel to the Company.
Transfer Agent. The Company has contracted with DST Systems, Inc. ("DST"), 210
- --------------
W. 10th St., 8th Floor, Kansas City, Missouri 64105, to act as its transfer
agent, registrar, and dividend disbursing agent. DST will service shareholder
accounts, and its duties will include: (i) effecting sales redemptions and
exchanges of Company shares; (ii) distributing dividends and capital gains
associated with Company accounts; and (iii) maintaining account records and
responding to shareholder inquiries.
Name And Service Mark. The Chubb Corporation has in conjunction with its sale of
- ---------------------
Chubb Life to Jefferson-Pilot Corporation granted the Company the right to use
the "Chubb" name and service mark.
Capital Stock
- -------------
The authorized capital stock of the Company consists of 1,000,000,000 shares of
common stock, par value $.01, which are divided into six series: Van Eck/Chubb
Government Securities Fund, Van
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Eck/Chubb Total Return Fund, Van Eck/Chubb Tax-Exempt Fund, Van Eck/Chubb Growth
and Income Fund, Van Eck/Chubb Capital Appreciation Fund and Van Eck/Chubb
Global Income Fund. Each Fund currently consists of 100,000,000 authorized
shares. The Company has the right to issue additional shares without the consent
of the shareholders, and may allocate its issued and reissued shares to new
Funds or to one or more of the six existing Funds.
The assets received by the Company for the issuance or sale of shares of each
Fund and all income, earnings, profits and proceeds thereof are specifically
allocated to each Fund. They constitute the underlying assets of each Fund, are
required to be segregated on the books of account, and are to be charged with
the expense of such Fund. Any assets which are not clearly allocable to a
particular Fund are allocated among the Funds in proportion to their relative
net assets before adjustment for such unallocated liabilities. Each issued and
outstanding share in a Fund is entitled to participate equally in dividends and
distributions declared with respect to such Fund and in the net assets of such
Fund upon liquidation or dissolution remaining after satisfaction of outstanding
liabilities.
Chubb Life Insurance Company of New Hampshire, a wholly-owned subsidiary of the
Jefferson-Pilot Corporation a North Carolina Corporation, provided the initial
capital for the Company by purchasing shares of each of the original five Funds
valued at $100,000 prior to the date shares of the Company were offered to the
public. On July 1, 1991, Chubb Life Insurance Company of New Hampshire and Chubb
Life Insurance Company of America were merged into an affiliate, The Volunteer
State Life Insurance Company ("Volunteer"), which simultaneously changed its
name to Chubb Life Insurance Company of America ("Chubb Life"). Chubb Life
provided the initial investment for the Capital Appreciation Fund and the Global
Income Fund by purchasing 10,000 shares of each Fund at a cost of $10.00 per
share. Chubb Life was purchased by Jefferson Pilot Corporation in 1997 and
changed its name to Jefferson Pilot Financial Insurance Company and is no longer
affiliated with the Chubb Corporation or the Company. As of March 31, 1998, the
Chubb Corporation (a New Jersey corporation), and its wholly-owned subsidiaries,
Federal Insurance Company ("Federal Insurance") and Vigilant Insurance Company
("Vigilant Insurance"), together owned 54.43% of the outstanding shares of the
Company.
FINANCIAL STATEMENTS
The financial statements contained in the Company's December 31, 1998 Annual
Report to shareholders are incorporated herein by reference. The Annual Report
is available at no charge upon written or telephone request to the Company at
the address or telephone numbers set forth on the first page of this Statement
of Additional Information.
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APPENDIX
DESCRIPTION OF INVESTMENT RATINGS
MOODY'S - BOND RATINGS
Aaa - Bonds which are rated Aaa are judged to be of 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 not likely 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, fluctuation of protective
elements may be of greater amplitude, 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 giving 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.
RATING REFINEMENTS. Moody's may apply numerical modifiers, 1, 2 and 3, in each
generic rating classification from Aa through B in its municipal bond rating
system. The modifier 1 indicates that the security ranks in the higher end of
its generic category; the modifier 2 indicates a mid-range ranking; and a
modifier 3 indicates that the issue ranks in the lower end of its generic rating
category.
SHORT-TERM NOTES. The four ratings of Moody's for short-term notes are MIG 1,
MIG 2, MIG 3 and MIG 4. MIG 1 denotes "best quality, enjoying strong protection
from established cash flows." MIG 2 denotes "high quality" with "ample margins
of protection." MIG 3 notes are of "favorable quality...but lacking the
undeniable strength of the preceding grades." MIG 4 notes are of "adequate
quality, carrying specific risk but having protection...and not distinctly or
predominantly speculative."
MOODY'S COMMERCIAL PAPER RATINGS
Moody's commercial paper ratings are opinions of the ability of issuers to repay
punctually promissory obligations not having an original maturity in excess of 9
months. Moody's employs the following three designations, all judged to be
investment grade, to indicate the relative repayment capacity of rated issuers:
Issuers rated Prime-1 (or related supporting institutions) have a superior
capacity for repayment of short-term promissory obligations.
Issuers rated Prime-2 (or related supporting institutions) have a strong
capacity for repayment of short term promissory obligations.
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Issuers rated Prime-3 (or related supporting institutions) have an acceptable
capacity for repayment of short-term promissory obligations.
Issuers rated Not Prime do not fall within any of the Prime rating categories.
STANDARD & POOR'S - BOND RATINGS
A Standard & Poor's municipal debt rating is a current assessment of the
creditworthiness of an obligor with respect to a specific obligation. This
assessment may take into consideration obligors such as guarantors, insurers or
lessees.
The debt rating is not a recommendation to purchase, sell or hold a security,
inasmuch as it does not comment as to market price or suitability for a
particular investor.
The ratings are based on current information furnished by the issuer or obtained
by Standard & Poor's from sources Standard & Poor's considers reliable. Standard
& Poor's does not perform an audit in connection with any rating and may, on
occasion, rely on unaudited financial information. The ratings may be changed,
suspended, or withdrawn as a result of changes in, or unavailability of, such
information, or for other reasons.
The ratings are based, in varying degrees, on the following considerations:
I. Likelihood of default-capacity and willingness of the obligor as to the
timely payment of interest and repayment of principal in accordance with the
terms of the obligations.
II. Nature of and provisions of the obligations.
III. Protection afforded by, and relative position of, the obligations in the
event of bankruptcy, reorganization, or other arrangement under the laws of
bankruptcy and other laws affecting creditor's rights.
AAA. Debt rated "AAA" has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.
AA. Debt rated "AA" has a very strong capacity to pay interest and repay
principal and differs from the highest-rated issues only in small degree.
A. Debt rated "A" has 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 debt in higher-rated categories.
BBB. Debt rated "BBB" is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits 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
debt in this category than for debt in higher-rated categories.
Plus (+) or Minus (-): The ratings from "AA" to "BBB" may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
STANDARD & POOR'S COMMERCIAL PAPER RATINGS
A Standard & Poor's commercial paper rating is a current assessment of the
likelihood of timely payment of debt having an original maturity of no more than
365 days. Ratings are graded into four categories, ranging from "A" for the
highest quality obligations to "D" for the lowest. Ratings are applicable to
both taxable and tax-exempt commercial paper. The four categories are as
follows:
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A. Issues assigned this highest rating are regarded as having the greatest
capacity for timely payment. Issues in this category are further refined with
the designation 1, 2, and 3 to indicate the relative degree of safety.
A-1. This designation indicates that the degree of safety regarding timely
payment is very strong.
A-2. Capacity for timely payment on issues with this designation is strong.
However, the relative degree of safety is not as overwhelming as for issues
designated "A-1."
A-3 Issues carrying this designation have a satisfactory capacity or timely
payment. They are, however, somewhat more vulnerable to the adverse effects of
changes in circumstances than obligations carrying the higher designations.
The Commercial Paper Rating is not a recommendation to purchase or sell a
security. The ratings are based on current information furnished to Standard &
Poor's by the issuer and obtained by Standard & Poor's from other sources it
considers reliable. The ratings may be changed, suspended, or withdrawn as a
result of changes in, or unavailability of, such information.
Standard & Poor's rating categories with respect to certain municipal note
issues with a maturity of less than 3 years are as follows:
SP-1. A very strong, or strong, capacity to pay principal and interest. Issues
that possess overwhelming safety characteristics will be given a "+"
designation.
SP-2. A satisfactory capacity to pay principal and interest.
SP-3. A speculative capacity to pay principal and interest. Standard & Poor's
may continue to rate note issues with a maturity greater than 3 years in
accordance with the same rating scale currently employed for municipal bond
ratings.
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