1933 ACT REGISTRATION NO. 33-14737
1940 ACT REGISTRATION NO. 811-5155
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933
POST-EFFECTIVE AMENDMENT NO. 15
-AND-
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 16
VAN ECK/CHUBB FUNDS, INC
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)
99 PARK AVENUE, NEW YORK, NEW YORK 10016
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
212-687-5200
(REGISTRANT'S TELEPHONE NUMBER INCLUDING AREA CODE)
THOMAS ELWOOD, ESQ. - VAN ECK ASSOCIATES CORPORATION
99 PARK AVENUE, NEW YORK, NEW YORK 10016
(NAME AND ADDRESS OF AGENT FOR SERVICE)
COPY TO: PHILIP NEWMAN, ESQ., GOODWIN PROCTER & HOAR LLP
EXCHANGE PLACE, BOSTON, MASSACHUSETTS 02109
------------------------------------------------------------------
IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE (CHECK APPROPRIATE BOX):
[ ] IMMEDIATELY UPON FILING PURSUANT [ ] ON (DATE) PURSUANT TO
TO PARAGRAPH (B) PARAGRAPH (B)
[ ] 60 DAYS AFTER FILING PURSUANT TO [X] ON MAY 1, 2000 PURSUANT TO
PARAGRAPH (A)(1) PARAGRAPH (A)(1)
[ ] 75 DAYS AFTER FILING PURSUANT TO [ ] ON (DATE) PURSUANT TO
PARAGRAPH (A)(2) PARAGRAPH (A)(2) OF RULE 485
IF APPROPRIATE, CHECK THE FOLLOWING BOX:
[ ] THIS POST-EFFECTIVE AMENDMENT DESIGNATES A NEW EFFECTIVE DATE FOR A
PREVIOUSLY FILED POST-EFFECTIVE AMENDMENT
----------------------------------------------------
Title of Securities Being Registered: Common Stock, $.01 par value, of Van
Eck/Chubb Capital Appreciation Fund, Van Eck/Chubb Global Income Fund, Van
Eck/Chubb Government Securities Fund, Van Eck/Chubb Growth and Income Fund, Van
Eck/Chubb Tax-Exempt Fund and Van Eck/Chubb Total Return Fund.
-------------------------------------------
<PAGE>
VAN ECK/CHUBB FUNDS, INC.
CROSS-REFERENCE PAGE
PURSUANT TO RULE 501 (B) OF REGULATION S-K
UNDER THE SECURITIES ACT OF 1933, AS AMENDED
FORM N-1A
PART A
ITEM NO. LOCATION IN PROSPECTUS
- -------- ----------------------
1. Cover Page Cover Page
2. Synopsis Transaction Data
3. Condensed Financial Information Financial Highlights
4. General Description of Registrant Other Investments, Investment Policies,
Investment Techniques and Risks.
5. Management of the Fund Management of the Fund;
6. Capital Stock and Other Securities Dividends and Capital Gains; Taxes;
7. Purchase of Securities Being
Offered How to buy, sell, exchange or Transfer
shares
8. Redemption or Repurchase How to buy, sell, exchange or Transer
shares
9. Pending Legal Proceedings N/A
PART B LOCATION IN STATEMENT
ITEM NO. ADDITIONAL INFORMATION
- -------- ----------------------
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and History N/A
13. Investment Objectives and Policies Investment Objectives and Policies of
the Funds; Investment Restrictions;
Portfolio Transactions and Brokerage
14. Management of the Fund Directors and Officers
15. Control Persons and Principal Directors and Officers
Holders of Securities
PART B LOCATION IN STATEMENT
ITEM NO. ADDITIONAL INFORMATION
- -------- ----------------------
16. Investment Advisory and Other Investment Advisory Services;The
Services Distributor; Directors and Officers;
Additional Information
17. Brokerage Allocation and Other Portfolio Transactions and Brokerage
Practices
18. Capital Stock and Other Securities General Information
19. Purchase, Redemption and Pricing Valuation of Shares; Exchange
of Securities Being Offered Privilege; Tax-Sheltered Retirement
Plans; Investment Programs;
Redemptions in Kind
20. Tax Status Taxes
21. Underwriters The Distributor
22. Calculation of Performance Data Performance
23. Financial Statements Financial Statements
<PAGE>
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 1-202-942-8090, or write to them at the Public Reference
Room, Washington, D.C. 20549-0102, 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 or by electronic
request at the following E-mail address: [email protected]
o The Funds' annual report includes a discussion of market conditiono and
investment strategies that significantly affected the Funds' performance last
year.
[VAN ECK GLOBAL LOGO]
Transfer Agent: DST Systems, Inc.
P.O. Box 218407
Kansas City, Missouri
64121-8407
1-800-544-4653
SEC registration number: 811-04297
VEM 513504
Van Eck Chubb Funds
PROSPECTUS
May 1, 2000
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
<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
GLOBAL INCOME FUND 2
GOVERNMENT SECURITIES FUND 5
GROWTH AND INCOME FUND 8
TAX-EXEMPT FUND 11
TOTAL RETURN FUND 14
II. ADDITIONAL INVESTMENT STRATEGIES 17
OTHER INVESTMENTS, INVESTMENT POLICIES, INVESTMENT
TECHNIQUES AND RISKS
III. SHAREHOLDER INFORMATION 22
HOW TO BUY, SELL, EXCHANGE, OR TRANSFER SHARES;
AUTOMATIC SERVICES; MINIMUM PURCHASE AND ACCOUNT
SIZE; YOUR PRICE PER SHARE; SALES CHARGES; RETIREMENT
PLANS; DIVIDENDS AND CAPITAL GAINS; TAXES; AND
MANAGEMENT OF THE FUNDS
IV. FINANCIAL HIGHLIGHTS 33
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 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 sub-divisions), 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 Investors 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.
2 VAN ECK/CHUBB FUNDS PROSPECTUS
<PAGE>
I. THE FUNDS / GLOBAL INCOME
- --------------------------------------------------------------------------------
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 3/31/99) was -4.47%.
VAN ECK/CHUBB GLOBAL INCOME FUND
CLASS A SHARES ANNUAL TOTAL RETURNS (%)
As of December 31,
[BAR CHART OMITTED]
================================================================================
'96 '97 '98 '99
5.97 0.01 15.00 -9.55
================================================================================
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.
================================================================================
VAN ECK/CHUBB GLOBAL INCOME FUND
1-YEAR AND LIFE-OF-FUND ANNUALIZED PERFORMANCE
PLUS A COMPARISON TO THE SSB WORLD GOVERNMENT BOND INDEX*
As of December 31, 1999
1 YEAR LIFE-OF-FUND+
- --------------------------------------------------------------------------------
Class A Shares -13.81% 1.88%
SSB World Gov't. Bond Index -4.27% 4.43%
================================================================================
* The Salomon Smith Barney (SSB) World Government Bond Index is a market
capitalization weighted benchmark that tracks the performance of 17 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.
The Salomon Smith Barney World Government Bond Index is an unmanaged index
and includes the reinvestment of all dividends, but does not reflect the
payment of transaction costs, advisory fees or expenses that are associated
with an investment in the Fund. The Index's performance is not illustrative
of the Fund's performance. Indices are not securities in which investments
can be made.
+ Inception date 9/1/95.
VAN ECK/CHUBB FUNDS PROSPECTUS 3
<PAGE>
- --------------------------------------------------------------------------------
VAN ECK/CHUBB GLOBAL INCOME FUND EXPENSES
- --------------------------------------------------------------------------------
This table shows certain expenses you will incur as a Fund investor, either
directly or indirectly.
================================================================================
VAN ECK/CHUBB GLOBAL INCOME FUND
SHAREHOLDER EXPENSES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
CLASS A
Maximum Sales Charge (imposed on purchases as
a percentage of offering price) 4.75%
Maximum Deferred Sales Charge
(as a percentage) 0.00%
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT
ARE DEDUCTED FROM FUND ASSETS)
Management 0.20%
Administration Fees 0.45%
Distribution (12b-1 Fees) 0.50%
Other Expenses 0.27%
TOTAL ANNUAL FUND OPERATING EXPENSES* 1.42%
================================================================================
* Without a waiver from the Adviser, Total Fund Operating Expenses for A shares
would have been 1.35%. 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
invest-ment. 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.
================================================================================
EXPENSE EXAMPLE
WHAT A $10,000 INVESTMENT WOULD ACTUALLY COST
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------------------------------------------------------------------------------
Class A $613 $903 $1,214 $2,096
================================================================================
** Expenses would exceed the value of the investment due to the high level of
expenses if the Adviser does not maintain the fee waiver.
4 VAN ECK/CHUBB FUNDS PROSPECTUS
<PAGE>
I. THE FUNDS / GOVERNMENT SECURITIES
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2. 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
Corpor-ation; 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.
VAN ECK/CHUBB FUNDS PROSPECTUS 5
<PAGE>
- --------------------------------------------------------------------------------
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%.
[BAR CHART OMITTED]
================================================================================
VAN ECK/CHUBB GOVERNMENT SECURITIES FUND
CLASS A SHARES ANNUAL TOTAL RETURNS (%)
As of December 31,
'90 '91 '92 '93 '94 '95 '96 '97 '98 '99
8.90 15.97 7.44 9.29 -3.34 17.50 3.19 9.43 7.40 -1.20%
================================================================================
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.
================================================================================
VAN ECK/CHUBB GOVERNMENT SECURITIES FUND
1-YEAR, 5-YEAR AND 10-YEAR ANNUALIZED PERFORMANCE
PLUS A COMPARISON TO THE LEHMAN BROTHERS GOVERNMENT BOND INDEX*
As of December 31, 1999
1 YEAR 5 YEAR 10 YEAR
- --------------------------------------------------------------------------------
Class A Shares -5.90% 6.04% 6.75%
Lehman Brothers Gov't. Bond Index -2.23% 7.44% 7.48%
================================================================================
* 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.
The Lehman Brothers Government Bond Index is an unmanaged index and includes
the reinvestment of all dividends, but does not reflect the payment of
transaction costs, advisory fees or expenses that are associated with an
investment in the Fund. The Index's performance is not illustrative of the
Fund's performance. Indices are not securities in which investments can be
made.
6 VAN ECK/CHUBB FUNDS PROSPECTUS
<PAGE>
I. THE FUNDS / GOVERNMENT SECURITIES
- --------------------------------------------------------------------------------
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.
================================================================================
VAN ECK/CHUBB GOVERNMENT SECURITIES FUND
SHAREHOLDER EXPENSES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
CLASS A
Maximum Sales Charge (imposed on purchases as
a percentage of offering price) 4.75%
Maximum Deferred Sales Charge
(as a percentage) 0.00%
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT
ARE DEDUCTED FROM FUND ASSETS)
Management 0.20%
Administration Fees 0.45%
Distribution (12b-1 Fees) 0.50%
Other Expenses 0.35%
TOTAL ANNUAL FUND OPERATING EXPENSES* 1.50%
================================================================================
* After fee waiver by the Adviser, Total Annual Fund Operating Expenses for
A shares would have been 1.00%. 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.
================================================================================
EXPENSE EXAMPLE
WHAT A $10,000 INVESTMENT WOULD ACTUALLY COST
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------------------------------------------------------------------------------
Class A $620 $927 $1,255 $2,180
================================================================================
VAN ECK/CHUBB FUNDS PROSPECTUS 7
<PAGE>
- --------------------------------------------------------------------------------
3. 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
strategy of attempting to identify securities of companies whose
growth will exceed the market as a whole. The Fund attempts to
acquire these securities at prices which are reasonable compared
to other like companies. 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.
8 VAN ECK/CHUBB FUNDS PROSPECTUS
<PAGE>
I. THE FUNDS / GROWTH AND INCOME
- --------------------------------------------------------------------------------
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
12/31/99) was 22.42%. The lowest performing quarter (ended 9/30/98) was -24.74%.
[BAR CHART OMITTED]
================================================================================
VAN ECK/CHUBB GROWTH AND INCOME FUND
CLASS A SHARES ANNUAL TOTAL RETURNS (%)
As of December 31,
'90 '91 '92 '93 '94 '95 '96 '97 '98 '99
-3.36 33.48 6.84 15.29 -4.26 35.52 22.50 25.85 -0.19 29.42
================================================================================
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.
================================================================================
VAN ECK/CHUBB GROWTH AND INCOME FUND
1-YEAR, 5-YEAR AND 10-YEAR FUND ANNUALIZED PERFORMANCE
PLUS A COMPARISON TO THE S&P 500 INDEX*
As of December 31, 1999
1 YEAR 5 YEAR 10 YEAR
- --------------------------------------------------------------------------------
Class A Shares 21.99% 20.53% 14.46%
S&P 500 Index 21.04% 28.56% 18.21%
================================================================================
* 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.
The S&P 500 Index is an unmanaged index and includes the reinvestment of all
dividends, but does not reflect the payment of transaction costs, advisory
fees or expenses that are associated with an investment in the Fund. The
Index's performance is not illustrative of the Fund's performance. Indices
are not securities in which investments can be made.
VAN ECK/CHUBB FUNDS PROSPECTUS 9
<PAGE>
- --------------------------------------------------------------------------------
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.
================================================================================
VAN ECK/CHUBB GROWTH AND INCOME FUND
SHAREHOLDER EXPENSES (FEES PAID DIRECTLY FROM YOUR INVESTMENT)
CLASS A
Maximum Sales Charge (imposed on purchases as
a percentage of offering price) 5.75%
Maximum Deferred Sales Charge
(as a percentage) 0.00%
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT
ARE DEDUCTED FROM FUND ASSETS)
Management 0.20%
Administration Fees 0.45%
Distribution (12b-1 Fees) 0.50%
Other Expenses 0.35%
TOTAL ANNUAL FUND OPERATING EXPENSES* 1.50%
================================================================================
* After fee waiver by the Adviser, Total Annual Fund Operating Expenses for A
shares would have been 1.32%. 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
invest-ment. 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 invest-ment, your actual expenses may be higher or lower than those
shown.
================================================================================
EXPENSE EXAMPLE
WHAT A $10,000 INVESTMENT WOULD ACTUALLY COST
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------------------------------------------------------------------------------
Class A $719 $1,022 $1,346 $2,263
================================================================================
10 VAN ECK/CHUBB FUNDS PROSPECTUS
<PAGE>
I. THE FUNDS / TAX-EXEMPT
- --------------------------------------------------------------------------------
4. 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 maturities which maximize 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.
VAN ECK/CHUBB FUNDS PROSPECTUS 11
<PAGE>
- --------------------------------------------------------------------------------
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 6/30/89)
was 8.29%. The lowest performing quarter (ended 3/31/94) was -4.89%.
[BAR CHART OMITTED]
================================================================================
VAN ECK/CHUBB TAX-EXEMPT FUND
CLASS A SHARES ANNUAL TOTAL RETURNS (%)
As of December 31,
'90 '91 '92 '93 '94 '95 '96 '97 '98 '99
5.10 10.71 9.19 12.42 -5.97 15.88 4.01 8.73 6.00 -3.25
================================================================================
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.
================================================================================
VAN ECK/CHUBB TAX-EXEMPT FUND
1-YEAR, 5-YEAR, AND 10-YEAR ANNUALIZED PERFORMANCE
PLUS A COMPARISON TO THE LEHMAN BROTHERS MUNICIPAL BOND INDEX*
As of December 31, 1999
1 YEAR 5 YEAR 10 YEAR
- --------------------------------------------------------------------------------
Class A Shares -7.88% 5.06% 5.57%
Lehman Bros. Municipal Bond Index -2.06% 6.91% 6.89%
================================================================================
* 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.
The Lehman Brothers Municipal Bond Index is an unmanaged index and includes
the reinvestment of all dividends, but does not reflect the payment of
transaction costs, advisory fees or expenses that are associated with an
investment in the Fund. The Index's performance is not illustrative of the
Fund's performance. Indices are not securities in which investments can be
made.
12 VAN ECK/CHUBB FUNDS PROSPECTUS
<PAGE>
I. THE FUNDS / TAX-EXEMPT
- --------------------------------------------------------------------------------
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.
================================================================================
VAN ECK/CHUBB TAX-EXEMPT FUND
SHAREHOLDER EXPENSES (FEES THAT ARE DEDUCTED FROM YOUR INVESTMENT)
CLASS A
Maximum Sales Charge (imposed on purchases as
a percentage of offering price) 4.75%
Maximum Deferred Sales Charge
(as a percentage) 0.00%
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT
ARE DEDUCTED FROM FUND ASSETS)
Management 0.20%
Administration Fees 0.45%
Distribution (12b-1 Fees) 0.50%
Other Expenses 0.37%
TOTAL ANNUAL FUND OPERATING EXPENSES* 1.52%
================================================================================
* After fee waiver by the Adviser, Total Fund Operating Expenses for A shares
would have been 1.00%.
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.
================================================================================
EXPENSE EXAMPLE
WHAT A $10,000 INVESTMENT WOULD ACTUALLY COST
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------------------------------------------------------------------------------
Class A $622 $932 $1,265 $2,201
================================================================================
VAN ECK/CHUBB FUNDS PROSPECTUS 13
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
5. 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.
14 VAN ECK/CHUBB FUNDS PROSPECTUS
<PAGE>
I. THE FUNDS / TOTAL RETURN
- --------------------------------------------------------------------------------
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
12/31/99) was 14.53%. The lowest perform-ing quarter (ended 9/30/98) was -14.1%.
[BAR CHART OMITTED]
================================================================================
VAN ECK/CHUBB TOTAL RETURN FUND
CLASS A SHARES ANNUAL TOTAL RETURNS (%)
As of December 31,
'90 '91 '92 '93 '94 '95 '96 '97 '98 '99
-0.51 29.23 7.11 14.04 -4.21 30.13 17.04 24.09 2.73 18.57
================================================================================
Fund performance is shown with sales charges subtracted. This chart compares the
Fund's performance with a broad measure of market performance. Past perform-ance
does not guarantee or predict future results.
================================================================================
VAN ECK/CHUBB TOTAL RETURN FUND
1-YEAR, 5-YEAR, AND 10-YEAR ANNUALIZED PERFORMANCE
PLUS A COMPARISON TO THE S&P 500 INDEX*
As of December 31, 1999
1 YEAR 5 YEAR 10 YEAR
- --------------------------------------------------------------------------------
Class A Shares 11.73% 16.75% 12.55%
S&P 500 Index 21.04% 28.56% 18.21%
================================================================================
* 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.
The S&P 500 Index is an unmanaged index and includes the reinvestment of all
dividends, but does not reflect the payment of transaction costs, advisory
fees or expenses that are associated with an investment in the Fund. The
Index's performance is not illustrative of the Fund's performance. Indices
are not securities in which investments can be made.
VAN ECK/CHUBB FUNDS PROSPECTUS 15
<PAGE>
- --------------------------------------------------------------------------------
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.
================================================================================
VAN ECK/CHUBB TOTAL RETURN FUND
SHAREHOLDER EXPENSES (FEES THAT ARE DEDUCTED FROM YOUR INVESTMENT)
CLASS A
Maximum Sales Charge (imposed on purchases as
a percentage of offering price) 5.75%
Maximum Deferred Sales Charge
(as a percentage) 0.00%
ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT
ARE DEDUCTED FROM FUND ASSETS)
Management 0.20%
Administration Fees 0.45%
Distribution (12b-1 Fees) 0.50%
Other Expenses 0.34%
TOTAL ANNUAL FUND OPERATING EXPENSES* 1.49%
================================================================================
* After fee waiver by the Adviser, Total Fund Operating Expenses for A shares
would have been 1.32%.
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.
================================================================================
EXPENSE EXAMPLE
WHAT A $10,000 INVESTMENT WOULD ACTUALLY COST
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- --------------------------------------------------------------------------------
Class A $718 $1,019 $1,314 $2,252
================================================================================
16 VAN ECK/CHUBB FUNDS PROSPECTUS
<PAGE>
INVESTMENT POLICIES AND RISKS
- --------------------------------------------------------------------------------
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
credit-worthiness 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 Global Income Fund, Growth and Income Fund, and
Total Return Fund.
RISK The chance that an issuer will fail to repay
interest and principal in a timely manner.
VAN ECK/CHUBB FUNDS PROSPECTUS 17
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
EQUITY SECURITIES
FUNDS 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
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
deriv-ative 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.
18 VAN ECK/CHUBB FUNDS PROSPECTUS
<PAGE>
II. INVESTMENT POLICIES AND RISKS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FOREIGN SECURITIES, DEPOSITARY RECEIPTS
FUNDS 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 reveal-ing--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.
VAN ECK/CHUBB FUNDS PROSPECTUS 19
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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.
20 VAN ECK/CHUBB FUNDS PROSPECTUS
<PAGE>
II. INVESTMENT POLICIES AND RISKS
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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.
VAN ECK/CHUBB FUNDS PROSPECTUS 21
<PAGE>
- --------------------------------------------------------------------------------
III. SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
HOW TO BUY, SELL, EXCHANGE, OR TRANSFER SHARES; AUTOMATIC
SERVICES; MINIMUM PURCHASE AND ACCOUNT SIZE, 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 218407
KANSAS CITY, MO 64121-8407
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.
22 VAN ECK/CHUBB FUNDS PROSPECTUS
<PAGE>
II. SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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.)
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.
VAN ECK/CHUBB FUNDS PROSPECTUS 23
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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. Share-holders 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.
24 VAN ECK/CHUBB FUNDS PROSPECTUS
<PAGE>
III. SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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.
VAN ECK/CHUBB FUNDS PROSPECTUS 25
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2. SALES CHARGES
================================================================================
SALES CHARGES
GROWTH AND INCOME FUND-A AND TOTAL RETURN FUND-A
SALES CHARGE PERCENTAGE
AS A PERCENTAGE OF TO BROKERS
DOLLAR AMOUNT OF PURCHASE OFFERING PRICE NET AMOUNT INVESTED OR AGENTS*
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**
================================================================================
* 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.
================================================================================
SALES CHARGES
GLOBAL INCOME FUND-A, GOVERNMENT SECURITIES FUND-A AND TAX-EXEMPT FUND-A
SALES CHARGE PERCENTAGE
AS A PERCENTAGE OF TO BROKERS
DOLLAR AMOUNT OF PURCHASE OFFERING PRICE NET AMOUNT INVESTED OR AGENTS*
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**
================================================================================
* 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.
26 VAN ECK/CHUBB FUNDS PROSPECTUS
<PAGE>
III. SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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.
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.
VAN ECK/CHUBB FUNDS PROSPECTUS 27
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
3. 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
State Street Bank and Trust Company (formerly known as Investors Fiduciary Trust
Company) 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
4. 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.
28 VAN ECK/CHUBB FUNDS PROSPECTUS
<PAGE>
III. SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
5. 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.
================================================================================
DIVIDEND AND CAPITAL GAIN SCHEDULE
FUND DIVIDENDS AND SHORT-TERM LONG-TERM
CAPITAL GAINS CAPITAL GAINS
Global Income Fund-A Monthly December
Government Securities Fund-A Daily Accrual, paid monthly December
Growth and Income Fund-A December December
Tax-Exempt Fund-A Monthly December
Total Return Fund-A March/June/September/December December
================================================================================
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.
VAN ECK/CHUBB FUNDS PROSPECTUS 29
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
6. MANAGEMENT OF THE FUNDS
-------------------------
ADMINISTRATOR
Van Eck Associates
Corporation,
99 Park Avenue,
New York, NY 10016,
serves as administrator
to each of the Funds,
under an Administration
Agreement with Van
Eck/Chubb Funds, Inc.
------------+------------
|
- ------------------------- | ------------------------
INDEPENDENT AUDITORS \|/ INVESTMENT ADVISER
Ernst & Young LLP, ------------------------- Chubb Asset
787 Seventh Avenue, THE COMPANY Managers, Inc.,
New York, NY 10019, "The Company" is 15 Mountain View Road,
provides audit services, incorporated in the state Warren, NJ 07059,
consultation and advice of Maryland and consists a wholly owned
with respect to financial---> of the Van Eck/Chubb <------- subsidiary of
information in the Funds, Inc. listed in The Chubb Corporation,
Company's filings with this prospectus serves as investment
the SEC, consults with ("Funds"). The Board of adviser to the Funds.
the Company on accounting Directors manages the The Adviser works under
and financial reporting Funds' business and the supervision of the
matters, and prepares the affairs. Board of Directors.
Company's tax returns. ------------+------------ ------------------------
- ------------------------- / | \
\/_ | _\/
- ------------------------------------- | ----------------------------------
DISTRIBUTOR | TRANSFER AGENT
Van Eck Securities Corporation, | DST Systems, Inc.,
99 Park Ave., New York, NY 10016 | 210 West 10th Street, 8th Floor,
distributes the Funds and | Kansas City, MO 64105, serves
is wholly owned by the Administrator. \|/ as the Funds' transfer agent.
---------------------
CUSTODIAN
- ----------------------------- Citibank, N.A., ----------------------------
111 Wall Street,
New York, NY 10043,
holds Fund securities
and settles trades.
---------------------
30 VAN ECK/CHUBB FUNDS PROSPECTUS
<PAGE>
III. SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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
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.
VAN ECK/CHUBB FUNDS PROSPECTUS 31
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
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 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 on-going 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.
================================================================================
VAN ECK/CHUBB FUNDS ANNUAL 12b-1 SCHEDULE
expressed in basis points (bps)*
FUND FEE PAYMENT
TO DEALER
GLOBAL INCOME FUND-A 50 bps 25 bps
GOVERNMENT SECURITIES FUND-A 50 bps 25 bps
GROWTH AND INCOME FUND-A 50 bps 25 bps
TAX-EXEMPT FUND-A 50 bps 25 bps
TOTAL RETURN FUND-A 50 bps 25 bps
================================================================================
* 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.
32 VAN ECK/CHUBB FUNDS PROSPECTUS
<PAGE>
IV. FINANCIAL HIGHLIGHTS 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 FUNDS' FINANCIAL
STATEMENTS ARE INCLUDED IN THE FUNDS' ANNUAL REPORT WHICH IS
AVAILABLE UPON REQUEST.
1. VAN ECK/CHUBB GLOBAL INCOME FUND
================================================================================
FINANCIAL HIGHLIGHTS
For a share outstanding throughout each period:
PERIOD FROM
CLASS A SEPTEMBER 1,
YEAR ENDED DECEMBER 31, 1995(C)
DEC.31,
1999 1998 1997 1996 1995
------ ------ ------ ------ ------
NET ASSET VALUE,
BEGINNING OF PERIOD $10.32 $ 9.64 $10.24 $10.21 $10.00
- --------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.458 0.421 0.471 0.551 0.116
Net Gains (Losses) on
Securities (both realized
and unrealized) (1.430) 0.994 (0.476) 0.030 0.210
- --------------------------------------------------------------------------------
Total from Investment Operations (0.972) 1.415 (0.005) 0.581 0.326
- --------------------------------------------------------------------------------
LESS DISTRIBUTIONS TO SHAREHOLDERS
Dividends from
Net Investment Income (0.323) (0.445) (0.398) (0.485) (0.116)
Dividends in Excess
of Net Investment Income -- -- -- (0.066) --
Distributions from
Net Realized Gains -- (0.290) (0.084) -- --
Distributions in Excess
of Net Realized Gains -- -- (0.040) -- --
Tax Returns of Capital (0.135) -- (0.073) -- --
- --------------------------------------------------------------------------------
Total Distributions (0.458) (0.735) (0.595) (0.551) (0.116)
- --------------------------------------------------------------------------------
NET ASSET VALUE,
END OF PERIOD $ 8.89 $10.32 $ 9.64 $10.24 $10.21
- --------------------------------------------------------------------------------
Total Return (a) (9.55%) 15.00% 0.02% 5.95% 3.27%
- --------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
Gross Expenses (b) 1.42% 1.56% 1.56% 1.68% 2.14%(d)
Net Expenses 1.35% 1.35% 1.35% 1.23% 1.75%(d)
Net Investment Income (e) 4.83% 4.24% 4.62% 5.49% 4.48%(d)
Portfolio Turnover Rate 101.78% 99.31% 185.95% 80.70% 14.16%
Net Assets at End of Period (000) $76,085 $91,210 $52,088 $12,227 $10,706
================================================================================
(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.
(e) Ratios would have been 4.76%, 4.03%, 4.41%, 5.04% and 4.09%, respectively,
had the Investment Manager not waived fees and assumed expenses.
+ Ernst & Young LLP are auditors for the Funds for 1998 and 1999.
VAN ECK/CHUBB FUNDS PROSPECTUS 33
<PAGE>
2. VAN ECK/CHUBB GOVERNMENT SECURITIES FUND
================================================================================
FINANCIAL HIGHLIGHTS
For a share outstanding throughout
each period:
CLASS A
YEAR ENDED DECEMBER 31
1999 1998 1997 1996 1995
------ ------ ------ ------ ------
NET ASSET VALUE,
BEGINNING OF PERIOD $11.02 $10.82 $10.48 $10.78 $ 9.75
- --------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
Net Investment Income 0.550 0.583 0.616 0.623 0.636
Net Gains (Losses) on
Securities (both realized
and unrealized) (0.680) 0.200 0.340 (0.300) 1.030
- --------------------------------------------------------------------------------
Total from Investment Operations (0.130) 0.783 0.956 0.323 1.666
- --------------------------------------------------------------------------------
LESS DISTRIBUTIONS TO SHAREHOLDERS
Dividends from
Net Investment Income (0.550) (0.583) (0.616) (0.623) (0.636)
- --------------------------------------------------------------------------------
Total Distributions (0.550) (0.583) (0.616) (0.623) (0.636)
- --------------------------------------------------------------------------------
NET ASSET VALUE,
END OF PERIOD $10.34 $11.02 $10.82 $10.48 $10.78
- --------------------------------------------------------------------------------
Total Return (a) (1.20%) 7.40% 9.44% 3.19% 17.50%
- --------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
Gross Expenses (b) 1.50% 1.61% 1.55% 1.60% 1.70%
Net Expenses 1.00% 1.00% 1.00% 0.93% 1.00%
Net Investment Income (c) 5.15% 5.32% 5.78% 5.94% 6.16%
Portfolio Turnover Rate 41.09% 14.10% 39.86% 140.94% 276.56%
Net Assets at End of Period (000) $29,891 $32,730 $31,739 $12,818 $13,886
================================================================================
(a) Total return assumes investment of all distributions during the year 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.
(b) Had fees not been waived and expenses not been assumed.
(c) Ratios would have been 4.65%, 4.71%, 5.23%, 5.27% and 5.46%, respectively,
had the Investment Manager not waived fees and assumed expenses.
34 VAN ECK/CHUBB FUNDS PROSPECTUS
<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 FUNDS' FINANCIAL
STATEMENTS ARE INCLUDED IN THE FUNDS' ANNUAL REPORT WHICH IS
AVAILABLE UPON REQUEST.
3. VAN ECK/CHUBB GROWTH AND INCOME FUND
================================================================================
FINANCIAL HIGHLIGHTS
For a share outstanding throughout each period:
CLASS A
YEAR ENDED DECEMBER 31
1999 1998 1997 1996 1995
------- ------- ------- ------- -------
NET ASSET VALUE,
BEGINNING OF PERIOD $ 23.96 $ 24.56 $ 21.04 $ 18.58 $ 14.77
- --------------------------------------------------------------------------------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income (Loss) (0.030) 0.110 0.096 0.250 0.204
Net Gains (Losses) on
Securities (both realized
and unrealized) 7.080 (0.156) 5.286 3.931 5.042
- --------------------------------------------------------------------------------
Total from Investment
Operations 7.050 (0.046) 5.382 4.181 5.246
- --------------------------------------------------------------------------------
LESS DISTRIBUTIONS
TO SHAREHOLDERS
Dividends from
Net Investment Income -- (0.111) (0.096) (0.250) (0.204)
Dividends in Excess
of Net Investment Income . -- -- (0.004) -- --
Distributions from
Net Realized Gains (3.280) (0.443) (1.762) (1.471) (0.885)
Distributions in Excess
of Net Realized Gains -- -- -- -- (0.346)
Tax Return of Capital -- -- -- -- (0.001)
- --------------------------------------------------------------------------------
Total Distributions (3.280) (0.554) (1.862) (1.721) (1.436)
- --------------------------------------------------------------------------------
NET ASSET VALUE,
END OF PERIOD $ 27.73 $ 23.96 $ 24.56 $ 21.04 $ 18.58
- --------------------------------------------------------------------------------
Total Return (a) 29.42% (0.18%) 25.85% 22.50% 35.52%
- --------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
Gross Expenses (b) 1.50% 1.57% 1.49% 1.58% 1.69%
Net Expenses 1.32% 1.25% 1.25% 1.06% 1.08%
Net Investment Income
(Loss) (c) (0.16%) 0.44% 0.49% 1.29% 1.20%
Portfolio Turnover Rate 133.63% 43.42% 21.02% 44.50% 37.59%
Net Assets at End
of Period (000) $94,840 $67,478 $66,762 $40,282 $29,144
================================================================================
(a) Total return assumes reinvestment of all distributions during the year 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.
(b) Had fees not been waived and expenses not been assumed.
(c) Ratios would have been (0.34%), 0.12%, 0.25%, 0.77% and 0.59%,
respectively, had the Investment Manager not waived fees and assumed
expenses.
+ Ernst & Young LLP are auditors for the Funds for 1998 and 1999.
VAN ECK/CHUBB FUNDS PROSPECTUS 35
<PAGE>
4. VAN ECK/CHUBB TAX-EXEMPT FUND
================================================================================
FINANCIAL HIGHLIGHTS
For a share outstanding throughout each period:
CLASS A
YEAR ENDED DECEMBER 31
1999 1998 1997 1996 1995
------- ------- ------- ------- -------
NET ASSET VALUE,
BEGINNING OF PERIOD $ 12.74 $ 12.56 $ 12.15 $ 12.33 $ 11.22
- --------------------------------------------------------------------------------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income 0.533 0.537 0.581 0.611 0.621
Net Gains (Losses) on
Securities (both realized
and unrealized) (0.935) 0.202 0.450 (0.137) 1.132
- --------------------------------------------------------------------------------
Total from Investment
Operations (0.402) 0.739 1.031 0.474 1.753
- --------------------------------------------------------------------------------
LESS DISTRIBUTIONS
TO SHAREHOLDERS
Dividends from
Net Investment Income (0.533) (0.539) (0.581) (0.611) (0.621)
Distributions from
Net Realized Gains (0.005) (0.020) (0.036) (0.043) (0.010)
Distributions in Excess
of Net Realized Gains -- -- (0.004) -- (0.012)
- --------------------------------------------------------------------------------
Total Distributions (0.538) (0.559) (0.621) (0.654) (0.643)
- --------------------------------------------------------------------------------
NET ASSET VALUE,
End of Period $ 11.80 $ 12.74 $ 12.56 $ 12.15 $ 12.33
- --------------------------------------------------------------------------------
Total Return (a) (3.25%) 6.01% 8.73% 4.00% 15.88%
- --------------------------------------------------------------------------------
RATIOS TO AVERAGE
NET ASSETS
Gross Expenses (b) 1.52% 1.63% 1.56% 1.65% 1.79%
Net Expenses 1.00% 1.00% 1.00% 0.98% 1.00%
Net Investment Income (c) 4.30% 4.23% 4.74% 5.00% 5.20%
Portfolio Turnover Rate 0.74% 2.50% 12.78% 16.29% 7.39%
Net Assets at End
of Period (000) $28,409 $31,680 $31,288 $15,061 $15,259
================================================================================
(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.
(b) Had fees not been waived and expenses not been assumed.
(c) Ratios would have been 3.78%, 3.60%, 4.18%, 4.33% and 4.41%, respectively,
had the Investment Manager not waived fees and assumed expenses.
36 VAN ECK/CHUBB FUNDS PROSPECTUS
<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
FUNDS' FINANCIAL STATEMENTS ARE INCLUDED IN THE FUNDS'
ANNUAL REPORT WHICH IS AVAILABLE UPON REQUEST.
5. VAN ECK/CHUBB TOTAL RETURN FUND
================================================================================
FINANCIAL HIGHLIGHTS
For a share outstanding throughout each period:
CLASS A
YEAR ENDED DECEMBER 31
1999 1998 1997 1996 1995
------- ------- ------- ------- -------
NET ASSET VALUE,
BEGINNING OF PERIOD $ 19.27 $ 20.22 $ 17.41 $ 15.96 $ 13.23
- --------------------------------------------------------------------------------
INCOME FROM INVESTMENT
OPERATIONS
Net Investment Income 0.417 0.393 0.365 0.370 0.373
Net Gains (Losses) on
Securities (both realized
and unrealized) 3.113 0.158 3.778 2.321 3.586
- --------------------------------------------------------------------------------
Total from Investment
Operations 3.530 0.551 4.143 2.691 3.959
- --------------------------------------------------------------------------------
LESS DISTRIBUTIONS
TO SHAREHOLDERS
Dividends from
Net Investment Income (0.410) (0.390) (0.365) (0.370) (0.373)
Dividends in Excess
of Net Investment Income -- -- (0.004) -- --
Distributions from
Capital Gains (3.130) (1.111) (0.964) (0.871) (0.692)
Tax Return of Capital -- -- -- -- (0.164)
- --------------------------------------------------------------------------------
Total Distributions (3.540) (1.501) (1.333) (1.241) (1.229)
- --------------------------------------------------------------------------------
NET ASSET VALUE,
END OF PERIOD $ 19.26 $ 19.27 $ 20.22 $ 17.41 $ 15.96
- --------------------------------------------------------------------------------
Total Return (a) 18.57% 2.73% 24.09% 17.04% 30.13%
- --------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
Gross Expenses (b) 1.49% 1.61% 1.51% 1.59% 1.70%
Net Expenses 1.32% 1.25% 1.25% 1.08% 1.08%
Net Investment Income (c) 2.07% 1.87% 1.92% 2.26% 2.45%
Portfolio Turnover Rate 59.16% 15.78% 15.80% 27.01% 57.62%
Net Assets at End of
Period (000) $40,059 $42,524 $49,934 $31,064 $22,171
================================================================================
(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.
(b) Had fees not been waived and expenses not been assumed.
(c) Ratios would have been 1.90%, 1.51%, 1.66%, 1.75% and 1.83%, respectively,
had the Investment Manager not waived fees and assumed expenses.
+ Ernst & Young LLP are auditors for the Funds for 1998 and 1999.
VAN ECK/CHUBB FUNDS PROSPECTUS 37
<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
five series: Van Eck/Chubb Global Income Fund, Van Eck/Chubb Government
Securities Fund, Van Eck/Chubb Growth and Income Fund, Van Eck/Chubb Tax-Exempt
Fund and Van Eck/Chubb Total Return Fund.
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, 2000 (the "Prospectus"). This Statement of Additional Information
is incorporated by reference into the Prospectus. The Company's Annual Report is
incorporated by reference in this 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 OF CONTENTS
General Information ........................................................ 1
Investment Objectives and Policies of The Funds ............................ 1
Bank Obligations ........................................................... 1
Commercial Paper ........................................................... 1
Repurchase Agreements ...................................................... 1
Reverse Repurchase Agreements .............................................. 2
Lending of Portfolio Securities ............................................ 2
Restricted Securities ...................................................... 2
Loan Participations and Other Direct Indebtedness .......................... 3
Derivatives ................................................................ 3
When-Issued and Delayed Delivery Securities & Forward Commitments .......... 8
Foreign Securities ......................................................... 8
Foreign Currency Transactions .............................................. 9
Depositary Receipts ........................................................ 9
Mortgage-Related Securities ................................................ 9
Warrants ................................................................... 11
Low Rated or Unrated Debt Securities ....................................... 11
Investment Companies ....................................................... 11
Portfolio Turnover ......................................................... 11
Investment Restrictions .................................................... 11
Investment Advisory Services ............................................... 14
The Distributor ............................................................ 15
Portfolio Transactions and Brokerage ....................................... 17
Directors and Officers ..................................................... 19
Purchase of Shares ......................................................... 22
Valuation of Shares ........................................................ 22
Exchange Privilege ......................................................... 23
Tax-Sheltered Retirement Plans ............................................. 24
Investment Programs ........................................................ 27
Taxes ...................................................................... 28
Redemptions In Kind ........................................................ 30
Performance ................................................................ 30
Description of the Company ................................................. 32
Additional Information ..................................................... 33
Financial Statements ....................................................... 34
Appendix ................................................................... 35
STATEMENT OF ADDITIONAL INFORMATION
May 1, 2000
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GENERAL INFORMATION
Van Eck/Chubb Funds, Inc., (the "Company") is comprised of five 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.
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.
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.
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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.
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
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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 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 than 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.
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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.
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.
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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
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.
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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.
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
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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.
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 futures contracts by closing out its
positions.
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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 and the Total Return 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 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 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 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 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.
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FOREIGN CURRENCY TRANSACTIONS
The 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 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
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
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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 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 invest-
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ments, 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 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 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
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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 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.
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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 15%, of
the net asset value of any Fund in securities which are not readily
marketable, such as 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 and the Growth and Income 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.
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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 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 agreement for Global Income Fund was 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
FUND 1997 1998 1999
Government Securities Fund $0 $0 $0
Total Return Fund $0 $0 $0
Tax Exempt Fund $0 $0 $0
Growth and Income Fund $0 $0 $0
Global Income $0 $0 $0
Capital Appreciation Fund $0 $0 $0
ADMINISTRATOR'S FEES
FUND 1997 1998 1999
Government Securities Fund $ 65,379 $ 16,297 $ 50,491
Total Return Fund $230,030 $148,639 $187,470
Tax Exempt Fund $ 68,675 $ 12,314 $ 44,308
Growth and Income Fund $330,029 $250,547 $317,818
Global Income Fund $100,524 $361,208 $390,566
14
<PAGE>
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).
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 and
Growth and Income 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. Pursuant to an expense limitation agreement for Class A
shares, the rate of expenses borne by the Funds, based on average net assets,
were as follows: For the year ended December 31, 1998, the rates of expenses
borne by the Fund was limited to: Van Eck/Chubb Global Income Fund 1.35%, Van
Eck/Chubb Growth and Income Fund and the Van Eck/Chubb Total Return Fund 1.25%,
Van Eck/Chubb Government Securities Fund and Van Eck/Chubb Tax Exempt Fund 1.00%
of the average daily net assets. For the year ended December 31, 1999, Van
Eck/Chubb Global Income Fund, Van Eck/Chubb Government Securities Fund and Van
Eck/Chubb Tax-Exempt Fund, such limitation was 1.35%. For the year ended
December 31, 1999, such limitations were 1.25% and 1.35%, respectively, for the
Van Eck/Chubb Growth and Income Fund and Van Eck/Chubb Total Return Fund.
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 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 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. For the year ended December 31, 1999, the
Distributor retained $111,365 after reallowances of $21,090.
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 shares. Payments under the Distribution
Plan will be accrued daily and paid quarterly in arrears.
15
<PAGE>
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".
For the years ended December 31, 1999, 1998, and 1997, $635,183, $745,850
and $367,198 was paid by the Company to the Distributor and/or CSC, as the case
may be, under the Class A Plan of Distribution.
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 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.
16
<PAGE>
VAN ECK SECURITIES CORPORATION
12B-1 ACCOUNTING-VE/CHUBB FUNDS
12 MOS. ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
Capital Global Gov't Total Tax Growth
Appreciation Income Securities Return Exempt & Income Total
------ ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
TOTAL 12B-1 EXPENSE PER BOOKS 95,002 320,710 81,144 134,843 76,700 205,433 913,831
PAYMENT TO SECURITIES DEALERS 12,594 65,654 17,677 55,602 20,927 106,197 278,649
------ ------- ------- ------- ------- ------- -------
NET 12B-1 FEES 82,409 255,056 63,467 79,241 55,773 99,237 635,183
------ ------- ------- ------- ------- ------- -------
DISTRIBUTION EXPENDITURES:
General Printing 461 584 557 559 558 1,266 3,985
Reports 1,283 1,283 1,283 1,283 1,283 1,284 7,699
Dealer Fact Sheets 796 2,181 2,147 2,181 2,148 2,802 12,255
Prospectus 0 5,796 801 801 801 803 9,002
Dealer postage 218 17 17 17 17 19 305
Marketing Support Telephone 3,166 13,263 5,025 6,258 4,900 10,520 43,132
Marketing Dept Expenses 65,543 211,535 80,427 99,915 78,224 152,947 688,591
Telemarketing Dept Expenses 11,682 48,893 18,589 23,093 18,080 38,818 159,155
------ ------- ------- ------- ------- ------- -------
TOTAL EXPENDITURES 83,148 283,552 108,847 134,107 106,011 208,459 924,124
------ ------- ------- ------- ------- ------- -------
EXCESS EXPENSES OVER
PAYMENTS TO VESC ($) (740) (28,496) (45,379) (54,866) (50,238) (109,223) (288,941)
====== ======= ======= ======= ======= ======= =======
</TABLE>
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 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
17
<PAGE>
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, 1999, 1998 and 1997, 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, 1999, the Growth and Income
Fund and Total Return Fund held 16,100 and 9,000 shares, respectively, of
Merrill Lynch through their regular brokers.
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.
18
<PAGE>
DIRECTORS AND OFFICERS
The directors and officers of the Company, their addresses, their ages, their
positions with the Company, and their principal occupations for the past five
years are set forth below:
- --------------------------------------------------------------------------------
John C. van Eck@* (84) Chairman of the Board Chairman of the Board and
575 Park Avenue and Director President of other Investment
New York, NY Companies advised by 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@* (56) President and Director Executive Vice President and
Chief Investment Officer Road
of The Chubb Corporation;
Director, President and Chief
Operating Officer of the
Adviser.
- --------------------------------------------------------------------------------
Jeremy H. Biggs#@ (64) Director Trustee of other investment
1220 Park Avenue companies advised by the
New York, NY 10128 Administrator, Vice 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 School, St. James
Maryland.
- --------------------------------------------------------------------------------
Wesley G. McCain*#+ (57) Director Trustee of other investment
470 Park Avenue South companies advised by the
New York, New York Administrator; Chairman and
Owner, Townley Capital
Management, Inc.; Chairman,
Eclipse Funds; Chairman and
Owner, Eclipse Financial
Services Inc.; President,
Millbrook Associates Inc.;
General Partner, Pharaoh
Partners, L.P.; Principal,
Pharaoh Partners, (Cayman) LDC;
Trustee, Libre Group Trust;
Director, Libre Investments
(Cayman) Ltd.
- --------------------------------------------------------------------------------
David J. Olderman#+ (64) Director Trustee of other investment
40 East 52nd Street companies advised by the
New York, New York Administrator; Chairman of the
Board, Chief Executive Officer
and Owner, Carret & Company,
Inc.; Chairman of the Board,
American Copy Company
(1991-present); Chairman of the
Board, Brighton Partners Inc.
- --------------------------------------------------------------------------------
Bruce J. Smith (45) Vice President Officer of other investment
99 Park Avenue and Treasurer companies advised by the
New York, New York Administrator; Chief Financial
Officer, Senior Vice President
of Van Eck Associates
Corporation.
- --------------------------------------------------------------------------------
Thomas H. Elwood (52) Vice President Officer of other investment
99 Park Avenue and Secretary companies advised by the
New York, New York Administrator; Vice 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.
- --------------------------------------------------------------------------------
19
<PAGE>
Joseph P. DiMaggio (43) Controller Officer of other investment
99 Park Avenue companies advised by the
New York, New York Administrator; Managing
Director of Portfolio
Administration of Van Eck
Associates Corporation.
- --------------------------------------------------------------------------------
Susan C. Lashley (45) Vice President Officer of other investment
99 Park Avenue companies advised by the
New York, New York Administrator; Managing
Director, Mutual Fund
Operations of Van Eck
Securities Corporation.
- --------------------------------------------------------------------------------
Dina C. Lee (29) Assistant Secretary Assistant Secretary of other
99 Park Avenue investment companies advised or
New York, New York administered by the Adviser;
Staff Attorney of Van Eck
Associates Corporation and Van
Eck Securities Corporation.
- --------------------------------------------------------------------------------
Alex W. Bogaenko (36) Assistant Controller Assistant Controller of other
99 Park Avenue investment companies advised or
New York, New York administered by the Adviser;
Director of Portfolio
Administration of Van Eck
Associates Corporation.
- --------------------------------------------------------------------------------
- ----------
@ 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.
20
<PAGE>
1999 COMPENSATION TABLE
TOTAL COMPENSATION
NAME OF AGGREGATE PENSION OR RETIREMENT FROM FUND AND FUND
PERSON COMPENSATION BENEFITS ACCRUED AS COMPLEX(A) PAID
POSITION FROM FUND PART OF FUND EXPENSES TO DIRECTORS
- ------- ------------ --------------------- ------------------
John C. van Eck $0 $0 $0
Chairman
Michael O'Reilly $0 $0 $0
Director
Jeremy Biggs $6,500 $6,500 $42,500
Director
Wesley McCain $6,500 $6,500 $42,500
Director
David Olderman $6,500 $6,500 $33,500
Director
- ----------
(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:
Global Income Fund-Class A Growth & Income Fund-Class A
- -------------------------- ----------------------------
Federal Insurance Company 50.51% Federal Insurance Company 27.29%
Attn: Michael O'Reilly Attn: Michael O'Reilly
15 Mountain View Road 15 Mountain View Road
Warren, NJ 07059 Warren, NJ 07059
Tax-Exempt Fund-Class A
Chubb Corporation 9.00% -----------------------
Attn Investment Department Federal Insurance Company 68.20%
15 Mountain View Road Attn: Michael O'Reilly
Warren, NJ 07059 15 Mountain View Road
Warren, NJ 07059
Vigilant Insurance Company 5.62%
Attn Investment Department
c/o Chubb and Son Inc.
15 Mountain View Road
Warren, NJ 07059
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%
Attn: Michael O'Reilly
100 William Street
New York, New York 10038
21
<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.
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
22
<PAGE>
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.
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.
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 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
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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).
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. State Street Bank, 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
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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.
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.
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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 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.
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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 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
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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 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.
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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.
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.
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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.
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.
30
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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 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, 1999 for Tax-Exempt
Fund, Government Securities Fund and the Global Income Fund was 4.20%, 5.95% and
5.18%, respectively. The tax equivalent yield for the Tax-Exempt Fund for the
same period assuming federal tax brackets of 36%, and 39.6% was 6.56% and 6.95%
for Class A shares. 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 3.68% for
Class A, 5.45% for Class A and 5.11% for Class A shares, respectively, and the
tax equivalent yields for the Tax-Exempt Fund of 36% and 39.6% tax brackets
would have been 5.75% for Class A and 6.09% for Class A, 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)6 - 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 and the Global Income Fund (after maximum sales charge)
for the 12 months ended December 31, 1999 were -5.90%, 11.73%, -7.88%, 21.99%
and -13.81%, respectively. The average annual total return quotations for the
Government Securities Fund, the Total Return Fund, the Tax-Exempt Fund, the
Growth and Income Fund and the Global Income Fund for the 3 years ended December
31, 1999 were 3.42%, 12.53%, 2.02%, 15.29% and -0.30%, respectively. The average
annual total return quotations for the Government Securities Fund, the Total
Return Fund, the Tax-Exempt Fund and the Growth and Income Fund, for the 5 years
ended December 31, 1999 were 6.04%, 16.75%, 5.06% and 20.53%, respectively. The
average annual total return quotations for the Government Securities Fund, the
Total Return Fund, the Tax-Exempt Fund and
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<PAGE>
the Growth and Income Fund, for the 10 years ended December 31, 1999 were 6.75%,
12.55%, 5.57% and 14.46%, respectively. The average annual total return
quotations for these Funds since the Company's inception on December 1, 1987
through December 31, 1999 were 7.52%, 13.36%, 6.82% and 15.44%, respectively.
Additionally the Global Income Fund's average total return since inception on
September 1, 1995 through December 31, 1999 was 1.88%. These figures reflect a
portion of fees and other expenses of the Company which were waived or assumed
during the stated period.
These average annual total return figures represent the average annual
compound rate of return for the stated 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)n = 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, and the
Global Income Fund for the 12 months ended December 31, 1999 were -1.20%,
18.57%, -3.25%, 29.42% and -9.55%, 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 and Income Fund for
the 5 years ended December 31, 1999 were 7.08%, 18.15%, 6.09% and 21.97%,
respectively. Under this same calculation, the average annual total return
quotations for these Funds for the 10 years ended December 31, 1999 were 7.27%,
13.22%, 6.08% and 15.14%, respectively. In addition under the same calculation
the average annual total return for the Global Income Fund since its inception
September 1, 1995 through December 31, 1998 is 3.04%.
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 five funds, four are open-end diversified management investment
companies and one is a non-diversified company. The five funds are the 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 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.
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<PAGE>
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 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 five series: Van
Eck/Chubb Government Securities Fund, Van Eck/Chubb Total Return Fund, Van
Eck/Chubb Tax-Exempt Fund, Van Eck/Chubb Growth and Income 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
33
<PAGE>
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 February 29, 2000, 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 69.94% of the outstanding shares of the Company.
FINANCIAL STATEMENTS
The financial statements contained in the Company's December 31, 1999
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.
34
<PAGE>
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.
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.
35
<PAGE>
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:
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.
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<PAGE>
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.
37
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PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
Filed as part of this Prospectus:
Financial Highlights for the years ended December 31, 1995, 1996
1997, 1998 and 1999.
(a) Financial Statements
The financial statements contained in the Company's December 31,
1999 Annual Report to shareholders are incorporated by reference in
the Company's Statement Of Additional Information./9/
(b) Exhibits
1. a. Amended and Restated Articles of Incorporation./2/
b. Articles Supplementary to the Amended and Restated Articles of
Incorporation./6/
c. Articles Supplementary to the Amended and Restated Articles of
Incorporation./8/
d. Articles Supplementary to the Amended and Restated Articles of
Incorporation.
2. Amended and Restated By-Laws./4/
3. Not applicable.
4. a. Specimen of Certificate of Stock of the Chubb Money
Market Fund./1/
b. Specimen of Certificate of Stock of the Chubb Government
Securities Fund./1/
c. Specimen of Certificate of Stock of the Chubb Total Return
Fund./1/
d. Specimen of Certificate of Stock of the Chubb Tax-Exempt Fund./1/
e. Specimen of Certificate of Stock of the Chubb Growth and Income
Fund./5/
f. Specimen of Certificate of Stock of the Chubb Capital
Appreciation Fund./8/
g. Specimen of Certificate of Stock of the Chubb Global Income
Fund./8/
5. a. Investment Management Agreement between Chubb Investment Funds, Inc.,
Chubb Investment Advisory Corporation and Chubb Asset Managers, Inc. with
respect to Chubb Money Market Fund./1/
b. Technical Amendment to Investment Management Agreement between
Chubb Investment Funds, Inc., Chubb Investment Advisory Corporation
and Chubb Asset Managers, Inc. with respect to Chubb Money Market
C-1
<PAGE>
Fund./3/
c. Investment Management Agreement between Chubb Investment Funds,
Inc., Chubb Investment Advisory Corporation and Chubb Asset Managers,
Inc. with respect to Chubb Government Securities Fund./l/
d. Technical Amendment to Investment Management Agreement between
Chubb Investment Funds, Inc., Chubb Investment Advisory Corporation
and Chubb Asset Managers, Inc. with respect to Chubb Government
Securities Fund./3/
e. Investment Management Agreement between Chubb Investment Funds,
Inc., Chubb Investment Advisory Corporation and Chubb Asset Managers,
Inc. with respect to Chubb Total Return Fund./l/
f. Technical Amendment to Investment Management Agreement between
Chubb Investment Funds, Inc., Chubb Investment Advisory Corporation
and Chubb Asset Managers, Inc. with respect to Chubb Total Return
Fund./3/
g. Investment Management Agreement between Chubb Investment Funds,
Inc., Chubb Investment Advisory Corporation and Chubb Asset Managers,
Inc. with respect to Chubb Tax-Exempt Fund./l/
h. Technical Amendment to Investment Management Agreement between
Chubb Investment Funds, Inc., Chubb Investment Advisory Corporation
and Chubb Asset Managers, Inc. with respect to Chubb Tax-Exempt Fund./3/
i. Investment Management Agreement between Chubb Investment Funds,
Inc., Chubb Investment Advisory Corporation and Chubb Asset Managers,
Inc. with respect to Chubb Growth Fund, (now known as the Chubb Growth
and Income Fund)./l/
j. Technical Amendment to Investment Management Agreement between
Chubb Investment Funds, Inc., Chubb Investment Advisory Corporation
and Chubb Asset Managers, Inc. with respect to Chubb Growth and Income
Fund./3/
k. Investment Management Agreement between Chubb Investment Funds,
Inc., Chubb Investment Advisory Corporation and Chubb Asset Managers,
Inc. with respect to Chubb Capital Appreciation Fund./8/
1. Investment Management Agreement between Chubb Investment Funds,
Inc., Chubb Investment Advisory Corporation and Chubb Asset Managers,
Inc. with respect to Chubb Global Income Fund./8/
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<PAGE>
6. a. Fund Distribution Agreement between Van Eck/Chubb Funds, Inc. and
Van Eck Securities Corporation.
b. Specimen Copy of Selling Group Agreement.
7. Not applicable.
8. Custodial Services Agreement between Chubb Investment Funds, Inc. and
Citibank, N.A./l/
9. a. Shareholder Services Agreement between Chubb Investment Funds, Inc.
and Firstar Trust Company./7/
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<PAGE>
b. Agreement for Waiver of Fees and Assumption of Expenses between Chubb
Investment Funds, Inc., Chubb Investment Advisory Corporation, Chubb Asset
Managers, Inc., Chubb Securities Corporation, and Chubb Life Insurance
Company of New Hampshire./4/
10. Opinion and Consent of Counsel as to legality of the securities being
registered./1/
a. Opinion and Consent of Counsel as to legality of the securities
being registered./8/
b. Opinion and Consent of Counsel as to legality of the securities
being registered - Class B Shares to be filed by amendment.
11. Consent of Ernst & Young LLP.*
12. Chubb Asset Managers Inc. Code of Ethics.
13. Stock Subscription Agreement between Chubb Investment Funds, Inc. and Chubb
Life Insurance Company of America./1/
15. a. Rule 12b-1 Plan./1/
b. Rule 12b-1 Plans for Class B Shares.
16. Performance Calculation.
17. Financial Data Schedules.*
19. Consent of Freedman, Levy, Kroll & Simonds./1/
99.2 Stock Subscription Agreement between Chubb Investment Funds, Inc. and
Chubb Life Insurance Company of America./10/
99.4 Diagram of Subsidiaries of The Chubb Corporation./10/
99.5 Price Make-up Sheet./10/
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<PAGE>
/1/ Incorporated by reference to earlier filing on September 17, 1987, SEC File
No. 33-147367, to the exhibit number indicated on that Form N-lA Registration
Statement.
/2/ Incorporated by reference to earlier filing on April 28, 1988, SEC File No.
33-147367, to the exhibit number indicated on that Form N-lA Registration
Statement.
/3/ Incorporated by reference to earlier filing on April 17, 1989, SEC File No.
33-147367, to the exhibit number indicated on that Form N-lA Registration
Statement.
/4/ Incorporated by reference to earlier filing on April 15, 1991, SEC File No.
33-14737, to the exhibit number indicated on that Form N-lA Registration
Statement.
/5/ Incorporated by reference to earlier filing on April 22, 1992, SEC File No.
33-14737, to the exhibit number indicated on that Form N-1A Registration
Statement.
/6/ Incorporated by reference to earlier filing on April 23, 1994, SEC File No.
33-14737, to the exhibit number indicated on that Form N1-A Registration
Statement.
/7/ Incorporated by reference to earlier filing on April 17, 1995, SEC File No.
33-14737, to the exhibit number indicated on that Form N-lA Registration
Statement.
/8/ Incorporated by reference to earlier filing on June 16, 1995, SEC File No.
33-14737, to the exhibit number indicated on that Form N-lA Registration
Statement.
/9/ Incorporated by reference to Annual Report to Shareholders filed on
March 2, 1998, SEC File No. 33-14737.
/10/ Incorporated by reference to earlier filing on April 23, 1997, SEC File No.
33-14737, to the exhibit number indicated on that Form N-1A Registration
Statement.
*Filed herewith.
Item 25. Persons Controlled by or under Common Control with Registrant No person
is directly or indirectly controlled by Registrant.
The information in the Registrant's Statement of Additional Information dated
April 1, 1996 relating to ownership by Chubb Life Insurance Company of America
("Chubb Life") and its affiliated companies of outstanding shares of the Company
is incorporated herein by reference.
Chubb Life is a wholly-owned subsidiary of The Chubb Corporation, a New Jersey
corporation. Chubb Asset Managers, Inc. ("Chubb Asset"), a Delaware corporation,
which is the
C-5
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Investment adviser to the Registrant, is a wholly-owned subsidiary of The Chubb
Corporation. A diagram of the subsidiaries of The Chubb Corporation as
previously filed is incorporated herein by reference.
Item 26. Number of Holders of Securities
As of April 20, 2000.
(2)
(1) Number of
Title of Class Record Holders
-------------- --------------
Van Eck/Chubb Government Securities Fund; $.01 par value - Class A 369
Van Eck/Chubb Total Return Fund; $.01 par value - Class A 1369
Van Eck/Chubb Tax-Exempt Fund; $.01 par value - Class A 371
Van Eck/Chubb Growth and Income Fund; $.01 par value - Class A 2977
Van Eck/Chubb Global Income Fund; $.01 par value - Class A 1998
Chubb Life is the successor-in-interest to Chubb Life Insurance Company of
New Hampshire, which had provided the initial capital to the Company by
purchasing 100,000 shares of the Money Market Fund and 10,000 shares each 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, respectively.
Item 27. Indemnification
Reference is made to Article VII, Section 10 of the Registrant's Amended and
Restated Articles of Incorporation filed herein as Exhibit 1 to this
Registration Statement and to Article V of the Registrant's By-Laws filed herein
as Exhibit 2 to this Registration Statement. The Articles of Incorporation
provide that neither an officer nor director of the Registrant will be liable to
the Registrant or its shareholders for monetary damages for breach of fiduciary
duty as an officer or director, except to the extent such limitation of
liability is not otherwise permitted by law. The By-Laws provide that the
Registrant will indemnify its directors and officers to the extent permitted or
required by Maryland law. A resolution of the Board of Directors specifically
approving payment or advancement of expenses to an officer is required by the
By-Laws. Indemnification may not be made if the director or officer has incurred
liability by reason or willful misfeasance, bad faith, gross negligence or
reckless disregard of duties in the conduct of his/her office ("Disabling
Conduct"). The means of determining whether indemnification shall be made are
(1) a final decision by a court or other-body before
C-6
<PAGE>
whom the proceeding is brought that the director or officer was not liable by
reason of Disabling Conduct, or (2) in the absence of such a decision, a
reasonable determination, based on a review of the facts, that the director or
officer was not liable by reason of Disabling Conduct. Such latter determination
may be made either by (a) vote of a majority of directors who are neither
interested persons (as defined in the Investment Company Act of 1940) nor
parties to the proceeding or (b) independent legal counsel in a written opinion.
The advancement of legal expenses may not occur unless the director or officer
agrees to repay the advance (if it is determined that he/she is not entitled to
the indemnification) and one of three other conditions is satisfied: (1) the
director or officer provides security for his/her agreement to repay, (2) the
Registrant is insured against loss by reason of lawful advances, or '(3) the
directors who are not interested persons and are not parties to the proceedings,
or independent counsel in a written opinion, determine that there is reason to
believe that the director or officer will be found entitled to indemnification.
The directors and officers are currently covered for liabilities incurred
in their capacities as such directors and officers under the terms of a joint
liability insurance policy. This policy also covers the directors and officers
of Chubb Asset, Chubb Investment Advisory Corporation and Chubb America Fund,
Inc. The policy also insures the Registrant, Chubb Asset, Chubb Investment
Advisory Corporation and Chubb America Fund, Inc. for errors and omissions
liabilities.
Insofar as indemnification for liability arising under the Securities Act
of 1933 (the "Securities Act") may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the foregoing provisions, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
C-7
<PAGE>
Item 28. Business and Other Connections of Investment Adviser
Chubb Asset was formed in 1986 and was not previously engaged in any
business.
Reference is made to Form ADV of Chubb Asset (File No. 801 - 28901) as
currently on file with the Securities and Exchange Commission, and to the
caption "Management" in the Registrant's Prospectus and to the captions "The
Distributor", "Investment Advisery Services" and "Directors and Officers" in the
Registrant's Statement of Additional Information.
C-8
<PAGE>
ITEM 29. Principal underwriter
(a) Van Eck Securities Corporation, principal underwriter for the Registrant,
also distributes shares of Van Eck Worldwide Insurance Trust and Van Eck Funds.
(b) The following table presents certain information with respect to each
director and officer of Van Eck Securities Corporation:
<TABLE>
<CAPTION>
NAME AND PRINCIPAL POSITION AND OFFICES POSITION AND OFFICE
BUSINESS ADDRESS WITH UNDERWRITER WITH REGISTRANT
- ------------------ -------------------- -------------------
<S> <C> <C>
John C. van Eck Chairman and Direcor Chairman and Director
99 Park Avenue
New York, NY 10016
Jan van Eck President and Director None
99 Park Avenue
New York, NY 10016
Sigrid S. van Eck Vice President and Assistant Treasurer and Director None
575 Park Avenue
NY, NY 10021
Derek van Eck Director Vice President
99 Park Avenue
New York, NY 10016
Thomas Elwood Vice President, General Counsel and Secretary Vice President and Secretary
99 Park Avenue
New York, NY 10016
Bruce J. Smith Vice President and Chief Financial Officer, Treasurer, Controller Vice President and Treasurer
99 Park Avenue
New York, NY 10016
Susan C. Lashley Managing Director, Operations Vice President
99 Park Avenue
New York, NY 10016
Keith Fletcher Senior Managing Director None
99 Park Avenue
New York, NY 10016
Robin Kunhardt Director, Product Management None
99 Park Avenue
New York, NY 10016
(c) Not Applicable
</TABLE>
C-9
<PAGE>
Item 30. Location of Accounts and Records
The following entities prepare, maintain and preserve the records required by
Section 31(a) of the Investment Company Act for the Registrant. These records
include records relating to activities of these entities required to be
maintained under Rules 31a-1 and 31a-2 of the Investment Company Act, records
relating to applicable federal and state tax laws, and records under any other
law or administrative rules or procedures applicable to the Registrant. The
services are provided to the Registrant through written agreements between the
parties to the effect that such services will be provided to the Registrant for
such periods prescribed by the Rules and Regulations of the Securities and
Exchange Commission under the
C-10
<PAGE>
Investment Company Act and such records will be surrendered promptly on request:
Citibank, N.A., 111 Wall Street, New York, New York 10043 (records relating to
activities of the custodian and any subcustodian); Chubb Asset Managers, Inc.,
15 Mountain View Road, Warren, New Jersey 07061 (records relating to activities
of the investment adviser); Van Eck Securities Corporation, 99 Park Avenue, New
York, New York 10016 (records relating to activities of the Distributor);
Firstar Trust Company 615 East Michigan Street, Milwaukee, Wisconsin 53202-5207
(records relating to the activities of the Transfer Agent), Van Eck Associates
Corporation, 99 Park Avenue, New York, New York 10016 (records relating to
activities of the Administrator); and Chubb Investment Advisory Corporation, One
Granite Place, Concord, New Hampshire 03301 (certain books and records not
maintained by the Company's Custodian, investment adviser, Distributor, Transfer
Agent or Administrator).
Item 31. Management Services
Not applicable
Item 32. Undertakings
Not applicable.
C-11
<PAGE>
SIGNATURES
Pursuant to the requirement of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Post-Effective Amendment to the
Registration Statement pursuant to Rule 485(b) under the Securities Act of 1933,
and has duly caused this Amendment to the Registration Statement on Form N-1A to
be signed on its behalf of the undersigned, thereunto duly authorized, in the
City of New York, State of New York, on the 18th day of April 2000.
VAN ECK/CHUBB FUNDS, INC.
By: /s/ Michael O'Reilly
-------------------------------
Michael O'Reilly, President
POWER OF ATTORNEY
We, the undersigned officers and trustees of Van Eck/Chubb Funds, Inc.
(the "Funds"), do hereby severally constitute and appoint John C. van Eck,
Thomas H. Elwood and Dina C. Lee and each of them acting singly, as our true and
lawful attorneys, with full powers to them and each of them to sign for us, in
our names in the capacities indicated below, any and all amendments to the
Registration Statement of the Trust on Form N-1A filed with the Securities and
Exchange Commission to enable the Trust to comply with the provisions of the
Securities Act of 1933, as amended, and the Investments Company Act of 1940, as
amended, and all requirements and regulations of the Securities and exchange
Commission, hereby ratifying and confirming our signatures as they may be signed
by our said attorneys to any and all amendments to the Registration Statement.
IN WITNESS WHEREOF, we have hereunto set our hands on the date
indicated below.
Signature Title Date
- --------- ----- ----
/s/ John C. Van Eck Chairman April 18, 2000
- -------------------------
John C. Van Eck
/s/ Michael O' Reilly Director and President April 18, 2000
- -------------------------
Michael O' Reilly
/s/ Bruce J. Smith Chief Financial Officer April 18, 2000
- -------------------------
Bruce J. Smith
/s/ Jeremy H. Biggs Director April 18, 2000
- -------------------------
Jeremy H. Biggs
/s/ Wesley G. McCain Director April 18, 2000
- -------------------------
Wesley G. McCain
/s/ David J. Olderman Director April 18, 2000
- -------------------------
David J. Olderman
<PAGE>
Exhibit Index
-------------
Exhibit No. Item
- ----------- ----
Exhibit 11 Consent of Ernst & Young LLP
Exhibit 12 Chubb Asset Managers, Inc. Code of Ethics
Exhibit 27 Financial Data Schedule
EX-11
2
CONSENT OF INDEPENDENT AUDITORS
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Financial
Highlights" and "Independent Auditors" in the Statement of Additional
Information and to the incorporation by reference of our report dated February
10, 2000, in this Registration Statement (Form N-1A No. 33-14737) of Van
Eck/Chubb Funds, Inc.
ERNST & YOUNG LLP
New York, New York
April 18, 2000
CHUBB ASSET MANAGERS INC.
ACCESS PERSON'S
CODE OF CONDUCT
HANDBOOK
JULY 1999
Henry G. Gulick
Compliance Officer
Chubb Asset Managers, Inc.
15 Mountain View Road
Warren, New Jersey 07061
(908) 903-3561
<PAGE>
CHUBB ASSET MANAGERS, INC.
ACCESS PERSON'S
CODE OF CONDUCT
HANDBOOK
PREFACE
This handbook has been prepared for the use of Chubb Asset Managers, Inc.
Access Persons.
It contains copies of the Chubb Asset Managers, Inc. Code of Conduct, as
revised effective July 1999 as well as copies of the various forms used in
administering the Code of Conduct program.
Should you have any questions about the Code of Conduct or the forms at
any time, please feel free to contact the undersigned in my capacity as the
Chubb Asset Managers, Inc. Compliance Officer.
Henry G. Gulick
July 1999
<PAGE>
CHUBB ASSET MANAGERS, INC.
ACCESS PERSON'S
CODE OF CONDUCT
HANDBOOK
TABLE OF CONTENTS
PAGE
PREFACE
CHUBB ASSET MANAGERS, INC. CODE OF CONDUCT................................... 1
I. Purpose......................................................... 1
II. Federal Securities Law Standards................................ 3
III. Prohibited Transactions......................................... 4
IV. Procedures - Trading and Inside Information..................... 8
V. Reports of Personal Securities Trading and other Duties of the
Compliance Officer.............................................. 9
VI. Sanctions....................................................... 11
VII. Definitions..................................................... 12
APPENDICES
Listing of Access Persons and Operational Control Access Persons......... 15
10-Day Notice of Personal Securities Trading............................. 16
Access Person Statement of Compliance.................................... 17
Quarterly Securities Transaction Report.................................. 18
<PAGE>
Adopted as: The Code of Ethics
December 1, 1989
Revised to: The Code of Conduct
February 1992
January 1998
July 1999
CHUBB ASSET MANAGERS, INC.
CODE OF CONDUCT
Governing
Personal Securities Transactions
and
Prohibiting Misuse of Inside Information
in
compliance with
Rule 17(j)-1 under the Investment Company Act
Rule 204-2(a)(12) under the Investment Advisers Act
Section 204A of the Investment Advisers Act
Henry G. Gulick
Compliance Officer
Chubb Asset Managers, Inc.
15 Mountain View Road
P.O. Box 1615
Warren, NJ 07061-1615
(908) 903-3561
<PAGE>
CHUBB ASSET MANAGERS, INC. CODE OF CONDUCT JULY 1999
- --------------------------------------------------------------------------------
CHUBB ASSET MANAGERS, INC.
CODE OF CONDUCT
Governing Personal Securities Transactions
and Prohibiting Misuse of Inside Information
Revised Effective: July 1999
I. PURPOSE.
-------
This Code of Conduct ("Code") is intended to provide guidance to directors,
officers and employees of Chubb Asset Managers, Inc. ("Company") and certain
other Access Persons as to the minimum standards of conduct in personal
securities transactions that are consistent with the Company's responsibilities
to its clients, including Van Eck/Chubb Investment Funds and any other
registered investment company for which the Company acts as investment adviser
("Fund" or "Funds"), and to provide assurance that those employees, directors
and other Access Persons are in a position to act in the best interests of
clients of the Company and will act in compliance with applicable law,
specifically including the Insider Trading and Securities Fraud Enforcement Act
of 1988. Moreover, in the interests of avoiding even the appearance of improper
conduct, you will note this Code imposes standards which in some respects
actually exceed what may be legally required.
This Code is not intended to discourage personal securities investments or sound
personal investment programs on the part of those covered by the Code. It is
intended rather to assure that personal investing does not conflict with
fiduciary duties or legal requirements.
As a registered investment adviser, Chubb Asset Managers, Inc. and its
employees, officers and directors, have a fiduciary duty to first consider the
interests of the Company's clients in any securities transactions before their
own, and not to act regarding their personal accounts in a way which would
create a conflict with the interests of clients. As more fully described below,
this Code is designed to prevent at least certain specific types of personal
securities transactions:
(1) Trading by an individual during a period when the individual knows
that a securities recommendation is being considered to be made or
is made by the Company to any client prior to the client's acting on
the recommendation. Such trading could take advantage of, or could
avoid possible short-run market effects of, or have a harmful effect
on the client's transactions.
(2) Unusual trading through, or on recommendations made by, brokers or
dealers who provide research or execution services for the Company's
management of clients' accounts. Highly active, hot issue, or
unusually priced trading could motivate favoring a particular
broker-dealer without regard to whether it provides best available
execution of a client's portfolio transactions.
Moreover, this Code sets forth the Company's policy which forbids any of its
officers, directors or
1
<PAGE>
CHUBB ASSET MANAGERS, INC. CODE OF CONDUCT JULY 1999
- --------------------------------------------------------------------------------
employees as well as certain other Access Persons from trading, either
personally or on behalf of others, including clients of the Company, while
possessing material non-public information or communicating material non-public
information to others who might trade on the basis thereof. Such insider trading
or tipping violates law, is abusive of the securities markets and is of prime
concern to market regulators and enforcement authorities. The Company's policy
applies to every officer, director and employee of the Company as well as to
certain other Access Persons and extends to activities within and outside their
duties at the Company.
This Code prohibits such trading both directly and indirectly by a person
covered by this Code, including through partnerships, personal holding companies
or trusts over which such person has investment control or in which a beneficial
interest is held, or by any dependent or member of the person's immediate family
or household. It should also be noted that this Code applies to transactions in
derivative securities, such as options.
Each employee, officer, director and other Access Person should undertake to
have a reasonable understanding of and to comply with applicable Federal and
state laws and the rules of the Securities and Exchange Commission ("SEC")
governing his and her activities. Any person becoming aware of acts in violation
of applicable statutes or regulations or provisions of this Code should promptly
report the matter to the Compliance Officer. Each person should be sensitive not
only to actual conflicts but to the appearance of conflicts. Conduct violating
this Code can harm not only the person involved but clients and the reputation
of the Company. As set forth in Article VI below, violation of this code can be
expected to result in serious sanctions by the Company up to and including
dismissal. Moreover, violations could well result in civil or criminal
liability.
Each person covered by this Code will be given a copy of the Code annually by
the Compliance Officer and asked to sign and return a Statement of Compliance to
the Compliance Officer that s/he has received and read it, and that s/he agrees
to report all personal securities transactions as provided in this Code.
If you have any questions regarding whether a proposed act or transaction
involves a conflict of interest or material non-public information, the
submission of reports, or interpretation of this Code, do not hesitate to
consult the Compliance Officer. Except to the extent the records of the Company
are subject to inspection by the SEC or to legal process, inquiries, reports and
information will be held in confidence by the Compliance Officer and his or her
assistants and legal counsel, unless they reveal a violation that warrants
action by the Company or require a report to its Board of Directors.
Certain terms are capitalized when they appear in the Code of Conduct. They are
defined terms, and the definitions are important. Defined terms are defined
either immediately after their first use in this Code, or in the listings set
forth in the last section of the Code.
2
<PAGE>
CHUBB ASSET MANAGERS, INC. CODE OF CONDUCT JULY 1999
- --------------------------------------------------------------------------------
II. FEDERAL SECURITIES LAW STANDARDS.
--------------------------------
Rule 17j-1 under the Investment Company Act makes it unlawful for any affiliated
person of the Company in connection with the direct or indirect Purchase or Sale
of Securities Held or to be Acquired by any Fund:
1. To employ any device, scheme, or artifice to defraud any Fund;
2. To make to any Fund any untrue statement of a material fact or omit
to state to such Fund a material fact necessary in order to make the
statements made, in light of the circumstances under which they are
made, not misleading;
3. To engage in any act, transaction, practice or course of business
which operates or would operate as a fraud or deceit on any Fund; or
4. To engage in any fraudulent, deceptive or manipulative practices
with respect to any Fund.
This Rule requires the Company to adopt a written code of ethics containing
provisions reasonably necessary to prevent Access Persons from engaging in any
of the foregoing, and to use reasonable diligence and institute procedures
necessary to prevent violations of such code.
Rule 204-2(a) (12) under the Investment Advisers Act requires the Company: to
keep a record of every transaction in a security by any director or officer of
the Company, any employee who makes or participates in the determination of
recommendations or who in connection with his or her duties obtains information
concerning such recommendations prior to their effective public dissemination,
and any affiliated or controlling person of the Company who obtains such
information; and to institute adequate procedures and use reasonable diligence
to obtain promptly reports of all transactions required to be reported.
Section 204(A) of the Investment Advisers Act requires the Company to establish,
maintain and enforce written policies and procedures reasonably designed, taking
into consideration the nature of the Company's business, to prevent the misuse
in violation of Federal securities laws of material non-public information by
the Company or any person associated with the Company.
3
<PAGE>
CHUBB ASSET MANAGERS, INC. CODE OF CONDUCT JULY 1999
- --------------------------------------------------------------------------------
III. PROHIBITED AND RESTRICTEDTRANSACTIONS.
-------------------------------------
1. INTERESTS CONFLICTING WITH RECOMMENDATIONS TO CLIENTS OF THE COMPANY
--------------------------------------------------------------------
Subject to subsection 2, no Access Person shall directly or
indirectly engage in the Purchase or Sale of Securities in which
such Access Person has, or by reason of such transaction acquires,
any direct or indirect Beneficial Interest if such security, to that
Access Person's actual knowledge at the time of such purchase or
sale:
(a) is being considered for purchase or sale by any client*; or
(b) Is being purchased or sold by a client.
2. CERTAIN PRECLEARANCE TRANSACTIONS
Subject to subsection 3, all Access Persons are required to preclear
transactions as identified in (a), (b) and (c) of this subsection 2.
Preclearance requests are effective for 3 business days from and
including the date the clearance is granted. The following
transactions are subject to preclearance under this subsection 2:
a.) Initial Public Offerings (IPO). All Purchases directly or
indirectly by an Access Person of securities in an IPO (except
registered open-end investment company securities) are subject
to obtaining written preclearance from the Compliance Officer:
b.) Private Placement. All purchases and sales directly or
indirectly by an Access Person of unregistered securities
(private placements) are subject to obtaining written
preclearance from the Compliance Officer;
c.) Short-Term Trading and Other Transactions. With respect to
Access Persons who are determined by the Compliance Officer to
have operational control over investment transactions of the
Company ("Operational Control Access Persons") and who
therefore are required under Article V of this Code to file a
"10-day Notice of Personal Trading Report", all purchases or
sales directly or indirectly by such Operational Control
Access Persons of securities (other than those transactions
which are required or authorized by other provisions of this
Code to be subject to obtaining preclearance from the
Compliance Officer) are subject to obtaining preclearance in
writing from the Company's designated Control Officer in order
to facilitate the elimination of potential conflicts
including, among others, those relating to short-term (60 days
or less) trading;
* A Security is being considered for purchase or sale beginning when a
recommendation to purchase or sell such security has been made and communicated
or, with respect to an Access Person making or participating in the
recommendation, when such person seriously considers making such a
recommendation. A security will normally no longer be subject to these
restrictions after a determination is made not to purchase or sell the security
for the account of any client or after 15 days have elapsed since the buying or
selling program for any client has been completed.
4
<PAGE>
CHUBB ASSET MANAGERS, INC. CODE OF CONDUCT JULY 1999
- --------------------------------------------------------------------------------
provided however, the written preclearance requirements of this
Section III.2.c.) shall not apply to:
(i) transactions in securities issued by any company included in
the Standard and Poor's 500 Stock Index; or
(ii) transactions during any calendar month of 201 or less shares
and in an amount not exceeding $5,000.
3. THE PROHIBITIONS AND RESTRICTIONS OF SUBSECTION 1 AND 2 DO NOT APPLY
--------------------------------------------------------------------
TO:
---
(a) Purchases or sales effected in any account over which the
Access Person has no direct or indirect influence or control;
or
(b) Purchases or sales of securities which are not eligible for
purchase or sale by any client. If there is any doubt as to
which securities are eligible, consult the Compliance Officer;
or
(c) Purchases or sales which are non-volitional on the part of
either the Access Person or the client; or
(d) Purchases which are part of an automatic dividend reinvestment
plan; or
(e) Purchases effected upon the exercise of rights issued by an
issuer pro rata to all holders of a class of its securities,
to the extent such rights were acquired from such issuer, and
sales of such rights so acquired; or
(f) Purchases or sales which receive the prior approval of the
Compliance Officer because (i) they are only remotely
potentially harmful to a client in that they would be unlikely
to affect a highly institutional market; or (ii) they are
clearly not related economically to the securities to be
purchased, sold or held by any client; or
(g) Purchases or sales of (i) shares of registered open-end
investment companies, (ii) securities issued by the government
of the United States, (iii) securities issued or guaranteed as
to principal or interest by the United States or certain
instrumentalities of the government of the United States (such
as FNMA and GNMA) which mature within 12 months, (iv) bankers'
acceptances and bank certificates of deposit, (v) commercial
paper and (vi) such other money market instruments as are
designated by the Compliance Officer.
4. CONFLICTING INTEREST WITH BEST EXECUTION FOR CLIENT
---------------------------------------------------
No Access Person placing orders for clients with brokers or dealers shall
purchase or sell, directly or indirectly, any security in which such person has,
or by reason of such transaction acquires, any direct or indirect Beneficial
Interest from, to or through such brokers or dealers if such transaction
receives or
5
<PAGE>
CHUBB ASSET MANAGERS, INC. CODE OF CONDUCT JULY 1999
- --------------------------------------------------------------------------------
represents special treatment in relation to its volume or terms or
is based on recommendations made by such brokers or dealers.
5. INSIDER TRADING
---------------
No Access Person or employee of the Company shall purchase or sell, directly or
indirectly, personally or on behalf of others, including clients, any security
while in possession of material non-public information, or communicate material
non-public information to others ("tipping") in violation of the law. This
prohibition extends to activities within and outside such person's duties at the
Company and,
(a) Information is generally considered material when there is a
substantial likelihood that a reasonable investor would
consider it important in making his or her investment
decision, or when it is reasonably likely to have a
substantial effect on the price of a company's securities.
Examples include, but are not limited to, dividend changes,
earnings estimates, changes in previously released earnings
estimates, significant merger or acquisition proposals or
agreements, major litigation, liquidation problems and
extraordinary management developments. Material information
does not have to relate to a company's business, but can
include knowledge of a forthcoming report or recommendation
concerning an issuer's securities that will have a significant
market effect.
(b) Information is generally considered non-public until it has
been effectively communicated to the marketplace. One must be
able to point to some fact to show that the information is
generally public. Examples would include information found in
a report filed with the SEC, or appearing on the Dow Jones
broad tape or in publications of general circulation.
(c) It is unlawful not only to use inside information by trading
while in possession of it but also to communicate (tip) such
information to others who trade on the bases of it.
6. PENALTIES FOR INSIDER TRADING.
-----------------------------
Penalties for trading on or communicating material non-public information are
severe, both for individuals involved in such unlawful conduct and their
employers. A person, for example can be subject to some or all of the penalties
below even if he or she does not personally benefit from the violation.
Penalties include:
- civil injunctions
- treble damages
- disgorgement of profits
- jail sentences
- fines for the person who committed the violation of up to
three times the profit gained or loss avoided, whether or not
the person actually benefitted, and
- fines for the employer or other controlling person of up to
the greater of $1,000,000 or three times the amount of the
profit gained or loss avoided.
6
<PAGE>
CHUBB ASSET MANAGERS, INC. CODE OF CONDUCT JULY 1999
- --------------------------------------------------------------------------------
In addition, as set forth in Article VI below any violation of this code can be
expected to result in serious sanctions by the Company up to and including
dismissal of the persons involved.
7. GIFTS
-----
No Access Person may accept gifts or entertainment of more than nominal value
from any person that does business with or on behalf of the Company or its
clients, or any of their respective affiliates.
8. BOARD MEMBERSHIP
----------------
Approval from the Compliance Officer is required before any Access Person is
permitted to serve as a board member of any for-profit organization.
7
<PAGE>
CHUBB ASSET MANAGERS, INC. CODE OF CONDUCT JULY 1999
- --------------------------------------------------------------------------------
IV. PROCEDURES - TRADING AND INSIDE INFORMATION
-------------------------------------------
The following procedures have been established to aid our officers, directors
and employees in avoiding insider trading, and to aid the Company in preventing,
detecting and imposing sanctions against insider trading. Every officer,
director and employee must follow these procedures or risk serious sanctions,
including dismissal, substantial personal liability and criminal penalties. If
you have any questions about these procedures consult the Compliance Officer.
1. IDENTIFYING INSIDE INFORMATION.
------------------------------
Before trading for yourself or others in the securities of a company about which
you may have potential inside information, ask yourself the following questions:
a) Is the information material? Is this information that an
investor might consider important in making his or her
investment decisions? Is this information that might
substantially affect the market price of the securities if
generally disclosed?
b) Is the information non-public? To whom has this information
been provided? Has the information been effectively
communicated to the marketplace by being published in REUTERS,
THE WALL STREET JOURNAL, other publications of general
circulation or a report filed with the SEC?
If, after consideration of the above, you believe that the information is
material and non-public, or if you have questions as to whether the information
is material and non-public, you should take the following steps;
i. Report the matter immediately to the Compliance Officer, including
the date and time received, by whom and how the information was
received.
ii. Do not purchase or sell the securities on behalf of yourself or
others.
iii. Do not communicate the information other than to the Compliance
Officer.
iv. Information in your possession that you identify as material and
non-public should be placed in a secured area and access to computer
files containing material non-public information should be
restricted.
v. Notify the Compliance Officer immediately upon conveying any
potentially material, non-public information to anyone else within
the Chubb group of companies, including the date and time the
information was conveyed, by whom and how the information was
received. (Material, non-public information must sometimes be
conveyed for valid business reasons, e.g., to take some action other
than trading in securities.)
vi. After the Compliance Officer has reviewed the issue, you will be
instructed to continue the prohibitions against trading and
communication, or you will be allowed to trade and communicate the
information.
8
<PAGE>
CHUBB ASSET MANAGERS, INC. CODE OF CONDUCT JULY 1999
- --------------------------------------------------------------------------------
V. REPORTS OF PERSONAL SECURITIES TRADING AND OTHER DUTIES OF THE COMPLIANCE
--------------------------------------------------------------------------
OFFICER.
--------
For purposes of Rule 204-2(a)(12), as a designated Access Person you must submit
to the Compliance Officer within 10 days after the end of each calendar quarter
a report (the "Quarterly Securities Transaction Report") of each securities
transaction in which you, or your family (including your spouse, minor children
and relatives who share your home), or trusts of which you are trustee or in
which you have or acquire any direct or indirect Beneficial Interest. Written
authorization excepting specific kinds of personal accounts or particular kinds
of transactions from these reporting requirements may be granted in the
discretion of the Compliance Officer. One example of a possible exception may be
a trust account in which you have a Beneficial Interest but do not have the
right to direct investments. No such exception shall be granted, however, for
any personal account where investment discretion is retained, or where the
personal account may be otherwise used to violate these policies and procedures.
Exempt from such reporting requirements under Rule 204-2(a)(12) are the
following: (a) transactions effected in any account over which neither you, nor
the Company, nor any other Access Person has any direct or indirect influence or
control; (b) transactions in securities issued by affiliated or unaffiliated
registered open-end investment companies; and (c) transactions in securities
which are direct obligations of The United States.
Please note that due to the express wording of Rule 204-2(a)(12) as an Access
Person you are required to report certain types of transactions (such as
automatic dividend reinvestment plan transactions, or commercial paper
transactions) even though such transactions may not be "prohibited" under Rule
17(j) or Section 204A as discussed above. Further, these Rule 204-2(a)(12)
reporting requirements apply regardless of whether or not the subject securities
are Securities Held or to be Acquired by a Fund or Client of the Company.
The Quarterly Securities Transaction Report shall include the name of the
security, date and nature of the transaction, quantity, price and the name of
the broker, dealer or bank through which the transaction was effected. If no
reportable transactions occurred during the applicable quarter, the Quarterly
Securities Transaction report should so state.
In addition, with respect to all securities transactions reportable in the
Quarterly Securities Transaction Reports, those certain Access Persons who are
specially identified and designated for such purposes by the Compliance Officer
as having operational control over investment transactions of the Company, must
also: (1) obtain written preclearance from the Company's Control Officer as set
forth in Item III.2.c.) above; and (2) submit to the Compliance Officer a report
(the "10-Day Notice of Personal Trading Report") of all such securities
transactions within 10 days of the transaction trade date.
The Compliance Officer will prepare and furnish forms on which such 10-Day and
Quarterly Reports are to be made, but may also accept in their place a directive
to your broker to send duplicate confirmations of all trades to the Compliance
Officer. The 10-Day and Quarterly Reports will be maintained and filed by the
Compliance Officer as a record of security transactions by Access Persons as
required by the securities laws. The reports will be available for reference
during any compliance investigation.
9
<PAGE>
CHUBB ASSET MANAGERS, INC. CODE OF CONDUCT JULY 1999
- --------------------------------------------------------------------------------
Personal securities transactions will be reviewed by the Compliance Officer for
signs of any unusual trades or trading patterns which may indicate that such
trades are being made based on non-public material information or for
indications of possible other violations of this Code.
The Compliance Officer shall be responsible for distributing this Code to each
employee, officer and director of the Company and to other Access Persons at
least annually, and for identifying and advising each Access Person of his or
her status as such. The Compliance Officer shall be responsible for maintaining
the records required by Rule 17j-1 of the Investment Company Act and Rule 204-2
(a) (12) of the Investment Advisers Act and by this Code and for reviewing all
reports of transactions filed pursuant to this Article to ascertain whether any
violation of this Code may have occurred, and shall report each violative or
questionable transaction to the Board of Directors of the Company. The
Compliance Officer shall also report to the Board of Directors of the Company on
at least a quarterly basis with respect to the operation of this Code and
related procedures. Such Officer may require other reports, specially or
periodically, at his or her discretion.
Any Access Person having purchased or sold any direct or indirect Beneficial
Interest in any security within 15 days of such security being considered for
purchase or sale by any client shall, as soon as s/he becomes aware of such
consideration, immediately report this fact and the nature of his or her
interest to the Compliance Officer. If feasible within the applicable time
constraints, such person shall refrain from participating in or influencing any
such recommendation within the specified 15-day period unless the Compliance
Officer has approved of such person's participation in the recommendation
process. If advance review with the Compliance Officer is not practical due to
applicable time constraints, however, then the Access Person may participate in
such recommendation process without such prior approval from the Compliance
Officer, but only on the condition that such Access Person must report her or
his participation in such recommendation process to the Compliance Officer
within 10 days after such participation.
10
<PAGE>
VI. SANCTIONS.
---------
Upon discovering a violation of this Code, the Board of Directors of the Company
may impose such sanctions as it deems appropriate. These may include, among
others, a request that any profits or reduction in losses realized by a person
subject to this Code resulting from the prohibited conduct be paid over to the
Company; a letter of censure; or suspension or termination of the person from
association with the Company. All material violations of this Code and any
sanctions imposed with respect thereto shall be reported periodically to the
Board of Directors of the Funds which respect to whose securities the violation
occurred.
11
<PAGE>
CHUBB ASSET MANAGERS, INC. CODE OF CONDUCT JULY 1999
- --------------------------------------------------------------------------------
VII. DEFINITIONS.
-----------
"Access Person" means:
(1) Any director or officer of the Company;
(2) Any employee of the Company (or of any company in a control
relationship to the Company) who, in connection with her or his
regular functions or duties, makes, participates in, or obtains
information regarding the purchase or sale of a security by a
client, or whose functions relate to the making of any
recommendation with respect to such purchases or sales, including
any employee who places orders or otherwise arranges for
transactions for any client but excluding any employee who received
no information about current recommendations or trading;
(3) Any natural person in a control relationship to the Company who
obtains information (other than publicly available information)
concerning recommendations made to any client with regard to the
purchase or sale of a security; and
(4) Such other persons as may be designated by the Compliance Officer.
"Beneficial Interest" is a pecuniary interest, as interpreted in the same manner
as in determining whether a person is subject to Section 16 of the Securities
Exchange Act of 1934 and the rules thereunder, except that the determination of
direct and indirect beneficial interest shall apply to all securities which an
Access Person has or acquires. This would include among other examples,
securities owned by a spouse or minor child, a relative who shares your home,
any present interest in a trust or estate, certain interests in corporations and
partnerships and most arrangements under which you have a present right to
acquire ownership of a security.
"Control Officer" shall be the person designated by the President of the Company
to perform such duties, provided that to the extent that the person so
designated would otherwise be the direct subject of any particular decision or
action of the Company Recorder, then, for the limited purposes of any such
decision or action, the President of the Company shall serve as the Control
Officer.
"Compliance Officer" shall be the person designated by the Board of Directors of
the Company to perform such duties, provided that to the extent that the person
so designated would otherwise be the direct subject of any particular decision
or action of the Compliance Officer, then, for the limited purposes of any such
decision or action, the President of the Company shall serve as the Compliance
Officer.
"Operational Control Access Person" means those Access Persons who are
determined by the Compliance Officer to have operational control over the
investment transactions of the Company.
"Purchase or Sale of Securities" includes, inter alia, writing an option to
purchase or sell the security, the acquisition or disposition of an option,
warrant, right or other interest relating to a security, and any security
presently convertible into or exchangeable for a security held or to be acquired
by a client.
12
<PAGE>
CHUBB ASSET MANAGERS, INC. CODE OF CONDUCT JULY 1999
- --------------------------------------------------------------------------------
"Securities Held or to be Acquired" by a client or Fund means any security
which, within the most recent 15 days, (i) is or has been so held or (ii) is
being or has been so considered for purchase by such clients or Fund.
13
<PAGE>
CHUBB ASSET MANAGERS, INC. CODE OF CONDUCT JULY 1999
- --------------------------------------------------------------------------------
APPENDICES
14
<PAGE>
CHUBB ASSET MANAGERS, INC. CODE OF CONDUCT JULY 1999
- --------------------------------------------------------------------------------
CHUBB ASSET MANAGERS, INC.
--------------------------
LIST OF ACCESS PERSONS AND OPERATIONAL CONTROL ACCESS PERSONS
-------------------------------------------------------------
ACCESS PERSONS
--------------
INDIVIDUAL TITLE
---------- -----
Gail E. Devlin Director
Dean R. O'Hare Director, Chairman and Chief Executive Officer
Henry G. Gulick Secretary
Philip J. Sempier Treasurer
Conceta Gaglia Advisory Person/Representative
Shirlene Moore Advisory Person/Representative
Rose Marie Buckle Advisory Person/Representative
Lynn Peoples Advisory Person/Representative
Pamela M. Siana Advisory Person/Representative
Tammie Vosburg Advisory Person/Representative
OPERATIONAL CONTROL ACCESS PERSONS
----------------------------------
Michael O'Reilly Director, President and Chief Operating Officer
Roger Brookhouse Senior Vice President
Frederick W. Gaertner Senior Vice President
Ned I. Gerstman Senior Vice President
Marjorie D. Raines Senior Vice President
Robert Witkoff Senior Vice President
Thomas J. Swartz, III Vice President
Paul R. Geyer Vice President
William Clarkson Vice President
Emma Fishwick Vice President
Peter Johnson Assistant Vice President
Charles Chesebrough Advisory Person/Representative
Brian Gingrich Advisory Person/Representative
15
<PAGE>
CHUBB ASSET MANAGERS, INC. CODE OF CONDUCT JULY 1999
- --------------------------------------------------------------------------------
CHUBB ASSET MANAGERS, INC.
ACCESS PERSON STATEMENT OF COMPLIANCE
FULL NAME:
-------------------------------------------------------
SPOUSE'S NAME:
---------------------------------------------------
CHILDREN'S NAMES: ---------------------
---------------------
---------------------
STATEMENT OF COMPLIANCE
I HAVE READ AND REVIEWED THE CHUBB ASSET MANAGERS CODE OF CONDUCT AS REVISED
EFFECTIVE JULY 1999 AND AGREE TO COMPLY FULLY WITH THE CODE OF CONDUCT. I
UNDERSTAND THAT ANY VIOLATION OF THE CODE OR FAILURE TO COMPLY WITH THE
PROCEDURES COULD NOT ONLY RESULT IN MY IMMEDIATE DISMISSAL, BUT MAY ALSO SUBJECT
ME, MY FAMILY, THE COMPANY, AND THE COMPANY'S DIRECTORS AND OFFICERS TO
REGULATORY, CIVIL AND CRIMINAL SANCTIONS.
AS PART OF MY COMPLIANCE WITH THE CODE OF CONDUCT, I UNDERSTAND THAT I MUST
REPORT TO THE COMPLIANCE OFFICER ALL SECURITIES TRANSACTIONS AS REQUIRED BY
ARTICLE V OF THE CODE ON THE PROVIDED QUARTERLY SECURITIES TRANSACTION REPORT
FORM (OR WITH THE APPROVAL OF THE COMPLIANCE OFFICER ARRANGE TO HAVE REPORTED BY
DUPLICATE BROKER CONFIRMATIONS) NOT LATER THAN 10 DAYS AFTER THE END OF EACH
CALENDAR QUARTER.
____ FURTHER, IF I HAVE INITIALED THE SPACE WHICH APPEARS TO THE LEFT OF THIS
SENTENCE, I ALSO CONFIRM MY UNDERSTANDING THAT I HAVE BEEN SPECIALLY
IDENTIFIED AND DESIGNATED BY THE COMPLIANCE OFFICER AS A PERSON WITH
OPERATIONAL CONTROL OVER THE COMPANY'S INVESTMENTS (AN "OPERATIONAL
CONTROL ACCESS PERSON") AND WHO THEREFORE SHOULD FILE 10-DAY NOTICE OF
PERSONAL SECURITIES TRADING REPORTS IN ADDITION TO THE ABOVE-MENTIONED
QUARTERLY REPORTS. BY SUCH INITIALS I CONFIRM MY UNDERSTANDING THAT AS
PART OF MY COMPLIANCE WITH THE CODE OF CONDUCT, I MUST REPORT TO THE
COMPLIANCE OFFICER ALL SECURITIES TRANSACTIONS AS REQUIRED BY ARTICLE V OF
THE CODE ON THE PROVIDED 10-DAY NOTICE OF PERSONAL SECURITIES TRADING
REPORT FORM (OR WITH THE APPROVAL OF THE COMPLIANCE OFFICER ARRANGE TO
HAVE REPORTED BY DUPLICATE BROKER CONFIRMATIONS) NOT LATER THAN 10 DAYS
AFTER THE TRADE DATE.
I UNDERSTAND THAT THIS INFORMATION WILL BE HELD IN STRICTEST CONFIDENCE AND WILL
BE USED ONLY FOR THE PURPOSE OF ENSURING COMPLIANCE WITH APPLICABLE LAW AND THE
PROVISIONS OF THE CODE.
- ----------------------- ------------------------------
DATE NAME (PLEASE PRINT)
------------------------------
SIGNATURE
THIS FORM SHOULD BE COMPLETED IN ITS ENTIRETY AND DELIVERED TO: HENRY G. GULICK,
COMPLIANCE OFFICER, CHUBB ASSET MANAGERS, INC. 15 MOUNTAIN VIEW ROAD, P.O. BOX
1615, WARREN, NJ 07061-1615, TELEPHONE: (908) 903-3561. FACSIMILE: (908)
903-2003.
26
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 1
<NAME> GOVERNMENT SECURITIES FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<INVESTMENTS-AT-COST> 30,009,169
<INVESTMENTS-AT-VALUE> 29,060,083
<RECEIVABLES> 323,048
<ASSETS-OTHER> 553,486
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 29,936,617
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<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 45,709
<TOTAL-LIABILITIES> 45,709
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 31,100,028
<SHARES-COMMON-STOCK> 2,891,064
<SHARES-COMMON-PRIOR> 2,984,712
<ACCUMULATED-NII-CURRENT> 21,141
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (281,175)
<ACCUM-APPREC-OR-DEPREC> (949,086)
<NET-ASSETS> 29,890,908
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,924,122
<OTHER-INCOME> 0
<EXPENSES-NET> 313,174
<NET-INVESTMENT-INCOME> 1,610,948
<REALIZED-GAINS-CURRENT> (39,186)
<APPREC-INCREASE-CURRENT> (1,950,772)
<NET-CHANGE-FROM-OPS> (379,010)
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<DISTRIBUTIONS-OF-INCOME> 1,610,948
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
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<NET-CHANGE-IN-ASSETS> (1,610,947)
<ACCUMULATED-NII-PRIOR> 16,625
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<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 237,474
<GROSS-ADVISORY-FEES> 62,563
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 470,255
<AVERAGE-NET-ASSETS> 31,281,500
<PER-SHARE-NAV-BEGIN> 11.02
<PER-SHARE-NII> 0.550
<PER-SHARE-GAIN-APPREC> (0.680)
<PER-SHARE-DIVIDEND> 0.550
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 10.340
<EXPENSE-RATIO> 1.00
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 2
<NAME> TOTAL RETURN FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<INVESTMENTS-AT-COST> 30,971,531
<INVESTMENTS-AT-VALUE> 38,731,124
<RECEIVABLES> 1,156,044
<ASSETS-OTHER> 271,040
<OTHER-ITEMS-ASSETS> 2,753
<TOTAL-ASSETS> 40,160,961
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 101,526
<TOTAL-LIABILITIES> 101,526
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 32,248,528
<SHARES-COMMON-STOCK> 2,079,710
<SHARES-COMMON-PRIOR> 2,223,505
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 11,910
<ACCUMULATED-NET-GAINS> 18,607
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 7,759,593
<NET-ASSETS> 40,059,435
<DIVIDEND-INCOME> 260,549
<INTEREST-INCOME> 1,060,897
<OTHER-INCOME> 0
<EXPENSES-NET> 582,228
<NET-INVESTMENT-INCOME> 739,218
<REALIZED-GAINS-CURRENT> (1,793,113)
<APPREC-INCREASE-CURRENT> 92,901
<NET-CHANGE-FROM-OPS> (960,994)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 788,420
<DISTRIBUTIONS-OF-GAINS> 5,586,753
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 55,017
<NUMBER-OF-SHARES-REDEEMED> 525,499
<SHARES-REINVESTED> 326,687
<NET-CHANGE-IN-ASSETS> (2,795,138)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 5,423
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 39,805
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 582,228
<AVERAGE-NET-ASSETS> 19,902,500
<PER-SHARE-NAV-BEGIN> 19.270
<PER-SHARE-NII> 0.417
<PER-SHARE-GAIN-APPREC> 3.113
<PER-SHARE-DIVIDEND> (0.410)
<PER-SHARE-DISTRIBUTIONS> (3.130)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 19.260
<EXPENSE-RATIO> 1.32
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 3
<NAME> TAX EXEMPT FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<INVESTMENTS-AT-COST> 28,095,248
<INVESTMENTS-AT-VALUE> 27,704,695
<RECEIVABLES> 450,266
<ASSETS-OTHER> 390,066
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 28,545,027
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 136,428
<TOTAL-LIABILITIES> 136,428
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 28,807,826
<SHARES-COMMON-STOCK> 2,404,028
<SHARES-COMMON-PRIOR> 2,488,641
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (8,119)
<ACCUMULATED-NET-GAINS> (555)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> (390,553)
<NET-ASSETS> 28,408,599
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,613,192
<OTHER-INCOME> 0
<EXPENSES-NET> 304,392
<NET-INVESTMENT-INCOME> 1,308,800
<REALIZED-GAINS-CURRENT> 10,244
<APPREC-INCREASE-CURRENT> (2,317,247)
<NET-CHANGE-FROM-OPS> (998,203)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,307,690
<DISTRIBUTIONS-OF-GAINS> (12,009)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 193,058
<NUMBER-OF-SHARES-REDEEMED> 372,252
<SHARES-REINVESTED> 98,581
<NET-CHANGE-IN-ASSETS> (975,602)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 12,570
<OVERDIST-NET-GAINS-PRIOR> 28
<GROSS-ADVISORY-FEES> 60,856
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 464,173
<AVERAGE-NET-ASSETS> 30,428,000
<PER-SHARE-NAV-BEGIN> 12.740
<PER-SHARE-NII> 0.533
<PER-SHARE-GAIN-APPREC> (0.935)
<PER-SHARE-DIVIDEND> (0.533)
<PER-SHARE-DISTRIBUTIONS> (0.005)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 11.800
<EXPENSE-RATIO> 1.00
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 4
<NAME> GROWTH & INCOME FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<INVESTMENTS-AT-COST> 60,814,770
<INVESTMENTS-AT-VALUE> 84,140,785
<RECEIVABLES> 141,769
<ASSETS-OTHER> 10,946,295
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 95,228,849
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 389,280
<TOTAL-LIABILITIES> 389,280
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 73,306,667
<SHARES-COMMON-STOCK> 3,420,590
<SHARES-COMMON-PRIOR> 2,841,294
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (1,793,113)
<OVERDISTRIBUTION-GAINS> 23,326,015
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 94,839,569
<DIVIDEND-INCOME> 640,524
<INTEREST-INCOME> 118,963
<OTHER-INCOME> 0
<EXPENSES-NET> 862,418
<NET-INVESTMENT-INCOME> (107,218)
<REALIZED-GAINS-CURRENT> 8,592,899
<APPREC-INCREASE-CURRENT> 11,647,179
<NET-CHANGE-FROM-OPS> 20,132,860
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 91,029
<NUMBER-OF-SHARES-REDEEMED> 865,772
<SHARES-REINVESTED> 353,240
<NET-CHANGE-IN-ASSETS> (10,052,985)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> (13,343)
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 130,692
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 985,604
<AVERAGE-NET-ASSETS> 65,346,000
<PER-SHARE-NAV-BEGIN> 23.960
<PER-SHARE-NII> (0.030)
<PER-SHARE-GAIN-APPREC> 7.080
<PER-SHARE-DIVIDEND> 0.000
<PER-SHARE-DISTRIBUTIONS> (3.280)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 27.730
<EXPENSE-RATIO> 1.32
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 5
<NAME> GLOBAL INCOME FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<INVESTMENTS-AT-COST> 76,002,819
<INVESTMENTS-AT-VALUE> 70,699,916
<RECEIVABLES> 5,935,259
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 3,873,979
<TOTAL-ASSETS> 76,635,175
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 550,272
<TOTAL-LIABILITIES> 550,272
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 86,557,174
<SHARES-COMMON-STOCK> 8,557,912
<SHARES-COMMON-PRIOR> 8,842,111
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (820,361)
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (4,240,798)
<ACCUM-APPREC-OR-DEPREC> (5,411,112)
<NET-ASSETS> 76,084,903
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 5,083,671
<OTHER-INCOME> (2,063)
<EXPENSES-NET> 1,110,734
<NET-INVESTMENT-INCOME> 3,970,874
<REALIZED-GAINS-CURRENT> (2,625,168)
<APPREC-INCREASE-CURRENT> (9,794,204)
<NET-CHANGE-FROM-OPS> (8,448,498)
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (2,797,922)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> (1,172,843)
<NUMBER-OF-SHARES-SOLD> 417,998
<NUMBER-OF-SHARES-REDEEMED> 1,080,087
<SHARES-REINVESTED> 377,890
<NET-CHANGE-IN-ASSETS> (15,128,348)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 820,361
<OVERDIST-NET-GAINS-PRIOR> 2,266,814
<GROSS-ADVISORY-FEES> 164,552
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,169,520
<AVERAGE-NET-ASSETS> 82,276,000
<PER-SHARE-NAV-BEGIN> 10.320
<PER-SHARE-NII> 0.458
<PER-SHARE-GAIN-APPREC> 1.430
<PER-SHARE-DIVIDEND> (0.323)
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> (0.135)
<PER-SHARE-NAV-END> 8.890
<EXPENSE-RATIO> 1.35
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 6
<NAME> CAPITAL APPRECIATION FUND
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<INVESTMENTS-AT-COST> 0
<INVESTMENTS-AT-VALUE> 0
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 0
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 0
<NET-ASSETS> 0
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 0
<OTHER-INCOME> 0
<EXPENSES-NET> 0
<NET-INVESTMENT-INCOME> 0
<REALIZED-GAINS-CURRENT> 0
<APPREC-INCREASE-CURRENT> 0
<NET-CHANGE-FROM-OPS> 0
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 0
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 0.000
<PER-SHARE-NII> 0.000
<PER-SHARE-GAIN-APPREC> 0.000
<PER-SHARE-DIVIDEND> 0.000
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 0.000
<EXPENSE-RATIO> 0.00
</TABLE>
