N-CSRS 1 c32875_ncsrs.txt ============================= OMB APPROVAL ============================= OMB Number: 3235-0570 Expires: Nov. 30, 2005 Estimated average burden hours per response: 5.0 ============================= UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSRS CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act file number 811-04297 VAN ECK FUNDS (Exact name of registrant as specified in charter) 99 Park Avenue, New York, NY 10016 (Address of principal executive offices) (Zip code) Van Eck Associates Corporation 99 PARK AVENUE, NEW YORK, NY 10016 (Name and address of agent for service) Registrant's telephone number, including area code: (212) 687-5200 Date of fiscal year end: DECEMBER 31 Date of reporting period: JUNE 30, 2004 ITEM 1. REPORT TO SHAREHOLDERS. VAN ECK GLOBAL -------------------------------------------------------------------------------- SEMI-ANNUAL REPORT JUNE 30, 2004 VAN ECK FUNDS VAN ECK FUNDS, INC. EMERGING MARKETS FUND MID CAP VALUE FUND GLOBAL HARD ASSETS FUND INTERNATIONAL INVESTORS GOLD FUND U.S. GOVERNMENT MONEY FUND GLOBAL INVESTMENTS SINCE 1955 The information in the shareholder letters represents the personal opinions of the individual portfolio manager(s) and may differ from those of other portfolio managers or of the firm as a whole. This information is not intended to be a forecast of future events, a guarantee of future results or investment advice. Also, please note that any discussion of the Fund's holdings, the Fund's performance, and the views of the portfolio manager(s) are as of June 30, 2004, and are subject to change. EMERGING MARKETS FUND -------------------------------------------------------------------------------- Dear Shareholder: The Van Eck Emerging Markets Fund provided a total return of -8.13% for the six months ended June 30, 2004. In comparison, emerging markets in general returned -0.78% for the same period, as measured by the Morgan Stanley Capital International (MSCI) Emerging Markets Free Index.(1) GENERAL MARKET & ECONOMIC REVIEW The global emerging equity markets produced modestly positive returns during the first quarter of 2004, but fell dramatically during the second quarter, as the environment quickly shifted from risk seeking to risk aversion. Concerns over potentially imminent increases in U.S. interest rates, ongoing conflict in Iraq, and rising oil prices dominated. Higher energy prices and their potential impact on developed market demand for oil was of particular concern to several of the emerging markets that depend on oil exports for a significant portion of their Gross Domestic Product. Perhaps the major issue affecting the emerging markets during the period was China, as government authorities there sought to slow down its economy through increases in reserve and capital requirements in several industries, including steel, aluminum, cement, and real estate. Given the experience of the last economic landing and the more recent contradictory remarks made by officials, there developed a great deal of skepticism about authorities' ability to engineer a "soft landing", I.E., a moderate slowdown. Cyclical stocks as well as emerging market equities geared toward developments in China were hit hard. Another factor that dragged down the emerging markets' semi-annual performance was significant profit-taking after a strong run in 2003 and as the yield curve flattened and leading indicators led many to believe that global economies may be peaking. Finally, corporate earnings prospects for the third quarter of 2004 were relatively muted. FUND REVIEW The primary factors affecting the Fund's relative performance were disappointing results from Fund holdings in South Korea and Taiwan, and underweighted positions in Mexico and the Eastern European markets, excluding Russia, which performed well during the semi-annual period. Further affecting relative results was the portfolio's bias toward cyclical stocks that we believed would benefit most from rebounding global economies. Domestically oriented, more defensive, late-cycle sectors, such as telecommunications, utilities, and healthcare, performed better during the first half of the year. The Fund's four largest allocations at the end of the period were in South Korea, Taiwan, Brazil and South Africa (representing 28.0%, 11.3%, 11.0% and 9.2% of Fund net assets, respectively, as of June 30). South Korea's equity market(2) was flat for the six months, while the remaining markets produced total returns of -0.33%, -10.86% and +6.01%, in U.S. dollar terms, respectively, during the first half of 2004. In terms of regional weightings, we continued to favor Asia at the expense of Latin America, Emerging Europe, and Africa. The Fund's weighting in Asia detracted from its relative six-month performance, as the other regions performed comparatively better during the period. The following is a review of several of the key emerging markets, in approximate order of the Fund's allocation to each. SOUTH KOREA'S exports did well, but the economy faced difficulties on the domestic side. Consumer confidence was low due primarily to banking sector troubles that began with over-distribution of credit cards and continued with high levels of debt owed after charging binges by much of the populace. The equity market was also affected for a short while by the General Assembly's vote to impeach South Korea's president, although the president's party subsequently won the majority in the Assembly making the prior vote a non-issue. Equities were derated based on lingering corporate governance issues, a rise in small and medium-sized enterprise delinquencies, weaker pricing in the technology sector, the impact of higher oil prices on its economy, growing concerns about stagflation, and the ripple effects of China's economic situation. TAIWAN'S equity market was heavily geared toward the technology sector, which experienced pressures on its profit margins during the period and 1 EMERGING MARKETS FUND -------------------------------------------------------------------------------- uncertainty regarding its second half of 2004 performance. Taiwan was also affected by political events, as the KMT party, perceived to be more friendly toward China, did not win the nation's presidential election as anticipated, and the incumbent party was re-elected instead. A close, disputed election and an assassination attempt on the new president only added to the unrest in the market. On the other hand, Taiwan's market was boosted by a substantial prospective increase in its weighting in the MSCI Emerging Markets Free Index. BRAZILIAN stocks were the most significant outperformers in 2003, but struggled during the first half of 2004 for several reasons. Due to its high external debt burden, the market was quite sensitive to global risk aversion. In addition, its domestic economic recovery remained elusive, and there were ongoing pricing pressures on several of its exported resources, such as iron ore and pulp. Finally, President Luiz Inacio Lula da Silva's administration was tainted by allegations of corruption and lost some of its former popularity. The SOUTH AFRICAN equity market performed relatively well, although the dollar-based prices of several commodities declined in the second quarter. The Fund prudently had little exposure to South African resource stocks, but an underweighted exposure to the market detracted. MEXICO (4.5% of Fund net assets) was one of the best-performing markets during the first half of 2004, climbing 14.28% in U.S. dollar terms. Key reforms appeared to have lost momentum and are yet to be passed through the political process. However, stocks performed well, based largely on an economy that finally began to benefit from the U.S. economic recovery, belying some of the worst fears about its losing competitiveness to China. The HONG KONG equity market (2.9% of Fund net assets) was down 2.76% in U.S. dollar terms for the six-month period. While impacted by events in China, the Hong Kong market benefited from the early stages of a two-way flow of capital with the Mainland. The Hong Kong market also benefited from relatively high index weightings in utilities and property stocks as well as signs that the nation was coming out of its deflationary cycle and was experiencing some domestic price recovery. In contrast to their strong relative performance in 2003, INDIAN stocks (3.0% of Fund net assets) were the second worst performers of the emerging markets during the first half of 2004. India has what many consider to be among the best-run companies in the emerging market universe, but equity valuations during the period were not compelling. Also, as seen elsewhere, India was affected by political events. The incumbent party was defeated in its general elections, and the market did not respond favorably to the winning Congress party, perceived to be less reform friendly. The Fund was prudently underweighted in the Indian equity market. THAILAND (3.5% of Fund net assets) also reversed course, having been the world's third best market in 2003 but the worst performer of the emerging markets during the six months ended June 30 with a total return of -18.93% in U.S. dollar terms. Thailand's equity market was affected during the first quarter in particular by an outbreak of bird flu, violence in the southern part of the country, and declining popularity of its prime minister. During the second quarter, the impact of these factors was somewhat ameliorated. CHINA (2.1% of Fund net assets) produced a total return of -14.92% in U.S. dollar terms for the first half of 2004, due primarily to the government's austerity measures discussed above. To its benefit, the Fund was underweighted, but was nevertheless impacted by its holding in the poorly performing Chalco (Aluminum Corporation of China, 2.1% of Fund net assets), an aluminum producer with attractive long-term fundamentals, but a company that found itself in the front line of government slow-down measures. RUSSIA (1.8% of Fund net assets) performed relatively well, advancing 2.83% for the semi-annual period. The Russian market benefited from a strong macroeconomic environment, including higher oil prices and strong industrial production. President Vladimir Putin was re-elected in March 2004. On the other hand, the market was affected by what is known as the "Yukos affair." Yukos (0% of Fund net assets) is Russia's oil giant, and after allegedly 2 EMERGING MARKETS FUND -------------------------------------------------------------------------------- crossing an invisible line between business and politics, its CEO Mikhail Khodorkovsky found himself in jail for tax evasion and fraud. Putin stated in June that he had no interest in bankrupting Yukos, but the ultimate fate of the company is difficult to predict. Overall, the first six months of 2004 was a challenging period for the emerging markets. However, emerging markets equities, in our opinion, can be an excellent way to position a portfolio for an upturn in global leading indicators. We maintain that portfolio diversification is a key element to successful investing, particularly in the volatile investment environment of the past several years. Investors should be aware that emerging markets can be extremely volatile. Because of this, they should be viewed as a complement to a broad-based portfolio. Shareholders should be aware that investing in the equity and fixed income markets of developing countries involves exposure to potentially unstable governments, economies based on only a few industries and securities markets that trade a small number of securities and may therefore at times be illiquid. Settlement and clearance practices may be less efficient than more developed markets. We appreciate your participation in the Van Eck Emerging Markets Fund and look forward to helping you meet your investment goals in the future. [GRAPHIC OMITTED] /s/ David A. Semple DAVID A. SEMPLE PORTFOLIO MANAGER July 16, 2004 3 EMERGING MARKETS FUND -------------------------------------------------------------------------------- All indices listed are unmanaged indices and include the reinvestment of all dividends where available, but do not reflect the payment of transaction costs, advisory fees or expenses that are associated with an investment in the Fund. An index's performance is not illustrative of the Fund's performance. Indices are not securities in which investments can be made. (1) The Morgan Stanley Capital International (MSCI) Emerging Markets Free Index is a market capitalization weighted index that captures 60% of the publicly traded equities in each industry for approximately 25 emerging markets. "Free" indicates that the Index includes only those securities available to foreign (E.G. U.S.) investors. (2) All regional and market returns are in U.S. dollar terms (unless otherwise specified) and are based on country-specific stock market indices. For example, the South Korean market is measured by the Korean Composite Index (KOSPI). -------------------------------------------------------------------------------- PERFORMANCE RECORD** AS OF 6/30/04 (UNAUDITED) -------------------------------------------------------------------------------- AVERAGE ANNUAL AFTER MAXIMUM BEFORE SALES TOTAL RETURN SALES CHARGE* CHARGE -------------------------------------------------------------------------------- A shares-- -------------------------------------------------------------------------------- Year to Date (13.43)% (8.13)% 1 year 24.60% 32.20% -------------------------------------------------------------------------------- 5 year (3.57)% (2.43)% -------------------------------------------------------------------------------- 10 year 4.36% 4.98% -------------------------------------------------------------------------------- Life (since 12/20/93) 3.77% 4.35% -------------------------------------------------------------------------------- C SHARES-- -------------------------------------------------------------------------------- Year to Date (9.62)% (8.71)% -------------------------------------------------------------------------------- Life (since 10/3/03) 3.30% 4.30% -------------------------------------------------------------------------------- PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS; CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE DATA QUOTED. Performance information reflects waivers of expenses and/or fees. Investment return and value of shares of the Fund will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. These returns do not reflect the deduction of taxes that a shareholder would pay on Fund dividends and distributions or the redemption of Fund shares. Performance information current to the most recent month end is available by calling 1-800-826-2333 or by visiting www.vaneck.com. The Adviser is currently waiving certain or all expenses on the Fund. Had the Fund incurred all expenses, investment returns would have been reduced. * A shares: maximum sales charge is 5.75% C shares: 1.00% redemption charge, first year ** Although the Fund has been in existence since December 20, 1993, prior to December 18, 2002, the Fund operated with a substantially different investment strategy. Prior to December 18, 2002, the Fund invested primarily in common stocks and other equity securities of large cap global growth companies and could not invest more than 10% of its assets in emerging markets securities, and performance for those periods is not indicative of the performance of the Fund under its current investment strategy. 4 EMERGING MARKETS FUND -------------------------------------------------------------------------------- GEOGRAPHICAL WEIGHTINGS* AS OF JUNE 30, 2004 (UNAUDITED) [CHART OMITTED] Other 6.5% China 2.1% Singapore 2.9% Hong Kong 2.9% India 3.0% Thailand 3.5% Mexico 4.5% Cash/Equivalents plus Other Assets Less Liabilities 9.6% Venezuela 5.5% South Africa 9.2% Brazil 11.0% Taiwan 11.3% South Korea 28.0% ------------------- *Percentage of net assets. Portfolio is subject to change. 5 EMERGING MARKETS FUND TOP TEN EQUITY HOLDINGS AS OF JUNE 30, 2004* -------------------------------------------------------------------------------- COMPANIA ANONIMA NACIONAL TELEFONOS DE VENEZUELA (CANTV) (VENEZUELA, 5.5%) CANTV is Venezuela's primary provider of fixed telecommunications services. The company also provides private network, data, public telephone, rural telephone and telex services. Through subsidiaries, CANTV provides wireless communications, Internet access and phone directories. HYUNDAI MOTOR CO. LTD. (SOUTH KOREA, 4.9%) Hyundai Motor manufactures, sells, and exports passenger cars, trucks and commercial vehicles. The company also sells various auto parts and operates auto repair service centers throughout South Korea; it also provides financial services through its subsidiaries. SAMSUNG ELECTRONICS CO. LTD. (SOUTH KOREA, 4.6%) Samsung Electronics manufactures and exports a wide range of consumer and industrial electronic equipment such as memory chips, semiconductors, personal computers, telecommunications equipment and televisions. BIDVEST GROUP LTD. (SOUTH AFRICA, 4.3%) Bidvest is an international investment holding company that invests in companies operating in the fields of service, distribution and trading with umbrella divisions in the areas of services, food service products, and commercial products. CORPORACION GEO S.A. DE C.V. (GEO) (MEXICO, 3.8%) Corporacion GEO is the leading developer of affordable housing in Mexico and Latin America, involved in all aspects from design and construction to marketing, sales and delivery. UNITED MICROELECTRONICS CORP. (TAIWAN, 3.8%) United Microelectronics specializes in providing foundry services for high performance semiconductor applications. Its core competency lies in its ability to produce high-yield integrated circuit wafers, manufactured on a per-customer basis. CIA VALE DO RIO DOCE (CVRD) (BRAZIL, 3.8%) CVRD is the world leader in iron ore and pellet segments, the world's second largest producer of manganese and ferro alloys, and Brazil's largest logistics provider. Areas of operation also include copper, potash, fertilizers and mineral prospecting. ASIAN PROPERTY DEVELOPMENT PC LTD. (THAILAND, 3.0%) Asian Property Development develops and sells inner city homes to middle-income and high-income buyers. Other activities include manufacturing and distribution of construction materials and providing precast installation services. FIRST ENGINEERING LTD. (SINGAPORE, 2.9%) First Engineering is a manufacturer of plastic components for the hard-disk drive and automotive industries. The company operates in Singapore, Malaysia and China. ITAUSA INVESTIMENTOS ITAU S.A. (BRAZIL, 2.8%) Itausa is an investment holding company with interests covering the financial, insurance, industrial and real estate areas. Its major holdings include Banco Itau, an investment bank in Latin America, and Itautea Philco, engaged in technological development in banking and commercial automation. --------------------- *Portfolio is subject to change. 6 GLOBAL HARD ASSETS FUND -------------------------------------------------------------------------------- Dear Shareholder: The Van Eck Global Hard Assets Fund delivered a total return of 2.31% for the six months ended June 30, 2004. During this time period, hard assets continued to offer investors diversification benefits in the form of competitive returns and limited correlation to the general stock market. After a long period of outperforming the general U.S. equity markets (the Fund had outpaced the Standard & Poor's 500 Index(1) for four consecutive calendar years as of December 2003), the Fund slightly lagged the S&P 500 (+3.44%) and outpaced the Dow Jones Industrial Average(2) (+0.80%) during the first half of 2004. The Goldman Sachs Natural Resources Index(3) rose 7.27% for the same period. GENERAL MARKET & ECONOMIC REVIEW During the first six months of 2004, the growing uncertainty in Iraq combined with the threat of rising interest rates and inflation set a sober tone on Wall Street. These issues, as well as an overheating energy market and concerns regarding the possibility of a slowdown in the Chinese economy were all factors that weighed on the minds of investors. While many key commodities, particularly base metals, experienced a sell-off this Spring, the main investment themes driving natural resources over the past several years remained intact. Hard assets continued to enjoy the conjunction of acute capacity shortages and strong demand. Recovering global economies, the continuation of strong demand from China and India and relatively low supplies across the commodities spectrum were all trends that, while closely watched, continued through the first six months of the year. In general, demand for most commodities continued to soar as developed economies recovered from the recession and emerging markets displayed a hunger for raw materials to fuel their growth. Rising inflation threats around the world also helped buoy the group, as inflationary pressures historically have increased the value of hard assets. Chinese government efforts to slow its booming economy set commodities back in April. High growth rates in China had led to significant bottlenecks, infrastructure shortages and massive rises in energy and raw material costs. The tightening measures were designed to reduce the rate of growth in certain sectors, particularly steel, aluminum and real estate. Many feared a "hard landing" scenario, one in which China's economy would slow substantially. These fears, in turn, sparked a severe sell-off in many commodities whose value had been closely tied to China. Throughout the period, we felt confident that China would achieve its objective of a "soft landing" scenario, I.E., a moderate slowdown. During a recent research trip to the region, we observed the continuation of strong demand trends and economic indicators throughout the period have supported that view. It is our opinion that China, historically a growth engine for commodities and other markets, has continued to play an increasingly important role in the global economy. Overall, we believe that the China demand story remains a compelling one. FUND REVIEW Assets of the Van Eck Global Hard Assets Fund are invested primarily in five sectors: ENERGY, INDUSTRIAL METALS, PRECIOUS METALS, PAPER AND FOREST PRODUCTS, and REAL ESTATE. ENERGY: Energy prices have remained durably strong throughout the first half despite climbing stockpiles and rising pricing premiums. Energy equities were strong as a result of rising commodity prices and announcements by exploration and commodity companies of increased capital spending budgets. A colder-than-anticipated winter, unrest in Saudi Arabia, ongoing speculative interest resulting from the situation in Iraq, and surprise results from OPEC's early February meeting kept prices high through the first quarter. As the year progressed, the inventory build was greater than normal. Iraqi production increased, OPEC agreement breaches remained endemic, imports were strong, and tanker shipment data suggested more crude oil was in transit. However, while inventories of crude and unleaded gasoline grew, pricing remained significantly above norms, suggesting that oil markets were pricing in a terrorist risk premium. While increased inventories and an overheating market gave us reason to proceed with caution, we believe that the underlying supply issues lend support to the longer-term outlook for the sector. Environmental and geopolitical issues continue to restrict new drilling and accessible reserves are being depleted. Concerns about the maturity of the world's largest oil and natural gas basins remain. For example, a very public debate is raging regarding the decline curves and potential 7 GLOBAL HARD ASSETS FUND -------------------------------------------------------------------------------- production of Saudi Arabia, owner of the largest oil reserves (approximately 25% of the world's total). In addition, the IEA (International Energy Agency) warns that unless producers step up spending, supplies will run short. The Agency estimates that exploration and production spending in the world is running as much as 15% behind what is needed. The Fund's exposure to the energy markets was increased during the period at the expense of industrial metals. At June 30, the energy sector represented 48.6% of the Fund's net assets, up from 44.2% at year-end 2003. During the period, we carefully combed the market to find compelling value among energy companies. Early in the year, fourth quarter earnings misses allowed for good entry points for holdings such as Cooper Cameron, Halliburton and Pride International (representing 2.2%, 3.3% and 1.6% of Fund net assets at June 30, respectively). Halliburton, based on inexpensive valuation and an improving asbestos liability situation, was a primary performance contributor in this sector. The Fund benefited from its positions in exploration and production companies such as Apache, Pioneer Natural Resources, and Talisman (2.1%, 1.4% and 3.0% of Fund net assets). Notably, consolidation continued during the period with M&A activity in the first six months of 2004 already exceeding that of 2003. In addition, capital discipline continued with more announcements of stock buybacks and dividend increases. The Fund's holdings in the oil service sector also contributed to performance. INDUSTRIAL METALS: Fund investments in the industrial metals sector represented 9.5% of Fund net assets at June 30, down from 15.1% in December 2003. The Fund's base metals investments included holdings in aluminum, nickel, copper, non-ferrous metals and steel, all essential raw materials for manufacturing. Strong demand and supply-side concerns drove the copper market's strong start to the year. Operational problems and labor strikes at some of the world's largest copper mines exacerbated an already tight supply. However, the copper market, like many other base metals markets, experienced a sharp decline later in the period. Coming off a year in which metals prices achieved a most dramatic rally (copper prices hit a nine-year high and nickel prices were up nearly five fold from their 1993 lows), many investors sold their positions fearing a cyclical downturn. More importantly, tightening of monetary policy in China led to significant pricing volatility in industrial metals, particularly copper and nickel. Speculative influences were most evident in the nickel market, with prices dropping over 20% in April alone. In our view, the nickel market remains a compelling investment as there has been limited capital expenditure from producers. Additionally, we expect Chinese demand to remain strong due to the expansion of stainless steel capacity, since nickel is a primary component of steel production. The steel market--one that is typically driven by Chinese consumption and supply-side constraints, particularly in coke, scrap and iron--saw a new catalyst emerge in recent months. Indications from our sources at large private steel companies were that steel demand was finally starting to pick up in the U.S. PRECIOUS METALS: As of June 30, 16.2% of the Fund's net assets were invested in the precious metals sector. Historically, gold prices have risen when the value of the U.S. dollar has declined and vice-versa. We attribute recent weakness of the price of gold to the rising strength in the dollar. After reaching multi-year highs during the period, the price of gold experienced a correction in April with the abrupt change in the market's interest rate outlook. Higher rate expectations caused the U.S. dollar to reach new highs for the year while gold continued to decline into May. The severity of the downturn in bullion was magnified in the gold equity market. South African shares were hit particularly hard due to the added impact of continuing strength in the rand currency, which has caused labor costs to rise dramatically in U.S. dollar terms. Among North American companies, the stocks showing the best performance were those with exploration success. The year so far has been disappointing for a number of small-cap, or "junior" gold companies. Many of these companies are developing properties around the world, and some have encountered problems with permitting, capital expenditure overruns, or changes in tax structure, resulting in underperformance in share prices. All of these Juniors are working to mitigate or reverse the impact of these adverse events. By the end of the first half, gold began to recover some of its losses as mixed economic results in June created uncertainty in the market outlook for interest rates and currencies. We believe that 8 GLOBAL HARD ASSETS FUND -------------------------------------------------------------------------------- economic imbalances lend themselves to a longer-term downward trend for the U.S. dollar. In addition, early signs of inflation may be revealing themselves and instability in the geopolitical environment continues to increase. In our view, many conditions are present today that support investment interest in gold-related securities. PAPER AND FOREST PRODUCTS: Fund investments in the paper and forest products sector represented 10.5% Of fund net assets at mid year. In general, paper and forest products held up better than most cyclicals during the march/april sell-off, with every grade of paper showing improvement during the period. The paper and forest products industries continued to be characterized by reduced capacity and relatively attractive stock prices. Significant production cutbacks kept capacity low. Industry consolidation proved to be a positive factor, further supporting prices. REAL ESTATE: The real estate sector represented 6.0% of Fund net assets at June 30 and benefited the Fund's performance during the period. REITs (Real Estate Investment Trusts), as measured by the Morgan Stanley REIT Index(4), returned 5.19% to investors during the first half of 2004. Driving the REIT markets was the high demand for real estate as an alternative investment with the potential for current income. Retail malls and outlets continued to provide strong performance throughout the period. The hotel sector showed marked improvement as occupancy rates for both tourism and business travel improved along with domestic and global economies. Recovering economies also resulted in increased demand for space and the stabilization of rents. Office and apartment companies observed improved leasing activity and supply/demand dynamics in most real estate markets began to turn more positive. While REITs had a decidedly negative response to the strong March labor report, attractive financing terms continued to buoy property values in these markets. Although the Fund's focus in the real estate sector continued to be heavily concentrated in the U.S. and Canadian markets, exposure to the Japanese real estate market during the period proved beneficial. Investors should be aware that the Fund is subject to certain risks associated with hard asset investments. The production and marketing of hard assets may be affected by actions and changes in governments. In addition, hard assets and hard asset securities may be cyclical in nature. During periods of economic or financial instability, hard asset securities may be subject to broad price fluctuations, reflecting volatility of energy and basic material prices and possible instability of supply of various hard assets. We continue to believe that exposure to hard assets may provide diversification benefits for investors. We appreciate your continued investment in the Van Eck Global Hard Assets Fund, and we look forward to helping you meet your investment goals in the future. [GRAPHIC OMITTED] /s/ Derek S. van Eck DEREK S. VAN ECK MANAGEMENT TEAM MEMBER [GRAPHIC OMITTED] [GRAPHIC OMITTED] /s/ Samuel R. Halpert /s/ Joseph M. Foster SAMUEL R. HALPERT JOSEPH M. FOSTER MANAGEMENT TEAM MEMBER MANAGEMENT TEAM MEMBER July 14, 2004 9 GLOBAL HARD ASSETS FUND -------------------------------------------------------------------------------- All indices listed are unmanaged indices and include the reinvestment of all dividends where available, but do not reflect the payment of transaction costs, advisory fees or expenses that are associated with an investment in the Fund. An index's performance is not illustrative of the Fund's performance. Indices are not securities in which investments can be made. (1) The S&P (Standard & Poor's) 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. This Index, calculated by Standard & Poor's, is a total return index with dividends reinvested. (2) The Dow Jones Industrial Average is a price-weighted average of 30 blue-chip stocks that are generally the leaders in their industry. It has been a widely followed indicator of the stock market since October 1, 1928. (3) The Goldman Sachs Natural Resources (GSR) Index is a modified capitalization-weighted index which includes companies involved in the following categories: extractive industries, energy companies, owners and operators of timber tracts, forestry services, producers of pulp and paper, and owners of plantations. (4) The Morgan Stanley REIT Index is a total return index of the most actively traded real estate investment trusts and is designed to be a measure of real estate equity performance. -------------------------------------------------------------------------------- PERFORMANCE RECORD AS OF 6/30/04 (UNAUDITED) -------------------------------------------------------------------------------- AVERAGE ANNUAL AFTER MAXIMUM BEFORE SALES TOTAL RETURN SALES CHARGE* CHARGE -------------------------------------------------------------------------------- A shares-- -------------------------------------------------------------------------------- Year to Date (3.58)% 2.31% -------------------------------------------------------------------------------- 1 year 30.14% 38.06% -------------------------------------------------------------------------------- 5 year 8.01% 9.30% -------------------------------------------------------------------------------- Life (since 11/2/94) 8.91% 9.58% -------------------------------------------------------------------------------- C shares-- -------------------------------------------------------------------------------- Year to Date 1.04% 2.04% -------------------------------------------------------------------------------- 1 year 35.93% 36.93% -------------------------------------------------------------------------------- 5 year 8.47% 8.47% -------------------------------------------------------------------------------- Life (since 11/2/94) 9.04% 9.04% -------------------------------------------------------------------------------- PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS; CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE DATA QUOTED. Performance information reflects waivers of expenses and/or fees. Investment return and value of shares of the Fund will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. These returns do not reflect the deduction of taxes that a shareholder would pay on Fund dividends and distributions or the redemption of Fund shares. Performance information current to the most recent month end is available by calling 1-800-826-2333 or by visiting www.vaneck.com. The Adviser is currently waiving certain or all expenses on the Fund. Had the Fund incurred all expenses, investment returns would have been reduced. * A Shares: maximum sales charge is 5.75% C Shares: 1.00% redemption charge, first year 10 GLOBAL HARD ASSETS FUND -------------------------------------------------------------------------------- GEOGRAPHICAL WEIGHTINGS* AS OF JUNE 30, 2004 (UNAUDITED) [CHART OMITTED] United States 47.5% Russia 1.0% Other 3.3% South Korea 2.1% France 3.0% Australia 6.3% South Africa 6.1% Cash/Equivalents plus Other Assets Less Liabilities 5.6% Canada 21.6% United Kingdom 3.5% SECTOR WEIGHTINGS* AS OF JUNE 30, 2004 (UNAUDITED) Precious Metals 16.2% Industrial Metals 9.5% Cash/Equivalents plus Other Assets Less Liabilities 5.6% Paper/Forest Products 10.5% Agriculture 1.7% Real Estate 6.0% Other 1.9% Energy 48.6% ------------------- *Percentage of net assets. Portfolio is subject to change. 11 GLOBAL HARD ASSETS FUND TOP TEN EQUITY HOLDINGS AS OF JUNE 30, 2004* -------------------------------------------------------------------------------- HALLIBURTON CO. (U.S., 3.3%) Halliburton provides energy services and engineering and construction services, as well as manufactures products for the energy industry. The company offers discrete services and products and integrated solutions to customers in the exploration, development, and production of oil and natural gas. BP PLC (UK, 3.1%) BP is a leading oil, gas and energy company. The company produces and markets crude oil and petroleum products worldwide, and is engaged in exploration and field development throughout the world. BP also manufactures and sells petroleum-based chemical products. TOTAL FINA ELF SA (FRANCE, 3.0%) Total Fina Elf is an integrated oil and gas specialty chemical company with operations in 120 countries. The company engages in all areas of the petroleum industry, from exploration and production to refining and shipping. TALISMAN ENERGY, INC. (CANADA, 3.0%) Talisman Energy is a Canadian-based international upstream oil and gas producer with operations in Canada, the North Sea and Indonesia. The company also conducts exploration in Algeria, Trinidad and Colombia. OCCIDENTAL PETROLEUM CORP. (U.S., 2.8%) Occidental Petroleum explores for, develops, produces and markets crude oil and natural gas. The company also manufactures and markets a variety of basic and specialty chemicals. VARCO INTERNATIONAL, INC. (U.S., 2.5%) Varco International designs and manufactures drilling equipment, machinery and rig instrumentation for oil and gas well drilling. The company also provides internal tubular coating, inspection services, solids control equipment services, coil tubing and pressure control equipment to the petroleum industry. Varco has operations worldwide. GLOBALSANTAFE CORP. (U.S., 2.3%) GlobalSantaFe is an international offshore and land contract driller, and provides drilling-related services including third-party rig operators, incentive drilling and drilling engineering and project management services. TIMBERWEST FOREST CORP. (CANADA, 2.3%) TimberWest is uniquely positioned as the largest owner of private forest lands in western Canada. The company's 334,000 hectares are located on Vancouver Island. TimberWest also owns renewable Crown harvest rights and operates a lumber mill located near Campbell River, British Columbia. COOPER CAMERON CORP. (U.S., 2.2%) Cooper Cameron manufactures oil and gas pressure control equipment, including valves, wellheads, chokes, blowout preventers, and assembled systems. The company's equipment is used for oil and gas drilling, production, and transmission in onshore, offshore, and subsea applications. Cooper also produces gas turbines, centrifugal gas and air compressors and other products. RANDGOLD RESOURCES LTD. (SOUTH AFRICA, 2.2%) Randgold Resources explores for and develops mines and mineral interests in sub-Saharan Africa. The company also acquires and rehabilitates existing under-performing gold mines, as well as mature exploration programs and bulk tonnage shallow deposits with gold producing potential. Randgold has interests in Cote d'Ivoire, Mali, Tanzania and Senegal. ---------------------- *Portfolio is subject to change. 12 INTERNATIONAL INVESTORS GOLD FUND -------------------------------------------------------------------------------- Dear Shareholder: After several calendar years of strong performance, the Van Eck International Investors Gold Fund declined 19.93% for the first six months of 2004. The Fund outperformed its benchmark, the Philadelphia Stock Exchange Gold and Silver (XAU) Index(1), which fell 20.27% during this same time period. GENERAL MARKET & ECONOMIC REVIEW At the start of the year, the U.S. dollar was making multi-year lows against a number of major currencies. Negative real yields in short-term U.S. Treasuries caused investors to sell dollars to invest in higher yields abroad. In addition, ongoing problems for U.S.-led forces in Iraq created pressure on the dollar. Then, robust economic data from U.S. manufacturing, payrolls, and retail sales convinced the market that rate increases would materialize sooner than expected. This abrupt change in rate expectations led the U.S. dollar to new highs for the year. Historically, gold prices have risen when the value of the U.S. dollar has declined and vice-versa. Gold, after rising to $426.45 an ounce on March 31, experienced one of its largest monthly declines in percentage terms on record. The severity of the downturn in bullion was magnified in the gold shares. South African shares were hit particularly hard due to the added impact of continuing strength in the rand (South Africa's currency), which has caused labor costs for those companies to rise dramatically in U.S. dollar terms. Gold continued to decline in May, reaching a low of $374.85 on May 13. However, it ended the period higher at $394.25, as mixed economic results in June created uncertainty in the market outlook for interest rates and currencies. FUND REVIEW South African gold-mining shares suffered during the period, as illustrated by the 29.71% decline of the FTSE Gold Mines Africa Sub-Index(2) for the first half of the year. South African exposure within the portfolio (15.2% of Fund net assets at June 30) was reallocated over the course of the year from higher-cost producers to those with more profitable domestic mines and more production outside of South Africa. As a result, Harmony/Avgold was reduced to approximately 0.9% of the portfolio from 6.8% at year-end 2003 (3.3% Avgold; 3.5% Harmony). Weightings were increased in Gold Fields Ltd. (4.4% of Fund net assets), black empowerment companies Mvelaphanda and African Rainbow Minerals (0.3% and 0.4% of Fund net assets), and platinum producers Impala and Anglo American Platinum (2.1% and 1.4% of Fund net assets). North American mining stocks declined 17.24% during the first half, as measured by the FTSE Gold Mines North America Sub-Index.(2) Among North American companies, stocks showing the best performance were those with exploration success. Meridian Gold (4.6% of Fund net assets) announced the discovery of a new vein at its 300,000 ounce per year El Penon mine in Chile. Placer Dome (4.6% of Fund net assets) continued to drill their Cortez Hills discovery in Nevada. Results indicate the emergence of a new world-class orebody for Placer. Glamis Gold (8.9% of Fund net assets) announced the discovery of the La Hamaka vein adjacent to their Marlin property in Guatemala, which is being developed for production in 2006. The new vein may enhance the profitability of the Marlin project. The year so far has been disappointing for a number of small-cap, or "junior" gold companies. Many of these companies are developing properties around the world, and some have encountered problems with permitting, capital expenditure overruns, or changes in tax structure, resulting in underperformance in share prices. Higher fuel, steel and labor costs caused capital estimates for Cumberland Resources' (0.8% of Fund net assets) Meadowbank project in Canada to increase over 50% above previous estimates. An onerous value-added tax was imposed on mining projects in Turkey, which had a negative impact on Eldorado's (2.0% of Fund net assets) Kisladag project. In Mexico, a bizarre ruling by an agrarian judge caused Metallica (0.7% of Fund net assets) to stop construction of their Cerro San Pedro mine. All of these Juniors are working to mitigate or reverse the impact of these adverse events. The FTSE Gold Mines Australasia Sub-Index(2) turned in the best regional performance with a decline of 10.19%. This is due to positive results from Newcrest Mining (5.9% of Fund net assets). Development of the large Telfer Mine in Western Australia is going well and encouraging exploration results were announced from the Gosowong property in Indonesia. There was some M&A excitement in the gold sector during the period. Wheaton River, one of the Fund's top positions (4.3% of Fund net assets), was the 13 INTERNATIONAL INVESTORS GOLD FUND -------------------------------------------------------------------------------- target of a friendly acquisition launched in April by Iamgold (3.5% of Fund net assets). Iamgold offered a premium of 26% to Wheaton's share price on the day of the announcement. Following this, the Fund realized profits by reducing the Wheaton position by roughly 40%. In the meantime, simultaneous takeover bids were launched by Coeur d'Alene Mines (0% of Fund net assets) for Wheaton and by Golden Star (1.3% of Fund net assets) for Iamgold. These hostile offers were contingent on shareholders voting against the Iamgold/Wheaton merger. Many Iamgold shareholders were unhappy with the terms of the Wheaton deal. On July 6th, they voted to reject the merger, enabling Golden Star and Coeur to further pursue their acquisition ambitions. In general, we have seen the dominant drivers of the gold market change over the course of the last several years. In 2001, investors turned to gold as a hedge against a collapsing stock market and accounting scandals amongst major corporations and accounting firms. In 2002, investors sought refuge from a falling U.S. dollar. The decline in the dollar coincided with the unprecedented fall in U.S. interest rates when the targeted Federal Funds rate was reduced to just 1% and real (inflation-adjusted) short term rates turned negative. Today, early signs of inflation may be revealing themselves and instability in the geopolitical environment continues to increase. In our view, many conditions are present today that support investment interest in gold-related securities. -------------------------------------------------------------------------------- COMMENTARY FROM FOUNDER, JOHN C. VAN ECK: OUR VIEW ON CURRENT MACRO ECONOMIC CONDITIONS POSSIBLE GLOBAL ECONOMIC AND FINANCIAL RISKS We believe that certain economic and financial risks exist that may justify a small allocation to gold-oriented investments. While these risks may dissipate without creating financial stress, we feel that investors should be aware that such risks exist and diversify their portfolios accordingly. U.S. BUDGET DEFICITS The massive U.S. fiscal stimulus leading from a budgetary surplus of 1.5% of GDP in 2000 to a likely deficit of 5% of GDP this year is, in our view, a deterioration in the U.S. fiscal position-- one that is without precedent since World War II. Moreover, interest rates in major countries have been held at or near post-war lows during the last few years. This has contributed to a pickup in economic growth since 2001. Despite this stimulus, many are questioning the sustainability of the economic recovery underway in the U.S. and around the globe. At the Annual General Meeting of the Bank for International Settlements at the end of June, the President and Chairman of the Board of Directors of the Bank warned that global risks to confidence in the current economic upturn "could materialize only too suddenly." He said that growth over the past few years has been brought about by very expansionary interventionist policies, that the effects of such policy stimulants were temporary and that they could not continue indefinitely. In our view, inflation and inflationary expectations may be edging higher. The U.S. seasonally-adjusted Consumer Price Index climbed at an annual rate of 4.9% during the first half of 2004, largely due to higher oil and commodity prices. This compares to 1.9% in 2003. In addition, long-term interest rates began to rise in April of this year. Interventionist policies, in our opinion, may at some time require adjustment if stability is to be maintained. DEBT BUILDING Debt in the U.S. has had a great period of growth. Total debt outstanding was $4.0 trillion in 1980 and climbed to $22.8 trillion at the end of March 2004. Debt growth has averaged approximately 8.1% annually since 1980, compared to real average gross national product growth of about 3.1% a year. Total household (mainly mortgage) debt also has grown rapidly. It peaked at $9.5 trillion at the end of March 2004, approximately 113% of disposable personal income. Debt service charges were kept relatively low by the decline in mortgage (and other) interest rates since 1980. However, the household debt service and financial obligation ratio for renters was 31.1% of disposable personal income during the first -------------------------------------------------------------------------------- 14 INTERNATIONAL INVESTORS GOLD FUND -------------------------------------------------------------------------------- -------------------------------------------------------------------------------- quarter of 2004. If interest (and tax) rates trend higher in the future, they and ensuing higher debt service charges could put pressure on future consumer borrowing and spending, thus slowing the economy. Mortgage refinancing demand has already declined. Domestic financial sectors debt outstanding also climbed rapidly, from $578 billion in 1980 to $11.3 trillion at the end of March 2004. The earlier annual growth rates of financial debt, as asset values rose, slowed from a peak of 19.5% in 1998 to an annual growth rate of 7.3% in the first quarter of 2004. A portion of the financial debt, estimated at several trillion dollars, finances the highly leveraged "carry trade" in which speculators borrow at short-term rates and invest in longer-term bonds. If longer-term interest rates rise in the future at greater than expected levels, the unwinding of these positions might encounter difficulties, raising interest rates further. FOREIGN EXCHANGE INTERVENTION The foreign exchange intervention by Asian monetary authorities to resist exchange rate appreciation has been unprecedented. Official foreign exchange reserve purchases in Asia of around 480 billion dollars during 2003 had no historic parallel. The unintended consequences of a reduction in expansionary interventionist policies and of a market correction of the global economic and financial imbalances could raise the risks of a business cycle credit contraction and recession. The teachings of history, classical economic theory and the modern Austrian school has led us to consider the cyclical possibilities of asset price declines, a correction of excessive private debt and the consequent diversification of portfolios into cash. On the other hand, further massive government deficit intervention might lead to a period of stagflation. It may be more politically expedient to inflate excessive debt away rather than pay it back in terms of present rates of expected currency depreciation. Additional risks include possible terrorism on U.S. soil or elsewhere, the uncertain outcome of the war in Iraq, and a weaker dollar. Historically, risks such as these that have materialized have influenced investors and speculators' confidence in financial assets such as stocks and bonds and caused them to look for alternative tangible assets, such as gold. NOT INTENDED AS A PREDICTION OF FUTURE RESULTS. PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS. -------------------------------------------------------------------------------- In conclusion, it is our view that there are three primary reasons to consider diversifying an investment portfolio with gold or gold-mining shares. First, gold's price historically has had a negative or zero correlation with stock market averages (except in 2003), which means it may provide diversification benefits. Second, gold is a debt-free monetary asset and can potentially act as a hedge against financial stress. Third, gold is a tangible asset. Tangible assets typically have been attractive during periods of negative real returns on short-term financial assets, which impair real wealth. Investors should be aware that the Fund is subject to certain risks associated with gold and gold-mining investments. Precious metals can swing sharply in response to cyclical economic conditions, political events or the monetary policies of various countries. We appreciate your participation in the Van Eck International Investors Gold Fund, and we look forward to working with you in the future. [GRAPHIC OMITTED] [GRAPHIC OMITTED] /s/ Joseph M. Foster /s/ John C. van Eck JOSEPH M. FOSTER JOHN C. VAN ECK MANAGEMENT TEAM MEMBER FOUNDER July 22, 2004 15 INTERNATIONAL INVESTORS GOLD FUND -------------------------------------------------------------------------------- All indices listed are unmanaged indices and include the reinvestment of all dividends where available, but do not reflect the payment of transaction costs, advisory fees or expenses that are associated with an investment in the Fund. An index's performance is not illustrative of the Fund's performance. Indices are not securities in which investments can be made. (1) The Philadelphia Stock Exchange Gold and Silver (XAU) Index is a capitalization-weighted index which includes the leading companies involved in the mining of gold and silver. (2) The Financial Times Gold Mines Index is a market capitalization-weighted global index of gold-mining shares. -------------------------------------------------------------------------------- PERFORMANCE RECORD AS OF 6/30/04 (UNAUDITED) -------------------------------------------------------------------------------- AVERAGE ANNUAL AFTER MAXIMUM BEFORE SALES TOTAL RETURN SALES CHARGE* CHARGE -------------------------------------------------------------------------------- A shares-- -------------------------------------------------------------------------------- Year to Date (24.53)% (19.93)% -------------------------------------------------------------------------------- 1 year 14.22% 21.20% -------------------------------------------------------------------------------- 5 year 13.17% 14.52% -------------------------------------------------------------------------------- 10 year (1.36)% (0.78)% -------------------------------------------------------------------------------- 15 year 1.54% 1.93% -------------------------------------------------------------------------------- 20 year 1.73% 2.03% -------------------------------------------------------------------------------- Life (since 2/10/56) 9.36% 9.49% -------------------------------------------------------------------------------- C shares-- -------------------------------------------------------------------------------- Year to Date (21.04)% (20.24)% -------------------------------------------------------------------------------- Life (since 10/3/03) (1.21)% (0.22)% -------------------------------------------------------------------------------- PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS; CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE DATA QUOTED. Performance information reflects waivers of expenses and/or fees. Investment return and value of shares of the Fund will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. These returns do not reflect the deduction of taxes that a shareholder would pay on Fund dividends and distributions or the redemption of Fund shares. Performance information current to the most recent month end is available by calling 1-800-826-2333 or by visiting www.vaneck.com. The Adviser is currently waiving certain or all expenses on the Fund. Had the Fund incurred all expenses, investment returns would have been reduced. * A Shares: maximum sales charge is 5.75% C Shares: 1.00% redemption charge, first year 16 INTERNATIONAL INVESTORS GOLD FUND -------------------------------------------------------------------------------- GEOGRAPHICAL WEIGHTINGS* AS OF JUNE 30, 2004 (UNAUDITED) [CHART OMITTED] Cash/Equivalents plus Other Assets Less Liabilities 0.6% South Africa 16.4% United States 16.1% Australia 9.6% United Kingdom 4.6% Peru 2.1% Sweden 0.2% Canada 50.4% ------------------- *Percentage of net assets. Portfolio is subject to change. 17 U.S. GOVERNMENT MONEY FUND -------------------------------------------------------------------------------- Dear Shareholder: The Van Eck U.S. Government Money Fund seeks to provide a high degree of safety and daily liquidity. It also serves to assist investors who wish to employ our exchange privileges or to use our check-writing privileges. During the first half of 2004, the yield on three-month Treasury bills averaged 1.00%. Treasury bill rates remained low, as the Federal Reserve had maintained a fed funds target rate of 1.00% for the last year until they raised the rate to 1.25% on June 30th. The U.S. economy grew at an estimated annualized rate in excess of 3.5% during the first half. Tightening labor markets, robust economic activity, and rising energy prices have combined to increase inflationary pressures and have led the Fed to start tightening monetary policy. Three-month T-bill rates began the year at their lows, hitting 0.86% in early January and ended the first half near their highs with a yield of 1.27% on June 30. As long as economic activity remains robust we look for money market rates to rise as the Federal Reserve continues to tighten monetary policy. The Fed Funds futures market is currently discounting an additional 100 basis points (1.00%) of tightening by the Federal Reserve through the end of the year. The Fund's investment strategy continues to emphasize safety by investing in short-term U.S. Treasury obligations and repurchase agreements collateralized by U.S. Treasury obligations. These obligations are conservative money market investments and offer the highest degree of security since they are backed by the United States Government. Of course, an investment in a money market fund is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. There can be no assurance that the Fund will be able to maintain a stable net asset value of $1.00 per share. It is possible to lose money by investing in the Fund. Repurchase agreements allow us to take advantage of higher yields without significantly increasing risk. The Fund's repurchase agreements are collateralized 102% by United States Treasury obligations with maturities of less than five years. In addition, your Fund has possession of the collateral. We plan to continue our current investment strategy, keeping an equal weighting between U.S. Treasury bills and repurchase agreements over time. However, when repurchase agreements offer an attractive yield pick-up over Treasury bills, we will look to place more emphasis on repurchase agreements. We appreciate your participation in the Van Eck U.S. Government Money Fund and look forward to helping you meet your investment objectives in the future. [GRAPHIC OMITTED] /s/ Gregory F. Krenzer GREGORY F. KRENZER PORTFOLIO MANAGER July 23, 2004 ------------------------ PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS; CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE DATA QUOTED. An investor's shares, when redeemed, may be worth more or less than their original cost. For current performance information, please call 1-800-826-2333. The Adviser is currently waiving certain or all expenses on the Fund. Had the Fund incurred all expenses, investment returns would have been reduced. 18 MID CAP VALUE FUND -------------------------------------------------------------------------------- Dear Shareholder: The Van Eck Mid Cap Value Fund gained 6.68% for the six months ended June 30, 2004. Your Fund performed in line with its benchmark index, the Russell Midcap Index,(1) which rose 6.67% for the semi-annual period. The Standard & Poor's Midcap 400 Index,(2) another measure of mid-cap stock performance, advanced 6.08% for the same period. GENERAL MARKET & ECONOMIC REVIEW All broadly watched U.S. equity indices provided positive performance for the six months ended June 30. Small-capitalization stocks showed the strongest relative performance, followed closely by mid-capitalization and then large-capitalization stocks. The market favored the value style over the growth style of investing across all capitalization sectors. For much of the semi-annual period, positive investor sentiment boosted the U.S. equity markets. Low interest rates and indications of rebounding economic activity helped to fuel an optimistic outlook. However, heightened geopolitical tensions, growing concerns over potential interest rate increases, and prospects for even higher oil prices contributed to generally declining equity indices in March and April and to investor uncertainty, reflected in relatively flat equity index returns in May and June. FUND REVIEW The Fund's strong performance for the period was primarily due to effective stock selection in the retailing, software and services, food, beverage and tobacco, and diversified financials industry groups. The Fund also benefited from its overweight exposure to the bottom 50% of companies within the Russell Midcap Index, as measured by market capitalization. For the six months ended June 30, these smaller mid-cap companies outperformed the larger mid-cap companies in the Index. Unlike the Index, which has a smaller weighting in securities with smaller market capitalizations, the Fund had approximately equal weightings among the securities in its portfolio. It is important to note that the Fund was invested in some, but not all, of the companies in the Russell Midcap Index. We select mid-cap stocks that we believe have an attractive combination of operating, valuation, and price characteristics. We employ a bottom-up, relative value-oriented, quantitative approach to selecting stocks, while seeking to achieve strong risk-adjusted returns. During the semi-annual period, stocks spanning a variety of industries made positive contributions to the Fund's performance. Mass merchandiser and international retailer Kmart Holding Corp. provided outstanding results. Other strong performers for the Fund included software company Autodesk, transportation company JB Hunt Transport Services, major hotel franchiser Choice Hotels, and mortgage services company MGIC Investment Corp. Of course, not all of the Fund's holdings performed well. Maxtor, which provides hard disk drive products for desktop computer systems, was the Fund's worst performing stock during the semi-annual period due to declining sales and profits in a highly competitive pricing environment. Other holdings that detracted from the Fund's performance included Ascential Software and American Power Conversion in technology, New York Community Bancorp in financials, and Quanta Services in utilities. [THE PERCENTAGE OF THE FUND'S NET ASSETS ALLOCATED TO THE ABOVE MENTIONED HOLDINGS AS OF JUNE 30: KMART, 1.8%; AUTODESK, 2.7%; JB HUNT TRANSPORT, 1.6%; CHOICE HOTELS, 1.0%; MGIC INVESTMENT, 1.5%. MAXTOR, ASCENTIAL, AMERICAN POWER, NY COMMUNITY BANCORP, AND QUANTA WERE ALL SOLD DURING THE PERIOD AND REPRESENTED 0% OF FUND NET ASSETS AT JUNE 30.] We made several changes to your Fund's portfolio during the first half of 2004, continuing the process we began since taking over as investment manager in June 2003. For example, we increased the Fund's energy holdings as a result of improved performance of energy stocks relative to other industry groups. Over the same period, we decreased the Fund's technology positions due to weaker relative performance of hardware and equipment companies. As of June 30, the Fund was underweight relative to its benchmark index in the utilities, real estate, and capital goods industry groups. Despite the Fund's relatively lower weightings to real estate and capital goods industry groups, the Fund's positions within these sectors underperformed related securities in the benchmark. At the end of the period, the Fund was overweight relative to the Russell Midcap Index in the food, beverage and tobacco, banks, and energy industry groups. The Fund's performance benefited from the 19 MID CAP VALUE FUND -------------------------------------------------------------------------------- relative overweighting in all three industry groups. Among the securities that fit the Fund's purchase criteria during the first half of the fiscal year were Healthsouth, Apogent Technologies, and Bausch & Lomb--all of which made positive contributions to the Fund's performance. Healthsouth, the largest provider of outpatient services in the U.S., was attractive due to the recent corporate restructuring it has undergone. Apogent Technologies, which developed and trademarked all-digital amplifier technology, has been acquiring businesses to expand its product line. Bausch & Lomb, a major provider of eye healthcare products, has seen higher foreign sales in Europe and Asia that have helped the company's earnings growth. [THE PERCENTAGE OF THE FUND'S NET ASSETS ALLOCATED TO THE ABOVE MENTIONED HOLDINGS AS OF JUNE 30: HEALTHSOUTH, 0.6%; APOGENT, 1.9%; AND BAUSCH & LOMB, 1.9%.] During the period, we sold the Fund's position in JDS Uniphase, a provider of advanced fiber optic components and modules, as the demand for its products plummeted and the company, in turn, reduced its workforce by 80%. We tendered the Fund's entire position in health improvement services company Advance PCS, which was acquired by Caremark Rx in a stock and cash transaction in March 2004. We also eliminated the Fund's holding in Crown Castle International, which owns and operates broadcast transmission towers, when its valuation levels increased significantly due to reports of strong operating results. Investors should be aware that mid-cap companies are often subject to less analyst coverage and may be in early and less predictable periods of their corporate existences. In addition, mid-cap companies often have greater price volatility, lower trading volume and less liquidity than larger, more established companies. We thank you for your investment in the Van Eck Mid Cap Value Fund, and we look forward to continuing to work with you in the future. [GRAPHIC OMITTED] /s/ Kathy O'Connor KATHY O'CONNOR PORTFOLIO MANAGER NEW YORK LIFE INVESTMENT MANAGEMENT LLC July 19, 2004 20 MID CAP VALUE FUND -------------------------------------------------------------------------------- All indices listed are unmanaged indices and include the reinvestment of all dividends where available, but do not reflect the payment of transaction costs, advisory fees or expenses that are associated with an investment in the Fund. An index's performance is not illustrative of the Fund's performance. Indices are not securities in which investments can be made. (1) The Russell Midcap Index measures the performance of the 800 smallest companies in the Russell 1000 Index, presenting approximately 26% of the total market capitalization of the Russell 1000 Index. As of the latest reconstitution, the average market capitalization was approximately $3.6 billion; the median market capitalization was approximately $2.8 billion. The index had a total market capitalization range of approximately $10.8 billion to $1.3 billion. (2) The Standard & Poor's (S&P) Midcap 400 Index is a capitalization-weighted index that measures the performance of the mid-range sector of the U.S. stock market. -------------------------------------------------------------------------------- PERFORMANCE RECORD+ AS OF 6/30/04 (UNAUDITED) -------------------------------------------------------------------------------- AVERAGE ANNUAL AFTER MAXIMUM BEFORE SALES TOTAL RETURN SALES CHARGE* CHARGE -------------------------------------------------------------------------------- A shares -------------------------------------------------------------------------------- Year to Date 0.57% 6.68% -------------------------------------------------------------------------------- 1 year 22.98% 30.48% -------------------------------------------------------------------------------- Life (since 1/1/02) 0.48% 2.89% -------------------------------------------------------------------------------- PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS; CURRENT PERFORMANCE MAY BE LOWER OR HIGHER THAN THE PERFORMANCE DATA QUOTED. Performance information reflects waivers of expenses and/or fees. Investment return and value of shares of the Fund will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. These returns do not reflect the deduction of taxes that a shareholder would pay on Fund dividends and distributions or the redemption of Fund shares. Performance information current to the most recent month end is available by calling 1-800-826-2333 or by visiting www.vaneck.com. The Adviser is currently waiving certain or all expenses on the Fund. Had the Fund incurred all expenses, investment returns would have been reduced. * A shares: maximum sales charge is 5.75% + Effective June 1, 2003, New York Life Investment Management LLC (NYLIM) became investment sub-adviser to the Fund. Prior to January 1, 2002 ("inception date"), the Fund operated under a different name with a different investment sub-adviser. 21 MID CAP VALUE FUND -------------------------------------------------------------------------------- SECTOR WEIGHTINGS* AS OF JUNE 30, 2004 (UNAUDITED) [CHART OMITTED] Industrials 7.3% Materials 2.3% Energy 7.3% Information Technology 13.3% Utilities 4.5% Financial Services 20.7% Other Assets Less Liabilities 0.4% Consumer Discretionary 20.0% Consumer Staples 14.3% Healthcare 9.9% ------------------- *Percentage of net assets. Portfolio is subject to change. 22 MID CAP VALUE FUND TOP TEN EQUITY HOLDINGS AS OF JUNE 30, 2004* -------------------------------------------------------------------------------- AUTODESK, INC. (2.7%) Autodesk supplies PC software and multimedia tools. The company's two-dimensional and three-dimensional products are used across industries and in the home for architectural design, mechanical design, geographic information systems and mapping, and visualization applications. Autodesk's software products are sold worldwide through a network of dealers and distributors. WILLIAMS COMPANIES, INC. (2.7%) Williams Companies moves, manages and markets a variety of energy products, including natural gas, liquid hydrocarbons, petroleum and electricity. Williams' gas wells, pipelines and midstream facilities are concentrated in the Northwest, the Rocky Mountains, the Gulf Coast and the Eastern Seaboard of the United States. R.J. REYNOLDS TOBACCO HOLDINGS, INC. (2.2%) R.J. Reynolds Tobacco Holdings is a holding company for Reynolds Tobacco, a cigarette manufacturer in the U.S., whose major brands include Doral, Winston, Camel, Salem and Vantage. OVERSEAS SHIPHOLDING GROUP, INC. (2.1%) Overseas Shipholding maintains a fleet of marine transport vessels. The company charters its ships to commercial shippers and United States and international governmental agencies. Overseas' ships are used to transport crude oil, petroleum products, grain, coal and iron ore. TEKTRONIX, INC. (1.9%) Tektronix manufactures and sells test, measurement, and monitoring solutions to companies involved in the semiconductor, computer, and networking industries. The company's products are used to assist in the design, building, deployment, and management of global communications networks and Internet technologies. APOGENT TECHNOLOGIES, INC. (1.9%) Apogent Technologies, through its subsidiaries, designs, manufactures, and markets value added laboratory and life science products. The company's products are for use in the clinical, research, and industrial markets worldwide. Apogent serves the labware and lifesciences, diagnostics and microbiology, clinical and industrial, and laboratory equipment markets. ACTIVISION, INC. (1.9%) Activision publishes, develops, and distributes interactive entertainment software. The company's software is used for Microsoft Windows compatible personal computers and console game systems such as Sony PlayStation and Nintendo 64. Activision maintains publishing and development operations in the U.S., Canada, the UK, France, Germany, Japan and Australia. BAUSCH & LOMB, INC. (1.9%) Bausch & Lomb develops, manufactures, and markets eye healthcare products. The company's products include contact lenses and lens care products, generic and proprietary prescription pharmaceuticals for the eye, and products for cataract and refractive surgery. Bausch & Lomb markets its products in countries around the world. KMART HOLDING CORP. (1.8%) Kmart Holding is a mass merchandising company that serves customers through its Kmart and Kmart SuperCenter retail outlets. EDISON INTERNATIONAL (1.8%) Edison International, through its subsidiaries, develops, acquires, owns and operates electric power generation facilities worldwide. The company also provides capital and financial services for energy and infrastructure projects, as well as manages and sells real estate projects. Additionally, Edison provides integrated energy services, utility outsourcing and consumer products. --------------------- *Portfolio is subject to change. 23 EMERGING MARKETS FUND SCHEDULE OF PORTFOLIO INVESTMENTS JUNE 30, 2004 (UNAUDITED) NO. OF SHARES SECURITIES (a) VALUE (NOTE 1) -------------------------------------------------------------------------------- BRAZIL: 11.0% 1,400,000 Caemi Mineracao e Metalurgia S.A. $ 532,560 26,000 Cia Vale do Rio Doce (Sponsored ADR) 1,016,600 633,429 Itausa Investimentos Itau S.A. 740,226 20,000 Votorantim Celulose (Sponsored ADR) 636,000 ------------- 2,925,386 ------------- CHINA: 2.1% 1,050,000 Aluminum Corporation of China Ltd. 562,034 ------------- HONG KONG: 2.9% 730,000 Chen Hsong Holdings Ltd. 411,805 4,636,000 Media Partners International Holdings, Inc. 231,806 500,000 Solomon Systech International Ltd. Industries Ltd. 123,721 ------------- 767,332 ------------- INDIA: 3.0% 40,000 Bharat Electronics Ltd. 340,289 125,000 Gail India Ltd. 462,681 ------------- 802,970 ------------- ISRAEL: 1.2% 4,700 Teva Pharmaceutical Industries Ltd. (Sponsored ADR) 316,263 ------------- MALAYSIA: 1.8% 1,570,000 Multi-Purpose Holdings Berhad 466,868 157,000 Multi-Purpose Holdings Berhad Rights (MYR 1.00, expiring 2/26/09) 18,592 ------------- 485,460 ------------- MEXICO: 4.5% 780,000 Corporacion GEO S.A. de C.V. (Series B) 1,025,870 108,700 Grupo Industrial Saltillo de C.V. 175,992 ------------- 1,201,862 ------------- RUSSIA: 1.8% 3,000 Lukoil (Sponsored ADR) 315,600 4,000,000 Uralsvyazinform 154,800 ------------- 470,400 ------------- SINGAPORE: 2.9% 1,300,000 First Engineering Ltd. 778,126 ------------- SOUTH AFRICA: 9.2% 345,704 African Bank Investments Ltd. 654,522 135,000 Bidvest Group Ltd. 1,137,184 400,000 FirstRand Ltd. 653,991 ------------- 2,445,697 ------------- SOUTH KOREA: 28.0% 5,300 Cheil Communications, Inc. $ 720,121 315,000 Curitel Communications 625,638 17,000 Honam Petrochemical Corp. 579,662 33,800 Hyundai Motor Co. Ltd. 1,300,225 30,000 Insun ENT Co. Ltd. 384,249 44,405 Kangwon Land, Inc. 491,894 50,000 Korean Air Lines Co. Ltd. 649,070 5,000 POSCO 644,743 2,976 Samsung Electronics Co. Ltd. 1,228,518 60,000 SFA Engineering Corp. 537,430 1,850 SK Telecom Co. Ltd. 304,197 ------------- 7,465,747 ------------- TAIWAN: 11.3% 266,219 Advantech Co. Ltd. 542,577 51,700 MediaTek, Inc. 412,246 350,000 Taiwan Fu Hsing Industrial Co. Ltd. 322,821 1,375,000 United Microelectronics Corp. 1,022,761 350,000 Waffer Technology Co. Ltd. 708,123 ------------- 3,008,528 ------------- THAILAND: 3.5% 7,500,000 Asian Property Development Public Co. Ltd. 791,209 175,000 Major Cineplex Group Public Co. Ltd. Warrants (THB 13.00, expiring 2/02/07) 15,556 700,000 Quality Houses Public Co. Ltd. Warrants (THB 1.20, expiring 9/11/08) 6,154 2,123,500 Royal Garden Resort Public Co. Ltd. 130,677 ------------- 943,596 ------------- TURKEY: 1.7% 1,232,000 Turkiye Is Bankasi (b) 448,151 ------------- VENEZUELA: 5.5% 73,000 Compania Anonima Nacional Telefonos de Venezuela (ADR) 1,470,950 ------------- TOTAL INVESTMENTS: 90.4% (Cost: $23,907,313) 24,092,502 ------------- See Notes to Financial Statements 24 EMERGING MARKETS FUND SCHEDULE OF PORTFOLIO INVESTMENTS (CONTINUED) JUNE 30, 2004 (UNAUDITED) PRINCIPAL DATE OF VALUE AMOUNT MATURITY COUPON (NOTE 1) -------------------------------------------------------------------------------- SHORT-TERM OBLIGATION: 6.4% Repurchase Agreement (Note 11): Purchased on 6/30/04; Maturity value $1,723,065 (with State Street Bank & Trust Co., collateralized by $1,795,000 Federal National Mortgage Association 1.91% due 2/15/05 with a value of $1,761,344) (Cost: $1,723,000) 7/01/04 1.35% $ 1,723,000 ------------- TOTAL INVESTMENTS: 96.8% (Cost: $25,630,313) 25,815,502 OTHER ASSETS LESS LIABILITIES: 3.2% 867,256 ------------- NET ASSETS: 100% $ 26,682,758 ============= ---------- (a) Unless otherwise indicated, securities owned are shares of common stock. (b) These shares are denominated in blocks of 100. GLOSSARY: ADR - American Depositary Receipt SUMMARY OF % OF INVESTMENTS NET BY INDUSTRY ASSETS -------------------------------------------------------------------------------- Auto 4.9% Banks 4.4% Basic Hardware 0.7% Capital Goods 2.8% Consumer Products 5.5% Diversified Financial 4.9% Energy 2.9% Entertainment and Leisure Time 0.1% Manufacturing 4.9% Materials 16.6% Media 3.6% Multi Industries 1.8% Petrochemical 2.2% Pharmaceuticals 1.2% Real Estate 6.8% Technology Hardware 17.5% Telecommunications 7.2% Transportation 2.4% Short-Term Obligation 6.4% Other assets less liabilities 3.2% ----- 100.0% ===== See Notes to Financial Statements 25 GLOBAL HARD ASSETS FUND SCHEDULE OF PORTFOLIO INVESTMENTS JUNE 30, 2004 (UNAUDITED) NO. OF SHARES SECURITIES (a) VALUE (NOTE 1) -------------------------------------------------------------------------------- AUSTRALIA: 6.3% 26,500 Alumina Ltd. $ 97,139 26,846 BHP Billiton Ltd. 233,532 5,369 BHP Steel Ltd. 25,123 879,358 Cooper Energy NL 103,784 129,215 Newcrest Mining Ltd. 1,236,170 542,500 Oil Search Ltd. 497,152 247,000 Portman Ltd. 301,804 41,000 Rio Tinto Ltd. 1,023,290 160,500 Santos Ltd. 772,190 241,250 WMC Resources Ltd. 824,040 ------------- 5,114,224 ------------- BRAZIL: 1.1% 32,000 Petroleo Brasileiro S.A. (ADR) 898,240 ------------- CANADA: 21.6% 15,000 Aber Diamond Corp. 444,374 87,000 Abitibi-Consolidated, Inc. 598,560 328,700 Bema Gold Corp. 893,954 707,700 Brazilian Resources, Inc. 60,808 5,720 Brookfield Homes Corp. 149,807 18,000 Brookfield Properties Corp. 514,017 10,600 Brookfield Properties Corp. (USD) 304,750 100,000 Cumberland Resources Ltd. 151,674 111,600 Domtar, Inc. 1,444,104 24,450 Ensign Resources Service Group, Inc. 387,101 249,900 Esprit Exploration Ltd. 651,637 37,000 First Capital Realty, Inc. 449,230 30,000 FNX Mining Co., Inc. 141,213 325,000 Killam Properties, Inc. 502,652 39,865 Meridian Gold, Inc. 514,099 575,000 Miramar Mining Corp. 661,611 603,000 Northern Orion Resources, Inc. 1,383,152 301,500 Northern Orion Resources, Inc. Warrants (CAD 2.00, expiring 5/29/08) 337,903 7,800 NQL Drilling Tools, Inc. (Class A) 13,113 31,800 Placer Dome, Inc. 529,152 70,000 SFK Pulp Fund 476,464 11,400 Suncor Energy, Inc. 289,685 22,600 Suncor Energy, Inc. (USD) 578,786 4,600 SunOpta, Inc. 39,284 111,000 Talisman Energy, Inc. 2,413,404 186,000 TimberWest Forest Corp. 1,865,003 13,100 Trican Well Service Ltd. 411,088 9,000 Westport Innovations, Inc. 11,028 455,000 Wheaton River Minerals Ltd. 1,271,444 ------------- 17,489,097 ------------- FINLAND: 1.1% 67,500 Storo Enso Oyj (R Shares) 915,455 ------------- FRANCE: 3.0% 25,700 Total Fina Elf SA (Sponsored ADR) 2,469,256 ------------- HONG KONG: 0.4% 44,400 Sun Hung Kai Properties Ltd. 364,317 ------------- PERU: 0.7% 26,400 Compania de Minas Buenaventura S.A. (Sponsored ADR) 583,440 ------------- RUSSIA: 1.0% 8,750 JSC MMC Norilsk Nickel (Sponsored ADR) $ 479,500 7,800 Surgutneftegaz, Inc. Preferred Stock (Sponsored ADR) 335,400 ------------- 814,900 ------------- SOUTH AFRICA: 6.1% 5,200 Anglo American PLC 106,422 15,100 Anglo Gold Ltd. (Sponsored ADR) 485,616 45,000 Gold Fields Ltd. 471,552 15,300 Impala Platinum Holdings Ltd. 1,156,245 198,000 Randgold Resources Ltd. (ADR) 1,746,360 63,600 Sappi Ltd. (Sponsored ADR) 976,260 ------------- 4,942,455 ------------- SOUTH KOREA: 2.1% 51,000 POSCO (Sponsored ADR) 1,709,010 ------------- UNITED KINGDOM: 3.5% 37,462 BHP Billiton PLC 325,232 46,500 BP PLC (Sponsored ADR) 2,491,005 ------------- 2,816,237 ------------- UNITED STATES: 47.5% 20,000 Agnico-Eagle Ltd. Warrants (USD 19.00, expiring 11/14/07) 57,400 30,900 Alcoa, Inc. 1,020,627 15,000 AMB Property Corp. 519,450 14,200 Anadarko Petroleum Corp. 832,120 39,000 Apache Corp. 1,698,450 7,000 Boston Properties, Inc. 350,560 33,700 Bunge Ltd. 1,312,278 26,000 Chicago Bridge & Iron Co. 724,100 16,000 ConocoPhillips 1,220,640 36,100 Cooper Cameron Corp. 1,758,070 38,600 Crescent Real Estate Equities Co. 622,232 23,300 Ensco International Corp. 678,030 19,500 Firstenergy Corp. 729,495 18,000 FMC Technologies, Inc. 518,400 15,000 Forest Oil Corp. 409,800 24,100 Frontier Oil Corp. 510,679 47,900 Glamis Gold Ltd. 839,687 71,000 GlobalSantaFe Corp. 1,881,500 42,000 Golden Star Resources Ltd. Warrants (USD 1.50, expiring 12/11/04)* 131,880 87,700 Halliburton Co. 2,653,802 105,000 Hecla Mining Co. 598,500 7,000 Kerr-McGee Corp. 376,390 20,800 Key Energy Services, Inc. 196,352 73,400 La Quinta Corp. 616,560 82,700 McDermott International, Inc. 840,232 16,500 Murphy Oil Corp. (b) 1,216,050 35,500 Nabors Industries Ltd. 1,605,310 46,600 Occidental Petroleum Corp. 2,255,906 45,500 Parker Drilling Co. 173,810 14,000 Peabody Energy Co. 783,860 35,000 PetroKazakhstan, Inc.--Class A 952,700 32,300 Pioneer Natural Resources, Inc. 1,133,084 6,900 Plains Exploration & Production Co. 126,615 See Notes to Financial Statements 26 GLOBAL HARD ASSETS FUND SCHEDULE OF PORTFOLIO INVESTMENTS (CONTINUED) JUNE 30, 2004 (UNAUDITED) NO. OF SHARES/ PRINCIPAL AMOUNT SECURITIES (a) VALUE (NOTE 1) -------------------------------------------------------------------------------- UNITED STATES: (CONTINUED) 44,000 Pope & Talbot, Inc. $ 869,880 74,000 Pride International, Inc. 1,266,140 23,000 Remington Oil & Gas Corp. 542,800 29,000 Smith International, Inc. 1,617,040 10,000 Starwood Hotels & Resorts Worldwide, Inc. 448,500 94,000 Varco International, Inc. 2,057,660 22,000 Weatherford International Ltd. 989,560 21,600 Weyerhaeuser Co. 1,363,394 ------------- 38,499,543 ------------- TOTAL STOCKS AND OTHER INVESTMENTS: 94.4% (Cost: $58,886,591) 76,616,174 ------------- CORPORATE NOTE UNITED STATES: 0.0% 25,000 Brookfield Homes Corp. 12.00%, 6/30/20 (Cost: $25,737) 25,875 ------------- SHORT-TERM OBLIGATION: 6.6% INTEREST MATURITY RATE DATE -------------------------------------------------------------------------------- $5,331,000 Repurchase Agreement (Note 10): Purchased on 06/30/04; maturity value $5,331,000 (with State Street Bank & Trust Co., collateralized by $5,465,000 Federal Home Loan Bank 1.50% due 5/13/05 with a value of $5,441,943) (Cost: $5,331,000) 1.35% 7/01/04 5,331,000 ------------- TOTAL INVESTMENTS: 101.0% (Cost: $64,243,328) 81,973,049 ------------- OPTIONS WRITTEN: UNITED STATES: 0.0% (132) McDermott International, Inc. (Call Option-Strike USD 10.00, expiring 7/17/04) (7,920) ------------ TOTAL OPTIONS WRITTEN: 0.0% (Premiums received: $13,397) (7,920) ------------ OTHER ASSETS LESS LIABILITIES: (1.0%) (853,555) ------------ NET ASSETS: 100% $81,111,574 ============ ---------- (a) Unless otherwise indicated, securities owned are shares of common stock. (b) Security segregated for options written. * Fair value as determined by a valuation committee under the direction of the Board of Trustees. GLOSSARY: ADR - American Depositary Receipt SUMMARY OF % OF INVESTMENTS NET BY INDUSTRY ASSETS -------------------------------------------------------------------------------- Agriculture 1.7% Energy 48.6% Industrial Metals 9.5% Paper & Forest Products 10.5% Precious Metals 16.2% Real Estate 6.0% Utilities 1.9% Short-Term Obligation 6.6% Other assets less liabilities (1.0)% ------- 100.0% ======= See Notes to Financial Statements 27 INTERNATIONAL INVESTORS GOLD FUND SCHEDULE OF PORTFOLIO INVESTMENTS JUNE 30, 2004 (UNAUDITED) NO. OF SHARES SECURITIES (a) VALUE (NOTE 1) -------------------------------------------------------------------------------- AUSTRALIA: 9.6% 1,825,000 Adamus Resources Ltd. $ 1,000,935 360,000 Kingsgate Consolidated Ltd. 877,254 6,533,788 Lihir Gold Ltd. 4,490,722 49,456 New Yilgarn Ltd.*(b) 642 1,459,685 Newcrest Mining Ltd. 13,964,463 2,875,000 Oxiana Resources NL 1,656,654 422,000 Sino Gold Ltd. 635,753 ------------- 22,626,423 ------------- CANADA: 50.4% 178,800 Agnico-Eagle Mines Ltd. 2,361,948 1,397,500 Apollo Gold Corp. 1,910,808 650,000 Aurelian Resources, Inc. 582,785 650,000 Aurelian Resources, Inc. Warrants (CAD 0.60 year 1, CAD 0.75 year 2, CAD 0.85 year 3, CAD 1.00 year 4, expiring 4/09/07)* 218,545 3,250,000 Aurizon Mines Ltd. 3,763,822 1,000,000 AXMIN, Inc. 523,013 1,000,000 Bema Gold Corp. 2,720,000 500,000 Bema Gold Corp. Warrants (CAD 1.90, expiring 10/27/07) 877,914 1,863,000 Cambior Inc. 5,044,500 1,078,600 Central Fund of Canada Ltd. (Class A) 5,673,436 1,750,000 Claude Resources, Inc. 1,686,715 1,219,100 Cumberland Resources Ltd. 1,849,053 245,000 DRC Resources Corp 1,006,799 1,800,000 Eldorado Gold Corp. 4,666,766 150,000 Gabriel Resources Ltd. 144,576 295,000 Gammon Lake Resources Inc. 1,944,038 175,800 Goldcorp, Inc. (Class A) 2,051,586 340,000 Golden Star Resources Ltd. 1,582,636 84,000 Golden Star Resources Ltd. (USD) 389,760 275,000 Golden Star Resources Ltd. Warrants (CAD 2.28, expiring 7/23/04) 801,330 83,500 Golden Star Resources Ltd. Warrants ($1.50, expiring 12/11/04)* 262,190 650,000 Great Basin Gold Ltd. 849,895 5,310,810 Guinor Gold Corp. 4,206,111 1,488,200 IAMGOLD Corp. 8,294,958 245,000 IMA Exploration, Inc. 536,349 700,000 Ivanhoe Mines Ltd. 3,765,690 25,005 Kinross Gold Corp. 138,626 1,124,490 Kinross Gold Corp. (USD) 6,252,164 845,660 Meridian Gold, Inc. 10,905,627 720,000 Mexgold Resources, Inc. 1,586,970 360,000 Mexgold Resources, Inc. Warrants (CAD 2.50, expiring 2/26/06)* 121,040 500,000 Minefinders Corp. Ltd. 3,380,903 1,997,300 Miramar Mining Corp. 2,298,149 1,072,000 Northern Orion Resources, Inc. 2,458,936 536,000 Northern Orion Resources, Inc. Warrants (CAD 2.00, expiring 5/29/08) 600,717 1,270,000 Northgate Exploration Ltd. 1,973,700 166,666 Northgate Exploration Ltd. Warrants (CAD 3.00, expiring 12/28/06) 52,301 CANADA: (CONTINUED) 2,700,000 Orezone Resources, Inc. (Class A) $ 2,178,721 236,759 Pan American Silver Corp. 3,120,464 118,380 Pan American Silver Corp. Warrants (CAD 12.00, expiring 2/20/08) 782,773 659,875 Placer Dome, Inc. 10,980,320 555,555 Red Back Mining NL 767,915 400,000 River Gold Mines Ltd. 777,047 685,000 Virginia Gold Mines Ltd. 562,986 2,670,000 Wheaton River Minerals Ltd. 7,460,998 1,750,000 Wheaton River Minerals Ltd. Warrants (CAD 1.65, expiring 5/30/07) 2,732,741 735,000 Wolfden Resources Inc. 2,745,816 ------------- 119,594,137 ------------- PERU: 2.1% 222,000 Compania de Minas Buenaventura S.A. (ADR) (Series B) 4,906,200 ------------- SOUTH AFRICA: 15.2% 181,000 African Rainbow Minerals Ltd. 987,405 89,500 Anglo American Platinum Corp. 3,374,649 395,149 AngloGold Ltd. (Sponsored ADR) 12,707,992 279,000 Durban Roodepoort Deep Ltd. (Sponsored ADR) 708,660 1,000,162 Gold Fields Ltd. (Sponsored ADR) 10,511,703 194,586 Harmony Gold Mining Co. Ltd. (Sponsored ADR) 2,037,177 44,000 Impala Platinum Holdings Ltd. 3,325,150 92,000 Impala Platinum Holdings Ltd. (Sponsored ADR) 1,743,814 222,000 Mvelaphanda Resources Ltd. 605,536 ------------- 36,002,086 ------------- SWEDEN: 0.2% 650,000 Riddarhyttan Resources AB 461,446 ------------- UNITED STATES: 16.1% 1,205,300 Glamis Gold Ltd. 21,128,909 337,400 Hecla Mining Co. 1,923,180 100,000 Metallica Resources, Inc. 95,000 1,610,000 Metallica Resources, Inc. (CAD) 1,539,749 255,000 Metallica Resources, Inc. Warrants (CAD 3.10, expiring 12/11/08) 66,684 475,000 Metallica Resources, Inc. Warrants (CAD 2.00, expiring 3/15/05)* 0 300,000 Newmont Mining Corp. 11,628,000 119,100 Royal Gold, Inc. 1,687,647 ------------- 38,069,169 ------------- UNITED KINGDOM: 4.6% 1,240,000 Randgold Resources Ltd. (ADR) 10,936,798 ------------- TOTAL STOCK AND OTHER INVESTMENTS: 98.2% (Cost: $137,470,886) 232,596,259 ------------- See Notes to Financial Statements 28 INTERNATIONAL INVESTORS GOLD FUND SCHEDULE OF PORTFOLIO INVESTMENTS (CONTINUED) JUNE 30, 2004 (UNAUDITED) NO. OF SHARES/ PRINCIPAL AMOUNT SECURITIES (a) VALUE (NOTE 1) -------------------------------------------------------------------------------- CORPORATE NOTE SOUTH AFRICA: 1.2% 3,000,000 Durban Roodeport Deep Ltd. 6.00% 11/12/06 Senior Convertible Note 144A (Cost: $3,000,000) $ 2,906,250 ------------- MATURITY INTEREST DATE RATE -------------------------------------------------------------------------------- SHORT-TERM OBLIGATION: 0.5% $1,158,000 Repurchase Agreement Purchased on 6/30/04; maturity value $1,158,043 (with State Street Bank & Trust Co., collateralized by $1,175,000 Federal Home Loan Bank 1.875% due 2/15/05 with a value of $1,181,609.38) (Cost: $1,158,000) 7/01/04 1.35% 1,158,000 ------------- TOTAL INVESTMENTS: 99.9% (Cost: $141,628,886) 236,660,509 OTHER ASSETS LESS LIABILITIES: 0.1% 200,696 ------------- NET ASSETS: 100% $236,861,205 ============= ---------- (a) Unless otherwise indicated, securities owned are shares of common stock. (b) Restricted security (Note 14) * Fair value as determined by a valuation committee under the direction of the Board of Trustees. GLOSSARY: ADR - American Depositary Receipt SUMMARY OF % OF INVESTMENTS NET BY INDUSTRY ASSETS -------------------------------------------------------------------------------- Mining Diversified 1.6% Platinum 3.6% Precious Metals 94.2% Short-Term Obligation 0.5% Other assets less liabilites 0.1% ----- 100.0% ===== See Notes to Financial Statements 29 U.S. GOVERNMENT MONEY FUND SCHEDULE OF PORTFOLIO INVESTMENTS JUNE 30, 2004 (UNAUDITED) ANNUALIZED YIELD AT TIME OF PRINCIPAL PURCHASE OR MATURITY VALUE AMOUNT COUPON RATE DATE (NOTE 1) -------------------------------------------------------------------------------- U.S. TREASURY BILL: 55.9% (Cost: $6,500,000) 0.92% 7/01/04 $ 6,500,000 ------------ INTEREST MATURITY RATE DATE -------------------------------------------------------------------------------- SHORT-TERM OBLIGATION: 49.5% $5,755,000 Repurchase Agreement (Note 10): Purchased on 6/30/04; maturity value $5,755,000 (with State Street Bank and Trust Co., collateralized by $5,880,000 U.S. Treasury Note 1.625% due 4/30/05 with a value of $5,872,650) (Cost: $5,755,000) 1.35% 7/01/04 5,755,000 ------------ TOTAL INVESTMENTS: 105.4% (Cost: $12,255,000) 12,255,000 OTHER ASSETS LESS LIABILITIES: (5.4)% (628,712) ------------ NET ASSETS: 100% $11,626,288 ============ See Notes to Financial Statements 30 [This page intentionally left blank.] 31 VAN ECK FUNDS STATEMENTS OF ASSETS AND LIABILITIES JUNE 30, 2004 (UNAUDITED)
EMERGING GLOBAL HARD MARKETS FUND ASSETS FUND ------------- ------------ ASSETS: Investments at cost ....................................................... $ 25,630,313 $ 64,243,328 ============ ============ Investments at value (including repurchase agreements of $1,723,000, $5,331,000, $1,158,000 and $5,755,000) (Note 1) ............. $ 25,815,502 $ 81,973,049 Cash ...................................................................... -- 16,855 Foreign currency (Cost: $986,491, $1,473, $0 and $0) ...................... 981,900 1,462 Cash--initial margin for swap (Note 10) ................................... -- 38,990 Receivables: Securities sold ......................................................... -- 300,006 Due from Adviser ........................................................ -- -- Dividends and interest .................................................. 38,458 105,952 Capital shares sold ..................................................... -- 454,592 Due from broker--swap (Note 10) ......................................... -- 461,472 Prepaid expense and other assets .......................................... 32,807 158,009 ------------ ------------ Total assets .......................................................... 26,868,667 83,510,387 ------------ ------------ LIABILITIES: Payables: Securities purchased .................................................... -- 1,992,066 Capital shares redeemed ................................................. 40,347 134,764 Accounts payable ........................................................ 65,081 61,706 Due to Distributor (Note 5) ............................................. 41,795 140,526 Due to Adviser (Note 2) ................................................. 38,686 61,831 Options written (Premiums received $0, $13,397, $0 and $0) (Note 1) ..... -- 7,920 ------------ ------------ Total liabilities ..................................................... 185,909 2,398,813 ------------ ------------ Net Assets ................................................................ $ 26,682,758 $ 81,111,574 ============ ============ CLASS A SHARES+: Net assets ................................................................ $ 24,274,110 $ 64,927,623 ============ ============ Shares outstanding ........................................................ 3,114,004 3,488,053 ============ ============ Net asset value and redemption price per share ............................ $ 7.80 $ 18.61 ============ ============ Maximum offering price per share .......................................... $ 8.28 $ 19.75 ============ ============ CLASS C SHARES: Net assets ................................................................ $ 2,408,648 $ 16,183,951 ============ ============ Shares outstanding ........................................................ 310,260 898,221 ============ ============ Net asset value, maximum offering and redemption price per share (Redemption may be subject to a contingent deferred sales charge within the first year of ownership) .............................. $ 7.76 $ 18.02 ============ ============ Net assets consist of: Aggregate paid in capital ............................................... $ 28,259,015 $ 99,064,148 Unrealized appreciation of investments, swaps, foreign currency, forward foreign currency contracts, and other assets and liabilities denominated in foreign currencies ....................................... 173,552 18,197,264 Overdistributed/underdistributed net investment loss .................... (84,118) (79,560) Accumulated realized gain (loss) ........................................ (1,665,691) (36,070,278) ------------ ------------ Net Assets ................................................................ $ 26,682,758 $ 81,111,574 ============ ============
---------- + The U.S. Government Money Fund does not have a designated class of shares. See Notes to Financial Statements 32
INTERNATIONAL INVESTORS U.S. GOVERNMENT GOLD FUND MONEY FUND --------------- -------------- ASSETS: Investments at cost ....................................................... $141,628,886 $ 12,255,000 ============ ============ Investments at value (including repurchase agreements of $1,723,000, $5,331,000, $1,158,000 and $5,755,000) (NOTE 1) ............... $236,660,509 $ 12,255,000 Cash ...................................................................... 27,454 4,356 Foreign currency (Cost: $986,491, $1,473, $0 and $0) ...................... -- -- Cash--initial margin for swap (Note 10) ................................... -- -- Receivables: Securities sold ......................................................... 1,149,973 -- Due from Adviser ........................................................ -- 5,723 Dividends and interest .................................................. 28,966 216 Capital shares sold ..................................................... 107,186 200 Due from broker--swap (Note 10) ......................................... -- -- Prepaid expense and other assets .......................................... 238,959 13,217 ------------ ------------ Total assets .......................................................... 238,213,047 12,278,712 ------------ ------------ LIABILITIES: Payables: Securities purchased .................................................... -- -- Capital shares redeemed ................................................. 860,665 601,009 Accounts payable ........................................................ 182,026 40,589 Due to Distributor (Note 5) ............................................. 75,921 10,826 Due to Adviser (Note 2) ................................................. 233,230 -- Options written (Premiums received $0, $13,397, $0 and $0) (Note 1) ..... -- -- ------------ ------------ Total liabilities ..................................................... 1,351,842 652,424 ------------ ------------ Net Assets ................................................................ $236,861,205 $ 11,626,288 ============ ============ CLASS A SHARES+: Net assets ................................................................ $230,912,945 $ 11,626,288 ============ ============ Shares outstanding ........................................................ 24,772,760 11,626,236 ============ ============ Net asset value and redemption price per share ............................ $ 9.32 $ 1.00 ============ ============ Maximum offering price per share .......................................... $ 9.89 -- ============ ============ CLASS C SHARES: Net assets ................................................................ $ 5,948,260 -- ============ ============ Shares outstanding ........................................................ 642,024 -- ============ ============ Net asset value, maximum offering and redemption price per share (Redemption may be subject to a contingent deferred sales charge within the first year of ownership) .............................. $ 9.26 -- ============ ============ Net assets consist of: Aggregate paid in capital ............................................... $130,131,108 $ 11,732,572 Unrealized appreciation of investments, swaps, foreign currency, forward foreign currency contracts, and other assets and liabilities denominated in foreign currencies ....................................... 95,031,623 -- Overdistributed/underdistributed net investment loss .................... (2,230,661) (32,439) Accumulated realized gain (loss) ........................................ 13,929,135 (73,845) ------------ ------------ Net Assets ................................................................ $236,861,205 $ 11,626,288 ============ ============
See Notes to Financial Statements 33 VAN ECK FUNDS STATEMENTS OF OPERATIONS SIX MONTHS ENDED JUNE 30, 2004 (UNAUDITED)
EMERGING GLOBAL HARD MARKETS FUND ASSETS FUND ------------- ------------- INCOME: Dividends ................................................................. $ 414,854 $ 811,996 Interest .................................................................. 719 28,037 Foreign taxes withheld .................................................... (38,165) (51,564) ------------ ------------ Total income .............................................................. 377,408 788,469 ------------ ------------ EXPENSES: Management (Note 2) ....................................................... 118,233 404,288 Distribution Class A (Note 5) ............................................. 71,253 167,504 Distribution Class C (Note 5) ............................................. 6,695 69,279 Administration (Note 2) ................................................... 55,718 36,621 Reports to shareholders ................................................... 5,442 16,822 Trustees' fees and expenses (Note 8) ...................................... 2,671 6,266 Transfer agent (Class A) .................................................. 46,902 87,282 Transfer agent (Class C) .................................................. 14,399 18,616 Custodian ................................................................. 36,178 11,752 Registration (Class A) .................................................... 9,713 8,756 Registration (Class C) .................................................... 8,724 7,138 Professional .............................................................. 22,587 21,879 Insurance ................................................................. 3,069 1,082 Interest expense (Note 12) ................................................ 6,710 -- Other ..................................................................... 7,645 9,570 ------------ ------------ Total expenses ............................................................ 415,939 866,855 Expense reduction (Note 2) ................................................ (66,067) (34,956) ------------ ------------ Net expenses .............................................................. 349,872 831,899 ------------ ------------ Net investment income (loss) .............................................. 27,536 (43,430) ------------ ------------ REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (NOTE 3): Realized gain from investments ............................................ 4,373,584 3,133,858 Realized loss from forward foreign currency contracts and foreign currency transactions ................................................... (48,658) (9,008) Realized gain from options ................................................ -- 15,601 Realized gain from futures and swaps ...................................... -- 126,275 Change in unrealized appreciation (depreciation) of foreign currency, forward foreign currency contracts and other assets and liabilities denominated in foreign currencies ....................................... (1,389) 404 Change in unrealized appreciation (depreciation) of investments and swaps . (6,905,947) (1,869,702) ------------ ------------ Net gain (loss) on investments and foreign currency transactions .......... (2,582,410) 1,397,428 ------------ ------------ NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ........... $ (2,554,874) $ 1,353,998 ============ ============
See Notes to Financial Statements 34
INTERNATIONAL INVESTORS U.S. GOVERNMENT GOLD FUND MONEY FUND ----------------- --------------- INCOME: Dividends ................................................................. $ 372,496 $ -- Interest .................................................................. 131,642 55,997 Foreign taxes withheld .................................................... (17,561) -- ------------ ------------ Total income .............................................................. 486,577 55,997 ------------ ------------ EXPENSES: Management (Note 2) ....................................................... 1,000,733 31,608 Distribution Class A (Note 5) ............................................. 327,358 15,804 Distribution Class C (Note 5) ............................................. 24,788 -- Administration (Note 2) ................................................... 438,138 34,897 Reports to shareholders ................................................... 70,442 6,186 Trustees' fees and expenses (Note 8) ...................................... 29,374 2,462 Transfer agent (Class A) .................................................. 357,920 24,960 Transfer agent (Class C) .................................................. 7,220 -- Custodian ................................................................. 29,806 2,650 Registration (Class A) .................................................... 6,536 13,726 Registration (Class C) .................................................... 5,092 Professional .............................................................. 65,430 22,582 Insurance ................................................................. 14,812 -- Interest expense (Note 12) ................................................ -- -- Other ..................................................................... 16,279 6,029 ------------ ------------ Total expenses ............................................................ 2,393,928 160,904 Expense reduction (Note 2) ................................................ (5,065) (104,907) ------------ ------------ Net expenses .............................................................. 2,388,863 55,997 ------------ ------------ Net investment income (loss) .............................................. (1,902,286) -- ------------ ------------ REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (NOTE 3): Realized gain from investments ............................................ 19,477,866 -- Realized loss from forward foreign currency contracts and foreign currency transactions ................................................... (197,940) -- Realized gain from options ................................................ -- -- Realized gain from futures and swaps Change in unrealized appreciation (depreciation) of foreign currency, forward foreign currency contracts and other assets and liabilities denominated in foreign currencies ....................................... (39,630) -- Change in unrealized appreciation (depreciation) of investments and swaps . (77,968,449) -- ------------ ------------ Net gain (loss) on investments and foreign currency transactions .......... (58,728,153) -- ------------ ------------ NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS ........... $(60,630,439) $ -- ============ ============
See Notes to Financial Statements 35 VAN ECK FUNDS STATEMENTS OF CHANGES IN NET ASSETS
EMERGING MARKETS GLOBAL HARD ASSETS FUND FUND ---------------------------- ----------------------------- SIX MONTHS SIX MONTHS ENDED YEAR ENDED ENDED YEAR ENDED JUNE 30, 2004 DECEMBER 31, JUNE 30, 2004 DECEMBER 31, (UNAUDITED) 2003 (UNAUDITED) 2003 ------------ ------------ ------------ ------------ INCREASE (DECREASE) IN NET ASSETS: OPERATIONS: Net investment income (loss) ................................. $ 27,536 $ 98,614 $ (43,430) $ (412,036) Realized gain (loss) from investments ........................ 4,373,584 3,704,997 3,133,858 1,826,884 Realized gain (loss) from forward foreign currency contracts and foreign currency transactions ......................... (48,658) (60,364) (9,008) 33,544 Realized gain from swaps futures and options ................. -- -- 141,876 170,333 Change in unrealized appreciation (depreciation) of foreign currency, forward foreign currency contracts and other assets and liabilities denominated in foreign currencies .......... (1,389) 12,823 404 4,980 Change in unrealized appreciation (depreciation) of investments and swaps .................................................. (6,905,947) 7,376,303 (1,869,702) 18,221,378 ------------- ------------- ------------- ------------- Increase (decrease) in net assets resulting from operations .. (2,554,874) 11,132,373 1,353,998 19,845,083 ------------- ------------- ------------- ------------- DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income+: Class A Shares ............................................. -- -- -- -- Class B Shares ............................................. -- -- -- -- Class C Shares ............................................. -- -- -- -- Realized gain: Class A Shares ............................................. -- -- -- -- Class B Shares ............................................. -- -- -- -- Class C Shares ............................................. -- -- -- -- ------------- ------------- ------------- ------------- Total dividends and distributions ............................ -- -- -- -- ------------- ------------- ------------- ------------- CAPITAL SHARE TRANSACTIONS (NOTE 6): Net proceeds from sales of shares+: Class A Shares ............................................. 3,379,932 280,273 15,873,179 179,375,633 Shares issued in connection with the merger involving Asia Dynasty Class A (Note 13) ........................... -- 12,377,530 -- -- Class B Shares ............................................. -- -- -- 301,630 Shares converted from Class B to Class C (Note 6) - Global Hard Assets Fund .................................. -- -- -- 3,293,328 Class C Shares* ............................................ 1,048,662 90,235 6,885,798 5,240,169 Shares issued in connection with the merger involving Asia Dynasty Class C (Note 13) ........................... -- 2,403,885 -- -- ------------- ------------- ------------- ------------- 4,428,594 15,151,923 22,758,977 188,210,760 ------------- ------------- ------------- ------------- Reinvestment of dividends+: Class A Shares ............................................. -- -- -- -- Class B Shares ............................................. -- -- -- -- Class C Shares ............................................. -- -- -- -- ------------- ------------- ------------- ------------- -- -- -- -- ------------- ------------- ------------- ------------- Cost of shares reacquired+: Class A Shares ............................................. (5,825,924) (4,172,590) (16,695,652) (171,346,247) Class B Shares ............................................. -- -- -- (3,858,750) Class C Shares ............................................. (986,950) (67,364) (2,457,641) (870,211) ------------- ------------- ------------- ------------- (6,812,874) (4,239,954) (19,153,293) (176,075,208) ------------- ------------- ------------- ------------- Increase (decrease) in net assets resulting from capital share transactions ......................................... (2,384,280) 10,911,969 3,605,684 12,135,552 Capital Contribution from Advisor (Note 2) ................... -- -- -- -- ------------- ------------- ------------- ------------- Total increase (decrease) in net assets ...................... (4,939,154) 22,044,342 4,959,682 31,980,635 NET ASSETS: Beginning of period .......................................... 31,621,912 9,577,570 76,151,893 44,171,258 ------------- ------------- ------------- ------------- End of period ................................................ $ 26,682,758 $ 31,621,912 $ 81,111,575 $ 76,151,893 ============= ============= ============= ============= Undistributed/overdistributed net investment income (loss) ... $ (84,118) $ (62,996) $ (79,560) $ (27,122) ============= ============= ============= =============
---------- + The U.S. Government Money Fund does not have a designated class of shares; as a result, all activity is shown on the Class A shares line. * For Emerging Markets Fund and International Investors Gold Fund, Class C shares began October 3, 2003 See Notes to Financial Statements 36
INTERNATIONAL INVESTORS GOLD U.S. GOVERNMENT MONEY FUND FUND ---------------------------- ----------------------------- SIX MONTHS SIX MONTHS ENDED YEAR ENDED ENDED YEAR ENDED JUNE 30, 2004 DECEMBER 31, JUNE 30, 2004 DECEMBER 31, (UNAUDITED) 2003 (UNAUDITED) 2003 ------------ ------------ ------------ ------------ INCREASE (DECREASE) IN NET ASSETS: OPERATIONS: Net investment income (loss) ................................. $ (1,902,286) $ (2,513,591) $ -- $ 23,135 Realized gain (loss) from investments ........................ 19,477,866 17,787,944 -- (2,128) Realized gain (loss) from forward foreign currency contracts and foreign currency transactions ......................... (197,940) (224,522) -- -- Realized gain from swaps futures and options ................. -- -- -- -- Change in unrealized appreciation (depreciation) of foreign currency, forward foreign currency contracts and other assets and liabilities denominated in foreign currencies .......... (39,630) 39,779 -- -- Change in unrealized appreciation (depreciation) of investments and swaps .................................................. (77,968,449) 84,204,578 -- -- ------------- ------------- ------------- ------------- Increase (decrease) in net assets resulting from operations .. (60,630,439) 99,294,188 -- 21,007 ------------- ------------- ------------- ------------- DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM: Net investment income+: Class A Shares ............................................. -- -- -- (28,125) Class B Shares ............................................. -- -- -- -- Class C Shares ............................................. -- -- -- -- Realized gain: Class A Shares ............................................. -- (5,961,389) -- -- Class B Shares ............................................. -- -- -- -- Class C Shares ............................................. -- -- -- -- ------------- ------------- ------------- ------------- Total dividends and distributions ............................ -- (5,961,389) -- (28,125) ------------- ------------- ------------- ------------- CAPITAL SHARE TRANSACTIONS (NOTE 6): Net proceeds from sales of shares+: Class A Shares ............................................. 11,414,062 846,301,085 9,494,408 952,357,199 Shares issued in connection with the merger involving Asia Dynasty Class A (Note 13) ........................... -- -- -- -- Class B Shares ............................................. -- -- -- -- Shares converted from Class B to Class C (Note 6) - Global Hard Assets Fund .................................. -- -- -- -- Class C Shares* ............................................ 3,730,954 3,357,938 -- -- Shares issued in connection with the merger involving Asia Dynasty Class C (Note 13) ........................... -- -- -- -- ------------- ------------- ------------- ------------- 15,145,016 849,659,023 9,494,408 952,357,199 ------------- ------------- ------------- ------------- Reinvestment of dividends+: Class A Shares ............................................. -- 4,450,316 -- 20,116 Class B Shares ............................................. -- -- -- -- Class C Shares ............................................. -- -- -- -- ------------- ------------- ------------- ------------- -- 4,450,316 -- 20,116 ------------- ------------- ------------- ------------- Cost of shares reacquired+: Class A Shares ............................................. (26,866,699) (842,499,427) (14,991,661) (982,848,075) Class B Shares ............................................. -- -- -- -- Class C Shares ............................................. (185,247) (11,908) -- -- ------------- ------------- ------------- ------------- (27,051,946) (842,511,335) (14,991,661) (982,848,075) ------------- ------------- ------------- ------------- Increase (decrease) in net assets resulting from capital share transactions ......................................... (11,906,930) 11,598,004 (5,497,253) (30,470,760) Capital Contribution from Advisor (Note 2) ................... -- -- 70,355 20,000 ------------- ------------- ------------- ------------- Total increase (decrease) in net assets ...................... (72,537,369) 104,930,803 (5,426,898) (30,457,878) NET ASSETS: Beginning of period .......................................... 309,398,574 204,467,771 17,053,186 47,511,064 ------------- ------------- ------------- ------------- End of period ................................................ $ 236,861,205 $ 309,398,574 $ 11,626,288 $ 17,053,186 ============= ============= ============= ============= Undistributed/overdistributed net investment income (loss) ... $ (2,230,661) $ (130,435) $ (32,439) $ (32,439) ============= ============= ============= =============
---------- + The U.S. Government Money Fund does not have a designated class of shares; as a result, all activity is shown on the Class A shares line. * For Emerging Markets Fund and International Investors Gold Fund, Class C shares began October 3, 2003 See Notes to Financial Statements 37 EMERGING MARKETS FUND -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS For a share outstanding throughout each period:
CLASS C ---------------------- FOR THE CLASS A PERIOD ------------------------------------------------------------------- SIX MONTHS OCTOBER 3, SIX MONTHS ENDED 2003* ENDED YEAR ENDED DECEMBER 31, JUNE 30, THROUGH JUNE 30, 2004 ---------------------------------------------------- 2004 DECEMBER 31, (UNAUDITED) 2003 2002 2001 2000 1999 (UNAUDITED) 2003 ----------- ------- -------- ------- ------- ------ ----------- ------ Net Asset Value, Beginning of Period ......................... $ 8.49 $ 4.85 $ 6.47 $ 8.98 $ 13.49 $ 10.78 $ 8.50 $ 7.44 ------ ------ ------ ------ ------ ------ ----- ----- Income from Investment Operations: Net Investment Income (Loss) ..... 0.01 0.05 (0.02) (0.09) (0.16) (0.06) -- 0.01 Net Gain (Loss) on Investments (both Realized and Unrealized) ... (0.70) 3.59 (1.60) (2.37) (2.73) 3.59 (0.74) 1.05 ------ ------ ------ ------ ------ ------ ----- ----- Total from Investment Operations ... (0.69) 3.64 (1.62) (2.46) (2.89) 3.53 (0.74) 1.06 ------ ------ ------ ------ ------ ------ ----- ----- Less Dividends and Distributions: Dividends from Net Investment Income ........................ -- -- -- --(e) --(e) -- -- -- Distribution from Capital Gains .. -- -- -- (0.05) (1.62) (0.82) -- -- ------ ------ ------ ------ ------ ------ ----- ----- Total Dividends and Distributions .. -- -- -- (0.05) (1.62) (0.82) -- -- ------ ------ ------ ------ ------ ------ ----- ----- Net Asset Value, End of Period ..... $ 7.80 $ 8.49 $ 4.85 $ 6.47 $ 8.98 $ 13.49 $ 7.76 $ 8.50 ====== ====== ====== ====== ====== ====== ===== ===== Total Return (a) ................... (8.13)% 75.05% (25.04)% (27.32)% (21.88)% 32.83% (8.71)% 14.25% ------------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTARY DATA Net Assets, End of Period (000) .... $24,274 $28,956 $ 9,578 $13,032 $23,990 $33,070 $2,409 $2,665 Ratio of Gross Expenses to Average Net Assets ............... 2.53%(f) 3.08% 2.91% 2.45% 2.15% 2.20% 3.58%(f) 2.76%(f) Ratio of Net Expenses to Average Net Assets (b) ........... 2.12%(c)(f) 2.00%(c) 2.00%(c) 2.00%(c) 2.00%(c) 2.00% 2.74%(c)(f) 2.50%(f) Ratio of Net Investment Income (Loss) to Average Net Assets (d) ........ 0.23%(f) 0.71% (0.30)% (0.95)% (1.35)% (0.48)% (0.33)%(f) 0.67%(f) Portfolio Turnover Rate ............ 67% 128% 120% 56% 98% 86% 67% 128%
---------- (a) Total return is calculated assuming an initial investment of $10,000 made at the net asset value at the beginning of the period, reinvestment of dividends and distributions at net asset value on the dividend payment date and a redemption on the last day of the period. The return does not reflect the deduction of taxes that a shareholder would pay on Fund dividends and distributions or the redemption of Fund shares. Returns for periods less than a year are not annualized. (b) After expenses reduced by a custodian fee, directed brokerage and/or Advisory expense reimbursement arrangement. (c) Net of interest expense. (d) For the six months ended June 30, 2004 and the years ended 2003, 2002, 2001, 2000 and 1999, the net effect of the reductions due to a custodian fee, directed brokerage and/or Advisory expense reimbursement arrangement, for each of the periods, for Class A are 0.37%, 1.05%, 0.90%, 0.42%, 0.12% and 0.20% and the six months ended June 30, 2004 and the period October 3, 2003 through December 31, 2003 for Class C is 0.81% and 0.25%, respectively. (e) Amount represents less than $0.005 per share. (f) Annualized. * Inception date of Class C shares. See Notes to Financial Statements 38 GLOBAL HARD ASSETS FUND -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS For a share outstanding throughout each period:
CLASS A ------------------------------------------------------------------------------------------- SIX MONTHS ENDED YEAR ENDED DECEMBER 31, JUNE, 30 2004 ---------------------------------------------------------------------- (UNAUDITED) 2003 2002 2001 2000 1999 ----------- ------- ------- ------- ------- ------- Net Asset Value, Beginning of Period ...... $ 18.19 $ 12.77 $ 11.96 $ 13.08 $ 12.01 $ 10.34 ------- ------- ------- ------- ------- ------- Income from Investment Operations: Net Investment Income (Loss) ............ -- (0.08) (0.05) (0.03) 0.08 0.07 Net Gain (Loss) on Investments (both Realized and Unrealized) ........ 0.42 5.50 0.86 (1.09) 0.99 1.65 ------- ------- ------- ------- ------- ------- Total from Investment Operations .......... 0.42 5.42 0.81 (1.12) 1.07 1.72 ------- ------- ------- ------- ------- ------- Less Dividends and Distributions: Dividends from Net Investment Income .... -- -- -- -- -- (0.01) Tax Return of Capital ................... -- -- -- -- -- (0.04) ------- ------- ------- ------- ------- ------- Total Dividends and Distributions ......... -- -- -- -- -- (0.05) ------- ------- ------- ------- ------- ------- Net Asset Value, End of Period ............ $ 18.61 $ 18.19 $ 12.77 $ 11.96 $ 13.08 $ 12.01 ======= ======= ======= ======= ======= ======= Total Return (a) .......................... 2.31% 42.44% 6.77% (8.56)% 8.91% 16.64% ------------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTARY DATA Net Assets, End of Period (000) ........... $64,928 $64,661 $39,106 $49,244 $13,581 $17,757 Ratio of Gross Expenses to Average Net Assets 2.05%(f) 2.43% 2.64% 2.76% 2.52% 2.89% Ratio of Net Expenses to Average Net Assets (d)............................... 1.95%(f) 2.43% 2.61% 2.58%(b) 2.00%(b) 2.00%(b) Ratio of Net Investment Income (Loss) To .. (0.01)%(f) (0.68)% (0.31)% (0.51)%(c) 0.49%(c) 0.49%(c) Average Net Assets Portfolio Turnover Rate ................... 23% 40% 177% 265% 92% 195%
CLASS C ------------------------------------------------------------------------------------------- SIX MONTHS ENDED YEAR ENDED DECEMBER 31, JUNE, 30 2004 ---------------------------------------------------------------------- (UNAUDITED) 2003 2002 2001 2000 1999 ----------- ------- ------- ------- ------- ------- Net Asset Value, Beginning of Period ...... $ 17.66 $ 12.55 $ 11.87 $ 13.01 $ 12.04 $ 10.40 ------- ------- ------- ------- ------- ------- Income from Investment Operations: Net Investment Income (Loss) ............ (0.04) (0.05) (0.19) (0.14) (0.02) (0.03) Net Gain (Loss) on Investments (both Realized and Unrealized) ........ 0.40 5.16 0.87 (1.00) 0.99 1.67 ------- ------- ------- ------- ------- ------- Total from Investment Operations .......... 0.36 5.11 0.68 (1.14) 0.97 1.64 ------- ------- ------- ------- ------- ------- Less Dividends and Distributions: Dividends from Net Investment Income .... -- -- -- -- -- -- Tax Return of Capital ................... -- -- -- -- -- -- ------- ------- ------- ------- ------- ------- Total Dividends and Distributions ......... -- -- -- -- -- -- ------- ------- ------- ------- ------- ------- Net Asset Value, End of Period ............ $ 18.02 $ 17.66 $ 12.55 $ 11.87 $ 13.01 $ 12.04 ======= ======= ======= ======= ======= ======= Total Return (a) .......................... 2.04% 40.72% 5.73% (8.83)% 8.06% 15.77% ---------------------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTARY DATA Net Assets, End of Period (000) ........... $16,184 $11,490 $ 2,202 $ 2,066 $ 2,697 $ 3,223 Ratio of Gross Expenses to Average Net .... 2.61%(f) 3.76% 3.72% 3.20% 3.82% 4.15% Assets Ratio of Net Expenses to Average Net Assets (d)........................... 2.55%(f) 3.76% 3.70% 3.08%(b) 2.75%(b) 2.71%(b) Ratio of Net Investment Income (Loss) To .. 0.58%(f) (0.75)% (1.36)% (0.73)%(c) (0.23)%(c) (0.22)%(c) Average Net Assets Portfolio Turnover Rate ................... 23% 40% 177% 265% 92% 195%
---------- (a) Total return is calculated assuming an initial investment of $10,000 made at the net asset value at the beginning of the period, reinvestment of dividends and distributions at net asset value on the dividend payment date and a redemption on the last day of the period. The return does not reflect the deduction of taxes that a shareholder would pay on Fund dividends and distributions or the redemption of Fund shares. (b) After expenses reduced by a custodian fee, directed brokerage and/or Advisory expense reimbursement arrangement. (c) For the six months ended June 30, 2004 and years ended 2001, 2000 and 1999, the net effect of reductions due to a custodian fee, directed brokerage and/or Advisory expense reimbursement arrangement, for each of the periods, for Class A are 0.10%, 0.08%, 0.43% and 0.84%, respectively; and Class C are 0.06%, 0.00%, 0.98% and 1.39%, respectively. (d) Net of interest expense. (f) Annualized. See Notes to Financial Statements 39 INTERNATIONAL INVESTORS GOLD FUND -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS For a share outstanding throughout each period:
CLASS A --------------------------------------------------------------------- SIX MONTHS ENDED JUNE 30, 2004 YEAR ENDED DECEMBER 31, ---------------- --------------------------------------------------- (UNAUDITED) 2003 2002 2001 2000 1999 ------------- ------ ------- ------- ------- ------- Net Asset Value, Beginning of Period .............. $11.64 $ 8.30 $ 5.36 $ 4.45 $ 5.73 $ 6.59 ------- ------- ------- ------- ------- ------- Income from Investment Operations: Net Investment Income (Loss) .................... (0.07) (0.10) (0.01) 0.01 0.00(d) 0.03 Net Gain (Loss) on Investments (both Realized and Unrealized) ................. (2.25) 3.66 4.86 0.91 (1.27) (0.84) ------- ------- ------- ------- ------- ------- Total from Investment Operations .................. (2.32) 3.56 4.85 0.92 (1.27) (0.81) ------- ------- ------- ------- ------- ------- Less Dividends and Distributions: Dividends from Net Investment Income ............ -- -- -- (0.01) -- (0.05) Distributions from Capital Gains ................ -- (0.22) (1.91) -- -- -- Tax Return of Capital ........................... -- -- -- -- (0.01) -- ------- ------- ------- ------- ------- ------- Total Dividends and Distributions ................. -- (0.22) (1.91) (0.01) (0.01) (0.05) ------- ------- ------- ------- ------- ------- Net Asset Value, End of Period .................... $ 9.32 $11.64 $ 8.30 $ 5.36 $ 4.45 $ 5.73 ======= ======= ======= ======= ======= ======= Total Return (a) .................................. (19.93)% 44.25% 90.48% 20.74% (22.18)% (12.37)% ------------------------------------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTARY DATA Net Assets, End of Period (000) ................... $230,913 $305,863 $204,468 $121,767 $116,513 $169,045 Ratio of Gross Expenses to Average Net Assets ..... 1.77%(e) 1.87% 2.02% 2.25% 2.30% 2.09% Ratio of Net Expenses to Average Net Assets (b) ... 1.77%(e) 1.85% 1.96% 2.17% 2.17% 2.08% Ratio of Net Investment Income to Average Net Assets ........................................... (1.41)%(e) (1.04)% (0.14)% 0.09%(c) 0.08%(c) 0.46%(c) Portfolio Turnover Rate ........................... 25% 244% 720% 109% 65% 95% CLASS C -------------------------------- SIX MONTHS ENDED OCTOBER 3, JUNE 30, 2003* THROUGH 2004 DECEMBER 31, (UNAUDITED) 2003 ----------- -------------- Net Asset Value, Beginning of Period .............. $ 11.61 $ 9.28 ------- ------- Income from Investment Operations: Net Investment Income (Loss) .................... (0.09) (0.03) Net Gain (Loss) on Investments (both Realized and Unrealized) ................. (2.26) 2.36 ------- ------- Total from Investment Operations .................. (2.35) 2.33 ------- ------- Less Dividends and Distributions: Dividends from Net Investment Income ............ -- -- Distributions from Capital Gains ................ -- -- Tax Return of Capital ........................... -- -- ------- ------- Total Dividends and Distributions ................. -- -- ------- ------- Net Asset Value, End of Period .................... $ 9.26 $11.61 ======= ======= Total Return (a) .................................. (20.24)% 25.11% ------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTARY DATA Net Assets, End of Period (000) ................... $5,948 $3,535 Ratio of Gross Expenses to Average Net Assets ..... 2.94%(e) 2.46%(e) Ratio of Net Expenses to Average Net Assets (b) ... 2.74%(e) 2.46%(e) Ratio of Net Investment Income to Average Net Assets ........................................... (11.70)%(e) (1.99)%(e) Portfolio Turnover Rate ........................... 25% 244%
-------------- (a) Total return is calculated assuming an initial investment of $10,000 made at the net asset value at the beginning of the period, reinvestment of dividends and distributions at net asset value on the dividend payment date and a redemption on the last day of the period. The return does not reflect the deduction of taxes that a shareholder would pay on Fund dividends and distributions or the redemption of Fund shares. Returns for periods less than a year are not annualized. (b) Net of interest expense. (c) For the years ended 2001, 2000 and 1999, the net effect of the reductions due to a custodian fee or directed brokerage arrangement, for each of the years for Class A shares, are 0.00%, 0.02% and 0.01%, respectively and for the six months ended June 30, 2004, the net effect of reductions due to Advisory expense reimbursement for Class C shares is 0.20%. (d) Amount represents less than $0.01 per share. (e) Annualized. * Inception date of Class C shares. See Notes to Financial Statements 40 U.S. GOVERNMENT MONEY FUND -------------------------------------------------------------------------------- FINANCIAL HIGHLIGHTS For a share outstanding throughout each period:
SIX MONTHS ENDED YEAR ENDED DECEMBER 31, JUNE 30, 2004 -------------------------------------------------------- (UNAUDITED) 2003 2002 2001 2000 1999 ----------- ----- ----- ----- ----- ----- Net Asset Value, Beginning of Period ......... $1.00 $1.00 $1.00 $ 1.00 $ 1.00 $ 1.00 ----- ----- ----- ----- ----- ----- Income from Investment Operations: Net Investment Income ...................... 0.00(d) 0.00(d) 0.00(d) 0.02 0.05 0.03 ----- ----- ----- ----- ----- ----- Less Dividends to Shareholders: Dividends from Net Investment Income ....... 0.00(d) 0.00(d) 0.00(d) (0.02) (0.05) (0.03) ----- ----- ----- ----- ----- ----- Net Asset Value, End of Period ............... $1.00 $1.00 $1.00 $ 1.00 $ 1.00 $ 1.00 ===== ===== ===== ===== ===== ===== Total Return (a) ............................. 0.00% 0.22% 0.43% 2.21% 4.77% 3.43% ----------------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTARY DATA Net Assets, End of Period (000) .............. $11,626 $17,053 $47,511 $46,069 $73,797 $97,443 Ratio of Gross Expenses to Average Net Assets 2.54%(e) 1.57% 1.35% 1.23% 1.10% 1.15% Ratio of Net Expenses to Average Net Assets .. 0.89%(b)(e) 0.90%(b) 1.15%(b) 1.21%(b) -- -- Ratio of Net Investment Income to Average..... Net Assets 0.00%(c)(e) 0.15%(c) 0.46% (c) 2.71%(c) 4.80% 3.68%
----------------- (a) Total return is calculated assuming an initial investment of $10,000 made at the net asset value at the beginning of the year, reinvestment of dividends and distributions at net asset value on the dividend payment date and a redemption on the last day of the year. The return does not reflect the deduction of taxes that a shareholder would pay on Fund dividends and distributions or the redemption of Fund shares. At June 30, 2004 and in the year ended 2000, approximately 0.55% and 0.06% of total return relates to amounts contributed by the Adviser. (b) After expenses reduced by an Advisory fee waiver arrangement. (c) Net effect of expense reimbursement by Adviser to average net assets for the six months ended June 30, 2004 and the years ended December 31, 2003, December 31, 2002 and December 31, 2001 were 1.65%, 0.67%, 0.20% and 0.02%, respectively. (d) Amount represents less than $0.01 per share. (e) Annualized. See Notes to Financial Statements 41 VAN ECK FUNDS NOTES TO FINANCIAL STATEMENTS (unaudited) -------------------------------------------------------------------------------- NOTE 1--SIGNIFICANT ACCOUNTING POLICIES--Van Eck Funds (the "Trust"), organized as a Massachusetts business trust on April 3, 1985, is registered under the Investment Company Act of 1940, as amended. The Trust operates as a series fund currently comprised of four portfolios: Emerging Markets Fund Global Hard Assets Fund, International Investors Gold Fund and U.S. Government Money Fund collectively (the "Funds"). The U.S. Government Money Fund is classified as a diversified fund under the Investment Company Act of 1940, as amended. Emerging Markets Fund, Global Hard Assets Fund, and International Investors Gold Fund are classified as non-diversified funds. The following is a summary of significant accounting policies consistently followed by the Funds in the preparation of their financial statements. The policies are in conformity with accounting principles generally accepted in the United States. The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts in the financial statements. Actual results could differ from those estimates. A. SECURITY VALUATION--Securities traded on national or foreign exchanges are valued at the last sales prices reported at the close of business. As of June 23, 2003, the portfolios began pricing securities traded on the NASDAQ stock market using the NASDAQ official closing price. Over-the-counter securities and listed securities for which no sale was reported are valued at the mean of the bid and ask prices. Securities in which the Funds invest are traded in markets that close before 4:00 p.m. Eastern Time. Normally, developments that occur between the close of the foreign markets and 4:00 p.m. Eastern Time will not be reflected in the Fund's NAV. However, if Emerging Markets Fund, Global Hard Assets Fund and International Investors Gold Fund determine that such developments are so significant that they will materially affect the value of the Fund's securities, the Fund may adjust the previous closing prices to reflect what the Valuation Committee under the direction of the Board of Trustees believes to be the fair value of these securities as of 4:00 p.m. Eastern Time. The Funds may also fair value securities in other situations, for example, when a particular foreign market is closed but the Fund is open. Short-term obligations are valued at amortized cost, which, with accrued interest, approximates market value. Forward foreign currency contracts are valued at the spot currency rate plus an amount ("points"), which reflects the differences in interest rates between the U.S. and foreign markets. B. FEDERAL INCOME TAXES--It is each Fund's policy to comply with the provisions of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable income to its shareholders. Therefore, no federal income tax provision is required. C. CURRENCY TRANSLATION--Assets and liabilities denominated in foreign currencies and commitments under forward foreign currency contracts are translated into U.S. dollars at the mean of the quoted bid and ask prices of such currencies. Purchases and sales of investments are translated at the exchange rates prevailing when such investments are acquired or sold. Income and expenses are translated at the exchange rates prevailing when accrued. The portion of realized and unrealized gains and losses on investments that result from fluctuations in foreign currency exchange rates is not separately disclosed. Realized gains or losses and the appreciation or depreciation attributable to foreign currency fluctuations on other foreign currency denominated assets and liabilities are recorded as net realized or unrealized gains and losses from foreign currency transactions, respectively. D. OTHER--Security transactions are accounted for on trade date. Dividend income is recorded on the ex-dividend date. Dividends on foreign securities are recorded when the Funds are informed of such dividends. Interest income is accrued as earned. Estimated foreign taxes that are expected to be withheld from proceeds at sale of certain foreign investments are accrued by the Funds and decrease the unrealized gain on investments. For the Emerging Markets Fund, International Investors Gold Fund and Global Hard Assets Fund, income, expenses (excluding class-specific expenses) and realized/unrealized gains/losses are allocated proportionately to each class of shares based upon the relative net asset value of outstanding shares (or the value of dividend-eligible shares, as appropriate) of each class at the beginning of the day (after adjusting for current capital share activity of the respective classes). Class-specific expenses are charged directly to the applicable class of shares. E. DISTRIBUTIONS TO SHAREHOLDERS--Dividends to shareholders from net investment income and realized gains, if any, are recorded on the ex-dividend date. Income and capital gains distributions are determined in accordance with income tax regulations, which may differ from such amounts determined in accordance with accounting principles generally accepted in the United States. F. OPTION CONTRACTS--The Funds (except U.S. Government Money Fund) may invest, for hedging and other purposes, in call and put options on securities, currencies and commodities. Call and put options give the Funds the right, but not the obligation, to buy (calls) or sell (puts) the instrument underlying the option at a specified price. The premium paid on the option, should it be exercised, will, on a call, increase the cost of the instrument acquired and, on a put, reduce the proceeds received from the sale of the instrument underlying the option. If the options are not exercised, the premium paid will be recorded as a realized loss upon expiration. The Funds may incur additional risk to the extent the value of the underlying instrument does not correlate with the movement of the option value. The Funds (except U.S. Government Money Fund) may also write call or put options. As the writer of an option, the Funds receive a premium. The Funds keep the premium whether or not the option is exercised. The premium will be recorded, upon expiration of the option, as a realized gain. If the option is exercised, the Funds must sell, in the case of a written call, or buy, in the case of a written put, the underlying instrument at the exercise price. The Funds may write only covered puts and calls. A covered call option is an option in which the Funds own the instrument underlying the call. A covered call sold by the Funds expose them during the term of the option to possible loss of opportunity to realize appreciation in the market price of the underlying instrument or to possible continued holding of an underlying instrument which might otherwise have been sold to protect against a decline in the market price of the underlying instrument. A covered put exposes the Funds during the term of the option to a decline in price of the underlying instrument. A put option sold by the Funds is covered when, among other things, cash or short-term liquid securities are placed in a segregated account to fulfill the obligations undertaken. The Funds may incur additional risk from investments in written currency 42 VAN ECK FUNDS NOTES TO FINANCIAL STATEMENTS (unaudited) (continued) -------------------------------------------------------------------------------- options if there are unanticipated movements in the underlying currencies. Transactions in call options written for the period ended June 30, 2004 were as follows: GLOBAL HARD ASSETS FUND NUMBER OF CONTRACTS PREMIUMS ------------------ --------- Options outstanding at beginning of period 160 $ 15,601 Options written 132 13,397 Options exercised (160) (15,601) --- -------- Options outstanding at end of period 132 $ 13,397 === ======== G. SHORT SALES--The Global Hard Assets Fund may make short sales of equity securities. A short sale occurs when the Fund sells a security, which it does not own, by borrowing it from a broker. In the event that the value of the security that the Fund sold short declines, the Fund will gain as it repurchases the security in the market at the lower price. If the price of the security increases, the Fund will suffer a loss, as it will have to repurchase the security at the higher price. Short sales may incur higher transaction costs than regular securities transactions. The Global Hard Assets Fund did not have any short sales for the period ended June 30, 2004. Cash is deposited in a segregated account with brokers, maintained by the Fund, for its open short sales. Proceeds from securities sold short are reported as liabilities and are marked to market. Gains and losses are classified as realized when short positions are closed. H. FUTURES--The Funds (except U.S. Government Money Fund) may buy and sell financial futures contracts, which may include security and interest-rate futures, stock and bond index futures contracts and foreign currency futures contracts. The Funds may engage in these transactions for hedging purposes and for other purposes. Global Hard Assets Fund may also buy and sell commodity futures contracts, which may include futures on natural resources and natural resource indices. A security or interest-rate futures contract is an agreement between two parties to buy or sell a specified security at a set price on a future date. An index futures contract is an agreement to take or make delivery of an amount of cash based on the difference between the value of the index at the beginning and at the end of the contract period. A foreign currency futures contract is an agreement to buy or sell a specified amount of currency at a set price on a future date. A commodity futures contract is an agreement to take or make delivery of a specified amount of a commodity, such as gold, at a set price on a future date. Realized gains and losses from futures contracts are reported separately. The Global Hard Assets Fund did not have any futures outstanding at June 30, 2004. I. STRUCTURED NOTES--The Funds may invest in indexed securities whose value is linked to one or more currencies, interest rates, commodities or financial commodity indices. When the Fund purchases a structured note (a non-publicly traded indexed security entered into directly between two parties) it will make a payment of principal to the counterparty. The Fund will purchase structured notes only from counterparties rated A or better by S&P, Moody's or another nationally recognized statistical rating organization. Van Eck Associates Corporation will monitor the liquidity of structured notes under supervision of the Board of Trustees and structured notes determined to be illiquid will be aggregated with other illiquid securities and limited to 15% of the net assets of the Fund. Indexed securities may be more volatile than the underlying instrument itself, and present many of the same risks as investing in futures and options. Indexed securities are also subject to credit risks associated with the issuer of the security with respect to both principal and interest. At June 30, 2004, there were no structured notes outstanding. NOTE 2--MANAGEMENT--Van Eck Associates Corporation (the "Adviser") earns fees for investment management and advisory services for each of the Funds. The Emerging Markets Fund pays the Adviser a monthly fee at the annual rate of 0.75% of average daily net assets. The Global Hard Assets Fund pays the Adviser a monthly fee at the annual rate of 1% of average daily net assets. The International Investors Gold Fund pays the Adviser a monthly fee at the annual rate of 0.75 of 1% of the first $500 million of average daily net assets of the Fund, 0.65 of 1% of the next $250 million of aver age daily net assets and 0.50 of 1% of average daily net assets in excess of $750 million. The U.S. Government Money Fund pays the Adviser a monthly fee at the annual rate of 0.50 of 1% of the first $500 million of average daily net assets, 0.40 of 1% of the next $250 million of average daily net assets and 0.375 of 1% of average daily net assets in excess of $750 million. In accordance with the advisory agreement, the Funds paid Van Eck Associates Corporation for costs incurred in connection with certain administrative and operating functions. The Funds paid costs in the following amounts for the six months ended June 30, 2004: $15,138 Emerging Markets Fund, $36,621 Global Hard Assets Fund, $438,138 International Investors Gold Fund and $34,897 U.S. Government Money Fund. For period January 1, 2004 through April 30, 2004, the Adviser agreed to assume expenses exceeding 2% of average daily net assets for Class A shares and 2.50% for Class C shares for the Emerging Markets Fund. For the preiod May 1, 2004 through April 30, 2004, the Adviser agreed to assume expenses exceeding 2.25% of average daily net assets for Class A shares and 2.75% for Class C shares for the Emerging Markets Fund. Expenses were reduced by $66,067 under this agreement. When necessary, the Adviser has agreed to waive a portion of the advisory fee for the U.S. Government Money Fund in order to preserve a positive daily yield and avoid a net operating loss. Expenses were reduced by $104,907 under this agreement. The Advisor agreed to assume expenses exceeding 1.75% of average daily net assets for Class A shares for the period May 1, 2004 to April 30, 2005 and 2.50% average daily net assets for Class C shares for the period March 24, 2004 through April 30, 2005 for the Global Hard Assets Fund. Expenses were reduced by $43,430 under this agreement. The Advisor agreed to assume expenses exceeding 2.50% of average daily net assets for Class C shares for the period May 1, 2004 through April 30, 2005 for the International Investors Gold Fund. Expenses were reduced by $5,065 under this agreement. Van Eck Associates Corporation also performs accounting and administrative services for Emerging Markets Fund and International Investors Gold Fund. The Adviser is paid a monthly fee at a rate of 0.25% of the average daily net assets on the first $500 million for Emerging Markets Fund, and at the rate of 0.25% per year on the first $750 million in International Investors Gold Fund, and 0.20% per 43 VAN ECK FUNDS NOTES TO FINANCIAL STATEMENTS (unaudited) -------------------------------------------------------------------------------- year of the average daily net assets in excess of $750 million in International Investors Gold Fund. For the six months ended June 30, 2004, Van Eck Securities Corporation (the "Distributor"), an affiliate of the Adviser, received a total of $653,683 in sales loads of which $556,201 was reallowed to broker/dealers and the remaining $97,482 was retained by the Distributor. Certain of the officers and trustees of the Trust are officers, directors or stockholders of Van Eck Associates Corporation and Van Eck Securities Corporation. At June 30, 2004 Van Eck Associates Corp. and affiliates of the Adviser owned approximately 29.9% of the outstanding shares of beneficial interest of the U.S. Government Money Fund. During the six months ending June 30, 2004, the Adviser made a capital contribution of $70,355 to the U.S. Government Money Fund, in order to maintain a constant net asset value of $1.00 per share. NOTE 3--INCOME TAXES--For federal income tax purposes, the identified cost of investments owned at June 30, 2004 is $25,815,502, $64,243,328 and $141,628,886 for the Emerging Markets Fund, Global Hard Assets Fund and International Investors Gold Fund, respectively. The U.S. Government Money Fund's identified cost for federal income taxes is the same for financial reporting purposes. As of June 30, 2004, gross unrealized appreciation and depreciation of investments were on a tax basis as follows: GROSS GROSS NET UNREALIZED UNREALIZED UNREALIZED FUND APPRECIATION DEPRECIATION APPRECIATION ---- ------------ ------------ ------------ Emerging Markets Fund ............ $ 3,115,016 $2,929,827 $ 185,189 Global Hard Assets Fund .......... 18,942,982 1,213,261 17,729,721 International Investors Gold Fund ...................... 102,150,791 7,119,168 95,031,623 At December 31, 2003 the Funds had the following capital loss carry forward available to offset capital gains in the amounts as follows: EXPIRING IN THE YEAR ENDED FUND DECEMBER 31, ----- -------------------------- EMERGING MARKETS FUND ........ 2008 $ 2,919,680 2009 1,371,498 2010 1,746,539 ----------- TOTAL $ 6,037,717 =========== Global Hard Assets Fund ...... 2005 $12,392,158 2006 18,829,076 2007 7,346,169 2009 750,927 ----------- Total $39,318,330 =========== U.S. Government Money Fund ... 2007 $ 9,832 2008 45,945 2009 14,730 2010 1,207 2011 2,132 ----------- TOTAL $ 73,846 =========== For Emerging Markets Fund, $3,745,837 of the capital loss carryforward is related to the acquisition of the Asia Dynasty Fund on October 31, 2003. This amount is subject to an annual limitation of $700,639 under tax rules. For Global Hard Assets Fund, $13,684,792 of the capital loss carry forward is subject to an annual limitation of $841,231 under tax rules. Included in the amount is $25,236,472 of capital loss carry forward related to the acquisition of Natural Resources Fund on June 22, 2001. NOTE 4--INVESTMENTS--Purchases and sales of investment securities other than U.S. government obligations and short-term obligations for the year ended June 30, 2004, were as follows: PROCEEDS COST OF FROM INVESTMENT INVESTMENT SECURITIES SECURITIES PURCHASED SOLD ------------ ------------ Emerging Markets Fund .................. $20,377,458 $24,676,749 Global Hard Assets Fund ................ 19,762,664 17,076,753 International Investors Gold Fund ...... 67,711,225 60,422,904 NOTE 5--12b-1 PLANS OF DISTRIBUTION--Pursuant to Rule 12b-1 Plans of Distribution (the "Plans"), all of the Funds are authorized to incur distribution expenses which will principally be payments to securities dealers who have sold shares and serviced shareholder accounts and payments to the distributor, Van Eck Securities Corporation (the "Distributor"), for reimbursement of other actual promotion and distribution expenses incurred by the distributor on behalf of the Funds. The amount paid under the Plans in any one year is limited to 0.50% of average daily net assets (except for International Investors Gold Fund and U.S. Government Money Fund which is 0.25%) for Class A shares and 1% of average daily net assets for Classes B and C shares (the "Annual Limitations"). Distribution expenses incurred under the Plans that have not been paid because they exceed the Annual Limitation may be carried forward to future years and paid by the Funds within the Annual Limitation. The Distributor has waived its right to reimbursement of the carried forward amounts incurred through June 30, 2004 in the event the Plans are terminated, unless the Board of Trustees determines that reimbursement of the carried forward amounts is appropriate. The accumulated amount of excess distribution expenses incurred over the Annual Limitations as of June 30, 2004, were as follows: International Investors Gold Fund--Class A ............... $2,758,578 International Investors Gold Fund--Class C ............... 22,861 Emerging Markets Fund--Class A ........................... 1,214,374 Emerging Markets Fund--Class C ........................... 14,583 Global Hard Assets Fund--Class A ......................... 1,464,186 Global Hard Assets Fund--Class C ......................... 425,908 NOTE 6--SHAREHOLDER TRANSACTIONS--Shares of beneficial interest issued and redeemed (unlimited number of $.001 par value shares authorized): EMERGING MARKETS FUND ----------------------------------- SIX MONTHS ENDED YEAR ENDED JUNE 30, 2004 DECEMBER 31, (UNAUDITED) 2003 --------------- ------------ CLASS A Shares sold .............................. 384,258 517,296 Shares issued in connection with the merger (Note 13) ....................... -- 1,601,259 Shares reacquired ........................ (679,000) (686,373) ------- --------- NET INCREASE (DECREASE) .................. (294,742) 1,432,182 ======= ========= 44 VAN ECK FUNDS NOTES TO FINANCIAL STATEMENTS (unaudited) (continued) -------------------------------------------------------------------------------- FOR THE PERIOD SIX MONTHS ENDED OCTOBER 3, 2003+ JUNE 30, 2004 THROUGH (UNAUDITED) DECEMBER 31, 2003 --------------- ----------------- CLASS C Shares sold ............................. 114,852 11,596 Shares issued in connection with the merger (Note 13) ...................... -- 310,410 Shares reacquired ....................... (118,334) (8,264) ----------- ------------ Net increase (decrease) ................. (3,482) 313,742 =========== ============ + Inception date of Class C shares. GLOBAL HARD ASSETS FUND ----------------------------------- SIX MONTHS ENDED YEAR ENDED JUNE 30, 2004 DECEMBER 31, (UNAUDITED) 2003 --------------- ----------------- CLASS A Shares sold ............................. 859,195 13,541,745 Shares reacquired ....................... (926,044) (13,047,991) ----------- ------------ Net Decrease ............................ (66,849) (493,754) =========== ============ CLASS B++ Shares sold ............................. -- 23,655 Shares converted to Class C ............. -- (209,633) Shares reacquired ....................... -- (43,130) ----------- ------------ Net decrease ............................ -- (229,108) =========== ============ CLASS C Shares sold ............................. 386,478 319,592 Shares converted from Class B ........... -- 209,100 Shares reacquired ....................... (138,766) (60,019) ----------- ------------ Net Increase ............................ 247,712 468,673 =========== ============ ++ Class B shares automatically converted to Class C shares October 31, 2003. INTERNATIONAL INVESTORS GOLD FUND ----------------------------------- SIX MONTHS ENDED YEAR ENDED JUNE 30, 2004 DECEMBER 31, (UNAUDITED) 2003 --------------- ----------------- CLASS A Shares sold ............................. 1,074,739 105,541,211 Shares reinvested ....................... -- 578,715 Shares reacquired ....................... (2,583,344) (104,472,118) ----------- ------------ Net Increase (Decrease) ................. (1,508,605) 1,647,808 =========== ============ FOR THE PERIOD SIX MONTHS ENDED OCTOBER 3, 2003+ JUNE 30, 2004 THROUGH (UNAUDITED) DECEMBER 31, 2003 --------------- ----------------- CLASS C Shares sold ............................. 357,138 305,539 Shares reinvested ....................... -- -- Shares reacquired ....................... (19,620) (1,033) ----------- ------------ Net increase ............................ 337,518 304,506 =========== ============ U.S. GOVERNMENT MONEY FUND ----------------------------------- SIX MONTHS ENDED YEAR ENDED JUNE 30, 2004 DECEMBER 31, (UNAUDITED) 2003 --------------- ----------------- CLASS A Shares sold ............................. 9,494,431 952,341,194 Shares reinvested ....................... -- 20,116 Shares reacquired ....................... (14,991,662) (982,848,075) ----------- ------------ Net Decrease ............................ (5,497,231) (30,486,765) =========== ============ NOTE 7--FORWARD FOREIGN CURRENCY CONTRACTS--The Funds (except U.S. Government Money Fund) may buy and sell forward foreign currency contracts to settle purchases and sales of foreign denominated securities. In addition, the Funds (except U.S. Government Money Fund) may enter into forward foreign currency contracts to hedge foreign denominated assets. Realized gains and losses from forward foreign currency contracts are included in realized gain (loss) from foreign currency transactions. At June 30, 2003, there were no forward foreign currency contracts outstanding. NOTE 8--TRUSTEE DEFERRED COMPENSATION PLAN--The Trust has a Deferred Compensation Plan (the "Plan") for its Trustees. Commencing January 1, 1996, the Trustees can elect to defer receipt of their trustee fees until retirement, disability or termination from the Board of Trustees. The Funds' contributions to the Plan are limited to the amount of fees earned by the participating Trustees. The fees otherwise payable to the participating Trustees are invested in shares of the Van Eck Funds as directed by the Trustees. The Funds have elected to show this deferred liability net of corresponding assets at fair market value for financial statement purposes. As of June 30, 2003, the total fair market value of the liability portion of the Plan is as follows: Emerging Markets Fund--$37,384, Global Hard Assets Fund--$83,707, International Investors Gold Fund--$154,747 and U.S. Government Money Fund--$62,416. NOTE 9--REPURCHASE AGREEMENTS--Collateral for repurchase agreements, the value of which must be at least 102% of the underlying debt obligation, plus accrued interest, is held by the Funds' custodian. In the remote chance the counterparty should fail to complete the repurchase agreement, realization and retention of the collateral may be subject to legal proceedings and the Funds would become exposed to market fluctuation on the collateral. NOTE 10--EQUITY SWAPS--The Funds (except U.S. Government Money Fund) may enter into equity swaps to gain investment exposure to the relevant market of the underlying security. A swap is an agreement that obligates the parties to exchange cash flows at specified intervals. The Fund is obligated to pay the counterparty on trade date an amount based upon the value of the underlying instrument and, at termination date, final payment is settled based on the value of the underlying security on trade date versus the value on termination date plus accrued dividends. Risks may arise as a result of the failure of the counterparty to the contract to comply with the terms of the swap contract. The Fund bears the risk of loss of the amount expected to be received under a swap agreement in the event of the default of the counterparty. Therefore, the Fund considers the creditworthiness of each counterparty to a swap contract in evaluating potential credit risk. Additionally, risks may arise from unanticipated movements in the value of the swap relative to the underlying securities. The Fund records a net receivable or payable daily, based on the change in the value of the underlying securities. The net receivable or payable for financial statement purposes is shown as due to or from broker. The Fund has collateralized 100% of the notional amount of the swap. Such amounts are reflected in the Statement of Assets and Liabilities as Cash-initial margin. At June 30, 2004, the following swap was outstanding (stated in U.S. dollars): 45 VAN ECK FUNDS NOTES TO FINANCIAL STATEMENTS (unaudited) (continued) -------------------------------------------------------------------------------- GLOBAL HARD ASSETS FUND UNDERLYING NUMBER OF NOTIONAL TERMINATION UNREALIZED SECURITY SHARES AMOUNT DATE APPRECIATION ----------- ----------- --------- ----------- ------------ Gazprom Oil Co. 239,200 $38,990 Open $461,471 NOTE 11--COMMODITY SWAPS--The Funds (except U.S. Government Money Fund) may enter into a commodity swap to gain investment exposure to the relevant spread of the commodity reference prices. A swap is an agreement that obligates the parties to exchange cash flows at specified intervals. At termination date, a final payment is made based on the swap's notional amount on trade date versus the value on termination date. Risks may arise as a result of the failure of the counterparty to the contract to comply with the terms of the swap contract. The Fund bears the risk of loss of the amount expected to be received under a swap agreement in the event of the default of the counterparty. Therefore, the Fund considers the creditworthiness of each counterparty to a swap contract in evaluating potential credit risk. Additionally, risks may arise from unanticipated movements in the value of the swap relative to the underlying reference prices. The Fund records a net receivable or payable daily, based on the change in the value of the swap. The net receivable or payable for financial statement purposes is shown as due to or from broker. At June 30, 2004, there were no outstanding commodity swaps. NOTE 12--BANK LINE OF CREDIT--The Trust participates with other funds managed by Van Eck Associates Corporation in a $45 million committed credit facility (the "Facility") to be utilized for temporary financing until the settlement of sales or purchases of portfolio securities, the repurchase or redemption of shares of the Funds at the request of the shareholders and other temporary or emergency purposes. In connection therewith, the Funds have agreed to pay commitment fees, pro rata, based on the unused but available balance. Interest is charged to the Fund at rates based on prevailing market rates in effect at the time of borrowings. For the six months ended June 30, 2004, the Funds made the following borrowings: AVERAGE AMOUNT AVERAGE INTEREST FUND BORROWED RATE ----- ---------------- ---------------- Emerging Markets Fund $ 773,874 1.66% At June 30, 2004 the Funds' had no outstanding borrowings under the line of credit. NOTE 13--FUND MERGER--As of the close of business on October 31, 2003, the Emerging Markets Fund acquired all the net assets of the Asia Dynasty Fund pursuant to a plan of reorganization approved by the Asia Dynasty Fund shareholders on October 30, 2003. The acquisition was accomplished by a tax-free exchange of 1,601,259 shares of Class A and 310,410 shares of Class B of the Asia Dynasty Fund to the Emerging Markets Fund, Class A and Class C. Asia Dynasty Fund's net assets at that date, including $5,836,709 of unrealized appreciation, were combined with those of the Emerging Markets Fund. The aggregate net assets of the Emerging Markets Fund and Asia Dynasty Fund before the acquisition were $14,802,607 and $14,781,415 respectively. NOTE 14--RESTRICTED SECURITY--The following security is restricted as to sale and is deemed to be illiquid: PERCENT OF DATE NET ASSETS ACQUIRED COST VALUE AT 6/30/04 ---------- ------ ------- ----------- INTERNATIONAL INVESTORS GOLD FUND New Yilgarn Ltd. 4/14/04 $-- $642 0.00% NOTE 15--REGULATORY MATTERS--In connection with their investigations of practices identified as "market timing" and "late trading" of mutual fund shares, the Office of the New York State Attorney General and the United States Securities and Exchange Commission have requested and received information from the Adviser. The investigations are ongoing. If it is determined that the Adviser or its affiliates engaged in improper or wrongful activity that caused a loss to a Fund, the Board of Trustees of the Funds will determine the amount of restitution that should be made to a Fund or its shareholders. At the present time, the amount of such restitution, if any, cannot be estimated. The Adviser has received a so-called "Wells Notice" from the Securities and Exchange Commission ("SEC") in connection with the SEC's investigation of market-timing activities in the securities industry as described in the Funds' prospectus and prospectus supplements. This Wells Notice informed the Adviser that the SEC staff is considering recommending that the SEC bring a civil or administrative action alleging violations of U.S. securities laws against the Adviser and two of its senior officers. Under SEC procedures, the Adviser has an opportunity to respond to the SEC staff before the staff makes a formal recommendation. The Adviser is currently considering whether to provide such a response, while continuing to cooperate fully with the SEC investigation. Costs associated with the investigations have been paid and will continue to be paid by the Adviser. 46 VAN ECK FUNDS, INC.--MID CAP VALUE SCHEDULE OF PORTFOLIO INVESTMENTS JUNE 30, 2004 (UNAUDITED) NO. OF SHARES SECURITIES (a) VALUE (NOTE 1) --------------------------------------------------------------------- COMMON STOCKS: 99.6% CONSUMER DISCRETIONARY: 20.0% 5,000 Barnes & Nobles, Inc. $ 169,900 4,200 Black & Decker Corp. 260,946 4,000 Choice Hotels International, Inc. 200,640 14,900 Circuit City Stores, Inc. 192,955 14,400 Dana Corp. 282,240 6,200 Dillards, Inc. (Class A) 138,260 4,400 Federated Department Stores, Inc. 216,040 3,700 Fortune Brands, Inc. 279,091 3,400 Home Depot, Inc., The 119,680 5,300 Kmart Holding Corp. 380,540 8,700 La-Z-Boy, Inc. 156,426 2,090 M.D.C. Holdings, Inc. 132,945 4,700 Outback Steakhouse, Inc. 194,392 2,300 Ryland Group, Inc. 179,860 9,400 Saks, Inc. 141,000 4,500 Sears, Roebuck and Co. 169,920 4,300 Sherwin Williams Co., The 178,665 6,200 Stanley Works, The 282,596 6,500 Toll Brothers, Inc. 275,080 7,600 Zale Corp. 207,176 ------------ 4,158,352 ------------ CONSUMER STAPLES: 14.3% 11,500 Albertsons, Inc. 305,210 4,900 Clorox Co. 263,522 6,700 Estee Lauder Companies., Inc. (Class A) 326,826 6,400 Hershey Foods Corp. 296,128 10,000 Hormel Foods Corp. 311,000 7,000 McCormick & Co., Inc. 238,000 10,000 Pilgrim's Pride Corp 289,400 6,900 R.J. Reynolds Tobacco Holdings, Inc. 466,371 5,100 Super Valu Supermarkets, LTD 156,111 14,400 Tysons Food, Inc. (Class A) 301,680 ------------ 2,954,248 ------------ ENERGY: 7.3% 7,200 Burlington Resources, Inc. 260,496 9,800 Overseas Shipholding Group 432,474 4,100 Sunoco, Inc. 260,842 9,800 Tesoro Petroleum Corp. 270,480 3,900 Valero Energy Corp. 287,664 ------------ 1,511,956 ------------ FINANCIAL SERVICES: 20.7% 17,100 AmeriCredit Corp. 333,963 4,200 Astoria Financial Corp. 153,636 6,000 CIT Group, Inc. 229,740 3,450 Doral Financial Corp. 119,025 7,200 Equity Office Properties Trust 195,840 5,400 First Bancorp Puerto Rico 220,050 7,000 Fremont General Corp. 123,550 6,500 GreenPoint Financial Corp 258,050 5,500 Independence Community Bank Corp. 200,200 8,100 IndyMac Bancorp, Inc. 255,960 5,125 International Bancshares Corp. 207,819 3,200 LNR Property Corp. 173,600 FINANCIAL SERVICES: (CONTINUED) 4,100 MBIA, Inc. $ 234,192 4,100 MGIC Investment Corp. 311,026 5,700 New Century Financial Corp. 266,874 5,600 PMI Group, Inc., The 243,712 5,200 Radian Group, Inc. 249,080 7,200 Silicon Valley Bancshares 285,480 4,700 WFS Financial, Inc. 232,697 ------------ 4,294,494 ------------ HEALTHCARE: 9.9% 12,400 Apogent Technologies, Inc. 396,800 5,900 Bausch & Lomb, Inc. 383,913 6,900 Coventry Health Care, Inc. 337,410 21,800 Healthsouth Corp. 130,800 8,100 Manor Care, Inc. 264,708 9,000 Mylan Laboratories, Inc. 182,250 9,400 Pacificare Health Systems, Inc. 363,404 ------------ 2,059,285 ------------ INDUSTRIALS: 7.3% 9,000 Brinks Co.,The 308,250 12,100 Cendant Corp. 296,208 8,400 J.B. Hunt Transport Services, Inc. 324,072 11,100 Kelly Services, Inc. (Class A) 330,780 7,400 Terex Corp. 252,562 ------------ 1,511,872 ------------ INFORMATION TECHNOLOGY: 13.3% 24,900 Activision, Inc. 395,910 13,200 Autodesk, Inc. 565,092 14,000 Avnet, Inc. 317,800 20,400 Cadence Design Systems, Inc. 298,452 9,100 Citrix Systems, Inc. 185,276 36,100 InFocus Corp. 306,850 30,900 Sanmina-SCI Corp. 281,190 11,800 Tektronix, Inc. 401,436 ------------ 2,752,006 ------------ MATERIALS: 2.3% 10,600 Louisiana Pacific Corp. 250,690 6,400 United States Steel LLC 224,768 ------------ 475,458 ------------ UTILITIES: 4.5% 14,600 Edison International 373,322 47,300 Williams Companies, Inc., The 562,870 ------------ 936,192 ------------ TOTAL INVESTMENTS: 99.6% (Cost: $16,553,068) 20,653,863 ------------ OTHER ASSETS LESS LIABILITIES: 0.4% 86,594 ------------ NET ASSETS: 100% $20,740,457 ============ ----- (a) Unless otherwise indicated, securities owned are shares of common stock. See Notes to Financial Statements 47 VAN ECK FUNDS, INC.--MID CAP VALUE FUND STATEMENT OF ASSETS AND LIABILITIES June 30, 2004 (unaudited)
ASSETS: Investments, at value (cost $16,553,068) (Note 1) .......................... $ 20,653,863 Receivables: Capital shares sold ..................................................... 404,704 Dividends ............................................................... 19,780 Prepaid expense ......................................................... 83,242 ------------ Total assets .......................................................... 21,161,589 ------------ LIABILITIES: Payables: Securities Purchased .................................................... 258,969 Capital shares redeemed ................................................. 63,477 Due to Distributor (Note 2) ............................................. 22,431 Due to Adviser .......................................................... 16,503 Due to Custodian ........................................................ 15,107 Accounts payable ........................................................ 44,645 ------------ Total liabilities .................................................... 421,132 ------------ Net Assets ................................................................ $ 20,740,457 ============ Shares outstanding ........................................................ 1,064,823 ============ Net asset value, redemption and offering price per share .................. $ 19.48 ============ Maximum offering price per share .......................................... $ 20.67 ============ Net assets consist of: Aggregate paid in capital .............................................. $ 41,862,044 Unrealized appreciation of investments ................................. 4,100,795 Accumulated realized loss .............................................. (25,131,315) Accumulated net investment loss ........................................ (91,067) ------------ $ 20,740,457 ============
48 VAN ECK FUNDS, INC.--MID CAP VALUE FUND STATEMENT OF OPERATIONS Six Months ended June 30, 2004 (unaudited)
INCOME (NOTE 1): Dividends ............................................................................... $ 133,400 Interest ................................................................................ 439 ------------ Total income .......................................................................... 133,839 EXPENSES: Advisory fee (Note 2) ................................................................... $ 77,560 Distribution (Note 2) ................................................................... 51,706 Transfer agency ......................................................................... 37,574 Professional ............................................................................ 28,232 Administration (Note 2) ................................................................. 28,048 Insurance ............................................................................... 11,317 Registration ............................................................................ 9,740 Shareholder reports ..................................................................... 6,884 Custodian ............................................................................... 3,060 Other ................................................................................... 3,370 ---------- Total expenses .......................................................................... 257,491 Expenses assumed by the Adviser (Note 2) ................................................ (40,324) ---------- Net expenses ............................................................................ 217,167 ------------ Net investment loss ..................................................................... (83,328) ------------ REALIZED AND UNREALIZED GAIN ON INVESTMENTS (NOTE 3): Change in unrealized appreciation of investments ........................................ 74,544 Realized gain from security transactions ................................................ 1,362,290 ------------ Net gain on investments ................................................................. 1,436,834 ------------ Net Increase in Net Assets Resulting from Operations .................................... $1,353,506 ============
See Notes to Financial Statements 49 VAN ECK FUNDS, INC.--MID CAP VALUE FUND STATEMENT OF CHANGES IN NET ASSETS
SIX MONTHS ENDED JUNE 30, YEAR ENDED 2004 DECEMBER 31, (UNAUDITED) 2003 ------------- ------------- INCREASE IN NET ASSETS: OPERATIONS: Net investment loss ....................................................................... $ (83,328) $ (114,245) Realized gain (loss) from security transactions ......................................... 1,362,290 (1,373,431) Change in unrealized appreciation of investments ........................................ 74,544 8,439,031 ------------ ------------ Net increase in net assets resulting from operations .................................... 1,353,506 6,951,355 ------------ ------------ CAPITAL SHARE TRANSACTIONS:* Proceeds from sale of shares ............................................................ 331,899 4,987,127 Cost of shares reacquired ............................................................... (1,657,653) (10,283,880) ------------ ------------ Decrease in net assets resulting from capital share transactions ........................ (1,325,754) (5,296,753) ------------ ------------ Total increase in net assets ............................................................ 27,752 1,654,602 NET ASSETS: Beginning of period ....................................................................... 20,712,706 19,058,104 ------------ ------------ End of period ............................................................................. 20,740,458 20,712,706 ============ ============ Accumulated net investment loss ........................................................... $ (91,067) $ (7,739) ============ ============ *SHARES OF COMMON STOCK ISSUED (800,000,000 SHARES AUTHORIZED OF $0.001 PAR VALUE) Shares sold ............................................................................. 17,668 337,553 Shares reacquired ....................................................................... (87,408) (696,731) ------------ ------------ Net decrease ............................................................................ (69,740) (359,178) ============ ============
See Notes to Financial Statements 50 VAN ECK FUNDS, INC.--MID CAP VALUE FUND FINANCIAL HIGHLIGHTS For a share outstanding throughout the period:
SIX MONTHS ENDED YEAR ENDED DECEMBER 31,* JUNE 30, 2004 --------------------------------------------------------- (UNAUDITED) 2003 (e) 2002 (d) 2001 2000 1999 ------- ------- ------- ------- ------- ------- Net Asset Value, Beginning of Period ................ $ 18.26 $ 12.76 $ 18.14 $ 21.17 $ 27.73 $ 23.96 ------- ------- ------- ------- ------- ------- Income From Investment Operations: Net Investment Loss .............................. (0.08) (0.10) (0.08) (0.05) (0.12) (0.03) Net Realized and Unrealized Gain (Loss) On Investments ................................. 1.30 5.60 (5.30) (2.98) (5.38) 7.08 ------ ------ ------- ------- ------- ------- Total from Investment Operations ................. 1.22 5.50 (5.38) (3.03) (5.50) 7.05 ------ ------ ------- ------- ------- ------- Less Distributions: Distributions from Realized Capital Gains ........ -- -- -- -- (1.06) (3.28) ------- ------ ------- ------- ------- ------- Total Dividends and Distributions ................ -- -- -- -- (1.06) (3.28) ------- ------ ------- ------- ------- ------- Net Asset Value, End of Period ...................... $ 19.48 $ 18.26 $ 12.76 $ 18.14 $ 21.17 $ 27.73 ======== ======= ======= ======= ======= ======= Total Return (a) .................................... 6.68% 43.10% (29.66)% (14.31)% (19.83)% 29.42% --------------------------------------------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTARY DATA Net Assets, End of Period (000's) ................... $20,740 $20,713 $19,058 $54,396 $69,091 $94,840 Ratio of Gross Expenses to Average Net Assets (b) ................................... 2.49%(f) 3.04% 3.07% 1.44% 1.38% 1.50% Ratio of Net Expenses to Average Net Assets ......... 2.10%(f) 2.10% 1.79% 1.35% 1.35% 1.32% Ratio of Net Investment Loss to Average Net Assets (c) ................................... (0.81)%(f) (0.60)% (0.52)% (0.25)% (0.46)% (0.16)% Portfolio Turnover Rate ............................. 38% 143% 335% 63% 125% 134%
---------- (a) Total return is calculated assuming an initial investment of $10,000 made at the net asset value at the beginning of the period, reinvestment of dividends and distributions at net asset value on the dividend payment date and a redemption on the last day of the period. The return does not reflect the deduction of taxes that a shareholder would pay on Fund dividends and distributions or the redemption of Fund shares. (b) Had fees not been waived and expenses not been assumed. (c) Ratios would have been (1.20)%,(1.54)%, (1.80)%, (0.34)%, (0.49)% and (0.34)%, respectively, had the Adviser not waived fees and had expenses not been assumed. (d) Includes the operations of the Van Eck Funds I, Inc. Mid Cap Value Fund from January 1, 2002 through June 7, 2002. The new advisory agreement dated January 1, 2002 names Van Eck Associates Corporation as the Adviser to the Fund. At January 1, 2002 John A. Levin & Co. Inc. was named sub-adviser to the Fund. (e) John A. Levin & Co. resigned as sub-adviser to the Fund effective June 1, 2003. New York Life Management LLC began to operate as the sub-adviser to the Fund effective June 1, 2003. (f) Annualized. * The Financial highlights table for the three years preceding 2002 is that of Van Eck Funds I, Inc. Mid Cap Value Fund (formerly Van Eck/Chubb Growth & Income Fund). See Note 1 for details. The investment returns prior to January 1, 2002 of the Van Eck Funds I, Inc. Mid Cap Value Fund (formerly Van Eck/Chubb Growth & Income Fund) were reflective of the previous investment adviser. See Notes to Financial Statements 51 VAN ECK FUNDS, INC.--MID CAP VALUE FUND NOTES TO FINANCIAL STATEMENTS (unaudited) -------------------------------------------------------------------------------- NOTE 1--SIGNIFICANT ACCOUNTING POLICIES--At a meeting of Directors held on December 11, 2001, the Board approved the name change of the Van Eck/Chubb Funds, Inc. to Van Eck Funds I, Inc. effective January 1, 2002. At a shareholder meeting held on June 6, 2002, approval was given to merge the assets of the Van Eck Funds I Inc., which consisted of two funds in the series, Mid Cap Value Fund (formerly Growth and Income Fund) and Total Return Fund into the Van Eck Funds II, Inc. Mid Cap Value Fund, effective June 7, 2002. Upon completion of the merger, Van Eck Funds II, Inc. began operating under the name Van Eck Funds, Inc. The Van Eck Funds, Inc. (the "Company"), was incorporated under the laws of the State of Maryland on January 30, 2002 and is registered under the Investment Company Act of 1940, as amended, as a diversified, open-end series management investment company. The Company consists of one fund in the series, Van Eck Mid Cap Value Fund (the "Fund"). The following is a summary of significant accounting policies consistently followed by Fund, in the preparation of its financial statements. The policies are in conformity with accounting principles generally accepted in the United States. The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that effect the reported amounts in the financial statements. Actual results could differ from those estimates. A. SECURITY VALUATION--Securities traded on national exchanges or traded on the NASDAQ National Market System are valued at the last sales prices reported at the close of business on the last business day of the period. As of June 23, 2003, the portfolios began pricing securities traded on the NASDAQ stock market using the NASDAQ official closing price. Over-the-counter securities not included in the NASDAQ National Market System and listed securities for which no sale was reported are valued at the mean of the bid and ask prices. Short-term obligations purchased with more than sixty days remaining to maturity are valued at market value. Short-term obligations purchased with sixty days or less to maturity are valued at amortized cost, which with accrued interest approximates market value. Securities for which quotations are not available are stated at fair value as determined by the Board of Trustees. B. FEDERAL INCOME TAXES--It is the Fund's policy to comply with the provisions of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable income to its shareholders. Therefore, no federal income tax provision is required. C. DIVIDENDS AND DISTRIBUTIONS--Dividend income and distributions to shareholders are recorded on the ex-dividend date. Income distributions and capital gain distributions are determined in accordance with income tax regulations, which may differ from such amounts reported in accordance with accounting principles generally accepted in the United States. D. OTHER--Security transactions are accounted for on the date the securities are purchased or sold. Interest income is accrued as earned. NOTE 2--AGREEMENTS AND AFFILIATES--Van Eck Associates Corporation ("VEAC", the "Adviser") earns a fee at an annual rate of 0.75% of the Fund's average net assets for investment management and advisory services. The Adviser agreed to assume expenses exceeding 2.10% of the average daily net assets of the Fund for the period January 1, 2004 through April 30, 2005. Expenses were reduced by $40,324 under this agreement. Under the Sub-Advisory Agreement, Van Eck Associates has paid New York Life Investment Management LLC ("NYLIM") NYLIM a fee, payable monthly, at an annual rate of 0.50% of the Fund's average daily net assets, reduced by 0.01% on an annual basis for each $1 million of such assets under $50 million. Certain officers and trustees of the Trust are officers of the Adviser. Van Eck Associates Corp. (the "Administrator") performs certain accounting and administrative services. In accordance with an accounting and administration agreement, the Administrator earns a fee of 0.15% of the Fund's average daily net assets. Van Eck Securities Corporation (the "Distributor"), a wholly owned subsidiary of the Investment Adviser, for the six months ended June 30, 2004, received a total of $7,815 in sales loads of which $6,292 was reallowed to broker-dealers and the remaining $1,523 was retained by the Distributor. Also, the Company has a plan of distribution pursuant to Rule 12b-1 that provides 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 plan is 0.50% per annum. In accordance with the Advisory Agreement, the Fund reimbursed Van Eck Associates Corporation for costs incurred in connection with certain operating functions. The Fund reimbursed costs in the amount $12,536. NOTE 3--INVESTMENTS--Purchases and sales of securities other than U.S. government securities and short-term obligations aggregated $7,747,858 and $9,048,331, respectively, for the six months ended June 30, 2004. NOTE 4--INCOME TAXES--For federal income tax purposes, the identified cost of investments owned at June 30, 2004 was $16,553,068. As of June 30, 2004, net unrealized appreciation for federal income tax purposes aggregated $4,100,795 of which $4,364,562 related to appreciated securities and $263,767 related to depreciated securities. As of December 31, 2003, the Fund had a capital loss carryfoward of $26,428,258 available, $8,215,559 expiring December 31, 2005, which are limited under tax rules, $1,273,029 expiring December 31, 2008 and $11,962,435 expiring December 31, 2009 of which a portion is limited under tax rules, $2,910,558 expiring December 31, 2010, and $2,066,677 expiring December 31, 2011. Some of the Fund's losses were acquired as a result of Fund mergers and are limited with respect to utilization under the tax rules: $8,215,559 of the capital loss carryforward is related to the acquisition of Van Eck/Chubb Capital Appreciation Fund on November 10, 1999. This amount is subject to an annual limitation of $1,520,870 under the tax rules; $2,719,386 of the capital loss carryforward is related to the acquisition of the Van Eck Total Return Fund on June 7, 2002. The amount is subject to an annual limitation of $516,199 under the tax rules. 52 VAN ECK FUNDS, INC.--MID CAP VALUE FUND NOTES TO FINANCIAL STATEMENTS (unaudited) (continued) -------------------------------------------------------------------------------- NOTE 5--DIRECTOR DEFERRED COMPENSATION PLAN--The Van Funds, Inc. Mid Cap Value Fund established a Deferred Compensation Plan (the "Plan") for Directors. The Directors can elect to defer receipt of their director meeting fees and retainers until retirement, disability or termination from the board. The Fund contributions to the Plan are limited to the amount of fees earned by the participating Directors. The fees otherwise payable to the participating Directors are invested in shares of the Fund as directed by the Directors. The Fund has elected to show this deferred liability net of the corresponding asset for financial statement purposes. As of June 30, 2004, the net assets and corresponding liability of the Fund's portion of the Plan was $10,355. NOTE 6--REGULATORY MATTERS--In connection with their investigations of practices identified as "market timing" and "late trading" of mutual fund shares, the Office of the New York State Attorney General and the United States Securities and Exchange Commission have requested and received information from the Adviser. The investigations are ongoing. If it is determined that the Adviser or its affiliates engaged in improper or wrongful activity that caused a loss to a Fund, the Board of Directors of the Fund will determine the amount of restitution that should be made to a Fund or its shareholders. At the present time, the amount of such restitution, if any, cannot be estimated. The Adviser has received a so-called "Wells Notice" from the Securities and Exchange Commission ("SEC") in connection with the SEC's investigation of market-timing activities in the securities industry as described in the Funds' prospectus and prospectus supplements. This Wells Notice informed the Adviser that the SEC staff is considering recommending that the SEC bring a civil or administrative action alleging violations of U.S. securities laws against the Adviser and two of its senior officers. Under SEC procedures, the Adviser has an opportunity to respond to the SEC staff before the staff makes a formal recommendation. The Adviser is currently considering whether to provide such a response, while continuing to cooperate fully with the SEC investigation. Costs associated with the investigations have been paid and will continue to be paid by the Adviser. 53 [GRAPHIC OMITTED] Investment Adviser: Van Eck Associates Corporation Distributor: Van Eck Securities Corporation 99 Park Avenue, New York, NY 10016 www.vaneck.com Account Assistance: (800) 544-4653 This report must be preceded or accompanied by a Van Eck Funds or Van Eck Funds, Inc. Prospectus, which includes more complete information, such as charges and expenses and the risks associated with international investing, including currency fluctuation or controls, expropriation, nationalization and confiscatory taxation. Investors should consider the investment objectives, risks and charges and expenses of the Fund. Please read the prospectus carefully before you invest. Additional information about the Fund's Board of Trustees/Directors/Officers and a description of the policies and procedures the Fund uses to determine how to vote proxies relating to portfolio securities are provided in the Statement of Additional Information. The Statement of Additional Information and information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12 month period ending June 30 is available, without charge, by calling 1-800-826-2333, or by visiting www.vaneck.com, or on the Securities and Exchange Commission's website at http://www.sec.gov. 54 Item 2. Code of Ethics Not applicable. Item 3. Audit Committee Financial Expert Not applicable. Item 4. Principal Accountant Fees and Services Not applicable. Item 5. Audit Committee of Listed Registrants Not applicable. Item 6. Schedule of Investments Not applicable. Item 7. Disclosure of Proxy Voting Policies and Procedures For Closed-End Management Investment Companies Not applicable. Item 8. Purchases of Equity Securities by Closed-End Management Investment Companies and Affiliated Purchases. Not applicable. Item 9. Submission of Matters to a Vote of Security Holders Not applicable. Item 10. Controls and Procedures. (a) The Chief Executive Officer and the Chief Financial Officer have concluded that the Van Eck Funds disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act) provide reasonable assurances that material information relating to the Van Eck Funds is made known to them by the appropriate persons, based on their evaluation of these controls and procedures as of a date within 90 days of the filing date of this report. (b) For the period ending June 30, 2004, the Chief Executive Officer and the Chief Financial Officer are aware of no significant changes in the registrant's internal controls over financial reporting that has materially affected or is reasonably likely to manually affect internal controls over financial reporting. Item 11. Exhibits. (a)(2) A separate certification for each principal executive officer and principal financial officer of the registrant as required by Rule 30a-2 under the Act (17 CFR 270.30a-2) is attached as Exhibit 99.CERT. (b) Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 is furnished as Exhibit 99.906CERT. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. (Registrant) VAN ECK FUNDS By (Signature and Title) /s/ Bruce J. Smith, VP & Treasurer ---------------------------------- Date September 7, 2004 ------------------ Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. By (Signature and Title) /s/ Keith J. Carlson, CEO -------------------------- Date September 7, 2004 ------------------ By (Signature and Title) /s/ Bruce J. Smith, CFO --------------------------- Date September 7, 2004