-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, RfLvQGimh/lMTaQe3X+ZwadPoxJaVWFp1ZsK6FrN/4zpndArWcxC2kllhItWbnfD madBnAiaUDMeprqAq571kw== 0000950146-96-001524.txt : 19960903 0000950146-96-001524.hdr.sgml : 19960903 ACCESSION NUMBER: 0000950146-96-001524 CONFORMED SUBMISSION TYPE: N-30D PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960830 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: VAN ECK FUNDS CENTRAL INDEX KEY: 0000768847 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: N-30D SEC ACT: 1940 Act SEC FILE NUMBER: 811-04297 FILM NUMBER: 96623861 BUSINESS ADDRESS: STREET 1: 99 PARK AVE STREET 2: 8TH FL CITY: NEW YORK STATE: NY ZIP: 10016 BUSINESS PHONE: 2126875200 MAIL ADDRESS: STREET 1: 99 PARK AVE STREET 2: 8TH FL CITY: NEW YORK STATE: NY ZIP: 10016 N-30D 1 GLOBAL BALANCED FUND J U N E 3 0 , 1 9 9 6 VAN ECK GLOBAL BALANCED FUND SEMI-ANNUAL REPORT [Van Eck Logo] Van Eck Global Balanced Fund ---------------------------- 1996 Semi-Annual Report Dear Fellow Shareholder: As we had expected in the beginning of 1996, world equity markets outperformed bond markets for the first six months of the year. Equity investors initially reacted negatively to declines in bond prices. However, after focusing on the positive impact on earnings growth and noting the favorable supply/demand situation in many equity markets, global equities registered strong gains. Conversely, the first half of 1996 was challenging for global fixed income investors, with declines in the U.S. bond market and moderate returns in most European markets. Continued strength of the U.S. dollar lowered returns on foreign securities for U.S. investors in unhedged portfolios. The Van Eck Global Balanced Fund had a total return of 4.3% for the six months ended June 30. World Equity Markets World equity markets rose 7.3% overall in the first half of 1996. The U.S. market led the rally, gaining 10.9% over this period. The economic uncertainty in the U.S. with which the market began the year gave way in the first quarter to signs of a pick-up in economic growth. Though bond yields responded by rising significantly, equity investors focused on the relatively benign investment backdrop of moderate growth, low inflation, corporate share buybacks and strong flows into equity mutual funds. Large capitalization cyclical stocks led the market higher in the first quarter, with growth and small cap stocks taking the lead in the second quarter. While the Fund's U.S. portfolio benefited from the overall market rise, positions in AIG and Merck resulted in underperformance versus the U.S. market. Both stocks suffered from profit-taking after strong performances in 1995, while AIG was also hit by the increase in U.S. bond yields. The Japanese equity market performed in-line with our expectations at the start of the year. Reacting to further signs of sustainable economic growth, the market increased 7.6% in local currency terms, though this translated into only a 1.2% increase on a dollar basis given the weakness of the yen. We were able to capitalize on much of the local market's move by hedging approximately 85% of the portfolio's yen equity exposure. The strength of the Japanese economy has clearly surprised on the upside. To date, the Bank of Japan (BOJ) has been reluctant to increase interest rates. Several factors are in place to naturally cool the economy, including a decline in government spending and tax increases that are slowing consumer spending growth. Thus, any premature change to monetary policy by the BOJ could possibly accentuate the negative effects of the fiscal drag already in place. We have maintained our focus on export/technology (Canon Inc., Sony Corp.), and domestic recovery plays (Mitsubishi Heavy Industries, Onward Kashiyama). European equities rose 6.6% during the first six months of the year; here as well, dollar strength eroded a significant portion of the gains (in local currency terms, European equities rose 10.4%). The peripheral markets of Sweden, Italy and Spain all performed well in response to declining short- and long-term interest rates as inflation subsided, and in reaction to favorable electoral outcomes (in Italy and Spain). With minimal economic growth on the horizon, defensive growth stocks throughout Europe were in favor, supporting rallies in the Netherlands and France. The portfolio was underexposed to European equities. However, our positions in growth stocks, such as Fresenius (a German medical equipment/products company), Nutricia (a Dutch infant formula producer) and Heineken, more than offset the underweighted market position. Asia Pacific and Latin American equities registered strong gains year-to-date, increasing 9.5% and 17.5%, respectively. Both regions' equity markets started the year strongly as international investors (particularly U.S. institutions) increased their equity weightings in these regions. As U.S. bonds began to sell off in March, many of the Asia Pacific and Latin American markets had a knee-jerk reaction to higher U.S. bond yields and the threat of increased short-term rates. After the initial reaction, investors focused on corporate earnings and economic growth, supporting rallies in most of the markets. In Latin America, further signs of a recovery in economic growth emerged following a weak 1995. A relatively positive outlook for earnings growth in both regions should support equity valuations going forward, although we continue to watch closely any developments at the U.S. Federal Reserve and their ensuing impact on equity prices in these regions. World Bond Markets Global bonds ended the first six months of 1996 with mixed results. A strengthening U.S. economy pushed U.S. bond yields up (and bond prices down) and propelled the dollar higher. Meanwhile, sluggish economic growth in Europe has brought interest rate reductions across the continent, although the appreciation of the greenback erased much of the outperformance of foreign markets versus the U.S. The turnaround in economic growth in the U.S. and Japan over the past six months has been dramatic. In the U.S., a disappointing Christmas selling season and subdued consumer confidence persuaded the Federal Reserve to cut interest rates in order to reduce the risk of a more prolonged economic downturn. Less than six weeks later, the strongest monthly Employment Report in twelve years obliterated any chance of further interest rate cuts and the bond market plunged three points, the largest fall in a decade. Since then, economic reports have been unambiguously strong, leading bond yields higher as markets moved to discount future Federal Reserve rate increases to contain inflation. As signs of economic strength grew, we gradually reduced the Fund's exposure to U.S. bonds. In Japan, the economic recovery gathered strength-in the first quarter, the economy grew at an astonishing rate of 12.7% on an annualized basis-leading some to expect an imminent interest rate increase. However, bonds have remained well supported despite fears of higher interest rates as buying by the Bank of Japan has supported prices, and the low level of short-term rates (0.50%) permits healthy profits to be earned by borrowing short-term funds to buy long-term bonds with higher yields. Anticipating higher short-term interest rates, we further reduced the Fund's exposure to Japanese bonds in the first quarter. In most of Europe, the growth environment has been rather different and we maintained an overweighted position in European bonds, favoring the higher-yielding markets. Government policy continues to be geared toward achieving the target levels for budget deficits specified in the Maastricht Treaty, the blueprint for European Monetary Union. With unemployment still high and consumer confidence at depressed levels, reductions in short-term rates have been the only tool available for policy makers to stimulate economies. Low growth rates and falling inflation and interest rates are ideal combinations for bond markets, and these conditions provided a safe harbor for bond investors seeking shelter from falling U.S. bond prices, showing once again the benefits of global diversification. Performance was especially strong in the higher-yielding bond markets (Italy, Spain and Sweden) as the convergence of bond yields toward those of the core markets (e.g., Germany) continued. Currency Review The dollar continued its climb against the Deutschemark and yen in response to improving relative growth prospects in the U.S., while the relative weakness of the German economy within Europe prompted the appreciation of other European currencies versus the mark. During the period, we continued to hedge a portion of the Fund's currency exposure into U.S. dollars. The Outlook The global economic environment is one of accelerating growth with stable to slightly increasing inflation. Bond market investors do not appear to be convinced that low inflation is here to stay. To date, equities have performed well, though recent earnings disappointments in the U.S. market have tested investors' resolve and volatility has increased. The one general cautionary note for global equities is their reaction to future global interest rate increases. We still believe that at current levels the risk-return trade-off favors equities versus bonds and have positioned the portfolio accordingly. Currently, the Fund is invested approximately 65% in equities, 31% in bonds and 4% in cash.* We believe the environment remains positive for equities despite the recent fluctuations (in July), which were caused by potential interest rate increases and earnings shortfalls. We continue to find attractive investment opportunities within Europe, anticipating a fourth quarter 1996 or early-1997 European recovery. Japanese economic recovery has supported our positive outlook on this market to date. However, potential rate increases have led us to marginally reduce our weighting in Japan and to cautiously observe further Bank of Japan pronouncements related to future monetary policy. We are positive toward the Asia Pacific and Latin American markets, which are capable of delivering relatively strong earnings growth. Similar to most markets, however, U.S. interest rate policy will be a contributing factor to future market moves. The rest of 1996 is likely to prove as challenging for the bond markets as the first half. If the pace of U.S. growth does not moderate, the threat of higher inflation will persist and the Federal Reserve will likely boost interest rates. This in turn will put further pressure on U.S. bond prices. In Europe, investors should continue to benefit from the slower growth environment and the very different interest rate profile. We will therefore continue to favor European markets over the U.S. The dollar should also continue to appreciate, albeit modestly, given this stronger growth environment. We appreciate your participation in the Global Balanced Fund and we look forward to helping you meet your investment objectives in the future. Picture of Picture of Picture of Anne M. Tatlock Steven J. Miller Anthony S. Gould /s/Anne M. Tatlock /s/Steven J. Miller /s/A. S. Gould Anne M. Tatlock Steven J. Miller Anthony S. Gould Global Strategist Global Equity Global Bond Manager Manager July 18, 1996 - ------------------------------------------------------------------------------- PERFORMANCE RECORD AS OF 6/30/96 - ------------------------------------------------------------------------------- Average Annual After Maximum Before Total Return Sales Charge + Sales Charge - ------------------------------------------------------------------------------- A shares-Life (since 12/20/93) 3.8% 5.9% - ------------------------------------------------------------------------------- 1 year 4.3% 9.6% - ------------------------------------------------------------------------------- B shares-Life (since 12/20/93) 3.9% 5.0% - ------------------------------------------------------------------------------- 1 year 3.6% 8.6% - ------------------------------------------------------------------------------- The performance data represents past performance and is not indicative of future results. Investment return and principal value of an investment in the Fund will vary so that shares, when redeemed, may be worth more or less than their original cost. At certain times in the past the Advisor has waived certain or all expenses on the Fund. Had the Fund incurred all expenses, investment returns would have been reduced. + A shares: maximum sales charge = 4.75% B shares: maximum contingent deferred sales charge = 5.00% Note: All equity performance figures are from Morgan Stanley Capital International Indices. *based on total net assets. REPRESENTATIVE EQUITY HOLDINGS* ------------------------------- JUNE 30, 1996 American International Group (AIG) (U.S., 4.3%) AIG is the premier growth participant in the global insurance industry with over 50% of its revenues generated overseas. AIG's strategic focus, global presence and exemplary balance sheet should enable it to outpace the earnings performance of most other insurance entities over the next several years. The Boeing Company (U.S.,0.5%) Boeing is the world's largest manufacturer of commercial aircraft, with the dominant market share position and the broadest product-line offering. Commercial business accounts for 80% of revenues and 85%-90% of profits. Space and defense account for the remaining percentage of revenues and income share. The company is well-positioned to take advantage of the ongoing growth occurring in the world aviation markets. Compass Group PLC (U.K.,0.6%) Compass Group is one of the leading international contract caterers, with operations in the U.K., U.S., Continental Europe and Scandinavia. The contract catering market is in the midst of a secular growth phase as private businesses, educational institutions and government entities continue to outsource their in-house dining services. Compass has supplemented the industry growth potential with several well-timed acquisitions in the major markets outside of the U.K., and is therefore solidly positioned to deliver strong future earnings growth. First Pacific Co., Ltd. (Hong Kong, 0.6%) First Pacific is a Hong Kong conglomerate with interests in four main areas: marketing and distribution, integrated property services, telecommunications and financial services. While marketing and distribution accounted for 55% of 1995 profits, future profit growth lies in telecommunications. First Pacific's telecommunications operations, which include cellular and paging services, are currently in Hong Kong, the Philippines and Indonesia, with footholds in India and China. Trading at a discount to its net asset value, the stock remains attractively valued given its strong earnings growth potential. Korea Mobile Telecom (S. Korea, 0.5%) Korea Mobile Telecom (KMT) is Korea's leading wireless telecommunications service provider, with over two million cellular subscribers and five million paging customers. Current cellular penetration in Korea is only 4% and is expected to rise to the mid-teens by the year 2000. Digital technology has recently been introduced by the company; this will lead to additional capacity to accommodate the increased demand. While KMT has some of the best growth prospects in Asia, its valuation with respect to underlying cash flows is at the low end of the telecom universe. Merck & Co. (U.S.,3.6%) From the standpoint of research productivity, relations with regulators and the regard of the medical profession, Merck is one of the world's leading drug companies. Merck's product line is broad, with 20 products having annual sales of over $100 million. Cardiovascular, ulcer and antibiotics products account for 36%, 10% and 6% of sales, respectively, with international markets contributing 44% of sales and 23% of pre-tax income. 'Hidden' assets include joint ventures with Astra, du Pont and Johnson & Johnson. Mitsubishi Heavy Industries (Japan, 1.1%) Mitsubishi Heavy Industries (MHI) is the largest heavy machinery manufacturer in Japan, with operations in power plants and systems, industrial machinery, shipbuilding, infrastructure, and civilian and defense aerospace. MHI should benefit from a recovery in capital spending in Japan, continued growth in Asia and a weaker Japanese yen. Management has demonstrated its commitment to maintaining competitiveness through cost control, leaving the company well-positioned in the current Japanese business environment. Roche Holdings AG (Switzerland, 0.5%) Roche is Switzerland's largest pharmaceutical company and ranks among the world leaders in the industry. The company's businesses are broken down into four main groups: pharmaceuticals, vitamins and fine chemicals, diagnostics, and fragrances and flavors. The company maintains an extensive and diversified drug business with leading positions in antibiotics, cardiac treatments and cancer therapies. The acquisition of Syntex in 1994 has enhanced the research capability and allowed for the expansion of the distribution network. Roche remains one of the highest quality investment vehicles within the pharmaceutical sector. Sony Corp. (Japan, 1.3%) Sony is one of Japan's leading consumer electronics firms. It has a strong global presence and a brand name that is recognized worldwide as synonymous with quality and innovation. Sony has a number of new, hit products (Playstation, Minidisc players, digital video cameras), and will be introducing more products later this year. It has also recently reorganized its businesses in order to promote greater entrepreneurship and profitability, and is entering a period of strong earnings growth. Sony will also be a major beneficiary of a weaker Japanese yen. Note: Equities are listed as percentage of total investments held. * Portfolio is subject to change. GLOBAL BALANCED FUND INVESTMENT PORTFOLIO JUNE 30, 1996 (unaudited) - -------------------------------------------------------------------------------- No. of Shares or Principal Value Amount Securities (a) (Note 1) - -------------------------------------------------------------------------------- Australia: 1.1% AUD 110,000 Government of Australia 6.25% 03/15/1999 $ 82,586 AUD 328,000 Government of Australia 9.00% 9/15/2004 262,484 101 News Corporation Ltd.(Pfd.) 493 ---------- 345,563 ---------- Canada: 1.2% CAD 534,000 Government of Canada Bond 6.50% 6/01/2004 368,227 ---------- Chile: 0.4% 6,000 Chilgener S.A. (ADR) 144,000 ---------- Denmark: 2.3% DKK 4,030,000 Denmark Government Bond 8.00% 3/15/2006 714,545 ---------- France: 5.2% FRF 2,600,000 BTAN 5.75% 3/12/1998 515,372 FRF 1,695,000 Bons de Tresor 7.00% 11/12/1999 347,775 829 Castorama Dubois Investissement 163,240 1,200 Cetelem 269,618 420 Legrand 75,036 750 Primagaz 83,163 1,200 Societe Generale 131,896 ---------- 1,586,100 ---------- Germany: 5.2% DEM 160,000 Bundesrepublik 6.25% 1/04/2024 93,032 DEM 50,000 Bundesrepublik 6.50% 7/15/2003 33,386 DEM 1,080,000 Deutschland Republic Bond 6.00% 1/05/2006 683,335 DEM 359,000 Deutschland Republic Bond 7.125% 12/20/2002 249,027 620 Fresenius AG (Pfd.) 112,026 820 Lufthansa AG 115,732 2,400 Siemens AG 128,086 3,500 VEBA AG 185,804 ---------- 1,600,428 ---------- Hong Kong: 2.5% 1,000 Asia Satellite Telecommunications 29,750 20,000 Cheung Kong (Holdings) Ltd. 144,044 110,416 First Pacific Co., Ltd. 169,746 9,143 HSBC Holdings PLC 138,196 15,000 Sun Hung Kai Properties Ltd. 151,634 7,000 The Guangshen Railway Company Ltd. 133,874 ---------- 767,244 ---------- India: 1.2% 6,900 India Magnum Fund "B" 358,800 ---------- Ireland: 0.9% 20,492 Bank of Ireland $ 139,986 IEP 80,000 Irish Government Bond 6.25% 4/01/1999 127,321 ---------- 267,307 ---------- Italy: 3.9% 21,100 Banco Popolare Di Milano 104,520 ITL 750,000,000 BTPS 10.50% 4/01/2000 517,949 ITL 640,000,000 BTPS 10.50% 4/15/1998 431,387 41,200 Fiat S.p.A. 137,893 ---------- 1,191,749 ---------- Japan: 16.7% 11,000 Canon Inc. 228,759 8,000 Canon Sales Co. 222,557 9,000 Credit Saison Co., Ltd. 217,540 37,000 Daicel Chemical Industries 227,801 16 DDI Corp. 139,517 15,000 Hankyu Department Store 197,017 50,000 Hitachi Ltd. 468,750 JPY 25,500,000 Japanese Government Bond 2.90% 12/20/2005 226,101 JPY 20,400,000 Japanese Government Bond 3.00% 9/20/2005 183,953 JPY 9,200,000 Japanese Government Bond 3.70% 9/21/2015 83,260 1,000 Keyence Corp. 135,906 900 Mars Engineering Corp. 71,008 9,000 Matsushita Electric Industrial Co., Ltd. 167,465 8,000 Mitsubishi Estate Co. Ltd. 110,184 38,000 Mitsubishi Heavy Industries Ltd. 330,314 21,000 Nisshinbo Industries Co. Ltd. 206,868 77,000 NKK Corp. 233,174 12,000 Nomura Securities Co. Ltd. 234,232 50 NTT Data Communications 149,587 14,000 Onward Kashiyama Co., Ltd. 228,577 2,000 Rohm Co. 132,075 15,000 Sekisui Chemical Co. 183,336 6,000 Sony Corp. (ADR) 396,750 14,000 Sumitomo Marine & Fire 121,950 11,000 Yamatake-Honeywell 199,662 ---------- 5,096,343 ---------- Malaysia: 0.7% 46,000 DCB Holdings Berhad 157,667 10,000 United Engineers 69,352 ---------- 227,019 ---------- See Notes to Financial Statements. GLOBAL BALANCED FUND INVESTMENT PORTFOLIO JUNE 30, 1996 (unaudited) - -------------------------------------------------------------------------------- No. of Shares or Principal Value Amount Securities (a) (Note 1) - -------------------------------------------------------------------------------- Netherlands: 2.7% 3,250 Aegon N.V. $ 149,494 68 Ahold N.V. Koninklijke 3,682 480 Heineken N.V. 107,154 1,100 Nutricia Verenigde Bedri 116,213 3,000 Royal Dutch Petroleum Co. (ADR) 461,250 ---------- 837,793 ---------- New Zealand: 0.2% 4,000 Tranz Rail Holdings, Ltd. (ADR) 55,500 ---------- Panama: 0.5% 3,400 Panamerican Beverages Inc. "A" 152,150 ---------- Peru: 0.8% 115,000 CPT Telefonica del Peru 233,102 ---------- Philippines: 0.4% 130,500 C & P Homes Inc. 113,294 ---------- South Korea: 1.7% KRW 320,000 Export/Import Bank 6.375% 2/15/2006 297,215 3,000 Korea Electric Power Corp. (ADR) 72,750 8,100 Korea Mobile Telecom (ADR) 138,713 ---------- 508,678 ---------- Spain: 2.9% 3,000 Banco de Santander S.A. 139,910 ESP 39,060,000 Kingdom of Spain Bond 10.25% 11/30/1998 322,289 12,200 Repsol, S.A. (ADR) 423,950 ---------- 886,149 ---------- Sweden: 3.6% 3,300 Astra AB "A" 145,727 3,100 Scania AB "A" 85,968 3,100 Scania AB "B" 86,202 SEK 4,600,000 Swedish Government Bond 10.25% 5/05/2000 766,248 ---------- 1,084,145 ---------- Switzerland: 0.9% 110 ABB AG 135,892 18 Roche Holdings Genusshein Warrants (Expiring 5/05/1998) 567 18 Roche Holdings AG 137,113 ---------- 273,572 ---------- Thailand: 0.2% THB 50,000 Bangkok Bank Public Conv. Bond 3.25% 3/03/200 56,500 ---------- United Kingdom: 7.7% GBP 29,000 British Air Capital Conv. Bond 9.75% 6/15/200 $ 109,633 60,000 Cable & Wireless PLC 396,832 19,100 Compass Group PLC 174,660 GBP 90,000 United Kingdom Government Bond 8.00% 9/27/2013 137,110 GBP 64,000 United Kingdom Government Bond 8.50% 7/16/2007 103,183 GBP 100,000 United Kingdom Government Bond 7.00% 11/06/2001 152,732 53,000 Railtrack Group PLC 180,204 5,300 Reuters Holdings PLC (ADR) 384,250 6,481 Siebe PLC 91,967 11,342 SmithKline Beecham 121,239 4,096 Thorn EMI PLC 114,085 GBP 77,000 United Kingdom Treasury Note 7.75% 9/08/2006 117,977 GBP 150,000 United Kingdom Treasury Note 9.75% 8/27/2002 257,917 ---------- 2,341,789 ---------- United States: 37.0% 2,000 American Express Co. 6.25% 'FDC' DECS(b)* 131,250 5,000 American Express Company 223,125 13,200 American International Group 1,301,850 5,000 Baker Hughes Inc. 164,375 2,700 Bank of New York Co. Inc.* 138,375 2,500 Berkley (W.R.) Corp. 104,375 1,800 Boeing Co. 156,825 5,500 Borg-Warner Automotive, Inc. 217,250 2,500 Burlington Northern Santa Fe 202,188 7,000 Cisco Systems, Inc. 396,375 5,800 Coastal Corp. 242,150 2,500 CPC International, Inc. 180,000 3,500 Deere & Co. 140,000 5,649 Disney (Walt) Co.* 355,181 3,000 Federal Home Loan Mortgage Corp. 256,500 8,500 Federal National Mortgage Assoc. 284,750 6,100 Federated Department Stores, Inc.* 208,163 60,000,000 Fannie Mae Global Bond (JPY) 2.00% 12/20/1999 549,870 10,000 Fort Howard Corp. 198,750 3,000 General Electric Co. 259,500 4,000 GTE Corp. 179,000 12,825 Health Management Associates, Inc. 259,706 1,700 Hewlett Packard Co. 169,363 3,500 Intel Corp. 257,031 See Notes to Financial Statements. GLOBAL BALANCED FUND INVESTMENT PORTFOLIO JUNE 30, 1996 (unaudited) - -------------------------------------------------------------------------------- No. of Shares or Principal Value Amount Securities (a) (Note 1) - -------------------------------------------------------------------------------- 327,000 KFW International Finance 7.50% 4/21/2005 $ 334,788 250,000 Liberty Property L.P. Convertible Sub. Deb. 8.00% 7/01/2000 250,000 3,000 Louisiana Land & Exploration Co. 172,875 6,000 Lucent Technologies Inc. 227,250 17,000 Merck & Co. 1,098,625 2,500 Mobil Corp. 280,313 4,000 Oracle Systems 157,750 3,400 Pfizer Inc. 242,675 2,000 Procter & Gamble Co.* 181,250 2,400 State Street Boston Corp. 122,400 USD 219,000 U.S. Treasury Bond 7.25% 5/15/2016* 224,304 USD 110,000 U.S. Treasury Bond 7.875% 2/15/2021* 120,777 USD 90,000 U.S. Treasury Bond 6.25% 8/15/2023 81,661 USD 298,000 U.S. Treasury Note 5.875% 2/15/2004* 284,776 USD 460,000 U.S. Treasury Note 7.25% 8/15/2004 476,603 USD 465,000 U.S. Treasury Note 5.875% 7/31/1997 465,219 ---------- 11,297,218 ---------- Total Stocks and Other Investments: 99.9% (Cost: $24,094,525) 30,507,215 =========== Notional Value Options Purchased: 0.1% - -------------------------------------------------------------- Options 931,200 Eurostyle Put Option (strike DEM @ 1.49 expiring 7/02/1996) 13,492 25,500,000 Japanese Government Bond Eurostyle Put Option 2.9% (strike price @ 96.01 expiring 9/20/1996) 1,209 29,524,500 Eurostyle Put Option on JPY vs US$ (strike price @ 109.35 expiring 9/12/1996) 3,151 29,524,500 Eurostyle Put Option on JPY vs US$ (strike price @ 109.35 expiring 9/12/1996) 3,151 ----------- (Cost: $18,146) 21,003 ----------- Total Investments: 100% (Cost: $24,112,671) $30,528,218 =========== - ---------- (a) Unless otherwise indicated, securities owned are shares of common stock. (b) Matures October 15, 1996 with a value based upon the average closing price of First Data Corp. common stock. * These securities are segregated for forward currency contracts. Summary of Investments % of By Industry Portfolio - ------------------------------- ------------ Aerospace & Military Technology 0.5% Auto & Trucks 1.0% Banks 3.2% Brewers 0.4% Chemicals 1.3% Data Processing 1.2% Drugs & Health Care 1.2% Drugs 0.8% Electric Utilities 0.2% Electronics & Electrical Equipment 7.7% Energy Equipment & Service 0.3% Engineering & Construction 0.2% Entertainment & Leisure 1.2% Financial Services 7.2% Food Processing 1.0% Food & Household Products 1.1% Foreign Government Bonds 24.3% Household Products 0.6% Housing & Construction 0.4% Insurance 5.5% Machinery 2.3% Miscellaneous 0.1% Office Equipment 0.7% Oil & Gas Exploration 0.6% Oil Integrated-International 3.8% Oil-Domestic 0.8% Oil/Gas Equipment & Services 0.5% Paper & Forest Products 0.7% Pharmaceuticals 4.9% Publishing & Broadcasting 1.6% Real Estate 2.1% Retail 3.3% Science & Technology 1.3% Semiconductors & Semiconductor Equipment 0.8% Steel 0.8% Telecommunications 4.4% Textiles 1.4% Transportation 2.3% U.S. Government Agencies & Obligations 7.2% Utilities 1.1% ----- 100.0% ===== See Notes to Financial Statements. GLOBAL BALANCED FUND FINANCIAL STATEMENTS (unaudited) - -------------------------------------------------------------------------------- Statement of Assets and Liabilities June 30, 1996 Assets: Investments at value (cost, $24,112,671) (Note 1) $30,528,218 Cash 1,101,241 Receivables: Securities sold 336,834 Interest and dividends 306,831 Open forward foreign currency contracts (Note 5) 136,884 Capital shares sold 14,097 Deferred organization costs 19,519 ----------- Total assets 32,443,624 ----------- Liabilities: Payables: Securities purchased 346,621 Capital shares repurchased 40,022 Dividends payable 21,642 Open forward foreign currency contracts (Note 5) 12,621 Accounts payable 107,378 ----------- Total liabilities 528,284 ----------- Net assets $31,915,340 ----------- Class A Net asset value and redemption price per share ($26,640,944/2,490,126) $10.70 ====== Maximum offering price per share (NAV/(1-maximum sales commission) $11.23 ====== Class B Net asset value, offering price and redemption price per share ($5,274,396/494,070) (Redemption may be subject to a contingent deferred sales charge within the first six years of ownership) $10.68 ====== Net assets consist of: Aggregate paid in capital $23,925,547 Unrealized appreciation of investments and options 6,534,956 Undistributed net investment income 103,377 Cumulative realized gains 1,351,460 ----------- $31,915,340 =========== - -------------------------------------------------------------------------------- Statement of Operations Six Months Ended June 30, 1996 Income Interest $425,840 Dividends (less foreign taxes withheld of $26,612) 169,978 -------- 595,818 Expenses: Management (Note 2) $128,504 Distribution--Class A (Note 4) 71,231 Distribution--Class B (Note 4) 28,877 Administrative (Note 2) 49,167 Transfer agent 51,900 Custodian 30,000 Professional 19,357 Reports to shareholders 20,000 Other 28,489 -------- 427,525 Expenses assumed by Adviser (Note 2) (8,974) -------- Total expenses 418,551 ------- Net investment income 177,267 Statement of Operations--(cont'd) Realized and Unrealized Gain (Loss) on Investments (Note 3) Realized gain from security transactions $ 2,367,286 Realized gain from foreign currency transactions 201,737 Realized gain on options 10,018 Change in unrealized depreciation of investments (1,459,741) Change in unrealized appreciation of forward currency contracts and other assets and liabilities 116,948 ----------- Net Increase in Net Assets Resulting from Operations $1,413,515 =========== - -------------------------------------------------------------------------------- Statements of Changes in Net Assets Six Months Ended June 30, Year Ended 1996 December 31, (unaudited) 1995 ------------ ------------ Increase (Decrease) in Net Assets: Operations: Net investment income $ 177,267 $ 95,512 Realized gain (loss) from security transactions 2,367,286 (149,178) Realized gain (loss) from foreign currency transactions 201,737 (126,137) Realized gain (loss) on options 10,018 (126,372) Change in unrealized appreciation (depreciation) of investments (1,459,741) 2,818,138 Change in unrealized appreciation of forward currency contracts and other assets and liabilities 116,948 90,961 ------------ ------------ Increase in net assets resulting from operations 1,413,515 2,602,924 ------------ ------------ Dividends to shareholders from net investment income: Class A Shares (151,629) (316,521) Class B Shares (9,864) (17,738) ------------ ------------ (161,493) (334,259) ------------ ------------ 1,252,022 2,268,665 ------------ ------------ Capital share transactions (Note 6): Net proceeds from sales of shares: Class A Shares 959,696 4,933,615 Class B Shares 244,735 967,866 ------------ ------------ 1,204,431 5,901,481 ------------ ------------ Net asset value of shares issued in connection with acquisition-- Class A Shares (Note 7) -- 19,351,109 ------------ ------------ Reinvestment of dividends: Class A Shares 128,589 327,164 Class B Shares 7,316 28,882 ------------ ------------ 135,905 356,046 ------------ ------------ Cost of shares reacquired: Class A Shares (6,116,389) (9,470,615) Class B Shares (1,343,232) (1,238,087) ------------ ------------ (7,459,621) (10,708,702) ------------ ------------ Increase (decrease) in net assets resulting from capital share transactions (6,119,285) 14,899,934 ------------ ------------ Total increase (decrease) in net assets (4,867,263) 17,168,599 Net Assets: Beginning of period 36,782,603 19,614,004 ------------ ------------ End of period (including undistributed net investment income and accumulated net investment loss of $103,377 and $52,307, respectively) $ 31,915,340 $ 36,782,603 ============ ============ See Notes to Financial Statements. Global Balanced Fund - -------------------------------------------------------------------------------- Financial Highlights For a share outstanding throughout each period
Class A Class B --------------------------------------------- ---------------------------------------------- For the For the Six Period Six Period Months December 20, Months December 20, Ended Year Year 1993 (a) Ended Year Year 1993 (a) June 30, Ended Ended to June 30 Ended Ended to 1996 December December December 1996 December December December (unaudited) 31, 1995 31, 1994 31, 1993 (unaudited) 31, 1995 31, 1994 31, 1993 ----------- -------- -------- -------- ----------- -------- -------- -------- Net Asset Value, Beginning of Period .. $ 10.31 $ 9.07 $ 9.53 $ 9.53 $ 10.28 $ 9.02 $ 9.53 $ 9.53 ------- ------- ------- ------ ------- ------- ------- ------ Income from Investment Operations: Net Investment Income ............... 0.07 0.07+ 0.19+ -- 0.03 0.01 0.11+ -- Net Gain (Loss) on Securities (both realized and unrealized) ..... 0.38 1.31 (0.56) -- 0.39 1.28 (0.57) -- ------- ------- ------- ------ ------- ------- ------- ------ Total from Investment Operations ...... 0.45 1.38 (0.37) -- 0.42 1.29 (0.46) -- ------- ------- ------- ------ ------- ------- ------- ------ Less Distributions: Dividends from Net Investment Income (0.06) (0.14) (0.09) -- (0.02) (0.03) (0.05) -- ------- ------- ------- ------ ------- ------- ------- ------ Net Asset Value, End of Period ........ $ 10.70 $ 10.31 $ 9.07 $ 9.53 $ 10.68 $ 10.28 $ 9.02 $ 9.53 ======= ======= ======= ====== ======= ======= ======= ====== Total Return (b) ...................... 4.26% 15.30% (3.90%) 0% 3.88% 14.54% (4.84%) 0% - ------------------------------------------------------------------------------------------------------------------------------------ Ratios/Supplementary Data Net Assets, End of Period (000) ....... $26,641 $30,632 $13,986 $ 562 $ 5,274 $ 6,151 $ 5,628 $ 130 Ratio of Expenses to Average Net Assets 2.19%* 2.69% 1.06%(c) 0.25%*(c) 2.96%* 3.20% 1.88%(c) 1.00%*(c) Ratio of Net Investment Income (Loss) to Average Net Assets ............... 1.17%* 0.68% 1.99% (0.25%)* 0.36%* 0.14% 1.14% (1.00%)* Portfolio Turnover Rate ............... 64.70% 196.69% 174.76% 0% 64.70% 196.69% 174.76% 0% Average Commissions Rate Paid ......... $0.0457 $0.0457
- ---------------- (a) Commencement of operations. (b) Total return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of dividends at net asset value during the period and a redemption on the last day of the period. A sales charge is not reflected in the calculations of total return. Total return for a period of less than one year is not annualized. (c) The expense ratios for Class A shares and Class B shares would have been 2.36%*, 2.59%, 7.76%, 3.18%*, 3.21% and 8.51%, respectively if the expenses were not assumed by the Advisor. * Annualized. + Based on average shares outstanding. See notes to Financial Statemetns. - -------------------------------------------------------------------------------- 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. The following is a summary of significant accounting policies consistently followed by the Global Balanced Fund series, a non-diversified fund (the "Fund") of the Trust in the preparation of its financial statements. The policies are in conformity with generally accepted accounting principles. A. Security Valuation--Securities traded on national or foreign exchanges are valued at the last sales prices reported at the close of business on the last business day of the period. Over-the-counter securities and listed securities for which no sale was reported are valued at the mean of the bid and asked prices. Short-term obligations are valued at cost which with accrued interest approximates 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. Currency Translation--Assets and liabilities denominated in foreign currencies and commitments under forward currency contracts are translated into U.S. dollars at the mean of the quoted bid and asked prices of such currencies. Purchases and sales of investments are translated at the exchange rates prevailing when such investments were acquired or sold. Income and expenses are translated at the exchange rates prevailing when accrued. Recognized gains or losses on security transactions and other foreign currency denominated assets and liabilities attributable to foreign currency fluctuations are recorded as realized gains and losses from foreign currency transactions. The portion of unrealized gains and losses on investments that result from fluctuations in foreign currency exchange rates are not separately disclosed. D. Distributions--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 generally accepted accounting principles. E. Other--Security transactions are accounted for on the date the securities are purchased or sold. Dividend income is recorded on the ex-dividend date. Interest income is accrued as earned. Premiums paid on bonds purchased are not amortized. F. Deferred Organization Costs--Deferred organization costs are being amortized over a period not exceeding five years. G. Use of Derivative Instruments Option Contracts--The Fund may invest, for hedging and other purposes, in call and put options on securities, currencies and commodities. GLOBAL BALANCED FUND - -------------------------------------------------------------------------------- Call and put options give the Fund 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 capital loss upon expiration. The Fund may incur additional risk to the extent the value of the underlying instrument does not correlate with the movement of the option value. The Fund may also write call or put options. As the writer of an option, the Fund receives a premium. The Fund keeps the premium whether or not the option is exercised. The premium will be recorded, upon expiration of the option, as a short-term capital gain. If the option is exercised, the Fund 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 Fund may write only covered puts and calls. A covered call option is an option in which the Fund owns the instrument underlying the call. A covered call sold by the Fund exposes it during the term of the option to possible loss of opportunity to realize appreciation in the market price of the underlying 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 Fund during the term of the option to a decline in price of the underlying instrument. A put option sold by the Fund is covered when, among other things, cash or short-term liquid securities are placed in a segregated account to fulfill the obligations undertaken. The Fund may incur additional risk from investments in written currency options if there are unanticipated movements in the underlying currencies. Forward Currency Contracts--The Fund may buy and sell forward currency contracts to settle purchases and sales of foreign denominated securities. In addition, the Fund may enter into forward currency contracts to hedge foreign denominated assets. The Fund may incur additional risk from investments in forward currency contracts if the counterparty is unable to fulfill its obligations or there are unanticipated movements of the foreign currency relative to the U.S. dollar. Realized gains and losses from forward currency contracts are included in realized gain (loss) from foreign currency transactions. Note 2--Van Eck Associates Corporation (the "Advisor") earned fees of $128,504 for the six months ended June 30, 1996 for investment management and advisory services. The fee is based on an annual rate of .75 of 1% of the Fund's average daily net assets. Van Eck Associates Corporation also earned fees for accounting and administrative services in the amount of $49,167 for the six months ended June 30, 1996. The fee is based on an annual rate of .25 of 1% of the Fund's average daily net assets. For the period May 1, 1996 to June 30, 1996, the Advisor has agreed to assume expenses in excess of 2% of the average daily net assets of Class A shares and 2.5% of daily average net assets for Class B shares. Fiduciary International, Inc., the sub-investment advisor, earned fees of $70,066 for the six months ended June 30, 1996 for investment management. The fee is based on an annual rate of .50 of 1% of the Fund's average daily net assets and is paid by the Advisor from the advisory fees it receives from the Fund. Van Eck Securities Corporation received $1,807 for the six months ended June 30, 1996 from commissions earned on sales of Class A shares after deducting $8,834 allowed to other dealers. Certain of the officers and trustees of the Trust are officers, directors or stockholders of Van Eck Associates Corporation and Van Eck Securities Corporation. Note 3--Purchases and proceeds from sales of investments other than short-term obligations, aggregated $21,377,169 and $22,209,534, respectively, for the six months ended June 30, 1996. For federal income tax purposes the cost of investments owned at June 30, 1996 was $24,112,671. As of June 30, 1996 net unrealized appreciation for federal income tax purposes aggregated $6,415,547 of which $6,736,872 related to appreciated investments and $321,325 related to depreciated investments. At December 31, 1995, the Fund had $583,319 of capital loss carryforwards expiring December 31, 2002, and $600,692 expiring December 31, 2003, available to offset future capital gains. Note 4--Pursuant to a Rule 12b-1 Plan of Distribution (the "Plan"), the Fund is authorized to incur distribution expenses which will principally be payments to securities dealers who have sold shares and service shareholder accounts and payments to Van Eck Securities Corporation ("VESC"), the distributor, for reimbursement of other actual promotion and distribution expenses incurred by the distributor on behalf of the Fund. The amount paid under the Plan in any one year is limited to .50% of average daily net assets for Class A shares and 1.00% of average daily net assets for Class B shares (the "Annual Limitation"). Distribution expenses incurred under the Plan that have not been paid because they exceed the Annual Limitation may be carried forward to future years and paid by the Fund within the Annual Limitation. VESC has waived its right to reimbursement for the carried forward amounts as of December 31, 1995 through April 30, 1997 in the event the Plan is terminated, unless the Board of Trustees determines that reimbursement of carried forward amounts is appropriate. The excess of distribution expenses incurred over the Annual Limitation at June 30, 1996 was $215,894 for Class A shares and $299,823 for Class B shares. Global Balanced Fund - ------------------------------------------------------------------------------- Note 5--At June 30, 1996, the Fund had the following outstanding forward currency contracts. Value at Unrealized Settlement Current Appreciation Contracts Date Value (Depreciation) - ------------------------------------ ---------- ---------- ------------- Foreign Currency Purchase Contracts: AUD 224,000 expiring 8/16/96 $ 193,980 $ 191,531 $ (2,449) CAD 17,000 expiring 7/18/96 12,509 12,468 (41) DEM 1,635,000 expiring 8/20/96 1,068,837 1,076,771 7,934 ESP 231,552,375 expiring 7/11/96 1,807,655 1,804,515 (3,140) GBP 165,000 expiring 7/09/96 251,074 256,144 5,070 ITL 301,699,000 expiring 7/19/96 192,077 196,226 4,149 JPY 202,386,520 expiring 7/09/96 1,873,075 1,848,931 (24,144) Foreign Currency Sale Contracts: AUD 337,000 expiring 8/16/96 268,554 264,532 4,022 CAD 109,000 expiring 7/18/96 79,562 79,943 (381) DEM 1,343,304 expiring 8/20/96 880,000 884,667 (4,667) DKK 1,742,000 expiring 8/13/96 298,543 297,391 1,152 ESP 146,092,000 expiring 7/11/96 1,174,043 1,138,512 35,531 FRF 1,518,000 expiring 7/17/96 291,923 295,045 (3,122) GBP 229,000 expiring 7/09/96 345,869 355,497 (9,628) HKD 2,332,000 expiring 8/22/96 301,487 301,254 233 IEP 80,000 expiring 7/12/96 126,498 127,704 (1,206) ITL 789,242,000 expiring 7/19/96 497,411 513,326 (15,915) JPY 515,107,689 expiring 7/19/96 4,847,493 4,705,840 141,653 SEK 5,028,000 expiring 7/11/96 746,881 757,669 (10,788) --------- $124,263 ========= Global Balanced Fund - -------------------------------------------------------------------------------- Note 6--Shares of Beneficial Interest Issued and Redeemed (unlimited number of $.001 par value shares authorized): Six Months Ended Year Ended June 30, 1996 December 31, (unaudited) 1995 -------------- ------------ Class A Shares sold 91,645 494,827 Shares issued in connection with an acquisition -- 1,869,672 Reinvestment of dividends 12,062 32,689 -------- --------- 103,707 2,397,188 Shares reacquired (583,467) (970,107) -------- --------- Net increase (decrease) (479,760) 1,427,081 ======== ========= Class B Shares sold 23,501 100,484 Reinvestment of dividends 685 3,060 -------- --------- 24,186 103,544 Shares reacquired (128,226) (129,053) -------- --------- Net decrease (104,040) (25,509) ======== ========= Note 7--The Fund invests in foreign securities. Investments in foreign securities may involve a greater degree of risk than investments in domestic securities due to political, economic or social instability. Foreign investments may also be subject to foreign taxes and settlement delays. The Fund will attempt to maintain an asset allocation of 60% in equity securities and 40% in debt securities. Since the Fund may have significant investments in foreign debt securities it may be subject to greater credit and interest risks and greater currency fluctuations than portfolios with significant investments in domestic debt securities. Van Eck Family of Funds - -------------------------------------------------------------------------------- Global Hard Assets Fund Seeks long-term capital appreciation by investing globally, primarily in "Hard Asset Securities." Income is a secondary consideration. International Investors Gold Fund Founded in 1955, this Fund is the oldest gold-oriented mutual fund in the U.S. It invests in gold-mining shares globally and seeks long-term capital appreciation, moderate yield and protection against monetary uncertainties. Gold/Resources Fund Seeking a long-term global hedge against inflation and other risks, this Fund invests in gold-mining and natural resources companies outside South Africa. Gold Opportunity Fund Seeks capital appreciation by investing globally in equity securities of companies engaged in the exploration, development, production and distribution of gold and other precious metals, and through active asset allocation between gold-related assets and cash instruments. Asia Dynasty Fund This Fund seeks long-term capital appreciation by investing in the equity securities of companies that are expected to benefit from the development and growth of the economies in the Asia Region. Asia Infrastructure Fund Seeks long-term capital appreciation by investing in the equity securities of infrastructure companies that are expected to benefit from the development and growth of the economies in the Asia Region. Global Balanced Fund This Fund seeks long-term capital appreciation together with current income by investing in stocks, bonds and money market instruments worldwide. Fiduciary International, Inc. serves as sub-investment advisor to this Fund. Global Income Fund This Fund seeks high total return through a flexible policy of investing globally, primarily in debt securities. U.S. Government Money Fund This Fund seeks the highest safety of principal and daily liquidity by investing in U.S. Treasury bills and repurchase agreements collateralized by U.S. Government obligations. - -------------------------------------------------------------------------------- This report must be accompanied or preceded by a Van Eck Global Funds prospectus, which includes more complete information, such as charges and expenses and the risks associated with international investing, including currency fluctuations or controls, expropriation, nationalization and confiscatory taxation. For a free Van Eck Gold & Money Funds prospectus, please call the number listed below. Please read the prospectus before investing. [Van Eck Logo] Van Eck Securities Corporation 99 Park Avenue, New York, NY 10016 http://www.vaneck.com For account assistance please call (800) 544-4653 B96-0726-002 -----END PRIVACY-ENHANCED MESSAGE-----