Worldwide Absolute Return Fund
Notes To Financial Statements (unaudited)
Note 1—Significant Accounting Policies—Van Eck Worldwide Insurance Trust (the “Trust”), organized as a Massachusetts business trust on January 7, 1987, is registered under the Investment Company Act of 1940, as amended. The Worldwide Absolute Return Fund (the “Fund”) is a non-diversified series of the Trust and seeks to achieve consistent absolute (positive) returns in various market cycles. The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements. The policies are in conformity with U.S. generally accepted accounting principles. The preparation of financial statements in conformity with U.S. generally accepted accounting principles 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 exchanges or on the NASDAQ National Market System are valued at the last sales price as reported at the close of each business day. Securities traded on the NASDAQ Stock Market are valued at 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. Futures contracts are valued using the closing price reported at the close of the respective exchange. Securities for which quotations are not available are stated at fair value as determined by a Pricing Committee of the Adviser appointed by the Board of Trustees. Certain factors such as economic conditions, political events, market trends and security specific information are used to determine the fair value for these securities.
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. Distributions to Shareholders—Distributions to shareholders from net investment income and realized gains, if any, are recorded on the ex-dividend date. Income and capital gain distributions are determined in accordance with income tax regulations, which may differ from such amounts determined in accordance with U.S. generally accepted accounting principles.
D. Securities Sold Short— A short sale occurs when the Fund sells a security, which it does not own, by borrowing it from a broker. Proceeds from securities sold short are reported as liabilities on the Statement of Assets and Liabilities and are marked to market daily. Gains and losses are classified as realized when short positions are closed. 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. Dividends on short sales are recorded as an expense by the Fund on the ex-dividend date. Cash is deposited in a segregated account with brokers, maintained by the Fund, for its open short sales. Securities sold short at June 30, 2006 are reflected in the Schedule of Portfolio Investments. Until the Fund replaces the borrowed security, the Fund maintains securities or permissible liquid assets in a segregated account with a broker or custodian sufficient to cover its short positions.
E. Other—Security transactions are accounted for on trade date. Dividend income is recorded on the ex-dividend date. Realized gains and losses are calculated on the identified cost basis. Interest income, including amortization on premiums and discounts, is accrued as earned.
Note 2—Management Agreement—Van Eck Associates Corporation (the “Adviser”) earns fees for investment management and advisory services provided to the Fund. The fee is based on an annual rate of 2.50% on the average daily net assets. The Adviser agreed to assume expenses, exceeding 2.50% of average daily net assets, except for interest, taxes, dividends on securities sold short, brokerage commissions and extraordinary expenses for the period January 1, 2005 through April 30, 2007. For the six months ended June 30, 2006, the Adviser assumed expenses in the amount of $3,781. Certain of the officers of the trust are officers, directors or stockholders of the Adviser and Van Eck Securities Corporation, the Distributor.
As of June 30, 2006, the Fund had two sub-advisers, Analytic Investors, Inc. (“Analytic”) and Gartmore Mutual Fund Capital Trust (“Gartmore”, formerly known as Coda Capital). The Adviser directly paid sub-advisory fees to Analytic at a rate 1.00% of the portion of the average daily net assets of the Fund managed by Analytic and to Gartmore at a rate of 0.75% of the portion of the average daily net assets of the Fund managed by Gartmore.
Note 3—Investments—For the six months ended June 30, 2006, purchases and sales of securities other than U.S. government securities and short-term obligations aggregated $4,488,998 and $3,500,159, respectively. For the six months ended June 30, 2006, proceeds of short sales and purchases of short sale covers aggregated $3,754,851 and $3,179,615, respectively.
The identified cost of investments owned at June 30, 2006 was $7,102,640 and net unrealized appreciation aggregated $109,369 of which $437,308 related to appreciated securities and $327,939 related to depreciated securities.
Note 4—Income Taxes—The tax character of distributions paid to shareholders during the six months ended June 30, 2006 consisted of long term capital gains of $41,962.
Note 5—Concentration of Risk—The Fund may invest in debt securities which are rated as below investment grade by rating
16
Worldwide Absolute Return Fund
Notes To Financial Statements (unaudited) (continued)
agencies. Such securities involve more risk of default than do higher rated securities and are subject to greater price variability.
At June 30, 2006, Van Eck Securities Corp. owned approximately 24% of the outstanding shares of beneficial interest of the Fund. Additionally, the aggregate shareholder accounts of three insurance companies own approximately 27%, 19% and 12% of the outstanding shares of beneficial interest of the Fund.
Note 6—Trustee Deferred Compensation Plan—The Trust established a Deferred Compensation Plan (the “Plan”) for Trustees. Commencing January 1, 1996, the Trustees can elect to defer receipt of their Trustee fees until retirement, disability or termination from the board. The Fund’s 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 and are reflected in the accompanying Statement of Assets and Liabilities.
Note 7—Repurchase Agreement—Collateral for repurchase agreements, in the form of U.S. government obligations, the value of which must be at least 102% of the underlying debt obligation, is held by the Fund’s 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 Fund would become exposed to market fluctuations on the collateral.
Note 8—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 (“NYAG”) and the United States Securities and Exchange Commission (“SEC”) have requested and received information from the Adviser. The investigations are ongoing, and the Adviser is continuing to cooperate with such investigations. 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, has not been determined.
In July 2004, the Adviser received a “Wells Notice” from the SEC in connection with the SEC’s investigation of market-timing activities. 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 the U.S. securities laws against the Adviser and two of its senior officers.
There cannot be any assurance that if the SEC or NYAG were to assess sanctions against the Adviser, such sanctions would not materially and adversely affect the Adviser.
17
Van Eck Worldwide Insurance Trust
Worldwide Absolute Return Fund
Approval of Advisory and Sub-Advisory Agreements
The Investment Company Act of 1940, as amended (the “1940 Act”), provides, in substance, that each investment advisory agreement between a Fund and its investment adviser will continue in effect from year to year only if its continuance is approved at least annually by the Board of Trustees (the “Board”), including by a vote of a majority of the Trustees who are not “interested persons” of the Fund (“Independent Trustees”), cast in person at a meeting called for the purpose of considering such approval.
In considering the renewal of the investment advisory agreements, the Board, comprised exclusively of Independent Trustees, reviewed and considered information that had been provided by Van Eck Associates Corporation, the Fund’s Adviser (the “Adviser”) and the Fund’s sub-advisers (the “Sub-Advisers”), throughout the year at regular Board meetings, as well as information furnished for the meetings of the Board held on June 13 and 14, 2006 to specifically consider the renewal of the Fund’s investment advisory agreement. This information included, among other things, the following:
- Information about the overall organization of the Adviser and the Adviser’s short-term and long- term business plan with respect to its mutual fund operations;
- The Adviser’s consolidated financial statements for the past 3 fiscal years;
- A description of the advisory and sub-advisory agreements with the Fund, their terms and the services provided thereunder;
- Information regarding each Sub-Adviser’s organization, personnel, investment strategies and key compliance procedures;
- Information concerning the Adviser’s compliance program, the resources devoted to compliance efforts undertaken by the Adviser and its affiliates on behalf of the Fund, and reports regarding a variety of compliance-related issues;
- An analysis of the profitability of the Adviser with respect to the services it provides to the Fund and the Van Eck complex of mutual funds as a whole;
- Reports with respect to the Adviser’s brokerage practices, including the benefits received by the Adviser from research acquired with soft dollars; and
- Other information provided by the Adviser and each Sub-Adviser in response to a comprehensive questionnaire prepared by independent legal counsel on behalf of the Independent Trustees.
In considering whether to approve the investment advisory and sub-advisory agreements, the Board evaluated the following factors: (1) the quality, nature, cost and character of the investment management services provided by the Sub-Advisers; (2) the capabilities and background of the Sub-Advisers’ investment personnel, and the overall capabilities, experience, resources and strengths of each Sub-Adviser and its affiliates in managing investment companies and other accounts utilizing similar investment strategies; (3) the quality, nature, cost and character of the administrative and other services provided by the Adviser and its affiliates, including its services in overseeing the services provided by each Sub-Adviser; (4) the quality, nature and extent of the services performed by the Adviser in interfacing with, and monitoring the services performed by, third parties, such as the Fund’s custodian, transfer agent, sub-accounting agent and independent auditors, and the Adviser’s commitment and efforts to review the quality and pricing of third party service providers to the Fund with a view to reducing non-management expenses of the Fund; (5) the terms of the advisory and sub-advisory agreements and the reasonableness and appropriateness of the particular fee paid by the Fund for the services described therein; (6) the profits, if any, realized by the Adviser from managing the Fund, in light of the services rendered and the costs associated with providing such services; (7) the Adviser’s willingness to subsidize the operations of the Fund from time to time by means of waiving a portion of its
18
Van Eck Worldwide Insurance Trust
Approval of Advisory and Sub-Advisory Agreements (continued)
management fees or paying expenses of the Fund; (8) the services, procedures and processes used to determine the value of Fund assets, and the actions taken to monitor and test the effectiveness of such services, procedures and processes; (9) the ongoing efforts of, and resources devoted by, the Adviser with respect to the development of a comprehensive compliance program and written compliance policies and procedures, and the implementation of recommendations of independent consultants with respect to a variety of compliance issues; (10) the responsiveness of the Adviser and its affiliated companies to inquiries from, and examinations by, regulatory agencies such as the SEC, the NASD and the office of the New York Attorney General (“NYAG”); (11) the Adviser’s record of compliance with its policies and procedures; and (12) the ability of the Adviser and each Sub-Adviser to attract and retain quality professional personnel to perform a variety of investment advisory and administrative services for the Fund.
The Board considered the fact that the Adviser has received a Wells Notice from the SEC in connection with on-going investigations concerning market timing and related matters. The Board determined that the Adviser continues to cooperate with the SEC, the NYAG and the Board in connection with these matters and that the Adviser has taken appropriate steps to implement policies and procedures reasonably designed to prevent harmful market timing activities by investors in the Fund. In addition, the Board concluded that the Adviser has acted in good faith in providing undertakings to the Board to make restitution of damages, if any, that may have resulted from any prior wrongful actions of the Adviser and that it would be appropriate to permit the SEC and the NYAG to bring to conclusion their pending regulatory investigations prior to the Board making any final determination of its own with respect to these same matters.
The Board noted that the Fund commenced its operations on May 1, 2003, and that the Adviser has not realized any profits with respect to the Fund since its commencement and does not expect to realize profits in the coming year. In view of the small size of the Fund and the fact that none of the Sub-Advisers is affiliated with the Adviser, the Board concluded that the profitability of the Sub-Advisers was not a relevant factor in its renewal deliberations regarding the Sub-Adviser. Similarly, the Board concluded that the Fund does not have sufficient assets for the Adviser or any Sub-Adviser to realize economies of scale for the foreseeable future, and, therefore, that the implementation of breakpoints would not be warranted at this time.
In its renewal deliberations for the Fund, the Board further noted that the Fund is unique in its structure and investment strategy, and that the Adviser has taken steps to expand the range of allowable investments for the Fund in an attempt to improve its performance. The Board also noted that the Adviser has agreed to waive and will continue to waive through April 2007 a portion of its management fee to limit the total expenses of the Fund. The Board concluded that it would be appropriate to allow the Adviser a reasonable period of time to evaluate the effectiveness of the Fund’s structure and investment strategy.
The Board considered additional factors with respect to Analytic Investors, Inc., AXA Rosenberg Investment Management LLC, Gartmore Mutual Fund Capital Trust, Martingale Asset Management, L.P., and PanAgora Asset Management, Inc., the Fund’s Sub-Advisers. The Board noted that only Analytic and Gartmore are currently managing a portion of the Fund’s assets. The Board concluded that each of the Sub-Advisers is qualified to manage the Fund’s assets in accordance with its respective investment objectives and policies, that each Sub-Adviser’s investment strategy is appropriate for pursuing the Fund’s investment objectives, and that the respective strategies of all the Sub-Advisers would be complementary in pursuing the Fund’s investment objective. The Board further concluded that it would be appropriate to allow the Sub-Advisers a reasonable period of time to evaluate the effectiveness of their investment strategies.
19
Van Eck Worldwide Insurance Trust
Approval of Advisory and Sub-Advisory Agreements (continued)
The Board did not consider any single factor as controlling in determining whether or not to renew the investment advisory agreement. Nor are the items described herein all of the matters considered by the Board. Based on its consideration of the foregoing factors and conclusions, and such other factors and conclusions as it deemed relevant, and assisted by the advice of its independent counsel, the Board concluded that the renewal of the investment advisory agreements, including the fee structures (described herein) is in the interests of shareholders, and accordingly, the Board approved the continuation of the advisory agreements for an additional one-year period.
20
Van Eck Worldwide Insurance Trust Worldwide Absolute Return Fund
On March 9, 2006, at a Special Meeting of Shareholders, the following proposals were voted:
| | | | % of Outstanding | | % of Shares |
| | No. of Shares | | Shares | | Present |
|
| |
|
| |
|
|
| |
| 1. To elect the following nominees as Trustees | | | | |
| |
| Richard C. Cowell | | | | | | | |
| Affirmative | 485,870.562 | | 79.418 | % | | 100.000 | % |
| Withhold | .000 | | .000 | % | | .000 | % |
| TOTAL | 485,870.562 | | 79.418 | % | | 100.000 | % |
| |
| Jon Lukomnik | | | | | | | |
| Affirmative | 485,870.562 | | 79.418 | % | | 100.000 | % |
| Withhold | .000 | | .000 | % | | .000 | % |
| TOTAL | 485,870.562 | | 79.418 | % | | 100.000 | % |
| |
| David J. Olderman | | | | | | | |
| Affirmative | 485,870.562 | | 79.418 | % | | 100.000 | % |
| Withhold | .000 | | .000 | % | | .000 | % |
| TOTAL | 485,870.562 | | 79.418 | % | | 100.000 | % |
| |
| Ralph F. Peters | | | | | | | |
| Affirmative | 485,870.562 | | 79.418 | % | | 100.000 | % |
| Withhold | .000 | | .000 | % | | .000 | % |
| TOTAL | 485,870.562 | | 79.418 | % | | 100.000 | % |
| |
| Wayne H. Shaner | | | | | | | |
| Affirmative | 485,870.562 | | 79.418 | % | | 100.000 | % |
| Withhold | .000 | | .000 | % | | .000 | % |
| TOTAL | 485,870.562 | | 79.418 | % | | 100.000 | % |
| |
| R. Alastair Short | | | | | | | |
| Affirmative | 485,870.562 | | 79.418 | % | | 100.000 | % |
| Withhold | .000 | | .000 | % | | .000 | % |
| TOTAL | 485,870.562 | | 79.418 | % | | 100.000 | % |
| |
| Richard D. Stamberger | | | | | | |
| Affirmative | 485,870.562 | | 79.418 | % | | 100.000 | % |
| Withhold | .000 | | .000 | % | | .000 | % |
| TOTAL | 485,870.562 | | 79.418 | % | | 100.000 | % |
21
Van Eck Worldwide Insurance Trust Worldwide Absolute Return Fund
| | | % of Outstanding | | % of Shares |
| No. of Shares | | Shares | | Present |
|
| |
|
| |
|
|
| |
| (2H) Commodities | | | | | | | |
| Affirmative | 481,552.891 | | 78.712 | % | | 99.111 | % |
| Against | .000 | | .000 | % | | .000 | % |
| Abstain | 4,317.671 | | .706 | % | | .889 | % |
| TOTAL | 485,870,562 | | 79.418 | % | | 100.000 | % |
| |
| (2G) Concentration | | | | | | | |
| Affirmative | 481,552.891 | | 78.712 | % | | 99.111 | % |
| Against | .000 | | .000 | % | | .000 | % |
| Abstain | 4,317.671 | | .706 | % | | .889 | % |
| TOTAL | 485,870,562 | | 79.418 | % | | 100.000 | % |
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| Investment Adviser: | | Van Eck Associates Corporation | | |
| Distributor: | | Van Eck Securities Corporation | | |
| | | 99 Park Avenue, New York, NY 10016 www.vaneck.com |
| Account Assistance | | 1.800.544.4653 | | |
This report must be preceded or accompanied by a Van Eck Worldwide Insurance Trust Prospectus, which includes more complete information. An investor should consider the investment objective, risks, and charges and expenses of the Fund carefully before investing. The prospectus contains this and other information about the investment company. Please read the prospectus carefully before investing.Additional information about the Fund’s Board of Trustees/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 and information regarding how the Fund voted proxies relating to portfolio securities during the most recent twelve 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.
The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission for the first and third quarters of each fiscal year on Form N-Q. The Fund’s Form N-Qs are available on the Commission’s website at http://www.sec.gov and may be reviewed and copied at the Commission’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 1.800. SEC.0330. The Fund’s complete schedule of portfolio holdings is also available by calling 1.800.826.2333 or by visiting www.vaneck.com.
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.
Information included in Item 1.
Item 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
Item 8. PORTFOLIO MANAGER OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
Item 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
Item 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No changes.
Item 11. CONTROLS AND PROCEDURES.
(a) The Chief Executive Officer and the Chief Financial Officer have concluded
that the Worldwide Absolute Return Fund 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 Worldwide
Absolute Return Fund 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) There were no significant changes in the registrant's internal controls
over financial reporting or in other factors that could significantly
affect these controls over financial reporting subsequent to the date of
our evaluation.
Item 12. EXHIBITS.
(a)(1) Not applicable.
(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) WORLDWIDE INSURANCE TRUST - WORLDWIDE ABSOLUTE RETURN FUND
By (Signature and Title) /s/ Bruce J. Smith, SVP & CFO
-----------------------------
Date August 28, 2006
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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 August 28, 2006
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By (Signature and Title) /s/ Bruce J. Smith, CFO
------------------------
Date August 28, 2006
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