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Worldwide Absolute Return Fund |
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Notes To Financial Statements
June 30, 2007 (unaudited)
Note 1—Fund Organization—Van Eck Worldwide Insurance Trust (the “Trust”), is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company. The Trust was organized as a Massachusetts business trust on January 7, 1987. 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.
Note 2—Significant Accounting Policies—The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that effect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates.
The following is a summary of significant accounting policies followed by the Fund.
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. Dividends and Distributions to Shareholders—Dividends from net investment income and distributions from net realized capital gains, if any, are declared and paid annually. Income dividends 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, 2007 are reflected in the Schedule of 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. Interest income, including amortization on premiums and discounts, is accrued as earned. Realized gains and losses are calculated on the identified cost basis.
Note 3—Management Fees—Van Eck Associates Corporation (the “Adviser”) is the investment adviser to the Fund. The Adviser receives a management fee, calculated daily and payable monthly based on an annual rate of 2.50% of 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, and extraordinary expenses for the period May 1, 2007 through April 30, 2008. For the six months ended June 30, 2007, the Adviser assumed expenses in the amount of $38,593. Certain of the officers and trustees of the Trust are officers, directors or stockholders of the Adviser and Van Eck Securities Corporation, the Distributor.
As of June 30, 2007, the Fund had two sub-advisers, Analytic Investors, Inc. (“Analytic”) and Lazard Asset Management LLC (Lazard). 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 Lazard at a rate of 1.00% of the portion of the average daily net assets of the Fund managed by Lazard.
Note 4—Investments—For the six months ended June 30, 2007, the cost of purchases and proceeds from sales of investments other than U.S. government securities and short-term obligations aggregated $5,499,705 and $4,889,725 respectively. For the six months ended June 30, 2007, proceeds of short sales and the cost of purchases of short sale covers aggregated $5,360,742 and $4,749,939, respectively.
Note 5—Income Taxes—For Federal income tax purposes, the identified cost of investments owned at June 30, 2007 was $7,115,511 and net unrealized appreciation aggregated $939,968 of which $1,015,298 related to appreciated securities and $75,330 related to depreciated securities.
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Worldwide Absolute Return Fund |
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Notes To Financial Statements (continued)
The tax character of dividends and distributions paid to shareholders was as follows:
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| | During the Six
Months Ended
June 30, 2007 | | During the
Year Ended
December 31, 2006 | |
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Ordinary income | | | $ | 145,472 | | | | $ | — | | |
Long term capital gains | | | | 100,445 | | | | | 41,962 | | |
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Total | | | $ | 245,917 | | | | $ | 41,962 | | |
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Note 6—Concentration of Risk—The Fund may invest in debt securities which are rated as below investment grade by rating agencies. Such securities involve more risk of default than do higher rated securities and are subject to greater price variability.
At June 30, 2007, Van Eck Securities Corp. owned approximately 17% of the outstanding shares of beneficial interest of the Fund. Additionally, the aggregate shareholder accounts of four insurance companies own approximately 30%, 29%, 15% and 8% of the outstanding shares of beneficial interest of the Fund.
Note 7—Trustee Deferred Compensation Plan—The Trust has established a Deferred Compensation Plan (the “Plan”) for Trustees under which the Trustees can elect to defer receipt of all or a portion of their Trustee fees until retirement, disability or termination from the Board of Trustees. The fees otherwise payable to the participating Trustees are deemed invested in shares of the Van Eck Funds (another registered investment company managed by the Adviser) as directed by the Trustees.
The expense for the deferred compensation plan is included in “Trustees fees and expenses” in the Statement of Operations. The liability for the deferred compensation plan is shown as “Deferred Trustee fees” in the Statement of Assets and Liabilities.
Note 8—Repurchase Agreements—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 9—New Accounting Policy—In September 2006, FASB issued Statement on Financial Accounting Standards No. 157, “Fair Value Measurements” (“FAS 157”). This standard clarifies the definition of fair value for financial reporting, establishes a framework for measuring fair value and requires additional disclosures about the use of fair value measurements. FAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007 and interim periods within those fiscal years. As of June 30, 2007, the Fund does not believe the adoption of FAS 157 will impact the amounts reported in the financial statements, however, additional disclosures will be required about the inputs used to develop the measurements of fair value and the effect of certain of the measurements reported in the statement of operations for a fiscal period.
Note 10—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 SEC have requested and received information from the Adviser. The Adviser will 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 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 time period for the Adviser’s response has been extended until further notice from the SEC. There cannot be any assurance that, if the SEC and/or the NYAG were to assess sanctions against the Adviser, such sanctions would not materially and adversely affect the Adviser.
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Van Eck Worldwide Insurance Trust |
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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 requested by the Board and furnished by the Adviser and the Sub-Advisers for the meetings of the Board held on May 30 and 31, 2007 to specifically consider the renewal of the Fund’s investment advisory agreement. This information included, among other things, the following:
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• | 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; |
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• | The Adviser’s consolidated financial statements for the past 3 fiscal years; |
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• | A description of the advisory and sub-advisory agreements with the Fund, their terms and the services provided thereunder; |
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• | Information regarding each Sub-Adviser’s organization, personnel, investment strategies and key compliance procedures; |
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• | 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; |
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• | Comparative information regarding the performance, for the one- and three-year periods ended December 31, 2006, of a relevant group of benchmark indices, as well as the performance of a variety of investment vehicles identified by the Adviser, which capture the unique investment style of the Fund. |
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• | Comparative information concerning the fees and expenses of a relevant peer fund with a management structure and investment strategies and techniques comparable to those of the Fund; |
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• | 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; |
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• | Reports with respect to the Adviser’s brokerage practices, including the benefits received by the Adviser from research acquired with soft dollars; and |
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• | 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. |
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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 |
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Van Eck Worldwide Insurance Trust |
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Approval of Advisory and Sub-Advisory Agreements (continued)
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 reduce the cost of the Fund to shareholders from time to time by means of waiving a portion of its 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 Securities and Exchange Commission (“SEC”); (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 had received in 2004 a Wells Notice from the SEC, as well as a request for information from the Office of the New York State Attorney General (“NYAG”), in connection with on-going investigations concerning market timing and related matters. The Board determined that the Adviser continues to cooperate with 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 Funds. 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 considered the fact that the Adviser is managing other investment products and vehicles, including hedge funds and separate accounts, that invest in the same financial markets and are managed by the same investment professionals according to a similar investment strategy as certain of the Funds. The Board concluded that the management of these products contributes to the Adviser’s financial stability and is helpful to the Adviser in attracting and retaining quality portfolio management personnel for the Funds. In addition, the Board concluded that the Adviser has established appropriate procedures to monitor conflicts of interest involving the management of the Funds and the other products and for resolving any such conflicts of interest in a fair and equitable manner.
In evaluating the investment performance of the Fund, the Board noted that the Fund’s performance had improved during 2006, and that the Fund had outperformed its benchmark index for the one-year period ended December 31, 2006. On the basis of the foregoing and other relevant considerations, the Board concluded that the performance of the Fund was satisfactory.
When considering the fees and expenses of the Fund, the Board noted that the Fund’s expense ratio, net of waivers, was comparable to the expense ratio of a relevant peer fund with a management structure and investment strategies
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Van Eck Worldwide Insurance Trust |
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Approval of Advisory and Sub-Advisory Agreements (continued)
and techniques similar to those of the Fund. The Board also noted that that the Fund is unique in its structure and investment strategy, and that the Adviser has agreed to waive and will continue to waive through April 2008 a portion of its management fee to limit the total expenses of the Fund. The Board concluded that the management fee charged to the Fund for advisory, sub-advisory and related services is reasonable and that the total expense ratio of the Fund is reasonable.
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 may not 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-Advisers. 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.
The Board considered additional factors with respect to Analytic Investors, Inc. (“Analytic”), Lazard Asset Management LLC (“Lazard”), Martingale Asset Management, L.P. and PanAgora Asset Management, Inc., the Fund’s Sub-Advisers. The Board noted that only Analytic and Lazard 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 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.
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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: | | (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
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Date August 28, 2007
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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
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Date August 28, 2007
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By (Signature and Title) /s/ Bruce J. Smith, CFO
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Date August 28, 2007
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