Registration Nos. 33-________
811-________
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933 X
Pre-Effective Amendment No.
Post Effective Amendment No.
and
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 X
Amendment No.
(Check appropriate box or boxes)
PRECIOUS METALS AND EQUITY TRUST
(Exact Name of Registrant as Specified in Charter)
2717 Furlong Road
Doylestown, Pennsylvania 18901
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (215) 794-2980
Peter K. Blume, Esquire
Yukevich, Blume, Marchetti & Zangrilli, P.C.
One Gateway Center, Sixth Floor
Pittsburgh, PA 15222
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering: As soon as practicable after
this Registration Statement becomes effective.
Pursuant to Rule 24f-2 under the Investment Company Act of 1940,
Registrant hereby elects to register an indefinite number of its shares of
beneficial interest with no par value. The amount of the registration fee is
$500.00.
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The Registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant shall
file a further amendment which specifically states that this registration
statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the registration statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
PRECIOUS METALS AND EQUITY TRUST
Cross Reference sheet Pursuant to Rule 495(a)
Part A
Form Item Cross Reference
Item 1. Cover Page. Cover Page
Item 2. Synopsis. Shareholder Transaction
Expenses; Annual Trust
Operating Expenses
Item 3. Condensed Financial Information. Not Applicable
Item 4. General Description of Registrant. Cover Page; About the Trust;
Investment Objective and
Policies; Specialized
Investment Techniques and
Related Risks
Item 5. Management of the Trust.
(a) ................................. Management -- Trustees
(b) ................................. Manager -- Investment Adviser
(c) ................................. Not Applicable
(d) ................................. Miscellaneous Information --
Custodian, Transfer Agent and
Dividend Paying Agent
(e) ................................. Management -- Expenses
(f) ................................. Management -- Brokerage
Item 6. Capital Stock and Other Securities.
(a) ................................. About the Trust;
Miscellaneous Information
(b) ................................. Not Applicable
(c) ................................. Not Applicable
(d) ................................. Not Applicable
(e) ................................. How to Purchase Shares; Other
Information
-- Shareholder Inquiries
(f) ................................. About the Trust; Services for
Shareholders -- Dividends and
Distributions; Taxes
Item 7. Purchase of Securities Being Offered.
(a) ................................. How to Purchase Shares
(b) ................................. Determination of Net Asset
Value
(c) ................................. How to Purchase Shares
(d) ................................. How to Purchase Shares
(e) ................................. Distribution of Shares
Item 8. Redemption or Repurchase. Redemption and Repurchase of
Shares
Item 9. Pending Legal Proceedings. Not Applicable
Part B Statement of Additional
Information
Form Item Cross Reference
Item 10. Cover Page..................... Cover Page
Item 11. Table of Contents.............. Table of Contents
Item 12. General Information and History. About the Trust
Item 13. Investment Objectives and Policies. Investment Objectives
and Policies; Specialized
Investment Techniques and
Related Risks
Item 14. Management of the Fund......... Management -- Officers and
Trustees
Item 15. Control Persons and Principal Holders of Securities.
(a) ............................... Management
(b) ............................... Management
(c) ............................... Management -- Officers and
Trustees
Item 16. Investment Advisory and Other Services.
(a), (b)............................... Management -- Investment
Advisory Contract
(c),(d),(e)............................ Not Applicable
(f) ............................... Distribution of Shares
(g) ............................... Not Applicable
(h) ............................... Miscellaneous Information
(i) ............................... Not Applicable
Item 17. Brokerage Allocation........... Portfolio Security Transactions
Item 18. Capital Stock and Other Securities. About the Trust
Item 19. Purchase Redemption and Pricing of Securities Being Offered.
(a),(b) ............................... How to Purchase Shares;
Determination of Net Asset
Value
(c) ............................... Not Applicable
Item 20. Tax Status..................... Taxes
Item 21. Underwriters................... Distribution of Shares; How
to Purchase Shares; Management
Item 22. Calculation of Performance Data. Not Applicable
Item 23. Financial Statements........... Financial Statements
Part C Other Information
Information required to be included in Part C is set forth under the appropriate
Item, so numbered, in Part C of the Registration Statement.
<PAGE>
PRECIOUS METALS AND EQUITY TRUST
PROSPECTUS
Dated ______________, 1996
Anchor Investment Management Corporation
Investment Adviser
2717 Furlong Road
Doylestown, Pennsylvania 18901
Precious Metals and Equity Trust (the "Trust") is a non-diversified
open-end management investment company established as an unincorpoated business
trust under the laws of Massachusetts by a Declaration of Trust dated May 20,
1996. Its investments and affairs are managed, subject to the supervision of its
Trustees, by Anchor Investment Management Corporation, a Massachusetts
corporation (the "Investment Adviser"). The address of the Trust is 2717 Furlong
Road, Doylestown, Pennsylvania 18901, and its telephone number is (215)
794-2980.
The primary investment objective of the Trust is long-term capital
appreciation and preservation of the purchasing power of shareholders' capital.
As a secondary investment objective, the Trust will seek to generate current
income consistent with the preservation of shareholders' purchasing power. The
investment strategy which the Trust will employ in seeking to achieve its
investment objectives is two-fold. When, based on an analysis of numerous
economic and monetary factors, the Investment Adviser expects an inflationary
cycle, the Trust will invest, directly and through one or more wholly-owned
subsidiaries, at least 65% of the value of its total assets in gold bullion,
gold certificates, and silver bullion; in any other precious metals and in any
precious metals-backed or indexed securities, which may be issued by either U.S.
or foreign private or governmental issuers, including, without limitation, the
government of South Africa and South African companies; in the equity or
convertible securities of U.S. or foreign companies primarily engaged in
businesses related to precious metals; in options on securities, securities
indices and currencies; in precious metals and financial futures contracts and
related options; and in repurchase agreements. A company which is "primarily
engaged" in an activity is one in which at least 50% of its assets are devoted
to, or 50% of its revenue is derived from, such activity. The terms "precious
metals-backed securities," "indexed securities," "equity securities" and
"convertible securities" are defined herein under "Investment Strategy."
As an integral part of its investment strategy, the Trust may invest up to
50% of its assets in the equity securities of companies (both foreign and
domestic) primarily engaged in gold exploration, mining or processing. During
such periods of actual or anticipated inflation the Trust may also hold up to
35% of its total assets in bank deposits, bank currency forward contracts and
certificates of deposit.
When, based on an analysis of numerous economic and monetary factors, the
Investment Adviser expects a deflationary cycle, the Trust will invest up to 90%
of its total assets in U.S. or foreign government and government agency
fixed-income securities of sufficient maturities to realize its objective of
long-term capital appreciation. During such periods, the Trust will hold the
balance of its assets in short-term U.S. or foreign denominated securities.
Investment in precious metals and related securities in anticipation of
inflationary periods is intended not only to preserve capital in the projected
ensuing inflationary period, but also to provide opportunity for capital
appreciation of the precious metals and related investments during such
inflationary period.
Investment in U.S. and other government securities in anticipation of
deflationary periods is intended to preserve capital, while providing a
relatively secure income, and to provide an opportunity for capital appreciation
if interest rates decline in such deflationary period.
To the extent permitted by relevant provisions of the Commodity Exchange
Act, the Trust may also engage in option transactions and futures transactions
(as described more fully herein).
No assurance can be given that the Trust's investment objectives will be
achieved.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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This Prospectus sets forth certain information about the Trust which
investors should know before investing, and it should be retained for future
reference. Additional facts about the Trust are contained in a Statement of
Additional Information dated , 1996, which has been filed with the Securities
and Exchange Commission. The Statement and the Trust's Annual Report for 199_
are available without charge by calling or by writing the Trust at the above
telephone number or address. The Statement of Additional Information is
incorporated by reference in this Prospectus.
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<PAGE>
TABLE OF TRUST FEES AND EXPENSES
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Load Imposed on Purchase ......... None
Maximum Sales Load Imposed on Reinvested Dividends None
Redemption Fees................................. None
Exchange Fees................................... None
Deferred Sales Load (as a percentage of original
purchase price) (Note 1)
Year of Purchase........................ 4.00%
Second Year............................. 3.00%
Third Year.............................. 2.00%
Fourth Year............................. 1.00%
ANNUAL TRUST OPERATING EXPENSES:
(as a percentage of average net assets) (Notes 2 and 3)
Management Fees................................. .75%
12b-1 Fees...................................... None
Other Expenses.................................. ____%
Total Trust Operating Expenses.................. ____%
EXAMPLE:
1 Year 3 Years
You would pay the following expenses on a $ $
$1,000 investment assuming (1) 5% annual
return and (2) redemption at the end of
each time period:
You would pay the following expenses on $ $
the same investment,assuming no redemption:
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESSER THAN THOSE SHOWN.The purpose
of this table is to assist the investor in understanding the various costs and
expenses that an investor in the Trust will bear, directly or indirectly. This
information should be read in conjunction with the Trust's Annual Report, which
contains a more complete description of the various costs and expenses and is
incorporated by reference in this Prospectus.
Note 1. A contingent deferred sales charge may be imposed upon certain
redemptions of shares purchased after inception of the Trust's Distribution
Plan. See "Contingent Deferred Sales Charge" herein. The Trustees do not
currently impose the charge.
Note 2. "Other Expenses" are estimated based onthe current operating expenses of
other similar funds under management by the Investment Adviser. Also, it should
be noted that the amount of the Trust's operating expenses as a percentage of
the Trust's average net assets is typically higher during the first year of the
Trust's operations.
Note 3. The Trustees have set an aggregate limit on the amount of 12b-1 payments
equal to .75 of 1% of the Trust's average daily assets for any fiscal year. The
Trustees do not currently impose the charge, since the Plan is not in effect.
<PAGE>
TABLE OF CONTENTS
TABLE OF TRUST FEES AND EXPENSES.............................................2
ANNUAL TRUST OPERATING EXPENSES..............................................2
ABOUT THE TRUST..............................................................4
INVESTMENT OBJECTIVES AND POLICIES...........................................5
Investment Strategy.......................................................5
Specialized Investment Techniques and Related Risks.......................7
Option Transactions Involving Portfolio Securities and Securities
Indices...................................................................7
Options on Foreign Currencies.............................................7
Financial and Precious Metals Futures and Related Options.................8
Limitations on Futures Contracts and Related Options......................8
Lending of Portfolio Securities...........................................9
Repurchase Agreements.....................................................9
Portfolio Turnover.......................................................10
Investment Restrictions..................................................10
INVESTOR CONSIDERATIONS.....................................................11
MANAGEMENT..................................................................11
Trustees.................................................................12
Investment Adviser.......................................................12
Expenses.................................................................12
Brokerage................................................................13
HOW TO PURCHASE SHARES......................................................13
DISTRIBUTION OF SHARES......................................................13
Contingent Deferred Sales Charge.........................................14
HOW TO EXCHANGE SECURITIES FOR TRUST SHARES.................................14
REDEMPTION AND REPURCHASE OF SHARES.........................................16
DETERMINATION OF NET ASSET VALUE............................................17
SERVICES FOR SHAREHOLDERS...................................................17
Open Accounts............................................................17
Invest-By-Mail...........................................................18
DIVIDENDS AND DISTRIBUTIONS.................................................18
TAXES.......................................................................18
MISCELLANEOUS INFORMATION...................................................19
Custodian, Transfer Agent and Dividend-Paying Agent......................19
Shareholder Inquiries....................................................19
APPLICATION FORM............................................................20
<PAGE>
ABOUT THE TRUST
The Precious Metals and Equity Trust is a non-diversified open-end
management investment company established as an unincorporated business trust
under the laws of Massachusetts by a Declaration of Trust dated May 20, 1996.
The capitalization of the Trust consists of an unlimited number of shares
of beneficial interest, without par value, designated "Common Shares," which
participate equally in dividends and distributions. Issued shares are fully paid
and non-assessable and transferable on the books of the Trust. The shares have
no preemptive rights. The shares each have one vote and proportionate
liquidation rights.
The Trust normally will not hold annual meetings of shareholders to elect
Trustees. If less than a majority of the Trustees holding office have been
elected by shareholders, a meeting of shareholders will be called to elect
Trustees. The Trust will, if requested by shareholders of at leasst ten percent
of the Trust's outstanding shares, call a meeting for the purpose of voting on
the removal of a Trustee or Trustees. Under the Declaration of Trust and the
Investment Company Act of 1940, the record holders of not less than two-thirds
of the outstanding shares of the Trust may remove a Trustee by votes cast in
person or by proxy at a meeting called for the purpose or by a written
declaration filed with the Trust's custodian bank. In connection with
shareholder rights to remove Trustees, the Trust will provide shareholders with
certain assistance in communicating with other shareholders. Except as described
above, the Trustees will continue to hold office and may appoint successor
Trustees.
Under Massachusetts law, shareholders could, under certain circumstances,
be held personally liable for the obligations of the Trust. However, the
Declaration of Trust disclaims shareholder liability for acts or obligations of
the Trust and requires that notice of this disclaimer be given in each
agreement, obligation or instrument entered into or executed by the Trust or a
Trustee. The Declaration of Trust provides for indemnification from the assets
of the Trust for all losses and expenses of any shareholder held personally
liable for the obligations of the Trust. Thus, the risk of a shareholder
incurring a financial loss on account of his or her liability as a shareholder
of the Trust is limited to circumstances in which the Trust itself would be
unable to meet its obligations. The possibility that these circumstances would
occur is remote. Upon payment of any liability incurred by the Trust, the
shareholder paying the liability will be entitled to reimbursement from the
general assets of the Trust. The Trustees intend to conduct the operations of
the Trust to avoid, to the extent possible, ultimate liability of shareholders
for liabilities of the Trust.
INVESTMENT OBJECTIVES AND POLICIES
The primary investment objective of the Trust is long-term capital
appreciation and preservation of the purchasing power of shareholders' capital.
The purchasing power of its shareholders' capital meants that the Trust seeks to
protect generally shareholders' invested capital against erosion o fthe value of
the U.S. dollar through inflation. This objective is fundamental and may not be
changed without shareholder approval. As a secondary investment objective, the
Trust will seek to generate current income consistent with the preservation of
shareholders' purchasing power. The Trust will endeavor to achieve its
objectives by anticipating inflationary and deflationary economic cycles and
investing the Trust's assets as set forth under "Investment Strategy" below.
There can, of course, be no guarantee that the Trust's investment objectives
will be achieved, due to the uncertainty inherent in all investments.
Since the values of the Trust's assets will fluctuate with general
economic and market conditions, the net asset value per share at the time an
investor's shares are redeemed may be more or less than the value at the time of
purchase.
Investment Strategy
Historically, during periods of increasing inflation and during periods of
economic or monetary instability, the prices of gold and silver and other
precious metals have tended to increase as rapidly or more rapidly than the rate
of inflation. Also, currencies of countries not involved in inflationary
circumstances may increase in value relative to the U.S. dollar. During these
same periods, interest rates have tended to increase, causing the market value
of debt instruments to decline. Conversely, during periods of deflation (when
inflationary forces are being reversed), the price of high grade debt
instruments has tended to increase while the value of precious metals has tended
to decline. Foreign currencies (relative to the U.S. dollar) may also decline in
value at such times.
Accordingly, the Investment Adviser will seek to anticipate oncoming
inflationary and deflationary economic cycles and will attempt to achieve the
Trust's investment objectives by following two distinct investment approaches
depending upon whether it perceives the economy as being in an inflationary or
deflationary environment, as follows:
1. Under normal circumstances, the Trust will pursue its primary investment
objectives by investing at least 65% of the value of its total assets in gold
bullion, gold certificates, and silver bullion; in any other precious metals and
in any precious metals-backed or indexed securities, which may be issued by
either U.S. or foreign private or governmental issuers, including, without
limitation the government of South Africa and South African companies, and in
the equity or convertible securities of U.S. or foreign companies primarily
engaged in business related to precious metals; in options on securities,
securities indices and currencies; in precious metals and financial futures
contracts and related options; and in repurchase agreements. As an integral part
of this strategy, the Trust may invest up to 50% of its assets in the equity
securities of companies (both foreign and domestic) primarily engaged in gold
exploration, mining or processing. During such periods, the Trust may also hold
up to 35% of its total assets in bank deposits, bank currency forward contracts
and certificates of deposits. As used herein, the following terms have the
indicated definitions: "precious metals-backed securities" means securities
which are redeemable at a specified conversion rate for precious metals or which
are guaranteed by precious metals; "indexed securities" means securities
comprising one of the exchange listed stock indices on which future contracts
and options can be purchased and sold, e.g., Gold/Silver Index listed on the
Philadelphia Stock Exchange; "equity securities" means common or preferred
shares in a corporation, whether or not transferable or denominated 'stock,' or
similar security, interests of a limited partner in a limited partnership, or
warrants or rights other than rights to convert, purchase, sell, or subscribe to
a share, security, or interest of a kind previously specified; and "convertible
securities" means debentures or preferred stock that may be exchanged by the
owner for common or preferred stock, usually of the same company, or precious
metals bullion, in accordance with the terms of the issue.
2. When, based on an analysis of numerous economic and monetary factors,
including a declining rate of change in the Consumer Price Index, the Investment
Adviser expects a deflationary cycle, the Trust will invest up to 90% of its
total assets in U.S. or foreign government and government agency fixed-income
securities of sufficient maturities to realize its objective of long-term
capital appreciation. During such periods, the Trust will hold the balance of
its assets in short-term U.S. or foreign denominated securities.
3. If, in the opinion of the Investment Adviser, there are periods when there is
a very small rate of change in the Consumer Price Index, and other leading
economic indicators such as interest rates and the value of the U.S. dollar,
offer no clear evidence of inflationary or deflationary trends, then, for
temporary defensive purposes, the Trust may invest up to 100% of its assets in
cash or cash equivalents (in U.S. dollars and foreign currencies).
Investment in precious metals and related securities in anticipation of
inflationary periods is intended not only to preserve capital in the projected
ensuing inflationary period, but also to provide opportunity for capital
appreciation of the precious metals and related investments during such
inflationary period. The broad range of precious metals and currency related
investment vehicles that may be utilized by the Trust during such inflationary
periods is intended to allow the Trust the widest possible latitude in
attempting to determine the most attractive investment posture for the current
period. There can be no assurance that the Trust will attain its investment
objectives.
Investment in U.S. and other government securities in anticipation of
deflationary periods is intended to preserve capital, while providing a
relatively secure income, and to provide an opportunity for capital appreciation
if interest rates decline in such deflationary periods. The Investment Adviser
believes that by not remaining fully invested in gold and silver and other
precious metals or securities tied to their value during periods of deflation,
the Trust can avoid declines in the price of precious metals that typically
occur during such periods and, at the same time, obtain the benefit of the
increase in value of debt instruments that typically occurs when interest rates
decline during such periods, thereby enhancing the Trust's potential to achieve
its investment objective of capital appreciation.
The policies set forth above are fundamental policies and may not be
changed without shareholder approval.
To the extent permitted by relevant provisions of the Commodity Exchange
Act, the Trust may also engage in option transactions and futures transactions
(as described more fully herein and in the Trust's Statement of Additional
Information).
It should be emphasized that the Investment Adviser will not apply a
rigid, mechanical determination in assessing whether the economy is in an
inflationary or disinflationary environment. Rather, its determination will be
the result of its subjective judgment of all factors it considers to be
relevant.
Specialized Investment Techniques And Related Risks
The Trust may use one or more of the following six (6) investment
techniques, each of which may involve certain risks which are summarized below
and discussed in the Statement of Additional Information. While in general such
transactions are not limited, reference is made to "Limitations on Futures
Contracts and Related Options," "Lending of Portfolio Securities" and
"Repurchase Agreements" herein for limitations applicable to those activities.
There can be no assurance that the Trust will attain its investment objectives.
1. Option Transactions Involving Portfolio Securities And Securities
Indices
The Trust may write call option contracts or purchase put or call options
with respect to portfolio securities and with respect to securities indices at
such times as the Investment Adviser determines to be appropriate. Call options
are written and put options are purchased solely as covered options--and such
options (which will generally correspond to the securities represented by the
index in the case of index options) on domestic securities are generally listed
on a national securities exchange. The Trust will write or purchase such options
only where economically appropriate as a hedging technique to reduce the risks
in management of its portfolio, and to preserve the Trust's net asset value, and
not for speculative purposes (i.e., not for profit). In no event will the Trust
purchase such options where the value of the options, either singly or in the
aggregate, would exceed 50% of the value of the Trust's assets at the time of
purchase. Exchanges on which such options currently are traded are the Chicago
Board of Options Exchange and the American, Pacific and Philadelphia Stock
Exchanges (the "Exchanges"). Options on foreign securities and on some domestic
securities may not be listed on any domestic or foreign exchange. The Trust
receives a premium on the sale of an option, but gives up the opportunity to
profit from any increase in the price of the security or representative
securities in the case of an index option above the exercise price of the
option. There can be no assurance that the Trust will always be able to close
out options positions at acceptable prices. The Trust pays a premium upon the
purchase of an option, which may be lost if the option proves to be of no
ultimate value.
2. Options On Foreign Currencies
The Trust may purchase put and call options on foreign currencies. The
Trust may purchase such options where economically appropriate as a hedging
technique to reduce the risks in management of its portfolio, and to preserve
the Trust's net asset value, and not for speculative purposes (i.e., not for
profit). In no event will the Trust purchase such options where the value of the
options, either singly or in the aggregate, would exceed 50% of the value of the
Trust's assets at the time of purchase.
The Trust's success in using such options depends, among other things, on
the Investment Adviser's ability to predict the direction and volatility of
price movements in the options markets as well as the securities markets and on
the Investment Adviser's ability to select the proper type, time and duration of
options. although the Investment Adviser has prior experience in utilizing
currency options, there can be no assurance that this technique will produce its
intended results. It should be recognized that the price movements of options in
relation to currencies purchased by the Trust may not correspond to the price
movements of the Trust's portfolio securities and may therefore cause the
options transactions to result in losses to the Trust.
3. Financial And Precious Metals Futures And Related Options
Financial futures contracts consist of interest rate futures contracts,
securities index futures contracts and currency futures contracts. Precious
metals futures contracts consist of futures contracts for the purchase or sale
of gold, silver and other precious metals. A futures contract obligates the
seller of the contract to deliver, and the purchaser to take delivery of, the
subject assets called for in the contract at a specified future time and at a
specified price. An option on the futures contract gives the purchaser the right
to assume a position in the contract (a long position if the option is a call
and a short position if the option is a put) at a specified exercise price at
any time during the period of the option.
The Trust may purchase or sell any financial or precious metals futures
contracts which are traded on an exchange or board of trade or other market. A
U.S. public market presently exists in interest rate futures contracts on
long-term U.S. Treasury bonds, U.S. Treasury notes and three-month U.S. Treasury
bills. Securities index futures contracts are currently traded with respect to
the Standard & Poor's 500 Composite Stock Price Index and such other broad based
stock market indices as the New York Stock Exchange Composite Stock Index and
the Value Line composite Stock Price Index. A clearing corporation associated
with the exchange or board of trade on which a financial futures contract trades
assumes responsibility for the completion of transactions and also guarantees
that open futures contracts will be performed. Currency and precious metals
futures contracts are also traded on various U.S. exchanges or boards of trade.
Options relating to U.S. Futures contracts are generally also traded on the same
exchanges or boards of trade.
The Trust may, following written notice thereof to its shareholders, take
advantage of opportunities in the area of precious metals related index options
and futures contracts and options on futures contracts which are not currently
available but which may be developed, to the extent such opportunities are
consistent with the Trust's investment objectives and legally permissible for
the Trust.
4. Limitations On Futures Contracts And Related Options
The Trust may not currently engage in transactions in futures contracts or
related options for speculative purposes, but only as a hedge against
anticipated changes in exchange rates or the market value of its portfolio
securities or other assets or securities or other assets which it intends to
purchase. Also, the Trust may not currently purchase or sell precious metals or
financial futures contracts or related options if, immediately thereafter, the
sum of the amount of initial margin deposits on the Trust's existing futures and
related options positions and the premiums paid for related options would exceed
5% of the market value of the Trust's total assets after taking into account
unrealized profits and losses on any such contracts. At the time of purchase of
a futures contract or an option on a futures contract, an amount of cash, U.S.
Government securities or other appropriate high-grade debt obligations equal to
the market value of the futures contract minus the Trust's initial margin
deposit with respect thereto will be deposited in a segregated account with the
Trust's custodian bank to collateralize fully the Trust's position and thereby
ensure that it is not leveraged.
To the extent to which the Trust may enter into futures contracts and
related options also may be limited by the requirements of the Internal Revenue
Code of 1986, as amended, for qualification as a regulated investment company.
See "Taxes" herein.
5. Lending Of Portfolio Securities
The Trust may seek to increase its income by lending portfolio securities.
Any such loan will be continuously secured by collateral at least equal to the
market value of the security loaned. The Trust would have the right to call a
loan and obtain the securities loaned at any time upon five days' notice. During
the existence of a loan, the Trust would continue to receive the equivalent of
the interest or dividends paid by the issuer on the securities loaned and would
also receive a fee, or the interest on investment of the collateral, if any. The
total value of the securities loaned at any time will not be permitted to exceed
30% of the Trust's total assets. As with other extensions of credit, there are
risks of delay in recovery or even loss of rights in the collateral should the
borrower of the securities fail financially. However, the loans would be made
only to U.S. domestic organizations deemed by the Trust's management to be of
good standing and when, in the judgment of the Trust's management, the
consideration to be earned justified the attendant risk.
6. Repurchase Agreements
A repurchase agreement is an agreement under which the Trust acquires a
money market instrument (a security issued by the U.S. government or any agency
thereof, a bankers' acceptance or a certificate of deposit) from a commercial
bank, subject to resale to the seller at an agreed upon price and date (normally
the next business day). Such an agreement is, in effect, a loan by the Trust.
The resale price reflects an agreed upon interest rate effective for the period
the instrument is held by the Trust and is unrelated to the interest rate on the
underlying instrument. The Trust will effect repurchasing agreements only with
large well-capitalized banks whose deposits are insured by the Federal Deposit
Insurance Corporation and which have the capital and undivided surplus of at
least $200,000,000. The instrument acquired by the Trust in these transactions
(including accrued interest) must have a total value in excess of the value of
the repurchase agreement and will be held by the Trust's custodian bank until
repurchased. The Trustees of the Trust will monitor the Trust's repurchase
agreement transactions on a continuous basis and will require that the
applicable collateral will be retained by the Trust's custodian bank. No more
than an aggregate of 10% of the Trust's total assets, at the time of investment,
will be invested in illiquid securities, including, without limitation,
repurchase agreements having maturities longer than seven days and other
investments subject to legal or contractual restrictions on resale, or which are
not readily marketable. There is no limitation on the Trust's assets with
respect to investments in repurchase agreements having maturities of less than
seven days.
The use of repurchase agreements involves certain risks. For example, if
the seller under a repurchase agreement defaults on its obligation to repurchase
the underlying instrument at a time when the value of the instrument has
declined, the Trust may incur a loss upon its disposition. If the seller becomes
insolvent and subject to liquidation or reorganization under bankruptcy or other
laws, a bankruptcy court may determine that the underlying instrument is
collateral for a loan by the Trust and therefore is subject to sale by the
trustee in bankruptcy. Finally, it is possible that the Trust may not be able to
substantiate its interest in the underlying instrument. While the Trust's
Trustees acknowledge these risks, it is expected that they can be controlled
through careful monitoring procedures.
Portfolio Turnover
Securities will generally be purchased for possible long-term appreciation
and not for short-term trading profits; however, the rate of portfolio turnover
is not a limiting factor when the Investment Adviser deems changes appropriate.
It is anticipated that the Trust's annual portfolio turnover rate will normally
not exceed 50%. A rate of turnover of 100% could occur, for example, if the
value of the lesser of purchases and sales of portfolio securities for a
particular year equaled the average monthly value of portfolio securities owned
during the year (excluding short-term securities).
A high rate of portfolio turnover involves a correspondingly greater
amount of brokerage commissions and other costs which must be borne directly by
the Trust and thus indirectly by its shareholders. It may also result in the
realization of larger amounts of short-term capital gains which are taxable to
shareholders as ordinary income.
Investment Restrictions
The practices described above with respect to options and futures
transactions and the lending of portfolio securities are fundamental policies
which may not be changed without approval of the shareholders. these policies
also provide, among other things, that the Trust may not purchase any securities
if as a result such purchase would cause more than 10% of the total outstanding
voting securities of the issuer to be held by the Trust. Also, these policies
provide that no more than an aggregate of 10% of the Trust's total assets, at
the time of investment, will be invested in repurchase agreements having
maturities longer than seven days and other investment subject to legal or
contractual restrictions on resale, or which are not readily marketable.
Further information on the Trust's investment restrictions may be found in
the Trust's Statement of Additional Information.
OTHER RISK FACTORS AND INVESTOR CONSIDERATIONS
The Trust's investments in foreign securities involve special risks for
the following reasons: (1) there may be less public information available about
foreign companies than is available about United States companies; (2) foreign
companies are not generally subject to the uniform accounting, auditing and
financial reporting standards and practices applicable to United States
companies; (3) foreign stock markets have less volume than the United States
markets, and the securities of some foreign companies are less liquid and more
volatile than the securities of comparable United States companies; (4) there
may be less governmental regulation of stock exchanges, brokers, listed
companies and banks in foreign countries than in the United States; (5) the
Trust may incur fees on currency exchanges when it changes investments from one
country to another; (6) the Trust's foreign investments could be affected by
expropriation, confiscatory taxation, nationalization of bank deposits,
establishment of exchanges controls, political or social instability, diplomatic
developments or currency blockage; (7) fluctuations in foreign exchange rates
will affect the value of the Trust's portfolio securities, the value of
dividends and interest earned, gains and losses realized on the sale of
securities, net investment income and unrealized appreciation or depreciation of
investments; (8) payments may be withheld at the source; and (9) it may be more
difficult to obtain legal judgments abroad.
Furthermore, the profits of the companies in which the Trust invests, and
thus the value of the Trust's securities, are directly affected by the price of
gold. The price of gold, in turn, is subject to dramatic upward and downward
movements, often over short periods of time, and is affected by, among other
things, industrial and commercial demand, investment and speculation, the
monetary and fiscal policies of central banks, governments and their agencies,
including gold auctions conducted by the U.S. Treasury Department and the
International Monetary Fund, and changes in international balances of payments
and governmental responses to them, including currency devaluation's and
exchange controls.
The Trust's purchase of securities of other investment companies results
in the layering of expenses such that investors indirectly bear a proportionate
share of the expenses of such investment companies including operating costs and
advisory and administrative fees.
There is no limitation on the Trust's investment in foreign securities.
Under the investment strategies outlined above, it is possible that during
certain periods, up to 100% of the Trust's assets may be invested in foreign
securities.
There can, of course, be no assurance that the Trust will achieve its
investment objectives since there is uncertainty in every investment.
MANAGEMENT
Trustees
Under the terms of the Declaration of Trust establishing the Trust, which
is governed by the laws of the Commonwealth of Massachusetts, the Trustees of
the Trust are ultimately responsible for the management of its business and
affairs. The Statement of Additional Information contains background information
regarding each Trustee and executive officer of the Trust.
Investment Adviser
The Investment Adviser, Anchor Investment Management Corporation, manages
the Trust's investments and affairs, subject to the supervision of the Trust's
Trustees. The principal offices of both the Trust and the Investment Adviser are
located at 2717 Furlong Road, Doylestown, Pennsylvania 18901.
For its services under its Investment Advisory Contract with the Trust
(the "Investment Advisory Contract"), the Investment Adviser receives a fee,
payable monthly, calculated at the rate of .75% per annum of the average daily
net assets of the Trust. This fee is higher than that charged to most other
investment companies.
The Investment Adviser and Meeschaert & Co., Inc., the Trust's underwriter
(the "distributor"), are affiliated through common control with Societe D'Etudes
et de Gestion Financieres Meeschaert, S.A., one of France's largest privately
owned investment management firms, which together are referred to as the
"Meeschaert Organization." The Meeschaert Organization was established in
Roubaix, France in 1935 by Emile C. Meeschaert, and presently manages, with full
discretion, an aggregate amount of approximately $1.5 billion for approximately
8,000 individual (and institutional) customers, including $250 million in French
mutual funds. The person who is primarily responsible for the day-to-day
management of the Trust's portfolio is Paul Jaspard, who is a Vice President of
the Investment Adviser. Mr. Jaspard is President of Global Equity Managers,
S.A., an investment advisory firm headquartered in Luxembourg. He has managed
other portfolios for the Meeschaert Organization for more than eighteen years.
Expenses
The Trust is responsible for all its expenses that are not assumed by the
Investment Adviser under the Investment Advisory Contract, including without
limitation, the fees and expenses of the custodian and transfer agent; costs
incurred in determining the Trust's net asset value and keeping its books; the
cost of share certificates; membership dues in investment company organizations;
distribution and brokerage commissions and fees; fees and expenses of
registering its shares; expenses of reports to shareholders, proxy statements
and other expenses of shareholders' meetings; insurance premiums; printing and
mailing expenses; interest, taxes and corporate fees; legal and accounting
expenses; and fees and expenses of Trustees not affiliated with the Investment
Adviser. The Trust will also bear expenses incurred in connection with
litigation in which the Trust is a party and the legal obligation the Trust may
have to indemnify its officers and Trustees with respect thereto.
Brokerage
Decisions to buy and sell portfolio securities for the Trust are made
pursuant to recommendations by the Investment Adviser. The Trust, through the
Investment Adviser, seeks to execute its portfolio security transactions on the
most favorable terms and in the most effective manner possible. To the extent
consistent with the policy of seeking best price and execution, a portion of the
Trust's portfolio transactions may be executed through the Distributor, which is
an affiliate of the Investment Adviser. In the event that this occurs, it will
be on the basis of what management believes to be current information as to
rates which are generally competitive with the rates available from other
responsible brokers and the lowest rates, if any, currently offered by the
Distributor. In selecting among broker-dealer firms to execute its portfolio
transactions, the Trust, through the Investment Adviser, may give consideration
to those firms which have sold or are selling shares of the Trust, and who
furnish other services to the Trust or the Investment Adviser.
HOW TO PURCHASE SHARES
Shares of the Trust may be purchased from the Distributor, 2717 Furlong
Road, Doylestown, Pennsylvania 18901. There is no sales charge or commission
payable by the investor with respect to purchases of shares. For new
shareholders initiating accounts, the minimum investment is $500, except for
exchanges of securities for Trust shares, where the minimum is $5,000 (see "How
to Exchange Securities for Trust Shares" below). There is no minimum for
shareholders purchasing additional shares for deposit to existing accounts.
An application for use in making an initial investment in the Trust is
included in the back of this Prospectus. The applicable price will be the
net asset value next determined after the order is received by the
Distributor. (See "Determination of Net Asset Value.")
DISTRIBUTION OF SHARES
In addition to advisory fees and other expenses, the Trust may pay for
certain expenses pursuant to a distribution plan (the "Plan") designed to meet
the requirements of Rule 12b-1 ("Rule 12b-1") under the Investment Company Act
of 1940. The Plan, which has been approved by the Board of Trustees of the Trust
but will not be implemented unless and until approved by a majority (as defined
in the Act) is of the type sometimes called a compensation plan. The Plan
provides that the Trust will pay the Distributor a commission equal to up to 5%
of the price paid to the Trust for each sale, all or any part of which may be
re-allowed by the Distributor to others (dealers) making such sales. To the
extent that the distribution fee is not paid to such dealers, the Distributor
may use such fee for its expenses of distribution of Trust shares. If such fee
exceeds its expenses, the Distributor may realize a profit from these
arrangements. An aggregate limit is currently in effect on the amount of all
payments pursuant to the Plan equal to .75 of 1% of the Trust's average daily
net assets for any fiscal year. If, so long as the Plan is in effect, the
Distributor's reallowances to dealers and other expenses exceed the limit
(currently .75 of 1%) for any particular year, it could collect in any future
year such amounts (which do not include interest or other carrying charges) up
to any amount by which amounts paid to it under the Plan in that year are less
than the earlier year's limit. In such a case it might receive amounts in excess
of its then current expenses. The Distributor's expenses are likely to be higher
in the early years of the Trust and accordingly, the annual fees received by the
Distributor in the early years are not likely to reimburse the Distributor for
the total distribution expenses that it will incur in those years. The following
numerical example demonstrates this principle: If, in each of the first three
years of sales of the Trust's shares, sales by the Distributor equaled
$1,000,000, and the Distributor's total expenses for such years were $60,000,
$55,000 and $45,000, respectively, the Distributor's expenses would exceed the
Distributor's expected commissions of $50,000 for the first two years. (Note:
this example does not take into account the .75 of 1% aggregate limit discussed
above.)
In 1992, the Securities and Exchange Commission approved amendments to the
National Association of Securities' Dealers ("NASD's") Rules of Fair Practice
that impose limits on mutual fund sales charges, including asset-based sales
charges and contingent deferred sales charges. These amendments became effective
on July 1, 1993, and could significantly affect the trust's implementation of
the Plan, which currently is not in effect.
Meeschaert & Co., Inc. serves as the Trust's principal underwriter
under a Distributor's Contract dated ____________, 1996.
Contingent Deferred Sales Charge
In conjunction with, but not as part of, the Plan, a contingent deferred
sales charge may be imposed upon certain redemptions of shares purchased after
inception of the Plan. The charge in respect of such redemptions made during the
first four calendar years following purchase of the shares is as follows: 4% in
the year of purchase; 3% in the second year; 2% in the third year; and 1% in the
fourth year. These charges are not received by the Distributor and will not
reduce amounts paid to the Distributor under the Plan.
HOW TO EXCHANGE SECURITIES FOR TRUST SHARES
When shares of the Trust are being offered, the Trust may accept U.S.
Government securities and U.S. Government agency fixed-income securities
acceptable to the Investment Adviser in exchange for shares of the Trust at net
asset value. The minimum value of securities accepted for deposit in any single
transaction is $5,000. The Trust will value accepted securities in the manner
provided for valuing its portfolio securities (see "Determination of Net Asset
Value").
Securities determined to be acceptable for the Trust, in proper form for
transfer to the Trust, together with a completed and signed letter of
transmittal in approved form (available from the Distributor) ("Letter of
Transmittal"), should be forwarded to the Trust as follows:
Investors Bank & Trust Company
Financial Product Services Group
Attn: Anchor Precious Metals and Equity Trust
1 Lincoln Plaza
Boston, Massachusetts 02205
An investor must forward all securities pursuant to a single Letter of
Transmittal or, in certain instances as indicated in the Instructions to the
Letter of Transmittal, multiple Letters of Transmittal attached and transmitted
as a single exchange. The Trust will only accept securities which are delivered
in proper form.
An investor will be required to represent, among other things, that the
securities forwarded are not subject to any restrictions upon their sale by the
Trust by reason of any agreement or representation that the investor has made in
respect thereof, or of his being in control of, controlled by, or under common
control with, the issuer thereof within the meaning of Section 2(11) of the
Securities Act of 1933, or for any other reason. The Trust will not accept
securities for exchange if, in the opinion of its counsel, acceptance would
violate any federal or other law to which the Trust is subject.
Investors who are contemplating an exchange of securities for shares of
the Trust, or their representatives, are advised to contact the Distributor to
determine whether the securities are acceptable to the Trust before forwarding
such securities. The Trust reserves the right to reject any securities when it
determines in its sole discretion that it is in the best interests of the Trust
to do so.
If securities presented for exchange are found to be in good order only in
part, the Trust may issue the appropriate number of shares in accordance with
the procedure described below for such part and return the balance to the
investor or, at its option, may waive any or all irregularities to the extent
permissible under applicable law and issue shares for all or a portion of such
defective presentation. A confirmation for shares of the Trust will be issued to
an investor after accepted securities presented by him have cleared for transfer
to the Trust. No certificates will be issued unless requested by the investor.
By tendering securities, an investor agrees to accept the determination of
market value by the Trustees concurrently with the determination of the Trust's
net asset value per share. The number of shares of the Trust to be issued to an
investor in exchange for securities shall be the value of such accepted
securities determined in the manner described above, divided by the net asset
value per Trust share next determined after the Trust's acceptance of such
securities.
A gain or loss for federal tax purposes may be realized by an investor in
connection with the exchange of securities for shares of the Trust, depending
upon his tax cost basis for the securities tendered for exchange. Each investor
should consult his tax advisor with respect to the particular federal income tax
consequences, as well as any state and local tax consequences, of exchanging his
securities for Trust shares.
REDEMPTION AND REPURCHASE OF SHARES
Any shareholder may require the Trust to redeem his shares. In addition,
the Trust maintains a continuous offer to repurchase its shares. If a
shareholder used the services of a broker in selling his shares in the
over-the-counter market, the broker may charge a reasonable fee for his
services. Redemptions and repurchases will be made in the following manner.
1. Certificates for shares of the Trust may be mailed or presented, duly
endorsed, with signatures guaranteed in the manner described below, with a
written request that the Trust redeem the shares, to the Trust's transfer agent,
Anchor Investment Management Corporation, at 2717 Furlong Road, Doylestown,
Pennsylvania 18901. If no certificate has been issued and shares are held in an
Open Account, a written request that the Trust redeem such shares, with
signatures guaranteed in the manner described below, may be mailed or presented
as described above. The redemption price will be the net asset value next
determined after the request and/or certificates are received.
2. A request for repurchase may be communicated to the Trust by a
shareholder through a broker. The repurchase price will be the net asset value
next determined after the request is received by the Trust, provided that, if
the broker receives the request before noon and transmits it to the Trust before
1:00 p.m. Eastern Time the same day, the repurchase price will be the net asset
value determined as of 12:00 noon Eastern Time that day. If the broker receives
the request after noon, the repurchase price will be the next asset value
determined as of 12:00 noon Eastern Time the following day. If an investor uses
the services of a broker in having his shares repurchased, the broker may charge
a reasonable fee for his services.
Payment for shares redeemed or repurchased will be delivered within seven
days after receipt of the shares, and/or required documents, duly endorsed. The
signature(s) on an issued certificate must be guaranteed by a commercial bank or
trust company or by a member of the New York, American, Pacific Coast, Boston or
Chicago Stock Exchange. A signature guarantee by a savings bank or savings and
loan association or notarization by a notary public is not acceptable.
In order to ensure proper authorization the transfer agent may request
additional documents such as, but not restricted to, stock powers, trust
instruments, certificates of corporate authority and waiver of tax required in
some states from selling estates before repurchasing shares.
The right of redemption may be suspended or the payment date postponed
when the New York Stock Exchange is closed for other than customary weekend or
holiday closings, or when trading on the New York Stock Exchange is restricted,
as determined by the Securities and Exchange Commission; for any period when an
emergency as defined by the rules of the Commission exists; or during any period
when the Commission has, by order, permitted such suspension. In case of a
suspension of the right of redemption, a shareholder who has tendered a
certificate for redemption or made a request for repurchase through a broker may
withdraw his request or certificate or, absent such withdrawal, he will receive
payment of the net asset value determined nest after the suspension has been
terminated.
A Shareholder may receive more or less than he paid for his shares,
depending on the net asset value of the shares at the time of redemption or
repurchase.
DETERMINATION OF NET ASSET VALUE
The net asset value is determined by the Trust as of 12:00 noon Eastern
Time on each business day on which the New York Stock Exchange is open for
trading or on any day that the Trust is open for business, but the New York
Stock Exchange is not open for business, if there occurs an event which might
materially affect the net asset value of the Trust's redeemable shares.
The manner of determination of the net asset value is briefly as follows:
Securities traded on a U.S. national or other foreign securities exchange are
valued at the last sale price on the primary exchange on which they are listed,
or if there has been no sale that day, at the current bid price. Other U.S. and
foreign securities and foreign currencies for which market quotations are
readily available are valued at the known current bid price believed most nearly
to represent current market value. Other securities (including limited traded
securities) and all other assets of the Trust are valued at fair value as
determined in good faith by the Trustees of the Trust. Liabilities are deducted
from the total, and the resulting amount is divided by the number of shares
outstanding.
Each day investment securities traded on a national securities exchange
are valued at the noon sales price; securities traded in the over-the-counter
market are valued at the last sale price as of 12:00 noon. Gold bullion is
valued each day at noon based on the New York spot gold price. Gold coins,
foreign currencies, and foreign denominated securities for which market
quotations are readily available are valued at the known bid prices as of 12:00
noon. Temporary cash investments are stated at cost. In the absence of a
reliable market for a particular metal, security or currency, an investment
therein will be valued at fair value as determined in good faith by the
Trustees.
SERVICES FOR SHAREHOLDERS
Open Accounts
As a convenience to the shareholder, all shares of the Trust registered in
his name are automatically credited to an Open Account maintained for him on the
books of the Trust. All shares acquired by the shareholder will be credited to
his Open Account and share certificates will not be issued unless requested.
Certificates representing fractional shares will not be issued in any case.
Certificates previously acquired may be surrendered to the Trust's transfer
agent, such certificates will be canceled and the share represented thereby will
continue to be credited to the Open Account of the shareholder.
Each time shares are credited to his Open Account, the shareholder will
receive a statement showing the details of the transaction and the then current
balance of shares owned by him. Shortly after the end of each calendar year he
will also receive a complete annual statement of his Open Account as well as
information as to the federal tax status of dividends and capital gain
distributions, if any, paid by the Trust during the year.
Shares credited to an Open Account are transferable upon written
instructions to the Trust's transfer agent.
Invest-By-Mail
An Open Account provides a single and convenient way of setting up a
flexible investment program for the accumulation of shares of the Trust. At any
time when the Trust is offering its shares the shareholder may send a check
(payable to the order of the Trust) to Investors Bank & Trust
Company--Shareholders Services, Attn: Anchor Precious Metals and Equity Trust,
24 Federal Street, Boston, Massachusetts 02110 (giving the full name or names of
his account). The check will be used to purchase additional shares for his Open
Account at the net asset value next determined after the check is received. Any
check not payable to the order of the Trust will be returned.
The cost of administering Open Accounts for the benefit of shareholders
who participate in them will be borne by the Trust as an expense of all its
shareholders.
DIVIDENDS AND DISTRIBUTIONS
The Trust currently intends to distribute any dividends and distributions
in additional shares, or, at the option of the shareholder, in cash. In
accordance with his distribution option, a shareholder may elect (1) to receive
both dividends and capital gain distributions in additional shares, or (2) to
receive dividends in cash and capital gain distributions in additional shares,
or (3) to receive both dividends and capital gain distributions in cash. A
shareholder may change his distribution option at any time by notifying the
Trust's transfer agent in writing. To be effective with respect to a particular
dividend or distribution, the new distribution option must be received by the
transfer agent at least 30 days prior to the close of the fiscal year. All
accounts with a cash dividend option will be changed to reinvest both dividends
and capital gains automatically upon determination by the Trust's transfer agent
that the address of record is not current.
Dividends and capital gain distributions received in shares will be
received by the Trust's transfer agent, as agent for the shareholder, and
credited to his Open Account in full and fractional shares computed at the
record date closing net asset value.
TAXES
The Trust intends to qualify under Subchapter M of the Internal Revenue
Code as a regulated investment company and to distribute substantially all
investment income and capital gains, if any, at least once every year so that,
to the extent of such distributions, the Trust will not be subject to federal
income taxes.
Shareholders will be subject to federal income taxes on distributions made
by the Trust whether they are received in cash or additional Trust shares.
Distributions of net investment income and short-term capital gains, if any,
will be taxable to shareholders as ordinary income. Distributions of long-term
capital gains, if any, will be taxable to shareholders as long-term capital
gains, without regard to how long a shareholder has held shares of the Trust.
Dividends paid by the Trust will generally not qualify for the dividends
received deductions for corporations. The Trust will notify shareholders each
year of the amount of dividends and distributions, including the amount of any
distribution of long-term capital gains.
The Trust's foreign investments may be subject to foreign withholding
taxes. The Trust will be entitled to claim a deduction for such foreign
withholding taxes for federal income tax purposes. However, any such taxes will
reduce the income available for distribution to shareholders.
The Trust is required to withhold 20% of the dividends paid with respect
to any shareholder who fails to furnish the Trust with a correct taxpayer
identification number, who under-reported dividend or interest income, or who
fails to certify to the Trust that he or she is not subject to such withholding.
An individual's tax identification is his or her social security number.
The foregoing is a general and abbreviated summary of the applicable
provisions of the Internal Revenue code and Treasury regulations currently in
effect. For the complete provisions, reference should be made to the pertinent
Code sections and regulations. The Code and regulations are subject to change by
legislative or administrative actions.
MISCELLANEOUS INFORMATION
Custodian, Transfer Agent and Dividend-Paying Agent
All securities, cash and other assets of the Trust are received, held in
custody and delivered or distributed by Investors Bank & Trust Company,
Custodian, 24 Federal Street, Boston, Massachusetts 02110, provided that in
cases where foreign securities must, as a practical matter, be held abroad, the
Trust's custodian bank and the Trust will make appropriate arrangements so that
such securities may legally be so held abroad. The Trust's custodian bank does
not decide on purchases or sales of portfolio securities or the making of
distributions. Anchor Investment Management Corporation, 2717 Furlong Road,
Doylestown, Pennsylvania 18901, serves as transfer agent and dividend-paying
agent for the Trust.
Shareholder Inquiries
For further information about the Trust, investors should call (215)
794-2980. Written inquiries should be addressed to Anchor Precious Metals and
Equity Trust, 2717 Furlong Road, Doylestown, Pennsylvania 18901.
<PAGE>
PRECIOUS METALS AND EQUITY TRUST
(the "Trust")
MEESCHAERT & CO., INC.
("Distributor")
APPLICATION AND REGISTRATION FORM1
Send Application to
Meeschaert & Co., Inc., 2717 Furlong Road, Doylestown, Pennsylvania 18901
Date:
-------------------
I. ACCOUNT REGISTRATION:
[GRAPHIC OMITTED] New: Social Security or Tax
Number___________________________________________________
(if two names below, circle which one has this number.)
[GRAPHIC OMITTED] Existing: Account Number
_________________________________________________________
(from your latest statement - vital for identification.)
Name(s)
______________________________________________________________________
(Type or print exactly as they are to appear on the Trust's records.)
Street
______________________________________________________________________
City __________________________________________ State _________ Zip__________
If address outside the U.S.A., please circle I (am) (am not) a
citizen of the U.S.A.
If registration requested in more than one name, shares will be registered
as "Joint Tenants with Rights of Survivorship" unless otherwise instructed.
II. BASIS FOR OPENING NEW ACCOUNT:
[GRAPHIC OMITTED] A check for $_______________ payable to the Trust attached.
or
[GRAPHIC OMITTED] Shares _______________ recently purchased on ____________
(number) (date)
Distribution Option: (exercisable only by holders of Common Shares) Check
only one. If none checked, option A will be assigned.
[GRAPHIC OMITTED] A. Dividends and capital gains in additional full and
fractional shares credited to shareholder's account, no certificates issued.
OR
[GRAPHIC OMITTED] B. Dividends in cash; capital gains in additional full and
fractional shares credited to shareholder's account; no certificates issued.
OR
[GRAPHIC OMITTED] C. Dividends in cash; capital gains in cash.
(Certificates will be issued to shareholders requesting such in writing from
the Transfer Agent.)
<PAGE>
III. INVEST-BY-MAIL SERVICE: for periodic share accumulation (whether or
not dividends are received in shares)
[GRAPHIC OMITTED] Please check if you wish to utilize the Trust's Invest-By-Mail
Service. This is a voluntary service involving no extra charge to the
shareholder, and it may be changed or discontinued at any time.
IV. SHAREHOLDER'S SIGNATURE: Should be the same as name in Account
Registration.
____________________________________ _____________________________________
Signature Signature of Co-Owner (if any)
(I have received a current prospectus of the Trust and I understand that my
account will be covered by the provisions on the reverse side of this
Application. I also understand that I may terminate any of these services at any
time.)
DEALER AUTHORIZATION:
(please print)
Representative
_______________________________ _____________________________________
Dealer's Name (Representative's Name)
_______________________________ _____________________________________
Home Office Address Telephone
Number(Representative's Number)
Branch Office:
______________________________________ ______________________________
City State Zip Address
________________ _______________________________ _______________________
Telephone Number Authorized Signature of Dealer City State Zip
<PAGE>
SUBJECT TO COMPLETION, DATED OCTOBER 3, 1996
PRECIOUS METALS AND EQUITY TRUST
2717 Furlong Road
Doylestown, Pennsylvania 18901
(412) 635-7610
STATEMENT OF ADDITIONAL INFORMATION
_____________, 1996
This Statement of Additional Information supplements the information contained
in the current Preliminary Prospectus of Precious Metals and Equity Trust (the
"Trust"), dated ____________, 1996, and should be read in conjunction with the
Trust's Preliminary Prospectus.
<PAGE>
TABLE OF CONTENTS
ABOUT THE TRUST .......................................................3
INVESTMENT STRATEGY ...................................................3
GENERAL RISK CONSIDERATIONS ...........................................5
Precious Metals ...................................................5
SPECIALIZED INVESTMENT TECHNIQUES AND RELATED RISKS ...................7
Option Transactions Involving Portfolio Securities and Securities
Indices............................................................7
Securities Options ................................................7
Index Options .....................................................8
Risk of Options and Indices .......................................8
Options on Foreign Currencies .....................................9
Risks of Foreign Currency Option Activities ......................10
Special Risks of Foreign Currency Options ........................11
Financial and Precious Metals Futures and Related Options ........12
Limitations on Futures Contracts and Related Options .............13
Risks Relating to Futures Contracts and Related Options ..........14
Lending of Portfolio Securities ..................................15
Repurchase Agreements ............................................15
PORTFOLIO TURNOVER ...................................................15
INVESTMENT RESTRICTIONS ..............................................15
MANAGEMENT ...........................................................17
Officers and Trustees ............................................17
Remuneration of Officers and Trustees ............................18
Investment Advisory Contract .....................................18
Investment Adviser ...............................................19
PRINCIPAL HOLDERS OF SECURITIES ......................................19
DETERMINATION OF NET ASSET VALUE .....................................19
DISTRIBUTION OF SHARES ...............................................20
Contingent Deferred Sales Charge.............................21
HOW TO PURCHASE SHARES ...............................................21
REDEMPTION, EXCHANGE AND REPURCHASE OF SHARES ........................22
DISTRIBUTIONS ........................................................22
TAXES ................................................................23
Tax Treatment of Options and Futures Transactions ................23
PORTFOLIO SECURITY TRANSACTIONS ......................................25
MISCELLANEOUS INFORMATION ............................................26
Custodian, Transfer Agent and Dividend-Paying Agent ..............26
Independent Public Accountants ...................................26
Registration Statement ...........................................26
FINANCIAL STATEMENTS..................................................26
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ABOUT THE TRUST
The Trust was established as an unincorporated business trust under the
laws of Massachusetts by a Declaration of Trust dated May 20, 1996.
The capitalization of the Trust consists of an unlimited number of shares
of beneficial interest, without par value, designated "Common Shares", which
participate equally in dividends and distributions. Issued shares are fully paid
and non-assessable and transferable on the books of the Trust. The shares have
no preemptive rights. The shares each have one vote and proportionate
liquidation rights.
The Trust normally will not hold meetings of shareholders to elect
Trustees. If less than a majority of the Trustees holding office have been
elected by shareholders, a meeting of shareholders will be called to elect
Trustees. The Trust will, if requested by shareholders of at least ten percent
of the Trust's outstanding shares, call a meeting for the purpose of voting on
the removal of a Trustee or Trustees. Under the Declaration of Trust and the
Investment Company Act of 1940, the record holders of not less than two-thirds
of the outstanding shares of the Trust may remove a Trustee by votes cast in
person or by proxy at a meeting called for the purpose or by a written
declaration filed with the Trust's custodian bank. In connection with
shareholder rights to remove Trustees, the Trust will provide shareholders with
certain assistance in communicating with other shareholders. Except as described
above, the Trustees will continue to hold office and may appoint successor
Trustees.
Under Massachusetts law, shareholders could, under certain circumstances,
be held personally liable for the obligations of the Trust. However, the
Declaration of Trust disclaims shareholder liability for acts or obligations of
the Trust and requires that notice of this disclaimer be given in each
agreement, obligation or instrument entered into or executed by the Trust or a
Trustee. The Declaration of Trust provides for indemnification from the assets
of the Trust for all losses and expenses of any shareholder held personally
liable for the obligations of the Trust. Thus, the risk of a shareholder
incurring a financial loss on account of his or her liability as a shareholder
of the Trust is limited to circumstances in which the Trust itself would be
unable to meet its obligations. The possibility that these circumstances would
occur is remote. Upon payment of any liability incurred by the Trust, the
shareholder paying the liability will be entitled to reimbursement from the
general assets of the Trust. The Trustees intend to conduct the operations of
the Trust to avoid, to the extent possible, ultimate liability of shareholders
for liabilities of the Trust.
INVESTMENT STRATEGY
The Trust's Preliminary Prospectus contains a description of the
investment objectives and policies of the Trust, including a discussion of
specialized techniques that the Trust may use in order to achieve its investment
objectives and certain risks related thereto. The following discussion is
intended to provide further information concerning investment strategy,
techniques, and risk considerations which the Investment Adviser believes to be
of interest to investors.
Historically, during periods of increasing inflation and during periods of
economic or monetary instability, the prices of gold and silver and other
precious metals have tended to increase as rapidly or more rapidly than the rate
of inflation. Also, currencies of countries not involved in inflationary
circumstances may increase in value relative to the U.S. dollar. During these
same periods, interest rates have tended to increase, causing the market value
of debt instruments to decline. Conversely, during periods of deflation (when
inflationary forces are being reversed) the price of high grade debt instruments
has tended to increase while the value of precious metals has tended to decline.
Foreign currencies (relative to the U.S. dollar) may also decline in value at
such times.
Accordingly, the Investment Adviser will seek to anticipate oncoming
inflationary and deflationary economic cycles.
The Investment Adviser's determination as to whether the economy is
inflationary or deflationary will be made based upon constant study of numerous
economic and monetary factors. These factors will include, but not necessarily
be limited to: actual and anticipated rates of change in the Consumer Price
Index ("CPI") over specified periods of time; actual and anticipated changes and
rates of changes in the U.S. dollar in relation to other key currencies, e.g.,
the German mark, the British pound and the Japanese yen; actual and anticipated
changes, and rates of change, in short and long term interest rates and real
interest rates, i.e., inflation adjusted interest rates; actual and anticipated
changes in the money supply; and actual and anticipated governmental fiscal and
monetary policy. It should be emphasized that the Investment Adviser will not
apply a rigid, mechanical determination in assessing whether the economy is an
inflationary or disinflationary environment. Rather, its determination will be
the result of its subjective judgment of all factors it considers relevant.
Under normal circumstances, particularly when, by reason of a rising rate
of change in the CPI, rising interest rates, and/or a decline in the value of
the U.S. dollar, an inflationary cycle is expected, the Trust will invest at
least 65% of the value of its total assets in gold bullion, gold certificates,
and silver bullion; in any other precious metals and related securities which
may be issued by either U.S. or foreign private or governmental issuers,
including without limitation the government of South Africa and South African
companies; in options on securities, securities indices and currencies; in
precious metals and financial futures contracts and related options; and in
repurchase agreements. As an integral part of this strategy the Trust may invest
up to 50% of its assets in the equity securities of companies (both foreign and
domestic) primarily engaged in gold exploration, mining or processing. A company
which is "primarily engaged" in an activity is one in which at least 50% of its
assets are devoted to or 50% of its revenue is derived from such activity.
Assets of the Trust not invested as described above will largely be invested in
debt instruments of the U.S. Government and its agencies having varied
maturities or in repurchase agreements or loans of securities as described
below. As used herein, the following terms have the indicated definitions:
"equity securities" means shares in a corporation, whether or not transferable
or denominated 'stock', or similar security, interest of a limited partner in a
limited partnership, or warrants or rights other than rights to convert, to
purchase, sell, or subscribe to a share, security, or interest of a kind
previously specified; and "convertible securities" means debentures or preferred
stock that may be exchanged by the owner for common stock or another security,
usually of the same company, in accordance with the terms of the issue.
When, by reason of a declining rate of change in the CPI, declining
interest rates, and/or an increase in the value of the U.S. dollar, a
deflationary cycles is anticipated, the Trust will invest up to 90% of its total
assets in debt instruments of U.S. or foreign government and government agency
fixed-income securities of sufficient maturities to realize its objective of
long-term capital appreciation. During such periods, the Trust will hold the
balance of its assets in short-term U.S. or foreign denominated securities.
U.S. Government securities include U.S. Treasury bills, notes and bonds,
which differ in their interest rates, maturities and times of issuance. Treasury
bills have maturities of one year or less. Treasury notes have maturities of one
to ten years and Treasury bonds have maturities of greater than ten years at the
date of issuance. U.S. Government securities also include obligations of
agencies and instrumentalities of the U.S. Government. Agencies and
instrumentalities of the U.S. Government include, but are not limited to:
Federal Land Banks; Farmers Home Administration; Central Bank of Cooperatives;
Federal Intermediate Credit Banks; Federal Home Loan Banks; and Federal National
Mortgage Association. Some obligations of the U.S. Government agencies and
instrumentalities, such as Treasury bills and Government National Mortgage
Association (GNMA) certificates, are supported by the full faith and credit of
the United States; others, such as securities of Federal Home Loan Banks, are
supported by the right of the issuer to borrow from the U.S. Treasury; still
others, such as bonds issued by the Federal National Mortgage Association, a
private corporation, are supported only by the credit of the instrumentality.
These securities are not insured by the U.S. Government and there can be no
assurance that the U.S. Government will support an instrumentality it sponsors.
The Trust will invest in the securities issued by such an instrumentality only
when its Investment Adviser determines that the credit risk with respect to the
instrumentality does not make its securities unsuitable investments.
GNMA certificates have yield and maturity characteristics corresponding to
the underlying mortgage loans. Thus, unlike U.S. Treasury bonds, which pay a
fixed rate of interest until maturity when the entire principal amount comes
due, payments on GNMA certificates include both interest and a partial
prepayment of principal. Additional prepayments of principal may result from the
prepayment, refinancing or foreclosure of the underlying mortgage loans.
Although maturities of the underlying mortgage loans range up to 30 years, such
prepayments shorten the effective maturities to approximately 12 years (based
upon current government statistics). GNMA certificates currently offer yields
higher than those available from other types of U.S. Government securities, but
because of the prepayment feature may be less effective than other types of
securities as a means of "locking in" attractive long-term interest rates. This
is caused by the need to reinvest prepayments of principal generally and the
possibility of significant unscheduled prepayments resulting from declines in
mortgage interest rates. As a result, GNMA certificates may have less potential
for capital appreciation during periods of declining interest rates than other
investments of comparable maturities, while having a comparable risk of decline
during periods of rising interest rates.
There are certain other risks associated with GNMA, Federal National
Mortgage Association (FNMA) and Federal Home Loan Mortgage Corporation (FHLMC)
certificates. Prepayments and scheduled payments of principal will be reinvested
at prevailing interest rates which may be less than the rate of interest for the
securities on which such payments are made. When prevailing interest rates rise,
the value of each of these types of securities may decrease as do other debt
securities, but when prevailing interest rates decline, the value of such
securities is not likely to rise on a comparable basis with other debt
securities because of the prepayment feature of each of these securities. If a
GNMA, FNMA, or FHLMC certificate is purchased at a premium above principal
because its fixed rate of interest exceeds the prevailing level of yields, the
premium is not guaranteed and a decline in value to par may result in a loss of
the premium especially in the event of prepayments.
U.S. Government debt securities of the sort owned by the Trust fluctuate
in market price (but not in ultimate repayment amount) primarily with interest
rate levels and trends, rising when interest rates decline and declining when
interest rates rise; they generally possess a high degree of dependability with
respect to timely payment of principal or interest.
If, in the opinion of the Investment Adviser, there are periods when there
is a very small rate of change in the Consumer Price Index and other leading
economic indicators such as interest rates and the value of the U.S. dollar,
offer no clear evidence of inflationary or deflationary trends, then, for
temporary defensive purposes, the Trust may invest in short-term U.S. Government
securities and other money market instruments, cash or cash equivalents. Money
market instruments include high-grade commercial paper (promissory notes issued
by corporations to finance their short-term credit needs), negotiable
certificates of deposit, non-negotiable fixed time deposits, bankers'
acceptances and repurchase agreements. Investments in commercial paper will be
rated Prime-1 by Moody's Investors Services, Inc. or A-1 by Standard & Poor's
Corporation or F-1 by Fitch Investors Service, Inc., which are the highest
ratings assigned by these agencies. Money market instruments will be limited to
U.S. dollar denominated instruments which are rated in the top two categories by
an independent nationally recognized rating organization or, if not rated, are
of comparable quality as determined by the Trustees. Investments in bank
instruments will be in instruments which are issued by U.S. or foreign banks
having capital and undivided surplus at the time of investment of $200,000,000
or more and which mature in one year or less from the date of acquisition.
GENERAL RISK CONSIDERATIONS
Because of the following considerations, an investment in the Trust should
not be considered a complete investment program (additional risk considerations
are discussed below).
The success of the Trust's investment program will be dependent to a high
degree on the Investment Adviser's ability to anticipate the onset and
termination of inflationary and deflationary cycles. A failure to anticipate a
deflationary cycle could result in the Trust's assets being disproportionately
invested in precious metals. Conversely, a failure to predict an inflationary
cycle could result in the Trust's assets being disproportionately invested in
U.S. Government securities. The success of the Trust's investment program will
also be dependent to a high degree on the validity of the premise that the
values of gold and other precious metals will move in a different direction than
the values of U.S. Government securities during periods of inflation or
deflation. If values of both precious metals and U.S. Government securities move
down during the same period of time, the value of the shareholder's investment
will decline rather than stabilize or increase, as anticipated, regardless of
whether the Trust is primarily invested in precious metals or U.S. Government
securities.
Investment on an international basis involves certain risks not involved
in domestic investments, including fluctuations in foreign exchange rates,
higher foreign brokerage costs, costs of currency conversion, currency blockage,
different accounting standards, difficulty in obtaining foreign court judgments,
future political and economic developments, and the possible imposition of
exchange controls or other foreign governmental laws or restrictions. Since the
Trust may invest in securities denominated or quoted in currencies other than
the U.S. dollar, changes in foreign currency exchange rates will affect the
value of securities in the portfolio and the unrealized appreciation or
depreciation of investments. In addition, with respect to certain foreign
countries there is the possibility of expropriation and nationalization of
assets, confiscatory taxation, political or social instability or diplomatic
developments which could affect investments in those countries. Interest and
dividends, and possibly other amounts received by the Trust in respect of
foreign investments, may be subject to withholding and other taxes at the
source, depending upon the laws of the county in which the investment is made.
Precious Metals
It should be recognized that any investment in gold and silver bullion and
other precious metals is subject to certain risks. For example, dramatic upward
or downward price movements may occur in gold or silver over short periods of
time, influenced by many factors such as international tensions, oil price
changes, interest rate policies, political uncertainties, rumors, supply and
demand factors and lack of regulation. Also, since investments in precious
metals do not generate any interest income or dividends, the only source of
return from these investments would be from any gains realized upon their sale.
Furthermore, the value of these investments may be affected by such factors as
the following:
1. Price Fluctuations: The price of gold has recently been subject to
dramatic upward and downward price movements over short periods of time. Such
prices have ranged from a low $37.39 per troy ounce on January 7, 1971 to a high
of over $800 per troy ounce in 1980. Such prices have been influenced by, among
other things, industrial and commercial demand, investment and speculation, and
monetary and fiscal policies of central banks and governments and their
agencies, including gold auctions conducted by the U.S. Treasury Department and
the International Monetary Fund.
2. Concentration of Source of Supply and Control of Sales: At the current
time there are only four major sources of supply of primary gold production, and
their market shares cannot be readily ascertained. The Republic of South Africa
and the former Union of Soviet Socialist Republics are the two largest
producers. Political and economic conditions affecting either country may have a
direct impact on that country's sales of gold. The only legally authorized sales
agent for gold produced in South Africa is the Reserve Bank of South Africa,
which controls the time and place of any sale of South African bullion in
accordance with its retention policies. The South African Ministry of Mines
determines gold mining policy and has required mining companies to produce lower
grades of ore when gold prices are rising. South Africa depends predominantly on
gold sales for the foreign exchange necessary to finance its imports, so that
its sales policy is necessarily subject to national economic and political
developments.
3. Tax and Currency Laws: Changes in the tax or currency laws of the
U.S. or of foreign countries may inhibit the Trust's ability to pursue, or
may increase the cost of pursing, its precious metals investment program.
4. Unpredictable Monetary Policies, Economic and Political Conditions: The
Trust's precious metals assets may be less liquid or the change in the value of
such assets may be more volatile (and less related to general price movements in
the U.S. securities markets) than would be the case with investments in the
securities of larger U.S. companies, particularly because the price of gold and
other precious metals may be affected by unpredictable international monetary
policies, conditions of scarcity and surplus and speculation. For instance,
major civil strife in South Africa could seriously influence the price of gold.
In addition, the use of gold or Special Drawing Rights (which are also used by
members of the International Monetary Fund for international settlements) to
settle net deficits and surpluses in trade and capital movements between nations
subjects the supply and demand of gold and therefore its price, to a variety of
economic factors which normally would not affect other types of commodities.
5. New and Developing Market: Between 1933 and December 31, 1974, a gold
market did not exist in the United States for individual investment purposes.
Since the latter date, markets have been developing. Certain entities, including
the U.S. Treasury and the International Monetary Fund, have from time to time
conducted sales of relatively large amounts of gold bullion and may continue to
do so from time to time in the future. Large purchases or sales of gold bullion,
including sales by such banks and agencies or by the U.S. Government, are likely
to affect the price of gold bullion.
6. Lack of Regulation: The trading of gold bullion in the United States is
not currently subject to existing rules which govern the trading of agricultural
and certain other commodities and commodity futures. The absence of such
regulation may adversely affect the continued development of an orderly market
in gold bullion. The development of a regulated futures market in gold bullion
might also affect the development of the market in and the price of gold bullion
in the United States.
In addition to being affected by many of the same factors influencing the
pricing of gold, silver prices may also be affected by labor relations in the
silver and copper mining industries (a significant portion of U.S. silver ore
production is a by-product of copper). Prices of other precious metals may be
similarly and otherwise affected.
Since investments in precious metals do not generate any interest or
dividends, the only source of return from such investments will be from any
gains (less any losses) realized from sales of such metals. It is expected that
any such income will be taxable as capital gain in the manner applicable to
ordinary business corporations.
Prices at which gold and silver bullion and other precious metals are
purchased or sold normally include dealer markups or markdowns, insurance
expenses, assay charges and shipping costs. For example, all such charges under
current market conditions for 400 troy ounces of gold bullion of at least
995/1000 purity do not generally in the aggregate exceed 2% of the price. Such
costs and expenses may be a grater or lesser percentage of the price from time
to time, depending on whether the price of gold bullion decreases or increases.
Such charges will vary in respect of other precious metals. In addition, the
Trust will incur ongoing storage costs for its precious metals.
SPECIALIZED INVESTMENT TECHNIQUES AND RELATED RISKS The Trust's
investments are subject to the following specialized
investment techniques and may involve certain risks, which are summarized below.
There can be no assurance that the Trust will attain its investment objectives.
Option Transactions Involving Portfolio Securities and Securities Indices
The Investment Adviser believes that the assets of the Trust may be
increased by realizing premiums from the writing of call options and by
purchasing put options with respect to securities held by the Trust. The Trust
may write call option contracts or purchase put or call options with respect to
portfolio securities and with respect to securities indices at such times as its
management determines to be appropriate. Call options are written and put
options are purchase solely as covered options -- options with respect to
securities which the Trust owns (which will generally correspond to the
securities represented by the index in the case of index options) -- and such
options on domestic securities are generally listed on a national securities
exchange. Such options are currently traded on the Chicago Board of Options
Exchange and the American, Pacific and Philadelphia Stock Exchanges (the
"Exchanges"). Options on foreign securities and on some domestic securities may
not be listed on any domestic or foreign exchange. The Trust receives a premium
on the sale of an option, but gives up the opportunity to profit from any
increase in the price of the security or representative securities in the case
of an index option above the exercise price of the option. The Trust pays a
premium upon the purchase of an option, which may be lost if the option proves
to be of no ultimate value. There can be no assurance that the Trust will always
be able to close out options positions at acceptable prices. The Trust will
write or purchase such options only where economically appropriate as a hedging
technique to reduce the risks in management of its portfolio, and to preserve
the Trust's net asset value, and not for speculative purposes (i.e., not for
profit). In no event will the Trust purchase such options where the value of the
options, either singly or in the aggregate, would exceed 50% of the value of the
Trust's assets at the time of purchase.
The Trust may also purchase put and call options for a premium. The trust
may sell a put or call option which it has previously purchased prior to the
sale of the underlying security. Such a sale would result in a net gain or loss
depending on whether the amount received on the sale is more or less than the
premium and other transaction costs paid.
It should be recognized that the Trust pays brokerage commissions in
connection with the writing and purchasing of options and efficient closing
transactions, as well as for purchases and sales of underlying securities. The
writing of options could result in significant increases in the Trust's
portfolio turnover rate, especially during periods when market prices of the
underlying securities appreciate.
In connection with the Trust's qualifying as a regulated investment
company under the Internal Revenue Code of 1986, other restrictions on the
Trust's ability to enter into option transactions may apply from time to time.
See "Taxes".
Securities Options
A call option is a short-term contract (having a duration of nine months
or less) which gives the purchaser of the option, in return for a premium paid,
the right to buy, and the writer the obligation to sell, the underlying security
at the exercise price at any time prior to the expiration of the option,
regardless of the market price of the security during the option period. The
premium paid to the writer is the consideration for undertaking the obligations
of the option contract. The writer forgoes the opportunity to profit from an
increase in the market price of the underlying security above the exercise price
except insofar as the premium represents such a profit. Should the price of the
security decline, on the other hand, the premium represents an offset to such
loss. A call option on a securities index is similar to a call option on an
individual security, except that the value of the option depends on the weighted
value of the group of securities comprising the index and all settlements are
made in cash.
If a call option expires on its stipulated expiration date or if the Trust
enters into a closing purchase transaction, the Trust will realize a gain (or
less if the cost of a closing purchase transaction exceeds the premium received
when the option was sold) without regard to any unrealized gain or loss on the
underlying security, and the liability related to such option will be
extinguished. If a call option is exercised, the Trust will realize a gain or
loss from the sale of the underlying security and the proceeds of the sale will
be increased by the premium originally received.
A put option gives the purchaser of the option the right to sell, and the
writer the obligation to buy, the underlying security at the exercise price
during the option period. Thus the Trust may purchase a put option on an
underlying security owned by the Trust as a defensive technique in order to
protect against an anticipated decline in the value of the security. For
example, a put option may be purchased in order to protect unrealized
appreciation of a security where the Investment Adviser deems it desirable to
continue to hold the security because of tax considerations. The premium paid
for the put option would reduce any capital gain when the security is eventually
sold.
As the foregoing suggests, the writing of call option contracts and the
purchasing of put options is a highly specialized activity which involves
investment techniques and risks different from those ordinarily associated with
investment companies, but the limitations described below tend to reduce such
risks.
When a security is sold from the Trust's portfolio, the Trust effects a
closing call purchase or put sale transaction so as to close out any existing
option on the security. A closing transaction may be made only on an Exchange or
other market which provides a secondary market for an option with the main
exercise price and expiration date. There is no assurance that a liquid
secondary market on an Exchange or otherwise will exist for any particular
option or at any particular time, and for some options no secondary market on an
Exchange or otherwise may exist. If the Trust is unable to effect a closing
transaction, in the case of a call option, the Trust will not be able to sell
the underlying security until the option expires or the Trust delivers the
underlying security upon exercise.
Index Options
A multiplier for an index option performs a function similar to the unit
of trading for an option on an individual security. It determines the total
dollar value per contract of each point between the exercise price of the option
and the current level of the underlying index. A multiplier of 100 means that a
one-point difference will yield $100. Options on different indices may have
different multipliers.
Securities indices for which options are currently traded include the
Standard & Poor's 100 and 500 Composite Stock Price Indices, Computer/Business
Equipment Index, Major Market Index, Amex Market Value Index, Computer
Technology Index, Oil and Gas Index, NYSE Options Index, Gaming/Hotel Index,
Telephone Index, Transportation Index, Technology Index, and Gold/Silver Index.
The Trust may write call options and purchase put and call options on any other
traded indices. Call options on securities indices written by the Trust will be
"covered' by identifying the specific portfolio securities being utilized.
To secure the obligation to deliver the underlying securities in the case
of an index call option written by the Trust, the Trust will be required to
deposit qualified securities. A "qualified security" is a security against which
the Trust has not written a call option and which has not been hedged by the
Trust by the sale of a financial futures contract. If at the close of business
on any day the market value of the qualified securities falls below 100% of the
current index value times the multiplier times the number of contracts, the
Trust will deposit an amount of cash or liquid assets equal in value to the
amount by which the call is "in-the-money" times the multiplier times the number
of contracts. Any amount segregated may be applied to the Trust's obligation to
segregate additional amounts in the event that the market value of the qualified
securities falls below 100% of the contract index value times the multiplier
times the number of contracts.
Risks of Options on Indices
Because the value of an index option depends upon movements in the level
of the index rather than the price of a particular security, whether the Trust
will realize a gain or loss on the purchase or sale of an option on an index
depends upon movements in the level of prices in the market generally or in an
industry or market segment, rather than movements in the price of an individual
security. Accordingly, successful use by the Trust of options on indices will be
subject to the Investment Adviser's ability to predict correctly movements in
the direction of the market generally or of a particular industry. This requires
different skills and techniques than predicting changes in the price of
individual securities.
Index prices may be distorted if trading of certain securities included in
the index is interrupted. Trading in index options also may be interrupted in
certain circumstances, such as if trading were halted in a substantial number of
securities included in the index. If this occurred, the Trust would not be able
to close out options which it has purchased or written and, if restriction on
exercise were imposed, might be unable to exercise an option it purchased, which
could result in substantial losses to the Trust. However, it is the Trust's
policy to purchase or write options only on indices which include a sufficient
number of securities so that the likelihood of a trading halt in the index is
minimized.
Because the exercise of an index option is settled in cash, an index call
writer cannot determine the amount of its settlement obligation in advance and,
unlike call writing on portfolio securities, cannot provide in advance for its
potential settlement obligation by holding the underlying securities.
Price movements in securities in the Trust's portfolio will not correlate
perfectly with movements in the level of the index and, therefore, the Trust
bears the risk that the price of the securities held by the Trust may not
increase as much as the index. In this event, the Trust would bear a loss on the
call which would not be completely offset by movements in the prices of the
Trust's portfolio securities. It is also possible that the index may rise when
the Trust's portfolio securities do not. If this occurred, the Trust would
experience a loss on the call which would not be offset by an increase in the
value of its portfolio and also might experience a loss in its portfolio.
Unless the Trust has other liquid assets which are sufficient to satisfy
the exercise of a call on an index, the Trust will be required to liquidate
portfolio securities in order to satisfy the exercise. Because an exercise must
be settled within hours after receiving the notice of exercise, if the Trust
fails to anticipate an exercise, it may have to borrow from a bank (in amounts
not exceeding 5% of the Trust's total assets) pending settlement of the sale of
securities in its portfolio and would incur interest charges thereon.
When the Trust has written a call on an index, there is also a risk that
the market may decline between the time the Trust has the call exercised against
it, at a price which is fixed as of the closing level of the index on the date
of exercise, and the time the Trust is able to sell securities in its portfolio.
As with options on portfolio securities, the Trust will not learn that a call
has been exercised until the day following the exercise date but, unlike a call
on a portfolio security in settlement, the Trust may have to sell part of its
portfolio securities in order to make settlement in cash, and the price of such
securities might decline before they could be sold.
If the Trust exercises a put option on an index which it has purchased
before final determination of the closing index value for that day, it runs the
risk that the level of the underlying index may change before closing. If this
change causes the exercised option to fall "out-of-the-money," the Trust will be
required to pay the difference between the closing index value and the exercise
price of the option (multiplied by the applicable multiplier) to the assigned
writer. Although the Trust may be able to minimize the risk by withholding
exercise instructions until just before the daily cutoff time or by selling
rather than exercising an option when the index level is close to the exercise
price, it may not be possible to eliminate this risk entirely because the cutoff
times for index options may be earlier than those fixed for other types of
options and may occur before definitive closing index values are announced.
Options on Foreign Currencies
The Trust may purchase put and call options on foreign currencies. The
Trust may purchase such options where economically appropriate as a hedging
technique to reduce the risks in management of its portfolio, and to preserve
the Trust's net asset value, and not for speculative purposes (i.e., not for
profit). In no event will the Trust purchase such options where the value of the
options, either singly or in the aggregate, would exceed 50% of the value of the
Trust's assets at the time of purchase.
The Trust's success in using such options depends, among other things, on
the Investment Adviser's ability to predict the direction and volatility of
price movements in the options markets as well as securities markets and on the
Investment Adviser's ability to select the proper type, time and duration of
options. Although the Investment Adviser has prior experience in utilizing
currency options, there can be no assurance that this technique will produce its
intended results. It should be recognized that the price movements of options
relating to currencies purchased by the Trust may not correspond to the price
movements of the Trust's portfolio securities and may therefore cause the
options transactions to result in losses to the Trust.
A put option on a foreign currency is a short-term contract (generally
having a duration of nine months or less) which gives the purchaser of the put
option, in return for a premium, the right to sell the underlying currency at a
specified price during the term of the option. A call option on a foreign
currency is a short-term contract which gives the purchaser of the call option,
in return for a premium, the right to buy the underlying currency at a specified
price during the term of the option. The purchase of put and call options on
foreign currencies is analogous to the purchase of puts and calls on stocks.
Options on foreign currencies are currently traded in the United States on
the Philadelphia Stock Exchange and the Chicago Board Options Exchange. Such
options are currently traded on British pounds, Swiss francs, Japanese yen,
Deutsche marks and Canadian dollars. The Trust could use foreign currency
options to protect against the decline in value of portfolio securities
resulting from changes in foreign exchange rates, as the following examples
illustrate:
1. In connection with the Trust's payment for securities of a foreign
issuer at some future date in a foreign currency, the Trust may purchase call
options on such foreign currency in order to hedge against the risk that the
value of the foreign currency might rise against the U.S. dollar, thereby
increasing the cost of the currency and the transaction.
EXAMPLE: The Trust must pay for the purchase of securities of a Swiss
issuer in Swiss francs. If the Trust is concerned that the price of Swiss francs
might rise in price in terms of the U.S. dollar from, for example, $.4780, it
might purchase Swiss franc June 48 call options for a premium of, for example,
.50 (i.e. $.050 per Swiss franc times 62,500 Swiss francs per contract, for a
total premium of $312.50--plus transaction costs). This would establish a
maximum cost for Swiss francs and, hence, the maximum cost in U.S. dollars for
the Swiss securities. Thus, if Swiss francs subsequently appreciated to $.4950
and the premium on Swiss franc June 48 call options increased to, for example,
1.95 (for a total premium of $1,218.75), the Trust could sell the option at a
profit ($1,218.75 less the original premium paid of $312.50 and transaction
costs) to offset the increased cost of acquiring Swiss francs. Alternatively,
the Trust could exercise the option contract. If the Swiss franc remained below
$.48, the Trust could let its calls expire (losing its premium) and purchase the
Swiss francs at a lower price.
2. The Trust may purchase foreign currency options to protect against
a decline in the Trust's cash and short-term U.S. Government securities.
EXAMPLE: The Trust may have investments in cash and in short-term U.S.
Government securities, e.g., U.S. Treasury bills having maturities of less than
one year. In order to hedge against a possible decline in the value of the U.S.
dollar, the Trust might purchase Deutsche mark 40 calls. If the Deutsche mark
appreciates above $.40, then the Trust could exercise its option contract and
stabilize the value of its cash holdings and the underlying value of the U.S.
Treasury bills in its portfolio as a result of the improved exchange rate
between the Deutsche mark and the U.S. dollar.
As is the case with other listed options, the effectiveness of foreign
currency options in carrying out the Trust's objectives will depend on the
exercise price of the option held and the extent to which the value of such
option will be affected by changes in the exchange rates of the underlying
currency. To terminate its rights in options which it has purchased, the Trust
would sell an option of the same series in a closing sale transaction. A gain or
loss, which will be offset by a loss or gain on the U.S. dollar, will be
realized depending on whether the sale price of the option is more or less than
the cost to the Trust of establishing the position. If the contemplated
transaction is not completed, the option may be allowed to expire, (resulting,
however, in the loss of the option premium amount), or liquidated for any
remaining value.
Foreign currency options purchased for the Trust shall be valued at the
last sale price on the principal Exchange on which such option is traded, or in
the absence of a sale, the mean between the last bid and offering prices.
Options which are not actively traded will be valued at the difference between
the option price and the current market price of the underlying security,
provided that the put price is higher than such market price or the call price
is lower than such market price. In the event that a put price is lower than the
current market value of the underlying security, or a call price is higher than
the current market value of the underlying security, then the option will be
assigned no value. The Trust will write or purchase such options only where
economically appropriate as a hedging technique to reduce the risks in
management of its portfolio, and to preserve the Trust's net asset value, and
not for speculative purposes (i.e., not for profit).
Risks of Foreign Currency Option Activities
Assuming that any decline in the value of the Trust's portfolio is
accompanied by a rise in the value of a foreign currency in relation to the U.S.
dollar, the purchase of options on the foreign currency may generate gains which
would partially offset such decline. However, if after the Trust purchases an
option, the value of the Trust's portfolio moves in the opposite direction from
that contemplated, the Trust may experience losses to the extent of premiums it
paid in purchasing such options, and this will reduce any gains the Trust would
otherwise have. For this reason as well as supply and demand imbalances and
other market factors, the price movements of options on foreign currencies
purchased by the Trust may not correspond to the price movements of the Trust's
portfolio securities and may cause the options transactions to result in losses
to the Trust.
Option positions on foreign currencies may be closed out only on an
Exchange or other market which provides a secondary market for options of the
same series. United States options on foreign currencies are currently traded
only on the Philadelphia Stock Exchange and the Chicago Board Options Exchange.
Trading in options on foreign currencies may be interrupted, for example,
because of supply and demand imbalances arising from a lack of either buyers or
sellers. In addition, trading may be suspended after the price of an option has
risen or fallen more than a specified maximum amount. Exercise of foreign
currency options also could be restricted or delayed because of regulatory
restrictions or other factors. Trading on options on foreign currencies
commenced in December, 1982. The ability to establish and close out positions in
such options will be subject to the development and maintenance of a liquid
secondary market. It is not certain that this market will continue. The Trust
will not purchase foreign currency options on any Exchange or other market
unless and until, in the Investment Adviser's opinion, the market for such
options has developed sufficiently. Although it is intended that the Trust
purchase options only when there appears to be an active market in such
instruments, there can be no assurance that a liquid market will exist at a time
when the Trust seeks to close a particular option position. Accordingly, the
Trust may experience losses as a result of its inability to close out an options
position.
Special Risks of Foreign Currency Options
In addition to the risks described above, there are special risks
associated with foreign currency options, including the following:
1. The value of foreign currency options is dependent upon the value of
foreign currencies relative to the U.S. dollar. As a result, the prices of
foreign currency options may vary with changes in the value of either or both
currencies. Thus, fluctuations in the value of the U.S. dollar will affect
exchange rates and the value of foreign currency options, even in the case of an
otherwise stable foreign currency. Conversely, fluctuations in the value of a
foreign currency will affect exchange rates and the value of foreign currency
options even if the value of the U.S. dollar remains relatively constant. Thus,
careful consideration must be given to factors affecting both the U.S. economy
and the economy of the foreign country issuing the foreign currency underlying
the option.
2. The value of any currency, including U.S. dollars and foreign
currencies, may be affected by a number of complex factors applicable to the
issuing country, such as the prevailing monetary policy of that country, its
money supply, its trade deficit or surplus, its balance of payments, interest
rates, inflation rates and the extent or trend of its economic growth. In
addition, foreign countries may take a variety of actions, such as increasing or
decreasing the money supply or purchasing or selling government obligations,
which may have an indirect but immediate effect on exchange rates.
3. The exchange rates of foreign currencies (and therefore the value of
foreign currency options) could be significantly affected, fixed or supported
directly or indirectly by government actions. Such government intervention may
increase risks to investors since exchange rates may not be free to fluctuate in
response to other market forces.
4. Because foreign currency transactions occurring in the interbank market
involve substantially larger amounts than those likely to be involved in the
exercise of individual foreign currency option contracts, investors who buy or
write foreign currency options may be disadvantaged by having to deal in an odd
lot market for the underlying foreign currencies at prices that are less
favorable than for round lots. Because this price differential may be
considerable, it must be taken into account when assessing the profitability of
a transaction in foreign currency options.
5. There is no systematic reporting of last sale information for foreign
currencies. There is reasonably current, representative bid and offer
information available on the floor of the exchange on which foreign currency
options are traded, in certain brokers' offices, in bank foreign trading
offices, and to others who wish to subscribe for their information. There is,
however, no regulatory requirement that those quotations be firm or revised on a
timely basis. The absence of last sale information and the limited availability
of quotations to individual investors may make it difficult for many investors
to obtain timely, accurate data about the state of the underlying market. In
addition, the quotation information that is available is representative of very
large transactions in the interbank market and does not reflect exchange rates
for smaller transactions. Since the relatively small amount of currency
underlying a single foreign currency option would be treated as an odd lot in
the interbank market (i.e., less than between $1 and $5 million), available
pricing information from that market may not necessarily reflect prices
pertinent to a single foreign currency option contract and investors who buy or
sell foreign currency options covering amounts of less than $1 to $5 million can
expect to deal in the underlying market at prices that are less favorable than
for round lots.
6. Foreign governmental restrictions or taxes could result in adverse
changes in the cost of acquiring or disposing of foreign currencies. If the
Options Clearing Corporation ("OCC") determines that such restrictions or taxes
would prevent the orderly settlement of foreign currency option exercises or
impose undue burdens on parties to exercise settlements, it has the authority to
impose special exercise settlement procedures, which could adversely affect the
Trust.
7. The interbank market in foreign currencies is a global,
around-the-clock market. Therefore, in contrast with the exchange markets for
stock options, the hours of trading for foreign currency options do not conform
to the hours during which the underlying currencies are traded. (Trading hours
for foreign currency options can be obtained from a broker.) To the extent that
the options markets are closed while the market for the underlying currencies
remain open, significant price and rate movements may take place in the
underlying markets that cannot be reflected in the options markets. The
possibility of such movements should be taken into account in (a) relating
closing prices in the options and underlying markets, and (b) determining
whether to close out a short options position that might be assigned in an
exercise that takes place after the options market is closed on the basis of
underlying currency price movements at a later hour.
8. Since settlement of foreign currency options must occur within the
country issuing that currency, investors through their brokers, must accept or
make delivery of the underlying foreign currency in conformity with any U.S. or
foreign restrictions or regulations regarding the maintenance of foreign banking
arrangements by U.S. residents and may be required to pay any fees, taxes or
charges associated with such delivery which are assessed in the issuing country.
Prior to the placing of any assets with a foreign custodian in connection with
the settlement of foreign currency options, the Trustees of the Trust shall have
determined that maintaining such assets in a particular country or countries is
consistent with the best interests of the Trust and its shareholders, and that
maintaining such assets with a particular foreign custodian is consistent with
the best interests of the Trust and its shareholders. The Trust shall also have
approved, as consistent with the best interests of the Trust and its
shareholders, a written contract between the Trust and such foreign custodian
that will maintain the Trust's assets. The Trustees shall also establish a
system to monitor such foreign custody arrangements and a majority of the
Trustees, at least annually, shall review and approve the continuance of such
arrangements as consistent with the best interests of the Trust and its
shareholders.
Financial and Precious Metals Futures and Related Options Financial futures
contracts consist of interest rate futures contracts,
securities index futures contracts and currency futures contracts. Precious
metals futures contracts consist of futures contracts for the purchase or sale
of gold, silver and other precious metals. A futures contract obligates the
seller of the contract to deliver, and the purchaser to take delivery of, the
subject assets called for in the contract at a specified future time and at a
specified price. An option on the futures contract gives the purchaser the right
to assume a position in the contract (a long position if the option is a call
and a short position if the option is a put) at a specified exercise price at
any time during the period of the option.
While the Trust's fundamental policies permit the Trust to engage in
financial and precious metals futures transactions, including the writing of
covered call options and the purchase and sale of put and call options in
connection therewith, the Trust may initially engage in such futures and related
option transactions only for hedging purposes, and its investment in such
transactions will be limited to commitments totaling no more than 5% of the
Trust's total assets. In order to engage in transactions not so limited, the
Trust may seek registration as a commodity pool operator with the federal
Commodity Futures Trading Commission. If such registration is effected, the
Trust would be able to enter into such futures and related option transactions
directly for profit purposes and not only for hedging, and would also be able to
effect such futures and related option transactions without limit as to the
amount of the Trust's assets involved. The discussion below as to these
transactions relates primarily to the use of such transactions within the
currently applicable restrictions and limits.
The Trust may use financial and precious metals futures contracts and
related options to hedge against changes in currency exchange rates or in the
market value of its portfolio assets or assets which it intends to purchase.
Hedging is accomplished when an investor takes a position in the futures market
opposite to his cash market position. There are two types of hedges--long (or
buying) and short (or selling) hedges. Historically, prices in the futures
market have tended to move in concert with cash market prices and prices in the
futures market have maintained a fairly predictable relationship to prices in
the cash market. Thus, a decline in the market value of securities in the
Trust's portfolio may be protected against to a considerable extent by gains
realized on futures contracts sales. Similarly, it is possible to protect
against an increase in the market price of assets which the Trust may wish to
purchase in the future by purchasing futures contracts.
The Trust may purchase or sell any financial or precious metals futures
contracts which are traded on an exchange or board of trade or other market. A
U.S. public market presently exists in interest rate futures contracts on
long-term U.S. Treasury bonds, U.S. Treasury notes and three-month U.S. Treasury
bills. Securities index futures contracts are currently traded with respect to
the Standard & Poor's 500 composite Stock Price Index and such other broad-based
stock market indices as the New York Stock Exchange Composite Stock Index and
the Value Line Composite Stock Price Index. A clearing corporation associated
with the exchange or board of trade on which a financial futures contact trades
assumes responsibility for the completion of transactions and also guarantees
that open futures contracts will be performed. Currency and precious metals
futures contracts are also traded on various U.S. Exchanges or boards of trade.
Options relating to U.S. futures contracts are generally also traded on the same
exchanges or boards of trade.
In contrast to the situation where the Trust purchases or sells a
security, no security or other asset is delivered or received by the Trust upon
the purchase or sale of a futures contract. Initially, the Trust will be
required to deposit in a segregated account with its custodian bank an amount of
cash or U.S. Treasury bills. This amount is known as initial margin and is in
the nature of a performance bond or good faith deposit on the contract. The
current initial margin deposit on the contract is approximately 5% of the
contract amount. Brokers may establish deposit requirements higher than this
minimum. Subsequent payments, called variation margin, will be made to and from
the account on a daily basis as the price of the futures contract fluctuates.
This process is known as marking to market.
The writer of an option on a futures contract is required to deposit
margin pursuant to requirements similar to those applicable to futures
contracts. Upon exercise of an option on a futures contract, the delivery of the
futures position by the writer of the option to the holder of the option will be
accompanied by delivery of the accumulated balance in the writer's margin
account. This amount will be equal to the amount by which the market price of
the futures contract at the time of exercise exceeds, in the case of a call, or
is less than, in the case of a put, the exercise price of the option on the
futures contract.
Although futures contracts by their terms call for actual delivery or
acceptance of currencies or securities or other assets, in most cases the
contracts are closed out before the settlement date without the making or taking
of delivery. Closing out is accomplished by effecting an offsetting transaction.
A futures contract sale is closed out by effecting a futures contract purchase
for the same aggregate amount of securities and the same delivery date. If the
sale price exceeds the offsetting purchase price, the seller immediately would
be paid the difference and would realize a gain. If the offsetting purchase
price exceeds the sale price, the seller immediately would pay the difference
and would realize a loss. Similarly, a futures contract purchase is closed out
by effecting a futures contract sale for the same securities and the same
delivery date. If the offsetting sale price exceeds the purchase price, the
purchaser would realize a gain, whereas if the purchase price exceeds the
offsetting sale price, the purchaser would realize a loss.
The Trust will pay commissions on futures contracts and related options
transactions. These commissions may be higher than those which would apply to
purchases and sales of securities directly.
The Trust may, following written notice thereof to its shareholders, take
advantage of opportunities in the area of precious metals related index options
and futures contracts and options on futures contracts which are not currently
available but which may be developed, to the extent such opportunities are
consistent with the Trust's investment objectives and legally permissible for
the Trust.
Limitations on Futures Contracts and Related Options
The Trust may not currently engage in transactions in futures contracts or
related options for speculative purposes, but only as a hedge against
anticipated changes in exchange rates or the market value of its portfolio
securities or other assets or securities or other assets which it intends to
purchase. Also, the Trust may not currently purchase or sell precious metals or
financial futures contracts or related options if, immediately thereafter, the
sum of the amount of initial margin deposits on the Trust's existing futures and
related options positions and the premiums paid for related options would exceed
5% of the market value of the Trust's total assets after taking into account
unrealized profits and losses on any such contracts. At the time of purchase of
a futures contract or an option on a futures contract, an amount of cash, U.S.
government securities or other appropriate high-grade debt obligations equal to
the market value of the futures contract, minus the Trust's initial margin
deposit with respect thereto, will be deposited in a segregated account with the
Trust's custodian bank to collateralize fully the position and thereby ensure
that it is not leveraged.
The extent to which the Trust may enter into futures contracts and related
options also may be limited by the requirements of the Internal Revenue Code of
1986 for qualification as a regulated investment company.
See "Taxes" herein.
Risks Relating to Futures Contracts and Related Options Positions in futures
contracts and related options may be closed out
only on an exchange or other market which provides a secondary market for such
contracts or options. The Trust will enter into futures or related options
positions only if there appears to be a liquid secondary market. However, there
can be no assurance that a liquid secondary market will exist for any particular
futures or related option contract at any specific time. Thus, it may not be
possible to close out a futures or related option position. In the case of a
futures position, in the event of adverse price movements, the Trust would
continue to be required to make daily margin payments. In this situation, if the
Trust has insufficient cash to meet daily margin requirements it may have to
sell portfolio assets at a time when it may be disadvantageous to do so. In
addition, the Trust may be required to take or make delivery of the securities
underlying the futures contracts it holds. The inability to close out futures
positions also could have an adverse impact on the Trust's ability to hedge its
portfolio effectively.
There are several risks in connection with the use of futures contracts as
a hedging device. While hedging can provide protection against an adverse
movement in the market prices, it can also preclude a hedger's opportunity to
benefit from a favorable market movement. In addition, investing in futures
contracts and options on futures contracts will cause the Trust to incur
additional brokerage commissions and may cause an increase in the Trust's
portfolio turnover rate.
The successful use of futures contracts and related options also depends
on the ability of the Trust's Investment Adviser to forecast correctly the
direction and extent f currency exchange rate and market movements within a
given time frame. To the extent exchange rate and market prices remain stable
during the period a futures contract or option is held by the Trust or such
prices move in a direction opposite to that anticipated, the Trust may realize a
loss on the hedging transaction which is not offset by an increase in the value
of its portfolio securities. As a result, the Trust's total return for the
period may be less than if it had not engaged in the hedging transaction.
Utilization of futures contracts by the Trust involves the risk of
imperfect correlation in movements in the price of futures contracts and
movements in the price of the currencies or securities or other assets which are
being hedged. If the price of the futures contract moves more or less than the
price of the currencies or securities or other assets being hedged, the Trust
will experience a gain or loss which will not be completely offset by movements
in the price of the currencies or securities or other assets. It is possible
that, where the Trust has sold futures contracts to hedge its portfolio
securities and other assets against decline in the market, the market may
advance and the value of securities held in the trust's portfolio (or related
currencies) may decline. If this occurred, the Trust would lose money on the
futures contract and would also experience a decline in value in its portfolio
securities and other assets. Where futures are purchased to hedge against a
possible increase in the prices of securities or other assets before the Trust
is able to invest its cash (or cash equivalents) in securities (or options) in
an orderly fashion, it is possible that the market may decline; if the Trust
then determines not to invest in securities (or options) at that time because of
concern as to possible further market decline or for other reasons, the Trust
will realize a loss on the futures that would not be offset by a reduction in
the price of securities purchased.
The market prices of futures contracts may be affected if participants in
the futures market elect to close out their contract through offsetting
transactions rather than to meet margin deposit requirements. In such case,
distortions in the normal relationship between the cash and futures markets
could result. Price distortions could also result if investors in futures
contracts opt to make or take delivery of the underlying securities rather than
to engage in closing transactions due to the resultant reduction in the
liquidity of the futures market. In addition, due to the fact that, from the
point of view of speculators, the deposit requirements in the futures markets
are less onerous than margin requirements in the cash market, increased
participation by speculators in the futures market could cause temporary price
distortions. Due to the possibility of price distortions in the futures market
and because of the imperfect correlation between movements in the prices of
currencies and securities and other assets and movements in the prices of
futures contracts, a correct forecast of market trends may still not result in a
successful hedging transaction.
Compared to the purchase or sale of futures contracts, the purchase of put
or call options on futures contracts involves less potential risk for the Trust
because the maximum amount at risk is the premium paid for the options plus
transaction costs. However, there may be circumstances when the purchase of an
option on a futures contract would result in a loss to the Trust while the
purchase or sale of the futures contract would not have resulted in a loss, such
as when there is no movement in the price of the underlying securities.
Lending of Portfolio Securities
The Trust may seek to increase its income by lending portfolio securities
. Any such loan will be continuously secured by collateral at least equal to the
market value of the security loaned. The Trust would have the right to call a
loan and obtain the securities loaned at any time on five days' notice. During
existence of a loan, the Trust would continue to receive the equivalent of the
interest or dividends paid by the issuer on the securities loaned and would also
receive a fee, or the interest on investment of the collateral, if any. The
total value of the securities loaned at any time will not be permitted to exceed
30% of the Trust's total assets. As with other extensions of credit, there are
risks of delay in recovery or even loss of rights in the collateral should the
borrower of the securities fail financially. However, the loans would be made
only to U.S. domestic organizations deemed by the Trust's management to be
earned justifies the attendant risk.
Repurchase Agreements
A repurchase agreement is an agreement under which the Trust acquires a
money market instrument (a security issued by the U.S. Government or any agency
thereof, a banker's acceptance or a certificate of deposit) from a commercial
bank, subject to resale to the seller at an agreed upon price and date (normally
the next business day). Such an agreement is, in effect, a loan by the Trust.
The resale price reflects an agreed upon interest rate effective for the period
the instrument is held by the Trust and is unrelated to the interest rate on the
underlying instrument. The Trust will effect repurchase agreements only with
large well-capitalized banks whose deposits are insured by the Federal Deposit
Insurance Corporation and which have capital and undivided surplus of at least
$200,000,000. The instrument acquired by the Trust in these transactions
(including accrued interest) must have a total value in excess of the value of
the repurchase agreement and will be held by the Trust's custodian bank until
repurchased. The Trustees of the Trust will monitor the Trust's repurchase
agreement transactions on a continuous basis and will require that the
applicable collateral will be retained by the Trust's custodian bank. No more
than an aggregate of 10% of the Trust's total assets, at the time of investment,
will be invested in illiquid securities, including, without limitation,
repurchase agreements maturing in more than seven days. There is no limitation
on the Trust's assets with respect to investments in repurchase agreements
having maturities of less than seven days.
The use of repurchase agreements involves certain risks. For example, if
the seller under a repurchase agreement defaults on its obligation to repurchase
the underlying instrument at a time when the value of the instrument has
declined, the Trust may incur a loss upon its disposition. If the seller becomes
insolvent and subject to liquidation or reorganization under bankruptcy or other
laws, a bankruptcy court may determine that the underlying instrument is
collateral for a loan by the Trust and therefore is subject to sale by the
trustee in bankruptcy. Finally, it is possible that the Trust may not be able to
substantiate its interest in the underlying instrument. While the Trust's
Trustees acknowledge these risks, it is expected that they can be controlled
through careful monitoring procedures.
PORTFOLIO TURNOVER
Securities will generally be purchased for possible long-term appreciation
and not for short-term trading profits; however, the rate of portfolio turnover
is not a limiting factor when the Investment Adviser deems changes appropriate.
It is anticipated that the Trust's annual portfolio turnover rate will normally
not exceed 50%. A rate of turnover of 100% could occur, for example, if the
value of the lesser of purchases and sales of portfolio securities for a
particular year equaled the average monthly value of portfolio securities owned
during the year (excluding short-term securities).
A high rate of portfolio turnover involves a correspondingly greater
amount of brokerage commissions and other costs which must be borne directly by
the Trust and thus indirectly by its shareholders. It may also result in the
realization of larger amounts of short-term capital gains which are taxable to
shareholders as ordinary income.
INVESTMENT RESTRICTIONS
The Trust has adopted the following investment restrictions which are
fundamental policies and cannot be changed without approval by the holders of a
majority of the outstanding voting securities of the Trust (which in the
Preliminary Prospectus and this Statement of Additional Information means the
lesser of either (i) a majority of the outstanding shares of the Trust or (ii)
67% or more of the shares represented at a meeting if more than 50% of such
shares are present or represented by proxy at the meeting):
1. The Trust will not purchase any securities (other than securities of
the U.S. Government, its agencies, or instrumentalities) if as a result more
than 5% of the Trust's total assets (taken at current value) would then be
invested in securities of a single issuer.
2. The Trust will not make loans, except that the Trust may (a) purchase a
portion of an issue or publicly distributed bonds, debentures, or similar debt
securities (including so called "repurchase agreements" whereby the Trust's cash
is, in effect, deposited on a secured basis with a bank for a period and yields
a return; provided, however, that no more than an aggregate of 10% of the
Trust's total assets, immediately after such investment, will be invested in
repurchase agreements having maturities longer than seven days and other
investments subject to legal or contractual restrictions on resale, or which are
not readily marketable), and (b) lend portfolio securities upon such conditions
as may be imposed from time to time by the Securities and Exchange Commission,
provided that the value of securities loaned at any time may not exceed 30% of
the Trust's total assets.
3. The Trust will not borrow in excess of 5% of its total assets, taken at
market or other fair value, at the time such borrowing is made, and any such
borrowing may be undertaken only as a temporary measure for extraordinary or
emergency purposes; and the Trust may not pledge, mortgage, or hypothecate its
assets taken at market to an extent greater than 15% of the Trust's gross assets
taken at cost. The Trust has no current intention of pledging its assets.
4. The Trust will not purchase any securities if such purchase would cause
more than 10% of the total outstanding voting securities of such issuer (other
than any wholly-owned subsidiary of the Trust) to be held by the Trust.
5. The purchase or retention of the securities of any issuer is prohibited
if the officers and Trustees of the Trust or its Investment Adviser owning
beneficially more than 1/2 of 1% of the securities of such issuer together own
beneficially more than 5% of the securities of such issuer.
6. The purchase of the securities of any other investment company is
prohibited, except that the Trust may make such a purchase in the open market
involving no commission or profit to a sponsor or dealer (other than the
customary broker's commission), provided that not more than 10% of the trust's
total assets (taken at market or other fair value) would be invested in such
securities and not more than 3% of the voting stock of another investment
company would be owned by the Trust immediately after the making of any such
investment, and the Trust may make such a purchase as part of a merger,
consolidation or acquisition of assets. The Trust has no current intention of
investing in other investment companies.
7. The purchase of securities of companies with a record (including that
of their predecessors) of less than three years' continuous operation is
prohibited if such purchase would cause the Trust's investments in such
companies taken at cost to exceed 5% of the total assets of the Trust taken at
current values, except that this restriction shall not apply to any of the
Trust's investments in any of its wholly-owned subsidiaries.
8. The Trust will not participate in a joint venture or on a joint and
several basis in any securities trading account.
9. The Trust will not act as an underwriter of securities issued by
others, except to the extent it may be deemed such in connection with the
disposition of securities owned by it.
10. The Trust will not make short sales of securities unless at all times
when a short position is open, it owns an equal amount of such securities or
owns securities convertible into or exchangeable for, without payment of any
further consideration, securities of the same issue as, and at least equal in
amount to, the securities sold short. The Trust has no current intention of
selling securities short.
11. The Trust will not purchase securities on margin, but may obtain such
short-term credits as may be necessary for the clearance of purchases and sales
of securities.
12. The Trust will not invest in a company in any single industry, if,
immediately after such investment, more than 25% of the Trust's total assets
would be invested in companies of such industry. Eligible industry
classifications are gold mining, silver mining, companies mining other precious
metals, gold manufacturing and industrial production and silver manufacturing
and industrial production.
13. The Trust will not make investments in real estate or indirect
interests in real estate.
14. The Trust will not write, purchase or sell puts, calls or combinations
thereof or take positions in commodities or commodity futures contracts or
related options except that the Trust may (a) write covered call options with
respect to securities, securities indices and currencies and enter into closing
purchase or sale transactions with respect to such written options, (b) purchase
put or call options with respect to securities, securities indices and
currencies, and (c) engage in financial and precious metals futures contracts
and related options transactions, all as described in the Preliminary Prospectus
and above under "Investment Policies and Risk Considerations".
MANAGEMENT
Officers and Trustees
The Trust's Officers and Trustees, their positions with the Trust and
their principal occupations are listed below. Except as indicated, each
individual has held the office shown or other offices in the same company, other
than the Trust, for the last five years. Unless otherwise noted, the business
address of each Officer and Trustee is 2717 Furlong Road, Doylestown,
Pennsylvania 18901, which is also the address of the Trust's Investment Adviser,
Meeschaert Investment Management Corporation. Those Trustees who are "interested
persons" of the Trust or the Investment Adviser, as defined in the Investment
Company Act of 1940, by virtue of their affiliation with either the Trust or the
Investment Adviser, are indicated by an asterisk (*).
Positions with Principal
Name and Address the Trust Occupation
DAVID W. C. PUTNAM Chairman Chairman and Trustee,
10 Langley Road and Trustee Anchor Capital Accumulation Trust,
Newton Centre, MA 02159 Anchor International Bond Trust,
Anchor
Strategic Assets Trust, Anchor
Resource and Commodity Trust,and
Anchor Gold and Currency Trust
(Investment Companies); President
and Director, F. L. Putnam Securities
Company, Inc.; Chairman and Director,
Boston Security Counsellors, Inc.
(Investment Adviser); Chairman and
Trustee, The Advest Advantage
Investment Trusts (Investment
Companies.)
SPENCER H. LE MENAGER Secretary and President, Equity, Inc.; formerly
222 Wisconsin Avenue Trustee President, Howe, Barnes & Johnson
P. O. Box 390 Inc. (securities dealer).
Lake Forest, IL 60045
MAURICE A. DONAHUE Trustee Director and Professor, Institute
50 Holy Family Road for Governmental Services and Walsh
Holyoke, MA 01040 -Saltonstall Professor of Practical
Politics, University of Massachusetts,
Director, Vanguard Savings Bank,
Former Member, Massachusetts House of
Representatives, Former Member and
President, Massachusetts Senate.
DAVID Y. WILLIAMS* President and President and Director, Anchor
2717 Furlong Road Trustee Investment Management Corporation;
Doylestown, PA 18901 President and Director,
Meeschaert & Co., Inc. (securities
dealer).
J. STEPHEN PUTNAM Vice President President, Robert Thomas
880 Carillon Parkway and Treasurer Securities, Inc. (securities
P.O. Box 12749 dealer) since June 1983; Director
St. Petersburg, FL 33733 F. L. Putnam Securities Company,
Incorporated. Formerly,
President and Director, EPB, Inc.
and Vice President, Burgess &
Leith Incorporated.
CHRISTOPHER Y. WILLIAMS Vice President and Secretary, Anchor
1442 Margaret Ct. Vice President Investment Management Corporation;
Jamison, PA 18929 and Vice President and Secretary,
Asst. Secretary Meeschaert & Co., Inc. (securities
dealer)
JOSEPH C. WILLIAMS Vice President Vice President and Treasurer, Anchor
4664 Louise St. Clair and Investment Management Corporation;
Doylestown, PA 18901 Asst. Treasurer Vice President and Treasurer,
Meeschaert & Co., Inc. (securities
dealer)
No Officer or Trustee of the Trust owned or had beneficial interests in any
shares of the Trust outstanding on the date hereof.
Messrs. Putnam, Le Menager, and Donahue are the Trustees who are not
"interested persons" (as that term is defined in the Investment Company Act
of 1940) of the Trust.
Mr. David W.C. Putnam and Mr. J. Stephen Putnam are brothers.
Mr. David Y. Williams is the father of Mr. Christopher Y. Williams and Mr.
Joseph C. Williams. Mr. Christopher Y. Williams and Mr. Joseph C. Williams
are brothers.
Mr. David W.C. Putnam and Mr. J. Stephen Putnam are brothers.
Mr. David Y. Williams is the father of Mr. Christopher Y. Williams and Mr.
Joseph C. Williams. Mr. Christopher Y. Williams and Mr. Joseph C. Williams
are brothers.
The standing audit committee is composed of Messrs. Le Menager and Donahue.
The Trust does not have a nominating or compensation committee.
Remuneration of Officers and Trustees
The Trust will not pay any remuneration to its Officers or Trustees as
such who are "interested persons" (as that term is defined in the Investment
Company Act of 1940) of the Trust or of any investment advisor or distributor of
the Trust but will pay an annual fee not in excess of $1,000 to each Trustee who
is not such an "interested person."
Investment Advisory Contract
The Trust engages Anchor Investment Management Corporation, formerly known
as Meeschaert Investment Management Corporation, as Investment Adviser pursuant
to an Investment Advisory Contract dated ____________, 1996, which was approved
on such date by the Trust's sole shareholder.
The Investment Adviser manages the investments and affairs of the Trust,
subject to the supervision of the Trust's Board of Trustees. The Investment
Adviser furnishes to the Trust investment advice and assistance, administrative
services, office space, equipment and clerical personnel and investment
advisory, statistical and research facilities. The Trust is responsible for all
its expenses not assumed by the Investment Adviser under the contract,
including, without limitation, the fees and expenses of the custodian and
transfer agents, costs incurred in determining the Trust's net asset value and
keeping its books; the cost of share certificates; membership dues in investment
company organizations; distribution and brokerage commissions and fees; fees and
expenses of registering its shares; expenses of reports to shareholders, proxy
statements and other expenses of shareholders' meetings; insurance premiums,
printing and mailing expenses; interest, taxes and corporate fees; legal and
accounting expenses; and fees and expenses of Trustees not affiliated with the
Investment Adviser. The Trust will also bear expenses incurred in connection
with litigation in which the Trust is a party and the legal obligation the Trust
may have to indemnify its Officers and Trustees with respect thereto.
The Trust pays the Investment Adviser, as compensation under the
Investment Advisory Contract, a monthly fee at the rate of .75% per annum of the
average daily net assets of the Trust. This fee is higher than that paid by most
other investment companies.
The Investment Advisory Contract dated _____________, 1996 will remain in
effect until ____________, 1998, but it may be extended from year to year
thereafter if approved at least annually (a) by the vote of a majority of the
outstanding shares of the Trust or by the Board of Trustees, and in either case,
(b) by a vote of a majority of the Trustees of the Trust who are not parties to
the contract or "interested persons" (as that term is defined in the Investment
Company Act of 1940) of any such party cast in person at a meeting called for
the purpose. Amendments to the contract require similar approval by the
shareholders and the Trustees who are not "interested persons" (the "Independent
Trustees"). The contract is terminable at any time without penalty by the Board
of Trustees of the Trust or by vote of a majority of the Trust's shares on 60
days' written notice or by the Investment Adviser on 90 days' written notice.
The contract terminates automatically in the event of its assignment (which
includes the transfer of a controlling block of the stock of the Investment
Adviser).
Investment Adviser
The Investment Adviser, Anchor Investment Management Corporation (formerly
Meeschaert Investment Management Corporation) is located at 2717 Furlong Road,
Doylestown, Pennsylvania 18901. The Trust's principal offices are also located
at this address.
The Investment Adviser and Meeschaert & Co., Inc., the Trust's principal
underwriter (the "Distributor"), are affiliated through common control with
Societe D'Etudes et de Gestion Financieres Meeschaert, S.A. ("Societe
D'Etudes"), one of France's largest privately-owned investment management firms,
which together are referred to as the "Meeschaert organization". The Meeschaert
organization was established in Roubaix, France in 1935 by Emile C. Meeschaert,
and presently manages, with full discretion, an aggregate amount of
approximately $1.5 billion for about 8,000 individual (and institutional)
customers, including $250 million in French mutual funds. The Investment
Adviser's Directors and Officers are as follows:
Luc E. Meeschaert, Chairman; his principal occupation is serving as Chief
Executive Officer of Societe D'Etudes.
David Y. Williams, President and Director; Mr. Williams is also a
Trustee of the Trust and President and a Director of Meeschaert & Co., Inc.,
the Trust's Distributor.
Paul Jaspard, Vice President; his principal occupation is serving as
President of Global Equity Managers, S.A., P.O. Box 1543 26A, rue
Albert-Premier, L-1015 Luxembourg (investment advisor). Mr. Jaspard has managed
other portfolios for the Meeschaert organization for more than eighteen years,
and is the individual primarily responsible for the day-to-day management of the
Trust's portfolio.
PRINCIPAL HOLDERS OF SECURITIES As of the date of this
Statement of Additional Information, Wendel &
Co., as an indirect nominee of Societe D'Etudes, 23 Rue Drouot, 75009, Paris,
France, held of record 100% of the outstanding shares of the Trust. As of the
date hereof, Societe D'Etudes had sole voting and investment power with respect
to all of the outstanding shares of the Trust.
DETERMINATION OF NET ASSET VALUE
The net asset value is determined by the Trust as of 12:00 Noon Eastern
Time on each business day on which the New York Stock Exchange is open for
trading or on any day that the Trust is open, but the New York Stock Exchange is
not open for business, if there occurs an event which might materially affect
the net asset value of the Trust's redeemable shares.
The manner of determination of the net asset value is briefly as follows:
Securities traded on a U.S. national or other foreign securities exchange are
valued at the last sale price on the primary exchange on which they are listed,
of if there has been no sale that day, at the current bid price. Other U.S. and
foreign securities for which market quotations are readily available are valued
at the known current bid price believed most nearly to represent current market
value. Other securities (including limited traded securities) and all other
assets of the Trust are valued at fair market value as determined in good faith
by the Trustees of the Trust. Liabilities are deducted from the total, and the
resulting amount is divided by the number of shares outstanding.
Each day investment securities traded on a national securities exchange
are valued at the noon sales price; securities traded in the over-the-counter
market are valued at the last sale price as of 12:00 Noon. Gold bullion is
valued at noon based on the New York spot gold price. Gold coins, foreign
currencies, and foreign denominated securities for which market quotations are
readily available are valued at the known bid price as of 12:00 Noon. Temporary
cash investments are stated at cost. In the absence of a reliable market for a
particular metal, security or currency, an investment therein will be valued at
fair value as determined in good faith by the Trustees.
Specimen Price Mark-Up Sheet
Cash $120,000
Deferred organization expenses 37,730
------
TOTAL ASSETS 157,730
Less: accrued expenses $37,730
------
NET ASSETS $120,000*
$120,000 divided by 12,000 outstanding shares = $10.00 net asset value per
share.
Offering price = net asset value per share, or $10.00.
*See the Balance Sheet of the Trust under "Financial Statements."
DISTRIBUTION OF SHARES
Rule 12-b-1 under the Investment Company Act of 1940 ("Rule 12b-1")
permits investment companies to use their assets to bear expenses of
distributing their shares if they comply with various conditions, including
adoption of a distribution plan containing certain provisions set forth in the
rule. On ____________, 1996, such a Plan was approved by the Board of Trustees,
including a majority of the Independent Trustees who have no direct or indirect
financial interest in the Plan or any agreement related thereto (the "Rule 12b-1
Trustees"). The Plan is of the type sometimes called a compensation plan.
The Plan is currently not in effect, and will not be implemented unless
and until reapproved by the Trust's shareholders and Board of Trustees.
In connection with the Plan, Trust shares are offered for sale at net
asset value, and the Trust may pay the Distributor a commission equal to up to
5% of the price paid to the Trust for each sale, all or any part of which may be
re-allowed by the Distributor to others (dealers) making such sales. To the
extent that the distribution fee is not paid to such dealers, the Distributor
may use such fee for its expenses of Distribution of Trust shares. If such fee
exceeds its expenses, the Distributor may realize a profit from these
arrangements. The Plan provides for an aggregate limit on the amount of all
payments pursuant to the Plan equal to .75 of 1% of the Trust's average daily
net assets for any fiscal year. If, so long as the Plan is in effect, the
Distributor's re-allowances to dealers and other expenses exceed the .75 of 1%
limit in any particular year, it could collect in any future year such amounts
(which do not include interest or other carrying charges) up to any amount by
which amounts paid to it under the Plan in that year are less than the
applicable limit for the prior year. In such a case it might receive amounts in
excess of its then current expenses.
Whether any expenditure under the Plan is subject to a state expense limit
will depend upon the nature of the expenditure and the terms of the state law,
regulation or order imposing the limit. Any expenditure subject to such a limit
will be included in the Trust's total operating expenses for purposes of
determining compliance with the expense limit.
The Plan may be terminated at any time by vote of the Rule 12b-1.
Trustees, or by vote of a majority of the outstanding voting shares of the
Trust. Any change in the Plan that would materially increase the distribution
expenses of the Trust provided for in the Plan requires shareholder approval;
otherwise, the Plan may be amended by the Trustees, including the Rule 12b-1
Trustees.
If and when the Plan is in effect, the selection and nomination of
candidates for Independent Trustees must be committed to the discretion of the
Independent Trustees.
The total amounts paid by the Trust under the foregoing arrangements may
not currently exceed the maximum limit specified above, and the amounts and
purposes of expenditures under the Plan must be reported to the Rule 12b-1
Trustees quarterly. The Rule 12-b1 Trustees may require or approve changes in
the implementation or operation of the Plan, and may also require that total
expenditures by the Trust under the Plan be kept within limits lower than the
maximum amount currently permitted under the Plan as stated above.
If the limit on expenditures is reached at any given time, the Distributor
intends, although it is not obligated to do so, to continue to offer shares of
the Trust and to continue to pay others re-allowances and maintenance fees. In
such an event, the Distributor intends that it will seek payment from the Trust
in the amount of its commissions (including re-allowances) and maintenance fees
at such times when the expenditures limit has not otherwise been reached. The
Trust will have no contractual obligation to pay any portion of such amounts to
the Distributor, and the amount, if any, and the time and conditions under which
the Trust might make such payment as requested by the Distributor will be solely
within the discretion of the 12b-1 Trustees.
In 1992, the Securities and Exchange Commission approved amendments to the
National Association of Securities' Dealers ("NASD's") Rules of Fair Practice
that impose limits on mutual fund sales charges, including asset-based sales
charges (i.e. Rule 12b-1 fees) and contingent deferred sales charges. These
amendments became effective on July 7, 1993. To the extent that such amendments
to Rule 12b-1 under the Investment Company Act of 1940 or the NASD's Rules of
Fair Practice are inconsistent with the Plan, the Trusts' Board of Trustees will
either terminate the Plan before it becomes effective or propose changes to the
Plan necessary to conform the Plan to such amendments.
Contingent Deferred Sales Charge
In conjunction with, but not as part of, the Plan, a contingent deferred
sales charge may be imposed upon certain redemptions of shares purchased after
inception of the plan. The charge in respect of such redemptions made during the
first four calendar years following purchase of the shares is as follows: 4% in
the year of purchase; 3% in the second year; 2% in the third year; and 1% in the
fourth year. These charges are not received by the Distributor and will not
reduce amounts paid to the Distributor under the Plan.
HOW TO PURCHASE SHARES
Shares of the Trust may be purchased from the Distributor, 2717 Furlong
Road, Doylestown, Pennsylvania 18901. There is no sales charge or commission
payable by the investor with respect to the purchase of shares. For new
shareholders initiating accounts, the minimum investment is $500, except for
exchanges of securities for Trust shares, where the minimum is $5,000 (see "How
to Exchange Securities for Trust Shares" in the Preliminary Prospectus). There
is no minimum for shareholders making additional investments to existing
accounts.
An application for use in making an initial investment in the Trust
appears in the back of the Trust's Preliminary Prospectus. The applicable price
will be the net asset value next determined after the order is received by the
Distributor. (See "Determination of Net Asset Value".)
The Distributor sells shares to the public as agent for the trust and is
the sole principal underwriter for the Trust under a Distributor's Contract
dated ___________, 1996. The contract automatically terminates upon assignment
(which includes the transfer of a controlling block of the stock of the
Distributor) by either party. The contract also provides that it will continue
for two years from its date and thereafter its continuation from year to year
will require approval by a majority of the Trust's shares or by the Board of
Trustees and, in addition to such approval, the approval, by vote cast in
person, at a meeting called for the purpose, by a majority of the Independent
Trustees. Under the contract, the Distributor pays expenses of sales literature,
including copies of any Preliminary Prospectus of the Trust delivered to
investors, and the Trust pays for its registration and registration of its
shares under the Federal Securities and Investment Company Acts and state
securities acts and other expenses in which it has a direct interest.
REDEMPTION, EXCHANGE AND REPURCHASE OF SHARES Any shareholder
will be able to require the Trust to redeem his
shares. In addition, the Trust will maintain a continuous offer to repurchase
its shares. If a shareholder uses the services of a broker in selling his shares
in the over-the-counter market, the broker may charge a reasonable fee for his
services. Redemptions, exchanges and repurchases will be made in the following
manner:
1. Certificates for shares of the Trust may be mailed or presented, duly
endorsed, with signatures guaranteed in the manner described below, with a
written request that the Trust redeem the shares, to the Trust's transfer agent,
Anchor Investment Management Corporation, 2717 Furlong Road, Doylestown,
Pennsylvania 18901 or to the Trust. If no certificate has been issued and shares
are held in an Open Account with the Trust's transfer agent, a written request
that the Trust redeem such shares, accompanied by a separate assignment form
(stock power), duly endorsed, with signatures guaranteed in the manner described
below, may be mailed to presented as described above. The redemption price will
be the net asset value next determined after the certificates and request are
received.
2. A request for repurchase may be communicated to the Trust by a
shareholder through a broker. The repurchase price will be the net asset value
next determined after the request is received by the Trust, provided that, if
the broker receives the request before noon and transmits it to the Trust before
1:00 p.m. Eastern Time the same day, the repurchase price will be the net asset
value determined as of 12:00 Noon Eastern Time that day. If the broker receives
the request after noon, the repurchase price will be the net asset value
determined as of 12:00 Noon Eastern Time the following day. If an investor uses
the services of a broker in having his shares repurchased, the broker may charge
a reasonable fee for his services.
Payment for shares redeemed or repurchased will be delivered within seven
days after receipt of the shares, and/or required documents, duly endorsed. The
signature(s) on the certificate or separate assignment form must be guaranteed
by a commercial bank or trust company or by a member of the New York, American,
Pacific Coast, Boston or Chicago Stock Exchange. A signature guarantee by a
savings bank and loan association or notarization by a notary public is not
acceptable.
In order to insure proper authorization the transfer agent may request
additional documents such as, but not restricted to, stock powers, trust
instruments, certificates of death, appointments as executor, certificates of
corporate authority and waiver of tax required in some states from selling
estates before redeeming shares.
Under unusual circumstances, when the Board of Trustees deems it in the
best interest of the Trust's shareholders, the Trust may make payment for shares
repurchased or redeemed in whole or in part in securities or other assets of the
Trust taken at current values. Such payments are permitted pursuant to Rule
18f-1 of the Investment Company Act of 1940, provided that the Trust does not
make an election with the Commission that would irrevocably preclude such
payments in kind. The Trust does not presently intend to make such an election.
Such an election would require the Trust to redeem with cash at a shareholder's
election in any case where the redemption involves less than $250,000 (or 1% of
the Trust's net assets at the beginning of each ninety day period during which
such redemptions are in effect, if that amount is less than $250,000). Should
payment be made in securities, the redeeming shareholder may incur brokerage
costs in converting such securities to cash.
The right of redemption may be suspended or the payment date postponed
when the New York Stock Exchange is closed for other than customary weekend or
holiday closings, or when trading on the New York Stock Exchange is restricted,
as determined by the Securities and Exchange Commission; for any period when an
emergency as defined by rules of the Commission exists; or during any period
when the Commission has, by order, permitted such suspension. In case of a
suspension of the right of redemption, a shareholder who has tendered a
certificate for redemption or made a request for redemption through a broker may
withdraw his request or certificate or he will receive payment of the net asset
value determined next after the suspension has been terminated.
A shareholder may receive more or less than he paid for his shares,
depending on the net asset value of the shares at the time of redemption or
repurchase.
DISTRIBUTIONS
The Trust distributes any income dividends and capital gains distributions
in additional shares, or, at the option of the shareholder, in cash. In
accordance with his distribution option, a shareholder may elect (1) to receive
both dividend and capital gain distributions in additional shares or (2) to
receive dividends in cash and capital gain distributions in additional shares or
(3) to receive both dividends and capital gain distributions in cash. A
shareholder may change his distribution option at any time by notifying the
Transfer Agent in writing. To be effective with respect to a particular dividend
or distribution, the new distribution option must be received by the Transfer
Agent at least 30 days prior to the close of the fiscal year. All accounts with
a cash dividend option will be changed to reinvest both dividends and capital
gains automatically upon determination by the Trust's transfer agent that the
address of record for the account is not current.
Dividends and capital gain distributions received in shares will be
received by the Trust's transfer agent, as agent for the shareholder, and
credited to his Open Account in full and fractional shares computed at the
record date closing net asset value.
Interest and dividends, and possible other amounts received by the Trust
in respect of foreign investments, may be subject to withholding and other taxes
at the source, depending upon the laws of the country in which the investment is
made.
TAXES
The Trust intends to qualify each year as a regulated investment company
under Subchapter M of the Internal Revenue Code, as subsequently amended or
re-enacted. In order to so qualify, the Trust must, among other things, (i)
derive at least 90% of its gross income from dividends, interest, payments with
respect to certain securities, loans and gains from the sale of securities; (ii)
derive less than 30% of its gross income from gains from the sale or other
disposition of securities held for less than three months; (iii) distribute at
least 90% of its dividend, interest and certain other taxable income each year;
(iv) maintain at least 50% of the value of its total assets in cash, cash items,
U.S. Government securities, securities of other regulated investment companies,
and other securities to the extent that no more than 5% of its assets are
invested in the securities of one issuer and it owns no more than 10% of the
value of any issuer's voting securities, and (v) have no more than 25% of its
assets invested in the securities (other than those of the U.S. Government or
other regulated investment companies) of any one issuer or of two or more
issuers which the Trust controls and which are engaged in the same, similar or
related trades and businesses. To the extent the Trust qualifies for treatment
as a regulated investment company, the Trust will not be subject to Federal
income tax on income paid to its shareholders in the form of dividends or
capital gains distributions.
Dividends paid by the trust will generally not qualify for the
dividends-received deductions for corporations. The Trust will notify
shareholders each year of the amount of dividends and distributions, including
the amount of any distribution of long-term capital gains.
The Trust will be subject to a nondeductible 4% exercise tax to the extent
that it fails to distribute, with respect to each calendar year, at least 98% of
its ordinary income for such calendar year and 98% of its capital gain net
income for the one-year period ending on October 31 of such calendar year. In
addition, to the extent that the Trust fails to distribute 100% of its ordinary
and capital gain net income with respect to any calendar year, the amount of
such shortfall is subject to such tax unless distributed with respect to the
following calendar year. For a distribution to qualify as such with respect to a
calendar year under the foregoing rules, it must be declared by the Trust before
December 31 of the year and paid by the Trust before the following February 1.
Such distributions will be taxable to taxable shareholders in the year the
distributions are declared rather than the year in which the distributions are
received.
The Trust's foreign investments may be subject to foreign withholding
taxes. The Trust will be entitled to claim a deduction for such foreign
withholding taxes for federal income tax purposes. However, any such taxes will
reduce the income available for distribution to shareholders.
Under the Interest and Dividend Compliance Act of 1983, the Trust will be
required to withhold and remit to the U.S. Treasury 20% of the dividends and
proceeds of redemptions paid with respect to any shareholder who fails to
furnish the Trust with a correct taxpayer identification number, who
under-reported dividends or interest income, or who fails to certify that he or
she is not subject to such withholding. An individual's tax identification
number is his or her social security number.
Tax Treatment of Options and Futures Transactions
In connection with its operations, the Trust may write and purchase
options. The tax consequences of transactions in options will vary depending
upon whether the option expires or is exercised, sold or closed. The Trust may
also affect transactions in financial futures contracts and related options. The
tax consequences of certain of these transactions were changes or clarified by
amendments made to the Internal Revenue Code by the Deficit Reduction Act of
1984 (the "Act"). Although no final regulations have been adopted under the Act,
the following discussion reflects the Trust's interpretation of applicable
changes made by the Act.
The Trust will seek principally to purchase or write futures contracts and
options that will be classified as "regulated futures contracts", "equity
options", or "nonequity options", to the extent consistent with its investment
objective and opportunities which appear available. "Regulated futures
contracts" are contracts which are marked-to-market under a daily cash flow
system of the type used by United States futures exchanges to determine the
amount which must be deposited (in the case of losses) and the amount which may
be withdrawn (in the case of gains) as a result of price changes with respect to
the contract during the day, and which are traded on or subject to the rules of
a qualified board of trade or exchange. "Equity options" are any options to buy
or sell stock, or any option, the value of which is determined directly or
indirectly by reference to any stock (or group of stocks) or stock index; equity
options do not include any options with respect to any group of stocks or stock
index if there is in effect a designation by the Commodity Futures Trading
Commission of a contract market for a contract based on such group of stocks or
index, or the Secretary of the Treasury determines that such option meets the
requirements of law for such a designation. "Nonequity options" are any listed
options which are not equity options.
Regulated futures contracts and nonequity options, defined as "Section
1256 Contracts" under the Act, are subject to a marked-to-market rule for
federal income tax purposes. Under this rule, each such contract and option held
by the Trust at the end of each fiscal year will be treated as sold for fair
market value on the last business day of such fiscal year. As described below,
the character of gain or loss resulting from the sale, disposition, closing out,
expiration or other termination of such contracts and options will be treated as
long-term capital gain or loss to the extent of 60% thereof, and as short-term
capital gain or loss to the extent of 40% thereof ("60/40 gain or loss"). Equity
options, on the other hand, are not subject to the marked-to-market rule. The
character of gain or loss resulting from the sale, disposition, closing out,
expiration or other termination of such equity options is not subject to the
60/40 gain or loss rule.
The Trust will not realize gain or loss on the receipt or payment of a
premium. If a call option written by the Trust expires without being exercised,
the premium received will be recognized by the Trust as a gain (60/40 for a
nonequity call option or short-term for an equity call option.) If a put option
purchased by the Trust expires without being exercised, the premium paid will be
recognized by the Trust as a loss (60/40 for a nonequity put option or short
long-term for an equity put option, depending on the holding period of the put);
if, however, the Trust acquired the put option on the same day it acquired the
property identified as intended to be used in exercising such put, the premium
paid will be added to the basis of the underlying securities. If a nonequity or
equity call option written by the Trust is exercised (or a nonequity put option
purchased by the Trust is sold), the Trust will recognize short or long-term
capital gain or loss depending on the holding period of the underlying
securities. If a regulated futures contract, nonequity call option written by
the Trust or nonequity put option purchased by the Trust is closed (i.e., the
Trust's obligations are terminated other than through exercise or lapse), the
Trust will recognize 60/40 gain or loss. If an equity call option written by the
Trust is closed, the Trust will recognize short-term capital gain or loss; if an
equity put option purchased by the Trust is closed, the Trust will recognize
long or short-term capital gain or loss, depending on the holding period of the
put option.
Section 1092 of the Internal Revenue Code, which applies to certain
straddles, may affect the taxation of the Trust's transactions in options on
portfolio securities and in financial futures (and related options). As a result
of rules under that section, the Trust may be required to postpone recognition
of losses incurred in certain closing purchase transactions under the year in
which the other leg of the straddle is closed. The Treasury Department has
issued temporary regulations on the holding period of straddles held by
regulated investment companies.
The Internal Revenue Service has ruled publicly that an exchange-traded
call option on a particular security is a security for the purpose of the 50% of
assets diversification test and that its issuer is the issuer of the underlying
security, not the writer of the option, for purposes of diversification
requirements. In contrast, the Internal Revenue Service has ruled privately that
the issuer of a broad-based financial futures option such as a stock index
futures contract (or an option on such a contract) is the writer of the
instrument and not the issuers of the group of stocks or securities which
comprise the index. Accordingly, the Trust much treat such a futures contract
(or option on it) as issued by a single issuer for purposes of meeting the
diversification tests.
In other private rulings, the Internal Revenue Service has addressed other
tax issues arising from investments by regulated investment companies in options
and future contracts. In particular, the Internal Revenue Service has stated in
private rulings that the gains recognized as a result of the deemed sale or
certain options under the marked-to-market rule (which are treated as 60/40
gain) will not be treated as gains from the sale or exchange of securities held
for less than three months, regardless of the actual holding period to year end.
The Internal Revenue Service also has stated in private rulings that gains or
losses with respect to index futures contracts on securities (and related
options) are gains and losses from the sale or exchange of securities.
The legislative history of the Tax Reform Act of 1986 provides that income
realized in connection with writing covered and uncovered put and call options
is intended by Congress to be qualifying income for purposes of the 90% passive
income test. However, the requirement that less than 30% of the Trust's gross
income be derived from gains from the sale or other disposition of securities
held for less than three months will restrict the Trust in its ability to write
covered call options or securities that it has held less than three months, to
effect closing purchase transactions with respect to options that have been held
less than three months, and to effect closing purchase transactions with respect
to options that have been written less than three months prior to such
transactions. Consequently, in order to avoid realizing a gain within the
three-month period, the Trust may be required to defer the closing out of an
option beyond the time when it might otherwise be advantageous to do so.
The Tax Reform Act of 1986 revised the rules concerning gains from sales
of assets held less than three months in the case of a "designated hedge". In
the case of a "designated hedge", recognized gains may be offset by unrecognized
declines in value of the other leg of the hedge during the period of the hedge
for purposes of determining whether gains from sales of securities held for less
than three months equal or exceed 30% of gross income. For example, if a fund
sells a one-month call at $95 on stock it owns which is worth $100 for $4, the
stock declines in value of $94 and the option is not exercised, the $4 of
recognized gain on lapse of the option is offset by the $6 decline in value of
the stock and there is no net gain for purposes of the three-month gains test.
The $4 is recognized under the usual rules for other purposes. The Conference
Committee Report on the 1986 Act established procedures for identification of a
"designated hedge" prior to issuance of regulations on the topic.
There are unanswered questions in this area. In particular, the Internal
Revenue Service has declined to determine whether any gain is derived from
securities held less than three months if a taxpayer buys a regulated futures
contract just prior to the end of its taxable year, has the contract
marked-to-market at year end, and then actually closes the contract within three
months of its initial purchase in the following taxable year. Furthermore, since
taxpayers other than the taxpayer requesting a particular private ruling are not
entitled to rely on it, the Trust intends to keep its activity in options at a
low volume until the Service rules publicly, or the Treasury Department issues
final regulations, on open issues.
If, in any taxable year, the Trust fails to qualify as a regulated
investment company, the Trust would be taxed in the same manner as an ordinary
corporation and the distributions to its shareholders would not be deductible by
the Trust in computing its taxable income. In addition, in the event of such
failure to qualify, the Trust's distributions, to the extent derived from the
Trust's current or accumulated earnings and profits, would be taxable to its
shareholders as ordinary income dividends, even if those dividends might
otherwise have been considered distributions of capital gains.
PORTFOLIO SECURITY TRANSACTIONS
Decisions to buy and sell portfolio securities for the Trust are made
pursuant to recommendations by the Investment Adviser. The Trust, through the
Investment Adviser, seeks to execute portfolio security transactions on the most
favorable terms and in the most effective manner possible. In seeking such
execution, the Investment Adviser will use its best judgment in evaluating the
terms of a transaction and will give consideration to various relevant factors,
including without limitation the size and type of the transaction, the nature
and character of the markets for the security, the confidentiality, speed and
certainty of effective execution required for the transaction, the reputation,
experience and financial condition of the broker-dealer and the quality of
services rendered by the broker-dealer in other transactions, and the
reasonableness of the brokerage commission, if any.
It is expected that on frequent occasions, there will be many
broker-dealer firms which will meet the foregoing criteria for a particular
transaction. In selecting among such firms, the Trust, through the Investment
Adviser, may give consideration to those firms which have sold, or are selling,
shares of the Trust. In addition, the Investment Adviser may allocate Trust
brokerage business on the basis of brokerage and research services and other
information provided by broker-dealer firms, which may involve the payment of
reasonable brokerage commissions in excess of those chargeable by other
broker-dealer firms for effecting the same transactions. Such "brokerage and
research services" may be used for other of the Investment Adviser's advisory
accounts and all such services may not be used by the Investment Adviser in
managing the Trust. The term "brokerage and research services" includes advice
as to the value of the securities; the advisability of investing in, purchasing
or selling securities; the availability of securities, or purchasers or sellers
of securities; furnishing analyses and reports concerning issuers, industries,
securities, economic factors and trends; portfolio strategy and the performance
of accounts; and effecting securities transactions and performing functions
incidental thereto (such as clearance and settlement).
The policy referred to above of considering sales of shares of the Trust
as one of the factors in the selection of broker-dealer firms to execute
portfolio transactions, subject to the requirement of seeking best execution, is
specifically permitted by a rule of the National Association of Securities
Dealers, Inc. The rule also provides, however, that no member firm shall favor
or disfavor the distribution of shares of any particular fund or group of funds
on the basis of brokerage commissions received or expected by such firm from any
source.
The Trust and one or more of the other investment companies or accounts
for which the Investment Adviser or its affiliates render investment advisory
services on occasion may simultaneously be engaged in the purchase or sale of
the same security. In such event the transactions in such security normally will
be averaged as to price and allocated as to amount among the several clients or
accounts in a manner deemed equitable to all. It is recognized that in some
cases this system could have a detrimental effect on the price or volume of the
security as far as the Trust is concerned. In other cases, however, it is
believed that the ability to participate in volume transactions will produce
better executions for the Trust.
To the extent consistent with the policy of seeking best price and
execution, a portion of the Trust's portfolio transactions may be executed
through the Distributor, Meeschaert & Co., Inc., which is an affiliate of the
Investment Adviser. In the event that this occurs, it will be on the basis of
what management believes to be current information as to rates which are
generally competitive with the rates available from other responsible brokers
and the lowest rates, if any, currently offered by the Distributor.
MISCELLANEOUS INFORMATION
Custodian, Transfer Agent and Dividend-Paying Agent
All securities, cash and other assets of the Trust are received, held in
custody and delivered or distributed by Investors Bank & Trust Company,
Custodian, 24 Federal Street, Boston, Massachusetts 02110, provided that in
cases where foreign securities must, as a practical matter, be held abroad, the
Trust's custodian bank and the Trust will make appropriate arrangements so that
such securities may be legally so held abroad. The Trust's custodian bank does
not decide on purchases or sales of portfolio securities or the making of
distributions. Anchor Investment Management Corporation, 2717 Furlong Road,
Doylestown, Pennsylvania 18901, serves as transfer agent and dividend-paying
agent for the Trust.
Independent Public Accountants
For the fiscal year ending December 31, 1996, the Trust intends to employ
Livingston & Haynes, P.C., Two Sun Life Park, Wellesley Hills, Massachusetts
02181, to certify its financial statements and to prepare its federal and state
income tax returns.
Registration Statement
This Statement of Additional Information does not contain all the
information set forth in the Registration Statement and the exhibits and
schedules relating thereto, which the Trust has filed with, and which are
available at the Securities and Exchange Commission, Washington, D.C., under the
Securities Act of 1933, as amended, and the Investment Company Act of 1940, as
amended, to which reference is hereby made.
Financial Statements
The financial statements of the Trust appearing in the Statement of
Additional Information have been examined by Livingston and Haynes, P.C.,
independent accountants, as set forth in their report, and are included in
reliance upon such reports given on the authority of said firm as experts in
accounting and auditing. A copy of the Trust's Annual Report may be obtained
without charge by writing Anchor Investment Management Corporation, 2717 Furlong
Road, Doylestown, Pennsylvania 18901, or by calling Anchor Investment Management
Corporation at (215) 794-2980.
<PAGE>
PART C
OTHER INFORMATION
Item 24. Financial Statements and Exhibits
(a) Financial Statements included in Part B:
(1) Report of Independent Accountants*
(2) Statement of Assets and Liabilities*
(b) Exhibits:
Exhibit No. Description of Exhibits
1 Declaration of Trust of Registrant.
2 By-Laws of Registrant.
3 None.
4 Specimen Certificate for Shares of Beneficial Interest*
5 Form of Investment Advisory Agreement between Registrant
and Anchor Investment Management Corporation.*
6 Form of Distribution Agreement between Registrant and
Meeschaert & Co., Inc. *
7 None.
8 Form of Custodian Agreement between Registrant and
Investor's Bank & Trust Company.*
9 Form of Transfer Agency and Services Agreement between
Registrant and Anchor Investment Management Corporation.*
10 Opinion of Yukevich, Blume, Marchetti & Zangrilli, P.C. *
11 Consent of Independent Accountants. *
12 None.
13 Not Applicable.
14 None.
15 Form of Plan of Distribution. *
16 Not Applicable.
Other Power of Attorney.
Item 25. Persons controlled by or under common Control with Registrant.
(a) No person controls the Registrant.
(b) As of the date hereof, Societe D'Etudes et de Gestion
Financieres Meeschaert, S.A., 23 Rue Drouot, Paris, France,
held of record 100% of the outstanding shares of beneficial
interest of the Registrant which it purchased pursuant to an
initial capital agreement before the effective date of this
Registration Statement.
Item 26. Number of Holders of Securities.
The number of holders of record of securities of the Registrant as
of _____________, 1996 is as follows:
Title of Class: Number of Holders of Record:
Common Shares 1
Item 27. Indemnification.
Pursuant to Section 5.2 and 5.3 of the Registrant's Declaration of
Trust and under Section 11.1 of the Registrant's By-Laws, the
indemnification of the Registrant's trustees, officers, employees
and agents is permitted if it is determined that they acted under
the belief that their actions were in or not opposed to the best
interest of the Registrant, and, with respect to any criminal
proceeding, they had reasonable cause to belief their conduct was
not unlawful. In addition, indemnification is permitted only if it
is determined that the actions in question did not render them
liable by reason of willful misfeasance, bad faith or gross
negligence in the performance of their duties or by reason of
reckless disregard of their obligations and duties to the
Registrant. Trustees, officers, employees and agents will be
indemnified for the expense of litigation if it is determined that
they are entitled to indemnification against any liability
established in such litigation. The Registrant may also advance
money for these expenses provided that they give their undertakings
to repay the Registrant unless the conduct is later determined to
permit indemnification.
Pursuant to section 5.2 of the Registrant's Declaration of Trust and
paragraph 6 of the Registrant's Advisory Agreement, neither the
Adviser nor any trustee, officer, employee or agent of the
Registrant shall be liable for any action or failure to act, except
in the case of bad faith, willful misfeasance, gross negligence or
reckless disregard of duties to the Registrant.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Act") may be permitted to trustees,
officers and controlling persons of the Registrant pursuant to the
foregoing provisions or otherwise, the Registrant has been advised
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and
is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a trustee, officer,
or controlling person of the Registrant in connection with the
successful defense of any action, suit or proceeding) is asserted
against the Registrant by such trustee, officer or controlling
person in connection with the shares being registered, the
Registrant will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification
by it is against public policy as expressed in the Act, and will be
governed by the final adjudication of such issue.
The Registrant hereby undertakes that it will apply the
indemnification provision of its By-Laws in a manner consistent with
Release 11330 of the Securities and Exchange Commission under the
Investment Company Act of 1940, so long as the interpretation of
Section 17(h) and 17(I) of such Act remains in effect.
Registrant, in conjunction with the Adviser, Registrant's Trustees
and other registered investment management companies managed by the
Adviser, maintains insurance on behalf of any person who is or was a
Trustee, officer, employee, or agent of Registrant, or who is or was
serving at the request of Registrant as a trustee, director,
officer, employee or agent of another trust or corporation, against
any liability asserted against him and incurred by him or arising
out of his position. However, in no event will Registrant maintain
insurance to indemnify any such person for any act for which
Registrant itself is not permitted to indemnify him.
Item 28. Business and Other connections of Investment Advisor.
Anchor Investment Management Corporation is the investment adviser
of the Trust (the "Adviser"). For a list of officers and directors
of the Adviser, together with information as to any other business,
profession, vocation or employment of a substantial nature engaged
in by the Adviser or such officers and directors during the past two
years, reference is made to Form ADV filed by it under the
Investment Advisers Act of 1940, and to the information in the
Statement of Additional Information under the caption of
"Management-Investment Adviser" which is hereby incorporated herein
by this reference thereto.
Item 29. Principal Underwriters.
(a) The Distributor currently acts as distributor for the
following investment companies:
Anchor Capital Accumulation Trust
S.E.C. file # 811-00972
Anchor International Bond Trust
S.E.C. file # 811-4644
Anchor Strategic Assets Trust
S.E.C. file #811-5963
Anchor Resource and Commodity Trust
S.E.C. file # 811-8706
(b) See the answer to Item 21 of Part B, which is herein
incorporated by this reference thereto.
Item 30. Location of Accounts and Records.
Persons maintaining physical possession of accounts, books, and
other documents required to be maintained by Section 31(a) of the
Investment Company Act of 1940 and rules promulgated thereunder
include Registrant's Secretary, David W.C. Putnam; Registrant's
Investment Advisor, Anchor Investment Management Corporation; and
Registrant's custodian, Investors Bank & Trust company. The address
of the Secretary is 10 Langley Road, Suite 404, Newton Centre,
Massachusetts 02159; the address of the investment adviser and the
transfer agent and dividend paying agent is 2717 Furlong Road,
Doylestown, Pennsylvania 18901; and the address of the custodian is
Financial Product Services, 1 Lincoln Plaza, Boston, Massachusetts
02205.
Item 31. Management Services.
Not applicable.
Item 32. Undertakings.
(a) Registrant hereby undertakes to file a post-effective
amendment, using financial statements that need not be
certified, within four to six months from the effective date
of Registrant's Registration Statement under the Securities
Act of 1933.
(b) Registrant hereby undertakes to call a meeting of
shareholders for the purpose of voting on the question of
removal of a Trustee or Trustees when requested in writing
to do so by the holders of at least 10% of the Registrant's
outstanding shares of common stock and, in connection with
such meeting, to comply with the provisions of Section
16(c) of the Investment Company Act of 1940 relating to
shareholder communications.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all the
requirements for effectiveness of this Registration Statement pursuant to Rule
485(b) and has duly caused this Amendment to the Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Doylestown and the Commonwealth of Pennsylvania on the 3rd day of October,
1996.
PRECIOUS METALS AND EQUITY TRUST
DAVID Y. WILLIAMS
By: ______________________________
David Y. Williams, President
Pursuant to the Securities Act of 1933, this Amendment to this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated.
Signature Title Date
* Chairman and October 3, 1996
- ----------------------------- Trustee
David W.C. Putnam
* Treasurer October 3, 1996
- ----------------------------- (Principal Financial
J. Stephen Putnam Officer)
* Trustee October 3, 1996
- -----------------------------
Maurice A. Donahue
* Secretary and October 3, 1996
- ----------------------------- Trustee
Spencer H. LeMenager
* President and October 3, 1996
- ----------------------------- Trustee
David Y. Williams
*By: PETER K. BLUME October 3, 1996
-------------------------
Peter K. Blume
Attorney-in-Fact
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
Pre-Effective Amendment No.
Post Effective Amendment No.
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT
OF 1940 X
Amendment No.
(Check appropriate box or boxes)
PRECIOUS METALS AND EQUITY TRUST
(Exact Name of Registrant as Specified in Charter)
EXHIBITS
<PAGE>
Exhibit Index
1. -- Declaration of Trust of Registrant.
2. -- By-Laws of Registrant.
3. -- None.
4. -- Specimen Certificate for Shares of Beneficial Interest.*
5. -- Form of Investment Advisory Agreement between Registrant and Anchor
Investment Management Corporation. *
6. -- Form of Distribution Agreement between Registrant and Meeschaert &
Co., Inc. *
7. -- None.
8. -- Form of Custodian Agreement between Registrant and Investor's Bank &
Trust Company. *
9. -- Form of Transfer Agency and Services Agreement between Registrant and
Anchor Investment Management Corporation. *
10. -- Opinion of Yukevich, Blume, Marchetti & Zangrilli. *
11. -- Consent of Independent Accountants. *
12. -- None.
13. -- Not Applicable.
14. -- None.
15. -- Form of Plan of Distribution. *
16. -- Not Applicable.
Other -- Power of Attorney.
- ----------------------
* To be filed by Amendment
<PAGE>
EXHIBIT 1
<PAGE>
PRECIOUS METALS
AND EQUITY TRUST
Declaration of Trust
<PAGE>
DECLARATION OF TRUST OF PRECIOUS METALS & EQUITY TRUST
Table of Contents
ARTICLE I
NAME AND DEFINITIONS.....................................................1
Section 1.1. Name.......................................................1
Section 1.2. Definitions................................................1
ARTICLE II
TRUSTEES.................................................................3
Section 2.1. Number of Trustees.........................................3
Section 2.2. Election or Appointment and Term...........................3
Section 2.3. Resignation and Removal....................................4
Section 2.4. Vacancies..................................................4
ARTICLE III
POWERS OF TRUSTEES.......................................................5
Section 3.1. General....................................................5
Section 3.2. Business and Investments...................................5
Section 3.3. Legal Title................................................6
Section 3.4. Issuance and Repurchase of Securities......................6
Section 3.5. Borrowing Money; Lending Trust Assets......................7
Section 3.6. Delegation; Committees.....................................7
Section 3.7. Collection and Payment.....................................7
Section 3.8. Expenses...................................................7
Section 3.9. Litigation.................................................7
Section 3.10. Miscellaneous Powers......................................7
Section 3.11. Manner of Acting; By-Laws.................................8
ARTICLE IV
INVESTMENT ADVISER, DISTRIBUTOR, CUSTODIAN AND
SHAREHOLDER SERVICING AGENT..............................................8
Section 4.1. Investment Adviser.........................................8
Section 4.2. Distributor................................................8
Section 4.3. Shareholder Servicing Agent................................8
Section 4.4. Custodian..................................................8
Section 4.5. Parties to Agreements......................................8
<PAGE>
ARTICLE V
LIMITATIONS OF LIABILITY OF SHAREHOLDERS,TRUSTEES AND OTHER..............10
Section 5.1. No Personal Liability of Shareholders,Trustees, etc........10
Section 5.2. Non-Liability of Trustees, etc.............................10
Section 5.3. Indemnification............................................10
Section 5.4. No Protection Against Certain 1940 Act Liabilities.........11
Section 5.5. No Bond Required of Trustees...............................11
Section 5.6. No Duty of Investigation; Notice in Trust Instruments, etc.11
Section 5.7. Reliance on Experts, etc...................................11
ARTICLE VI
SHARES OF BENEFICIAL INTEREST............................................12
Section 6.1. Beneficial Interest........................................12
Section 6.2 Rights of Shareholders.....................................12
Section 6.3. Trust Only.................................................13
Section 6.4. Issuance of Shares.........................................13
Section 6.5. Voting Powers..............................................13
ARTICLE VII
REDEMPTIONS..............................................................14
Section 7.1. Redemptions................................................14
Section 7.2. Redemption of Shares for Tax Purposes; Disclosure of
Holding....................................................14
Section 7.3. Redemptions to Reimburse Trust for Loss on Nonpayment for
Shares or for Other Charges..............................................14
Section 7.4. Payment for Redeemed Shares in Kind........................15
Section 7.5. Repurchase of Shares by Agreement with Shareholder.........15
ARTICLE VIII
DETERMINATION OF NET ASSET VALUE, NET INCOME AND DIVIDENDS AND
DISTRIBUTIONS............................................................15
Section 8.1. Net Asset Value............................................15
Section 8.2. Net Income.................................................15
Section 8.3. Dividends and Distributions................................16
Section 8.4. Power to Modify Foregoing Procedures.......................16
<PAGE>
ARTICLE IX
DURATION; TERMINATION OF TRUST; AMENDMENT; MERGERS, ETC..................16
Section 9.1. Duration...................................................16
Section 9.2. Termination of Trust.......................................16
Section 9.3. Amendment Procedures.......................................17
Section 9.4. Merger, Consolidation and Sale of Assets...................18
Section 9.5. Incorporation..............................................18
ARTICLE X
REPORTS TO SHAREHOLDERS..................................................19
ARTICLE XII
MISCELLANEOUS............................................................19
Section 11.1. Filing....................................................19
Section 11.2. Resident Agent............................................19
Section 11.3. Governing Law.............................................19
Section 11.4. Counterparts..............................................19
Section 11.5. Reliance by Third Parties.................................19
Section 11.6. Provisions in Conflict with Law or Regulations............20
<PAGE>
DECLARATION OF TRUST
OF
PRECIOUS METALS & EQUITY TRUST
DECLARATION OF TRUST of PRECIOUS METALS & EQUITY TRUST made this 20th day of
May, 1996, by the persons named at the foot of this Declaration of Trust, as
Trustees (such individuals, so long as they shall continue in office in
accordance with the provisions of this Declaration of Trust, and all other
individuals who may hereafter be duly elected or appointed, qualified and
serving as Trustees in accordance with the provisions hereof, being hereinafter
called "Trustees"), in its entirety as follows:
THE TRUSTEES hereby declare that all money and property contributed to the
Trust established hereby shall be held and managed in trust for the benefit of
the holders from time to time of the shares of beneficial interest issued
hereunder and subject to the provisions hereof, to wit:
ARTICLE I: NAME AND DEFINITIONS
Section 1.1. Name. The name of the Trust established hereby (the "Trust") is
the " Precious Metals & Equity Trust" and so far as may be practicable the
Trustees shall conduct the Trust's activities, execute all documents and sue or
be sued under that name, which name (and the word "Trust" wherever herein used)
shall refer to the Trustees as Trustees, and not as individuals, or personally,
and shall not refer to the officers, agents, employees or Shareholders of the
Trust. If the Trustees determine that the Trust's use of such name is not
advisable or if the Trust is required to discontinue the use of such name
pursuant to Section 11.7 hereof, then subject to that section the Trustees may
adopt such other name for the Trust as they deem proper and the Trust may h old
its property and conduct its activities under such other name.
Section 1.2. Definitions. Wherever they are used herein, the following
terms have the respective meanings assigned to them below:
(a) The terms "Affiliated Person" and "Commission" have the meanings
assigned to them in the 1940 Act.
(b) "By-Laws" means the By-Laws referred to in Section 3.11 hereof, as
amended and in effect from time to time.
(c) "Declaration" means this Declaration of Trust, as amended and in effect
from time to time. Reference in this Declaration of Trust to "Declaration,"
"hereof," "herein," "hereby" and "hereunder" shall be deemed to refer to this
Declaration rather than the article or section in which such words appear.
(d) "Distributor" means the party, other than the Trust, to the agreement
described in Section 4.2 hereof.
(e) Fundamental Policies" means the investment policies and restrictions
which are set forth in the Prospectus or the Statement of Additional Information
of the Trust and are designated therein as Fundamental policies.
(f) "Investment Adviser" means the party, other than the Trust, to the
agreement described in Section 4.1 hereof.
(g) "Majority Shareholder Vote," as used with respect to the election of any
Trustees at a meeting of Shareholders, means the vote for the election of such
Trustees of a plurality of all outstanding Shares of the Trust represented in
person or by proxy and entitled to vote thereon, provided that a quorum (as
determined in accordance with the By-Laws) is present, and as used with respect
to any other action required or permitted to be taken by Shareholders, means the
vote for such action of the holders of that majority of all outstanding Shares
of the Trust which consists of: (i) a majority of all Shares represented in
person or by proxy and entitled to vote on such action at the meeting of
Shareholders at which such action is to be taken, provided that a quorum (as
determined in accordance with the By-Laws) is present; or (ii) if such action is
to be taken by written consent of Shareholders, a majority of all Shares issued
and outstanding and entitled to vote on such action; provided, that (iii) as
used with respect to any action requiring the affirmative vote of "a majority of
the outstanding voting securities" of the Trust, as the quoted phrase is defined
in the 1940 Act, "Majority Shareholder Vote" means the vote for such action at a
meeting of Shareholders of the smallest majority of all outstanding Shares of
the Trust entitled to vote on such action which satisfies such 1940 Act voting
requirement.
(h) "1940 Act" means the provisions of the Investment Company Act of 1940
and the rules and regulations thereunder as amended from time to time and any
order or orders thereunder which may from time to time be applicable to the
Trust.
(i) "Person" means and includes individuals, corporations, partnerships,
trusts, associations, joint ventures and other entities, whether or not legal
entities, and governments and agencies and political subdivisions thereof.
(j) "Prospectus" means the prospectus which constitutes part of the
currently effective Registration Statement of the Trust under the Securities Act
of 1933, as such prospectus may be amended or supplemented from time to time.
(k) "Shareholder" means a record holder of outstanding Shares.
(l) "Shareholder Servicing Agent" means the party other than the Trust, to
the agreement described in Section 4.3 hereof.
(m) "Shares" means the units of interest into which the beneficial interest
in the Trust shall be divided from time to time, and includes fractions of
Shares as well as whole Shares.
(n) "Statement of Additional Information" means the statement of additional
information which constitutes part of the currently effective Registration
Statement of the Trust under the Securities Act of 1933, as such statement of
additional information may be amended or supplemented from time to time.
(o) "Trust" means the Trust established hereby by whatever name it may
then be known.
(p) "Trust Property" means any and all assets and property, real or
personal, tangible or intangible, which is owned or held by or for the account
of the Trust or the Trustees.
(q) "Trustees" means the individuals who have signed this Declaration, so
long as they shall continue in office in accordance with the provisions hereof,
and all other individuals who may from time to time be duly elected or
appointed, qualified and serving as Trustees in accordance with the provisions
hereof, and reference herein to a Trustee or the Trustees shall refer to such
individual or individuals in their capacity as Trustees hereunder.
ARTICLE II: TRUSTEES
Section 2.1. Number of Trustees. The number of Trustees shall be such number
as shall be fixed from time to time by a written instrument signed by a majority
of the Trustees, provided, however, that the number of Trustees shall not be
less than three (3) nor more than nine (9).
Section 2.2. Election or Appointment and Term. The initial Trustees shall be
the individuals signing this Declaration in that capacity. Thereafter, subject
to Section 16(a) of the 1940 Act, the Trustees may elect themselves or their
successors at such regular intervals, if any, as they deem proper, and may
appoint Trustees to fill vacancies as provided in Section 2.4 hereof; provided,
that Trustees shall be elected by a Majority Shareholder Vote and at such time
or times as the Trustees shall determine that such action is required under
Section 16(a) of 1940 Act or, if not so required, that such action is advisable.
The election or appointment of any Trustees by the Trustees or the Shareholders
shall not become effective until the individual so elected or appointed shall
have agreed in writing to accept such election or appointment and to be bound by
the terms of this Declaration. Subject to Section 2.3 hereof, the Trustees shall
have the power to set and alter the terms of office of the Trustees, and they
may at any time lengthen or shorten their own terms or make their terms of
unlimited duration; provided, that the term of office of any incumbent Trustee
shall continue until terminated as provided in Section 2.4 hereof, or, if not so
terminated until the election of such Trustee's successor in office has become
effective in accordance with this Section 2.2.
Section 2.3. Resignation and Removal. Any Trustee may resign his Trust
(without need for prior or subsequent accounting) by an instrument in writing
signed by him and delivered to the other Trustees, and such resignation shall be
effective upon such delivery or at any later date according to the terms of the
instrument. Any of the Trustees may be removed by the action of two-thirds of
the remaining Trustees; provided, that if the removal of one or more Trustees
would have the effect of reducing the number of remaining Trustees below the
minimum number prescribed by Section 2.1 hereof, then subject to Section 16(a)
of the 1940 Act, at the time of the removal of such Trustee or Trustees, the
remaining Trustees shall elect or appoint a number of additional Trustees at
least sufficient to increase the number of Trustees holding office to the
minimum number prescribed by Section 2.1 hereof. Upon the resignation or removal
of a Trustee, or his otherwise ceasing to be a Trustee, he shall execute and
deliver such documents as the remaining Trustees shall require for the purpose
of conveying to the Trust or the remaining Trustees any Trust Property held in
his name. Upon the incapacity or death of any Trustee, his legal representative
shall execute and deliver on his behalf such documents as the remaining Trustees
shall require as provided in the preceding sentence. However, the execution and
delivery of such documents by a former Trustee or his legal representative shall
not be requisite to the vesting of title to the Trust Property in the remaining
Trustees as provided in Section 3.3 hereof.
Section 2.4. Vacancies. The term of office of a Trustee shall terminate and
a vacancy shall occur in the event of such Trustee's death, resignation,
removal, bankruptcy, adjudicated incompetence or other incapacity to perform the
duties of the office of Trustees. No such vacancy shall operate to annul this
Declaration or to revoke any existing agency created pursuant to the terms of
this Declaration. In the case of an existing vacancy, including a vacancy
existing by reason of an increase in the number of Trustees, subject to the
provisions of Section 16(a) of the 1940 Act, the remaining Trustees, or, if only
one Trustee shall then remain in office, the sole remaining Trustees, shall
appoint such individual to fill such vacancy as they or he, in their or his
discretion, shall see fit. An appointment of a Trustee may be made in
anticipation of a vacancy to occur at a later date by reason of retirement or
resignation of a Trustee or an increase in the number of Trustees; provided,
that such appointment shall not become effective prior to such retirement or
resignation or such increase in the number of Trustees. Whenever a vacancy in
number of Trustees shall occur, until such vacancy is filled as provided in this
Section 2.4, the Trustees in office, regardless of their number, shall have all
the powers granted to the Trustees and shall discharge all the duties imposed
upon the Trustees by this Declaration. A written instrument certifying the
existence of such vacancy signed by a majority of the Trustees shall be
conclusive evidence of the existence of such vacancy.
<PAGE>
ARTICLE III: POWERS OF TRUSTEES
Section 3.1. General. The Trustees shall have exclusive and absolute control
over the Trust Property and over the business of the Trust to the same extent as
if the Trustees were the sole owners of the Trust Property and business in their
own right, but with such powers of delegation as may be permitted by this
Declaration. The Trustees shall have power to conduct the business of the Trust
and carry on its operations in any and all of its branches and maintain offices
both within and without The Commonwealth of Massachusetts, in any and all states
of the United States of America, in the District of Columbia, and in any and all
commonwealths, territories, dependencies, colonies, possessions, agencies or
instrumentalities of the United States of America and of foreign governments,
and to do all such other things and execute all such instruments as they deem
necessary, proper or desirable in order to promote the interests of the Trust
although such things are not herein specifically mentioned. Any determination as
to what is in the interests of the Trust made by the Trustees in good faith
shall be conclusive. In construing the provisions of this Declaration, the
presumption shall be in favor of a grant of power to the Trustees.
The enumeration of any specific power herein shall not be construed as
limiting the aforesaid power. Such powers of the Trustees may be exercised
without order of or resort to any court.
Section 3.2. Business and Investments. The Trustees shall have the
power with respect to the Trust:
(a) to conduct, operate and carry on the business of an investment company,
either directly or through one or more wholly owned subsidiaries, and, in
connection therewith:
(i) to subscribe for, purchase or otherwise acquire and invest and reinvest
in, to hold for investment or otherwise, to sell, transfer, assign, negotiate,
exchange, lend or otherwise dispose of, and to turn to account or realize upon
and generally deal in and with: (aa) securities (which term, "securities," shall
include without limitation any and all bills, notes, bonds, debentures or other
obligations or evidences of indebtedness, certificates of deposit, bankers
acceptances, commercial paper, repurchase agreements or other money market
instruments; stocks, shares or other equity ownership interest; and warrants,
options or other instruments representing rights to subscribe for, purchase,
receive or otherwise acquire or to sell, transfer, assign or otherwise dispose
of, and scrip, certificates, receipts or other instruments evidencing any
ownership rights or interests in, any of the foregoing), "when issued" and
"delayed delivery" contracts for securities, issued, guaranteed or sponsored by
any governments, political subdivisions or governmental authorities, agencies or
instrumentalities, by any individuals, firms, companies, corporations,
syndicates, associations or trusts, or by any other organizations or entities
whatsoever, irrespective of their forms or the names by which they may be
described, whether or not they be organized and operated for profit, and whether
they be domestic or foreign with respect to The Commonwealth of Massachusetts or
the United States of America, and options or other instruments entered into on a
national securities exchange relating to foreign currencies; (bb) precious
metals and other minerals, contracts to purchase and sell, and other interests
of every nature and kind in, such metals or minerals; (cc) rare coins and other
numismatic items; and
(ii) to acquire and become the owner of or interested in any securities by
delivering or issuing in exchange or payment therefore, in any lawful manner,
any of the Trust Property belonging to the Trust or any Shares of the Trust; and
(iii) to exercise while the owner of any securities or interests therein any
and all of the rights, powers and privileges of ownership of such securities or
interests, including without limitation any and all voting rights and rights of
assent, consent or dissent pertaining thereto, and to do any and all acts and
things for the preservation, protection, improvement and enhancement in value
thereof.
The Trustees shall not be limited to investing in securities maturing before the
possible termination of the Trust, nor shall the Trustees be limited by any law
limiting the investments which may be made by fiduciaries; and
(b) to conduct, operate and carry on any other lawful business and engage in
any other lawful business activity which the Trustees, in their sole and
absolute discretion, consider to be (i) incidental to the business of the Trust
as an investment company, (ii) conducive to or expedient for the benefit or
protection of the Trust, or (iii) calculated in any other manner to promote the
interests of the Trust or the Shareholders of the Trust.
Section 3.3. Legal Title. Legal title to all the Trust Property shall be
vested in the Trustees as joint tenants, except that the Trustees shall have
power to cause legal title to any Trust Property to be held by or in the name of
one or more of the Trustees, or in the name of the Trust, or in the name of any
other Person as nominee, on such terms as the Trustees may determine, provided
that the interest of the Trust therein is appropriately protected. The right,
title and interest of the Trustees in the Trust Property shall vest
automatically in each Person who may hereafter become a Trustee. Upon the
termination of the term of office of a Trustee as provided in Section 2.2 or 2.4
hereof, such Trustee shall automatically cease to have any right, title or
interest in any of the Trust Property, and the right, title and interest of such
Trustee in the Trust Property shall vest automatically in the remaining
Trustees. Such vesting and cessation of title shall be effective whether or not
conveyancing documents have been executed and delivered as provided in Section
2.3 hereof.
Section 3.4. Issuance and Repurchase of Securities. The Trustees shall have
the power to issue, sell, repurchase, redeem, retire, cancel, acquire, hold,
resell, reissue, dispose of, transfer, and otherwise deal in Shares of the
Trust, and, subject to Article VII, VIII and IX hereof, to apply to any such
repurchase, redemption, retirement, cancellation or acquisition of Shares of the
Trust, any Trusts or other assets of the Trust, whether constituting capital or
surplus or otherwise, to the full extent now or hereafter permitted by
applicable law.
Section 3.5. Borrowing Money; Lending Trust Assets. Subject to any
applicable Trustamental Policies of the Trust or any applicable provision of the
By-Laws, the Trustees shall have power to borrow money or otherwise obtain
credit and to secure the same by mortgaging, pledging or otherwise subjecting as
security the assets of the Trust, to endorse, guarantee, or undertake the
performance of any obligation, contract or engagement of any other Person and to
lend Trust Property.
Section 3.6. Delegation; Committees. The Trustees shall have power,
consistent with their continuing exclusive authority over the management of the
Trust and the Trust Property, to delegate from time to time to such committee or
committees as they may from time to time appoint from among their own number or
to such officers, employees or agents of the Trust as they may from time to time
designate the doing of such things and the execution of such instruments either
in the name of the Trust or the names of the Trustees or otherwise as the
Trustees may deem expedient.
Section 3.7. Collection and Payment. The Trustees shall have power to
collect all property due to the Trust; to pay all claims, including taxes,
against the Trust Property; to prosecute, defend, compromise or abandon any
claims relating to the Trust Property; to foreclose any security interest
securing any obligations by virtue of which any property is owed to the Trust;
and to enter into releases, agreements and other instruments.
Section 3.8. Expenses. The Trustees shall have the power to incur and pay
any expenses which, in the opinion of the Trustees, are necessary or incidental
to carry out any of the purposes of this Declaration, and to pay reasonable
compensation from the Trusts of the Trust to themselves as Trustees. The
Trustees shall fix the compensation of all officers, employees and Trustees of
the Trust.
Section 3.9. Litigation. The Trustees shall have the power to engage in and
to prosecute, defend, compromise, abandon, or adjust, by arbitration or
otherwise, any actions, suits, proceedings, disputes, claims, and demands
relating to the Trust or the Trust Property, and, out of the Trust Property, to
pay or to satisfy any debts, claims or expenses incurred in connection
therewith, including those of litigation, and such power shall include without
limitation the power of the Trustees or any appropriate committee thereof, in
the exercise of their or its good faith business judgment, consenting to dismiss
any action, suit, proceeding, dispute, claim, or demand, derivative or
otherwise, brought by any person, including a Shareholder in such Shareholder's
own name or in the name of the Trust, whether or not the Trust or any of the
Trustees may be named individually therein or the subject matter arises by
reason of business for or on behalf of the Trust.
Section 3.10. Miscellaneous Powers. The Trustees shall have the power to:
(a) employ or contract with such Persons as the Trustees may deem desirable for
the transaction of the business of the Trust; (b) enter into joint ventures,
partnerships and any other combinations or associations; (c) remove Trustees or
fill vacancies in or add to their number, subject to and in accordance with
Sections 2.3 and 2.4 hereof; elect and remove at will such officers and appoint
and terminate such agents or employees as they consider appropriate; and appoint
from their own number and terminate at will any one or more committees which may
exercise some or all of the power and authority of the Trustees as the Trustees
may determine; (d) purchase, and pay for out of Trust Property, insurance
policies insuring the Trust Property, and, to the extent permitted by law and
not inconsistent with any applicable provision of this Declaration or the
By-Laws, insuring the Shareholders, Trustees, officers, employees, agents,
investment advisers, distributors, selected dealers or independent contractors
of the Trust against all claims arising by reason of holding any such position
or by reason of any action taken or omitted to be taken by any such Person in
such capacity, whether or not constituting negligence, or whether or not the
Trust would have the power to indemnify such Person against such liability; (e)
establish pension, profit sharing, Share purchase, and other retirement,
incentive and benefit plans for any Trustees, officers, employees and agents of
the Trust; (f) indemnify any person with whom the Trust has dealings, including
the Shareholders, Trustees, officers, employees, agents, investment advisers,
distributors, selected dealers and independent contractors of the Trust, to such
extent permitted by law and not inconsistent with any applicable provision of
the By-Laws as the Trustees shall determine; (g) guarantee indebtedness or
contractual obligations of others; (h) determine and change the fiscal year of
the Trust and the method by which its accounts shall be kept; and (i) adopt a
seal for the Trust, but the absence of such seal shall not impair the validity
of any instrument executed on behalf of the Trust.
Section 3.11. Manner of Acting; By-Laws. Except as otherwise provided
herein, in the By-Laws or in any applicable provision of law, any action to be
taken by the Trustees may be taken by a majority of the Trustees present at a
meeting of Trustees (a quorum being present), including any meeting held by
means of a conference telephone circuit or similar communications equipment by
means of which all persons participating in the meeting can hear each other, or
by written consent or consents of all the Trustees. The Trustees shall adopt
By-Laws not inconsistent with this Declaration to provide for the conduct of the
business of the Trust and may amend or repeal such By-Laws to the extent such
power is not reserved to the Shareholders by express provision of such By-Laws.
ARTICLE IV: INVESTMENT ADVISER, DISTRIBUTOR, CUSTODIAN AND SHAREHOLDER SERVICING
AGENT
Section 4.1. Investment Adviser. The Trustees may in their discretion from
time to time enter into an investment advisory or management agreement whereby
the Investment Adviser which is the other party to such contract shall undertake
to furnish the Trust such management, investment advisory or supervisory,
administrative, accounting, legal, statistical and research facilities and
services, and such other facilities and services, if any, as the Trustees shall
from time to time consider desirable, all upon such terms and conditions as the
Trustees may in their discretion determine to be not inconsistent with this
Declaration, the applicable provisions of the 1940 Act and any applicable
provisions of the By-Laws of the Trust. Any such advisory or management
agreement and any amendment thereto shall be subject to approval by a Majority
Shareholder Vote at a meeting of the Shareholders of the Trust. Notwithstanding
any provisions of this Declaration, the Trustees may authorize the Investment
Adviser (subject to such general or specific instructions as the Trustees may
from time to time adopt) to effect purchases, sales, loans or exchanges of
portfolio securities of the Trust on behalf of the Trustees or may authorize any
officer or employee of the Trust or any Trustees to effect such purchases,
sales, loans or exchanges pursuant to recommendations of the Investment Adviser
(and all without further action by the Trustees). Any such purchases, sales,
loans and exchanges shall be deemed to have been authorized by all of the
Trustees. The Trustees may, in their sole discretion, call a meeting of
Shareholders in order to submit to a vote of Shareholders at such meeting the
approval of continuance of any such investment advisory or management agreement.
Section 4.2. Distributor. The Trustees may in their discretion from time to
time enter into an agreement providing for the sale of Shares to net the Trust
not less than the net asset value per Share (as described in Article VIII
hereof) and pursuant to which the Trust may appoint the other party to such
agreement as its sales agent for the distribution of such Shares. The agreement
shall contain such terms and conditions as the Trustees may in their discretion
determine to be not inconsistent with this Declaration, the applicable
provisions of the 1940 Act and any applicable provisions of the By-Laws of the
Trust.
Section 4.3. Shareholder Servicing Agent. The Trustees may in their
discretion from time to time enter into a shareholder servicing agreement
whereby the other party to such agreement shall undertake to furnish transfer
agency, shareholder and dividend disbursing services to the Trust and its
Shareholders. The agreement shall contain such terms and conditions as the
Trustees may in their discretion determine to be not inconsistent with this
Declaration and any applicable provisions of the 1940 Act and the By-Laws of the
Trust.
Section 4.4. Custodian. The Trustees may appoint a bank or Trust company
having an aggregate capital, surplus and undivided profits (as shown in its last
published report) of at least two million dollars ($2,000,000) as custodian of
the securities and cash of the Trust. The agreement shall contain such terms and
conditions as the Trustees in their discretion determine to be not inconsistent
with this Declaration, the applicable provisions of the 1940 Act and any
applicable provisions of the By-Laws of the Trust.
Section 4.5. Parties to Agreements. The Trustees may enter into any
agreement of the character described in Section 4.1, 4.2, 4.3 or 4.4 of this
Article IV and into any other agreement although one or more of the Trustees or
officers of the Trust may be an officer, director, Trustee, shareholder or
member of, or otherwise interested in, any other party to the agreement, and no
such agreement shall be invalidated or rendered voidable by reason of the
existence of any such relationship; nor shall any Person holding such
relationship be liable merely by reason of such relationship for any loss or
expense to the Trust under or by reason of said agreement or accountable for any
profit realized directly or indirectly therefrom. The same Person or an
Affiliated Person of any Person may be the other party to two or more of the
agreements entered into pursuant to Sections 4.1, 4.2, 4.3 or 4.4 above or
otherwise, and any individual may be financially interested in or otherwise
affiliated with any Person who is party to any of the agreements mentioned in
this Section 4.5.
ARTICLE V: LIMITATIONS OF LIABILITY OF SHAREHOLDERS, TRUSTEES AND OTHER
Section 5.1. No Personal Liability of Shareholders, Trustees, etc. No
Shareholder shall be subject to any personal liability whatsoever to any Person
in connection with Trust Property or the acts, obligations or affairs of the
Trust. Subject to Section 5.4 hereof, no Trustees, officer, employee or agent of
the Trust shall be subject to any personal liability whatsoever to any Person,
other than the Trust or its Shareholders, in connection with Trust Property or
the affairs of the Trust, and all such Persons shall look solely to the Trust
Property for satisfaction of claims of any nature arising in connection with the
affairs of the Trust. If any Shareholder, Trustee, officer, employee or agent,
as such, of the Trust is made a party to any suit or proceeding to enforce any
such liability, he shall not, on account thereof, be held to any personal
liability. The Trust shall indemnify and hold each Shareholder harmless from and
against all claims and liabilities to which such Shareholder may become subject
by reason of his being or having been a Shareholder, and shall reimburse such
Shareholder for all legal and other expenses reasonably incurred by him in
connection with any such claim or liability. The rights accruing to a
Shareholder under this Section 5.1 shall not exclude any other right to which
such Shareholder may be lawfully entitled, nor shall anything herein contained
restrict the right of the Trust to indemnify or reimburse a Shareholder in any
appropriate situation even though not specifically provided herein.
Section 5.2. Non-Liability of Trustees, etc. Subject to Section 5.4 hereof,
no Trustee, officer, employee or agent of the Trust shall be liable to the Trust
or to any Shareholder, Trustee, officer, employee or agent of the Trust for any
action or failure to act (including without limitation the failure to compel in
any way any former or acting Trustees to redress any breach of Trust).
Section 5.3. Indemnification.
(a) Subject to Section 5.4 hereof, the Trustees shall provide for
indemnification by the Trust of every Person who is, or has been, a Trustee,
officer, employee or agent of the Trust against all liability and against all
expenses reasonably incurred or paid by him in connection with any claim,
action, suit or proceeding in which he becomes involved as a party or otherwise
by virtue of his being or having been a Trustees, officer, employee or agent and
against amounts paid or incurred by him in the settlement thereof, in such
manner, to such extent and subject to such conditions and limitations as the
Trustees may provide from time to time in the By-Laws.
(b) The words "claim," "action," "suit," or "proceeding" shall apply to all
claims, actions, suits or proceedings (civil, criminal, or other, including
appeals), actual or threatened; and the words "liability" and "expenses" shall
include, without limitation, attorneys' fees, costs, judgments, amounts paid in
settlement, fines, penalties and other liabilities.
Section 5.4. No Protection Against Certain 1940 Act Liabilities. Nothing
contained in Sections 5.1, 5.2 or 5.3 hereof or in any provision of the By-Laws
described in Section 5.3 hereof shall protect any Trustee or officer of the
Trust from any liability to the Trust or its Shareholders for which he would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
office. Nothing contained in Sections 5.1, 5.2 or 5.3 hereof or in any agreement
of the character described in Section 4.1 or 4.2 hereof shall protect any
Investment Adviser to the Trust or Distributor of its Shares against any
liability to the Trust or its Shareholders to which he or it would otherwise be
subject by reason of willful misfeasance, bad faith, or gross negligence in the
performance of his or its duties to the Trust, or by reason of his or its
reckless disregard of his or its obligations and duties under the agreement
pursuant to which he or it serves as Investment Adviser to the Trust or
Distributor of its Shares.
Section 5.5. No Bond Required of Trustees. No Trustees shall be
obligated to give any bond or other security for the performance of any of
his duties hereunder.
Section 5.6. No Duty of Investigation; Notice in Trust Instruments, etc. No
purchaser, lender or other Person dealing with the Trustees or with any officer,
employee or agent of the Trust shall be bound to make any inquiry concerning the
validity of any transaction purporting to be made by the Trustees or by said
officer, employee or agent or be liable for the application of money or property
paid, loaned, or delivered to or on the order of the Trustees or of said
officer, employee or agent. Every contract, undertaking, instrument,
certificate, Share of obligation or other security of the Trust, and every other
act or thing whatsoever executed in connection with the Trust, shall be
conclusively presumed to have been executed or done by the executors thereof
only in their capacity as Trustees under this Declaration or in their capacity
as officers, employees or agents of the Trust. Every written agreement,
contract, instrument, undertaking, certificate, Share or other security of the
Trust executed, made or issued by the Trustees shall recite that the same is
executed, made or issued by them not individually, but as Trustees under this
Declaration, and that the obligations created or evidenced thereby are not
binding upon any of the Trustees or Shareholders individually, but bind only the
Trust Property, and may contain any further recital which they or he may deem
appropriate, but the omission of such recital shall not operate to bind the
Trustees or Shareholders individually.
Section 5.7. Reliance on Experts, etc. Each Trustee, officer or employee of
the Trust shall, in the performance of his duties, be fully and completely
justified and protected with regard to any act or any failure to act resulting
from reliance in good faith upon the books of account or other records of the
Trust, upon an opinion of counsel, or upon reports made to the Trust by any of
its officers or employees or by the Investment Adviser, the Distributor,
Shareholder Servicing Agent, selected dealers, accountants, appraisers or other
experts or consultants selected with reasonable care by the Trustees, officers
or employees of the Trust, regardless of whether such counsel or expert may also
be a Trustee.
ARTICLE VI: SHARES OF BENEFICIAL INTEREST
Section 6.1. Beneficial Interest. The interest of the Trust shall be divided
into transferable units to be called Shares of Beneficial Interest, without par
value. The number of such Shares of Beneficial Interest authorized hereunder is
unlimited. Each Share shall represent an equal proportionate share in the net
assets of the Trust. The Trustees may divide or combine the Shares into a
greater or lesser number of Shares without thereby changing the proportionate
interests in the assets of the Trust. All Shares issued hereunder including,
without limitation, Shares issued in connection with a dividend in Shares or a
division of Shares, shall be fully paid and nonassessable. The Shares shall
consist of and be issuable as Shares of two separate Classes, one such Class to
be designated as the "Common Shares" and the other such Class to be designated
as the "Class A Common Shares", and such Classes to have the respective
designations, privileges, limitations and rights as follows:
Common Shares
The Common Shares shall be designated "Common Shares" and shall have the
privileges, limitations and rights set forth for and/or applicable to shares of
Beneficial Interest in this Article VI of the Trust.
Class A. Common Shares
The Class A Common Shares shall be designated "Class A Common Shares" and
shall have the same privileges, limitations and rights as the Common Shares,
except that dividends upon such Class A Common Shares shall be paid only in
additional such Class A Common Shares and such Class A Common Shares may, at the
option of the record owner thereof, be exchanged at any time for an equal number
of whole and fractional Common Shares.
Section 6.2 Rights of Shareholders. The ownership of the Trust Property of
every description and the right to conduct any business hereinbefore described
shall be vested exclusively in the Trustees, and the Shareholders shall have no
interest therein other than the beneficial interest conferred by their Shares,
and they shall have no right to call for any partition or division of any
property, profits, rights or interests of the Trust nor can they be called upon
to assume any losses of the Trust or suffer an assessment of any kind by virtue
of their ownership of Shares. The Shares shall be personal property giving only
the rights specifically set forth in this Declaration. Shares shall not entitle
any holder thereof to preference, preemptive, appraisal, conversion or exchange
rights, except as the Trustees may determine.
Section 6.3. Trust Only. It is the intention of the Trustees to create only
the relationship of Trustees and beneficiary between the Trustees and each
Shareholder from time to time. It is not the intention of the Trustees to create
a general partnership, limited partnership, joint stock association,
corporation, bailment or any form of legal relationship other than a Trust.
Nothing in this Declaration shall be construed to make the Shareholders, either
by themselves or with the Trustees, partners or members of a joint stock
association.
Section 6.4. Issuance of Shares. The Trustees in their discretion may, from
time to time without vote of the Shareholders, issue Shares in addition to the
then issued and outstanding Shares and Shares held in the Treasury, to such
party or parties and for consideration in such amount not less than the greater
of the par value and the net asset value per Share (determined as set forth in
Article VIII hereof) and of such type, including cash or property, at such time
or times and on such terms as the Trustees may deem fitting, and may in such
manner acquire other assets (including the acquisition of assets subject to, and
in connection with, the assumption of liabilities) and businesses. In connection
with any issuance of Shares, the Trustees may issue fractional Shares.
Contributions to the Trust may be accepted for, and Shares shall be redeemed as,
whole Shares and fractions of a Share as described in the Prospectus or the
Statement of Additional Information.
Section 6.5. Voting Powers. The Shareholders shall have power to vote only
(i) for the election of Trustees as provided in Section 2.2 hereof and the
removal of Trustees to the extent provided in Section 16(c) of the 1940 Act,
(ii) with respect to approval or termination in accordance with the 1940 Act of
any investment advisory or management agreement described in Section 4.1 hereof,
(iii) with respect to termination of the Trust as provided in Section 9.2
hereof, (iv) with respect to any amendment of this Declaration to the extent and
as provided in Section 9.3 hereof, (v) with respect to any merger, consolidation
or sale of assets as provided in Section 9.4 hereof, (vi) with respect to
incorporation of the Trust to the extent and as provided in Section 9.5 hereof,
(vii) to the same extent as the stockholders of a Massachusetts business
corporation as to whether or not a court action, proceeding or claim should or
should not be brought maintained derivatively or as a class action on behalf of
the Trust or the Shareholders, and (viii) with respect to such additional
matters relating to the Trust as may be required by this Declaration, the
By-Laws or any undertaking filed by the Trust with the Commission (or any
successor agency) or with any state, or as to which the Trustees in their
discretion shall determine such Shareholder vote to be required by law or
otherwise to be necessary, appropriate or advisable. Each whole Share shall be
entitled to one vote as to any matter on which it is entitled to vote and each
fractional Share shall be entitled to a proportionate fractional vote, except
that Shares held in the treasury of the Trust as of the record date, as
determined in accordance with the By-Laws, shall not be voted. The Trustees
shall cause each matter required or permitted to be voted upon at a meeting or
by written consent of Shareholders to be submitted to a vote of outstanding
Shares entitled to vote thereon; provided, that there shall be no cumulative
voting of Shares in any election of Trustees. Until Shares are issued, the
Trustees may exercise all rights of Shareholders and may take any action
required by law, this Declaration or the By-Laws to be taken by Shareholders.
The By-Laws may include further provisions relating to Shareholders' votes and
meetings and related matters.
ARTICLE VII: REDEMPTIONS
Section 7.1. Redemptions. Each Shareholder shall have the right, at such
times as may be permitted by the Trust, to require the Trust to redeem all or
any part of his Shares, upon and subject to the terms and conditions provided in
this Article VII. The Trust shall, upon application of or pursuant to
authorization from any Shareholder, redeem from such Shareholder outstanding
Shares for an amount per Share determined by the Trustees in accordance with the
1940 Act; provided, that (a) such amount per Share shall not exceed the cash
equivalent of the proportionate interest of each Share or in the Trust Property
at the time of the redemption, and (b) if so authorized by the Trustees, the
Trust may, at any time and from time to time, charge fees for effecting such
redemption, at such rates as the Trustees may establish, if and to the extent
permitted under the 1940 Act, and may, at any time and from time to time,
pursuant to the 1940 Act, suspend such right of redemption. Redemption and
suspension and resumption of redemption of Shares shall be effected in
accordance with the procedures, and payment for Shares redeemed shall be made in
the manner, set forth in the Prospectus or the Statement of Additional
Information.
Section 7.2. Redemption of Shares for Tax Purposes; Disclosure of Holding.
If the Trustees shall, at any time and in good faith, be of the opinion that
direct or indirect ownership of Shares of the Trust has or may become
concentrated in any Person to an extent which would disqualify the Trust as a
regulated investment company under the Internal Revenue Code, then the Trustees
shall have the power by lot or other means deemed equitable by them (i) to call
for redemption from any such Person a number, or principal amount, of Shares of
the Trust sufficient, in the opinion of the Trustees, to maintain or bring the
direct or indirect ownership of Shares of the Trust into conformity with the
requirements for such qualification, and (ii) to refuse to transfer or issue
Shares of the Trust to any Person whose acquisition of the Shares of the Trust
would, in the opinion of the Trustees, result in such disqualification. The
redemption shall be effected at a redemption price determined in accordance with
Section 7.1 hereof.
The holders of Shares of the Trust shall upon demand disclose to the
Trustees in writing such information with respect to direct and indirect
ownership of Shares of the Trust as the Trustees deem necessary to comply with
the provisions of the Internal Revenue Code, or to comply with the requirements
of any other authority.
Section 7.3. Redemptions to Reimburse Trust for Loss on Nonpayment for
Shares or for Other Charges. The Trustees shall have the power to redeem Shares
owned by any Shareholder to the extent necessary (i) to reimburse the Trust for
any loss it has sustained by reason of the failure of such Shareholder to make
full payment for Shares purchased by such Shareholder, or (ii) to collect any
charge relating to a transaction effected for the benefit of such Shareholder
which is applicable to Shares as provided in the Prospectus. Any such redemption
shall be effected at the redemption price determined in accordance with Section
7.1. hereof.
Section 7.4. Payment for Redeemed Shares in Kind. Subject to any applicable
provisions of the 1940 Act, payment for any Shares redeemed pursuant to Section
7.1 or 7.2 hereof may, at the option of the Trustees or such officer or officers
of the Trust as they may authorize for the purpose, be made in cash or in kind,
or partially in cash and partially in kind, and, in case of full or partial
payment in kind, the Trustees or such authorized officer or officers shall have
absolute discretion to determine the securities or other assets of the Trust and
the amount thereof to be distributed in kind. For such purpose, the value of any
securities or other non-cash assets delivered in payment for Shares redeemed
shall be determined in the same manner as the value of such securities or other
non-cash assets are determined in accordance with Section 8.1 hereof for
purposes of determining the net asset value per Share applicable to such Shares,
as of the same time that the net asset value per Share applicable to such Shares
is determined.
Section 7.5. Repurchase of Shares by Agreement with Shareholder. The Trust
may repurchase its Shares from any Shareholder directly or through an agent
designated by it for the purpose, by agreement with such Shareholder, at a price
not exceeding the redemption price of such Shares determined pursuant to Section
7.1 hereof.
ARTICLE VIII: DETERMINATION OF NET ASSET VALUE, NET INCOME AND DIVIDENDS AND
DISTRIBUTIONS
Section 8.1. Net Asset Value. Subject to the applicable provisions of the
1940 Act, the Trustees shall have the power and duty to cause the net asset
value per Share of the Trust to be determined in such manner, with such
frequency and at such specific time of day as shall be set forth in or
prescribed by the Trustees in accordance with the By-Laws. The Trustees may
delegate the power and duty to determine the net asset value per Share to one or
more of their number, or to one or more officers of the Trust, or to any
Investment Adviser, custodian, Shareholder Servicing Agent, or other agent
appointed for the purpose by the Trust.
Section 8.2. Net Income. Subject to any applicable provisions of the 1940
Act, the Trustees shall have the power and duty to cause the net income of the
Trust to be determined on an accrual basis with the same frequency and at the
same time of day as the net asset value per Share of the Trust is determined in
accordance with Section 8.1 hereof. The Trustees shall have full discretion, to
the extent not inconsistent with the 1940 Act, to determine whether any cash or
property of the Trust shall be treated as income or as principal and whether any
item of expense shall be charged to the income or the principal account, and
their determination made in good faith shall be conclusive upon the
Shareholders. In the case of stock dividends received, the Trustees shall have
full discretion to determine, in the light of the particular circumstances, how
much, if any, of the value thereof shall be treated as income, and the balance,
if any, shall be treated as principal.
Section 8.3. Dividends and Distributions. The Trustees shall have the power
to declare and pay ratably to the Shareholders, as dividends or distributions on
their Shares, such proportion of the net income, capital gains, surplus
(including paid-in surplus), capital or assets of the Trust as the Trustees may
deem proper. Dividends and distributions on Shares of the Trust may be paid with
such frequency (which may be daily or at such other intervals as shall be
specified in a standing resolution or resolutions adopted by the Trustees) and
may be paid in cash or other property, or in additional Shares, in such manner,
at such times, and on such terms as the Trustees shall determine. Dividends and
distributions may be paid to the Shareholders of record at the time of declaring
the dividend or distribution or to the Shareholders of record at such later date
as the Trustees shall determine. The Trustees may always retain from the net
income of the Trust such amount as they may deem necessary to pay debts or
expenses or to meet obligations of the Trust or as they may deem desirable to
use in the conduct of the affairs or to retain for future requirements of the
business of the Trust.
Inasmuch as the computation of net income and gains for Federal income tax
purposes may vary from the computation thereof on the books of the Trust, the
foregoing provisions of this Section 8.3 shall be interpreted to give the
Trustees the power in their discretion to distribute for any fiscal year as
income dividends and as capital gains distributions, respectively, additional
amounts sufficient to enable the Trust to avoid or reduce liability for taxes.
Section 8.4. Power to Modify Foregoing Procedures. Notwithstanding any of
the foregoing provisions of this Article VIII, the Trustees may prescribe, in
their absolute discretion, such other bases and times for determining the net
asset value per Share of outstanding Shares, the net income of the Trust, or for
the declaration and payment of dividends and distributions, as they may deem
necessary or desirable to enable the Trust to comply with any provision of the
1940 Act, including without limitation any rule or regulation adopted pursuant
to Section 22 of the 1940 Act by the Commission.
ARTICLE IX: DURATION; TERMINATION OF TRUST; AMENDMENT; MERGERS, ETC.
Section 9.1. Duration. The Trust shall continue without limitation of
time but subject to the provisions of this Article IX.
Section 9.2. Termination of Trust.
(a) The Trust may be terminated upon the recommendation of a majority of the
Trustees, subject to approval by the affirmative vote of "a majority of the
outstanding voting securities" of the Trust, as the quoted phrase is defined in
the 1940 Act, taken by Majority Shareholder Vote at a meeting of Shareholders.
Upon the termination of the Trust:
(i) The Trust shall carry on no business except for the purpose of
winding up its affairs.
(ii) The Trustees shall proceed to wind up the affairs of the Trust and
all of the powers of the Trustees under this Declaration shall continue until
the affairs of the Trust shall have been wound up, including the power to
fulfill or discharge the contracts of the Trust, collect its assets, sell,
convey, assign, exchange, transfer or otherwise dispose of all or any part of
the remaining Trust Property to one or more persons at public or private sale
for consideration which may consist in whole or in part of cash, securities or
other property of any kind, discharge or pay its liabilities, and to do all
other acts appropriate to liquidate its business; provided, that any sale,
conveyance, assignment, exchange, transfer or other disposition of all or
substantially all the Trust Property shall require Shareholder approval in
accordance with Section 9.4 hereof.
(iii) After paying or adequately providing for the payment of all
liabilities, and upon receipt of such releases, indemnities and agreements, as
they deem necessary for their protection, the Trustees may distribute the
remaining Trust Property, in cash or in kind or partly each, among the
Shareholders according to their respective rights and interests.
(b) After termination of the Trust and distribution to the Shareholders as
herein provided, a majority of the Trustees shall execute and lodge among the
records of the Trust an instrument in writing setting forth the fact of such
termination, and the Trustees shall thereupon be discharged from all further
liabilities and duties hereunder, and the rights and interests of all
Shareholders shall thereupon cease.
Section 9.3. Amendment Procedures.
(a) This Declaration may be amended by a vote or written consent of the
Trustees, subject to and upon approval of such amendment by a Majority
Shareholder Vote. The Trustees may amend this Declaration without such
Shareholder approval to change the name of the Trust, to supply any omission, to
cure, correct or supplement any ambiguous, defective or inconsistent provision
hereof, or, if they deem it necessary, to conform this Declaration to the
requirements of applicable federal laws or regulations or the requirements of
the regulated investment company provisions of the Internal Revenue Code, or to
eliminate or reduce any federal, state or local taxes which are or may be
payable by the Trust or the Shareholders, but the Trustees shall not be liable
for failing to do so.
(b) No amendment may be made under this Section 9.3 which would change any
rights with respect to any Shares of the Trust by reducing the amount payable
thereon upon liquidation of the Trust or by diminishing or eliminating any
voting rights pertaining thereto, except with the vote or written consent of the
holders of two-thirds of the Shares outstanding and entitled to vote. Nothing
contained in this Declaration shall permit the amendment of this Declaration to
impair the exemption from personal liability of the Shareholders, Trustees,
officers, employees and agents of the Trust or to permit assessments upon
Shareholders.
(c) A certificate signed by a majority of the Trustees or by the Secretary
or any Assistant Secretary of the Trust, setting forth an amendment and reciting
that it was duly adopted by the Shareholders or by the Trustees aforesaid or a
copy of the Declaration, as amended, and executed by a majority of the Trustees
or certified by the Secretary or any Assistant Secretary of the Trust, shall be
conclusive evidence of such amendment when lodged among the records of the
Trust.
Section 9.4. Merger, Consolidation and Sale of Assets. The Trust may merge
into or consolidate with any other corporation, association, Trust or other
organization or may sell, lease or exchange all or substantially all of the
Trust Property, including its good will, upon such terms and conditions and for
such consideration when as authorized by vote or written consent of the Trustees
and approved by the affirmative vote of not less than two-thirds of the Shares
outstanding and entitled to vote, or by an instrument or instruments in writing
without a meeting consented to by the holders of not less than two-thirds of
such Shares, and by the vote or written consent of the holders of two-thirds of
the Shares of each of the Series of Shares; provided, however, that, if such
merger, consolidation, sale, lease or exchange is recommended by the Trustees, a
Majority Shareholder Vote shall be sufficient authorization.
Section 9.5. Incorporation. Subject to approval by a Majority Shareholder
Vote, the Trustees may cause to be organized or assist in organizing a
corporation or corporations under the laws of any jurisdiction or any other
Trust, partnership, association, or other organization to take over all of the
Trust Property or to carry on any business in which the Trust shall directly or
indirectly have any interest, and to sell, convey and transfer the Trust
Property to any such corporation, Trust, partnership, association or
organization in exchange for the shares or securities thereof or otherwise, and
to lend money to subscribe for the shares or securities of, and enter into any
contracts with any such corporation, Trust, partnership, association or
organization in which the Trust holds or is about to acquire shares or any other
interest. The Trustees may also cause a merger or consolidation between the
Trust or any successor thereto and any such corporation, Trust, partnership,
association or other organization if and to the extent permitted by law, as
provided under the law then in effect. Nothing contained herein shall be
construed as requiring approval of Shareholders for the Trustees to organize or
assist in organizing one or more corporations, trusts, partnerships,
associations or other organizations and selling, conveying or transferring a
portion of the Trust Property to such organization or entities.
<PAGE>
ARTICLE X: REPORTS TO SHAREHOLDERS
The Trustees shall at least semi-annually submit to the Shareholders of each
Series a written financial report meeting the requirements of the 1940 Act.
Shareholders shall be entitled to inspect the books and records of the Trust at
the discretion of the Trustees.
ARTICLE XII: MISCELLANEOUS
Section 11.1. Filing. This Declaration and any amendment hereto shall be
filed in the office of the Secretary of the Commonwealth of Massachusetts and in
such other places as may be required under the laws of the Commonwealth of
Massachusetts and may also be filed or recorded in such other places as the
Trustees deem appropriate. Each amendment so filed shall be accompanied by a
certificate signed and acknowledged by a Trustees or by the Secretary or any
Assistant Secretary of the Trust stating that such action was duly taken in a
manner provided herein, and unless such amendment or such certificate sets forth
some later time for the effectiveness of such amendment, such amendment shall be
effective upon its filing with the Secretary of the Commonwealth of
Massachusetts. A restated Declaration, integrating into a single instrument all
of the provisions of this Declaration which are then in effect and operative,
may be executed from time to time by a majority of the Trustees and shall, upon
filing with the Secretary of the Commonwealth of Massachusetts, be conclusive
evidence of all amendments contained therein and may thereafter be referred to
in lieu of the original Declaration and the various amendments thereto.
Section 11.2. Resident Agent. To the extent required, the Trustees shall
have power to appoint a resident agent for the Trust in the Commonwealth of
Massachusetts, and from time to time to replace the resident agent so appointed.
Section 11.3. Governing Law. This Declaration is executed by the Trustees
with reference to the laws of the Commonwealth of Massachusetts, and the rights
of all parties and the validity and construction of every provision hereof shall
be subject to and construed according to the laws of said Commonwealth.
Section 11.4. Counterparts. The Declaration may be simultaneously executed
in several counterparts, each of which shall be deemed to be an original, and
such counterparts, together, shall constitute one and the same instrument, which
shall be sufficiently evidenced by any such original counterpart.
Section 11.5. Reliance by Third Parties. Any certificate executed by an
individual who, according to the records of the Trust, appears to be a Trustee
hereunder, or Secretary or Assistant Secretary to the Trust, certifying to: (a)
the number or identity of Trustees or Shareholders, (b) the due authorization of
the execution of any instrument or wiring, (c) the form of any vote passed at a
meeting of Trustees or Shareholders, (d) the fact that the number of Trustees or
Shareholders present at any meeting or executing any written instrument
satisfies the requirements of this Declaration, (e) the form of any By-Laws
adopted by or the identity of any officers elected by the Trustees, or (f) the
existence of any fact or facts which in any manner relate to the affairs of the
Trust, shall be conclusive evidence as to the matters so certified in favor of
any Person dealing with the Trustees and their successors.
Section 11.6. Provisions in Conflict with Law or Regulations.
(a) The provisions of this Declaration are severable, and if the Trustees
shall determine, with the advice of counsel, that any of such provisions is in
conflict with the 1940 Act, the regulated investment company provisions of the
Internal Revenue Code or with other applicable laws and regulations, the
conflicting provisions shall be deemed superseded by such law or regulation to
the extent necessary to eliminate such conflict; provided, however, that such
determination shall not affect any of the remaining provisions of this
Declaration or render invalid or improper any action taken or omitted prior to
such determination.
(b) If any provision of this Declaration shall be held invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall
pertain only to such provision in such jurisdiction and shall not in any manner
affect such provision in any other jurisdiction or any other provision of this
Declaration in any jurisdiction.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Declaration of Trust on the
day and year first written above.
DAVID W.C. PUTNAM MAURICE A. DONAHUE
- -------------------------------- --------------------------------
David W.C. Putnam Maurice A. Donahue
as Trustee, and not individually as Trustee, and not individually
SPENCER H. LEMENAGER DAVID Y. WILLIAMS
- --------------------------------- --------------------------------
Spencer H. LeMenager David Y. Williams
as Trustee, and not individually as Trustee, and not individually
EXHIBIT 2
<PAGE>
PRECIOUS METALS
AND EQUITY TRUST
BY-LAWS
<PAGE>
BY-LAWS OF
PRECIOUS METALS AND EQUITY TRUST
ARTICLE I: DEFINITIONS
The terms "Affiliated Person," "Commission," "Declaration," "Distributor",
"Investment Adviser," "Majority Shareholder Vote," "1940 Act," "Person",
"Shareholder," "Shareholder Servicing Agent," "Shares," "Trust," "Trust
Property," and "Directors" have the respective meanings given them in the
Declaration of Trust of the PRECIOUS METALS AND EQUITY Trust dated May 20, 1996,
as amended from time to time.
ARTICLE II: OFFICES
Section 2.1. Principal Office.
The principal office of the Trust in the Commonwealth of Massachusetts shall be
located at the principal place of business in the Commonwealth of the
individual, firm or corporation acting as the Trust's resident agent in the
Commonwealth of Massachusetts.
Section 2.2. Other Offices.
In addition to its principal office in the Commonwealth of Massachusetts, the
Trust may have an office or offices at such other places within or without the
Commonwealth of Massachusetts as the Directors may from time to time designate
or the business of the Trust may require.
ARTICLE III: SHAREHOLDERS' MEETINGS
Section 3.1. Time and Place of Meetings.
All meetings of Shareholders shall be held at such time and place, whether
within or without the Commonwealth of Massachusetts, as shall be stated in the
notice of the meeting or in a duly executed waiver of notice thereof.
Section 3.2. Meetings.
Meetings of Shareholders of the Trust shall be held whenever a vote of
Shareholders is required by the Declaration and at such other times as the
Directors may deem necessary, appropriate or advisable. Meetings of Shareholders
to consider any matter as to which a vote of Shareholders is required by the
1940 Act or is permitted by Section 15(a)(3), 16(a) or 32(a)(3) of, or Rule
12b-1(b)(3)(iii) under, the 1940 Act and as to which the Directors have not
called a meeting of Shareholders shall be called by the secretary upon the
written request of the holders of Shares entitled to cast not less than twenty
five percent (25%) of all the votes then entitled to be cast at a meeting of
Shareholders. Such request shall state the purpose or purposes of such meeting
and the matters proposed to be acted on thereat. The secretary shall inform such
Shareholders of the estimated reasonable cost of preparing and mailing such
notice of the meeting. Upon payment to the Trust of such costs, the secretary
shall give notice stating the purpose or purposes of the meeting to each
Shareholder entitled to vote at such meeting. Unless requested by Shareholders
entitled to cast a majority of all votes entitled to be cast by the holders of
Shares of the Trust, a meeting need not be called to consider any matter which
is substantially the same as a matter voted on at any meeting of Shareholders
held during the preceding twelve (12) months.
Section 3.3. Notice of Meetings.
Written notice of each meeting of Shareholders stating the place, date and hour
thereof, and in the case of special meetings, specifying the purpose or purposes
thereof, shall be given to each Shareholder entitled to vote thereat, not less
than ten (10) nor more than ninety (90) days prior to the meeting either by mail
or by presenting it to such Shareholder personally or by leaving it at his
residence or usual place of business. If mailed, such notice shall be deemed to
be given when deposited in the United States mail, postage prepaid, addressed to
the Shareholder at his post office address as it appears on the records of the
Trust.
Section 3.4. Quorum; Adjournments.
Except as otherwise provided by law, by the Declaration or by these By-Laws, at
all meetings of Shareholders the holders of a majority of the shares issued and
outstanding and entitled to vote thereat present in person or represented by
proxy, shall be requisite and shall constitute a quorum for the transaction of
business; but this section shall not affect any applicable requirement of law or
the Declaration for the vote necessary for the adoption of any measure. In the
absence of a quorum, the Shareholders present in person or represented by proxy
and entitled to vote thereat shall have power to adjourn the meeting from time
to time without notice other than announcement at the meeting until such quorum
shall be present; and at any meeting at which a quorum shall be present, the
holders of Shares entitled to cast not less than a majority of all the votes
entitled to be cast at such meeting shall have the power to adjourn the meeting
from time to time without notice other than announcement at such meeting;
provided, however, that written notice shall be given as required by Section 3.3
if such meeting is adjourned to a date more than one hundred twenty (120) days
after the record date originally scheduled with respect to the meeting. At any
such adjourned meeting at which a quorum shall be present, any business may be
transacted which might have been transacted had a quorum been present at the
time originally fixed for the meeting.
Section 3.5. Vote Required.
Except as otherwise provided by law, by the Declaration or by these By-Laws, at
each meeting of Shareholders at which a quorum is present, all matters shall be
decided by Majority Shareholder Vote.
Section 3.6. Voting.
At any meeting of Shareholders, each Shareholder having the right to vote shall
be entitled to vote in person or by proxy, and each Shareholder of record shall
be entitled to one vote for each Share of beneficial interest of the Trust and
for the fractional portion of one vote for each fractional Share entitled to
vote so registered in his name on the records of the Trust on the date fixed as
the record date for the determination of Shareholders entitled to vote at such
meeting.
Section 3.7. Proxies.
Each proxy shall be in writing executed by the Shareholder giving the proxy or
by his duly authorized attorney. No proxy shall be valid after the expiration of
three years from its date, unless a longer period is provided for in the proxy.
Section 3.8. Procedures at Meetings.
At all meetings of Shareholders, all questions relating to the qualification of
voters, the validity of proxies, the acceptance or rejection of votes, the order
and manner in which matters are submitted to a vote, and all other matters
relating to questions of procedure shall be decided by the chairman of the
meeting, in a manner consistent with these By-Laws.
Section 3.9. Informal Action by Shareholders.
Any action required or permitted to be taken at a meeting of Shareholders may be
taken without a meeting if a consent in writing, setting forth such action, is
signed by each Shareholder entitled to vote on the matter, and such consents are
filed with the records of the Trust.
ARTICLE IV: DIRECTORS
Section 4.1. Annual Meetings of the Directors.
An annual meeting of the Directors, commencing with the year 199X, shall be held
on such date, not less than sixty (60) nor more than one hundred eighty (180)
days after the end of the Trust's last preceding fiscal year, as the Directors
shall prescribe. At each annual meeting, the Directors shall elect officers,
appoint committees, consider approving the continuation of any agreement between
the Trust and an Investment Adviser or Distributor and of any distribution plan
of the Trust pursuant to Rule 12b-1 under the 1940 Act, take any action which
the Directors are required to take annually by the 1940 Act and transact such
other business as may properly come before the meeting.
Section 4.2. Regular and Special Meetings of the Directors.
The Directors may in their discretion provide for regular or special meetings of
the Directors. Regular meetings of the Directors may be held without further
notice at such time and place as shall be fixed in advance by the Directors.
Special meetings of the Directors may be called at any time by the president and
shall be called by the president or the secretary upon the written request of
any two (2) Directors.
Section 4.3. Notice of Special Meetings.
Notice of any special meeting of the Directors shall be given by written notice
delivered personally, telegraphed or mailed to each Director at his business or
residence address. Personally delivered or telegram notices shall be given at
least forty-eight (48) hours prior to the meeting. Notice by mail shall be given
at least five (5) days prior to the meeting. If mailed, such notice will be
deemed to be given when deposited in the United States mail properly addressed,
with postage thereon prepaid. If notice be given by telegram, such notice shall
be deemed given when the telegram is delivered to the telegraph company. Neither
the business to be transacted at, nor the purpose of, any special meeting of the
Directors need be stated in the notice, unless specifically required by the 1940
Act.
Section 4.4. Quorum; Adjournments.
A majority of the number of Directors(but not fewer than two (2) Directors)
shall constitute a quorum for transaction of business at any meeting of the
Directors; provided, that if less than a majority of such number of Directors is
present at any such meeting, a majority of the Directors present or the sole
Director present may adjourn the meeting from time to time without further
notice until a quorum is present.
Section 4.5. Voting.
The action of a majority of the Directors present at a meeting at which a quorum
is present shall be the action of the Directors, unless the concurrence of a
greater proportion or of any specified group of Directors is required for such
action by law, the Declaration or these By-Laws.
Section 4.6. Executive and Other Committees.
The Directors may designate one or more committees, each committee to consist of
two (2) or more Directors and to have such title as the Directors may consider
to be properly descriptive of its function, except that not more than one
committee shall be designated as the Executive Committee. Each such committee
shall serve at the pleasure of the Directors.
In the absence of any member of such committee, the members thereof present at
any meeting, whether or not they constitute a quorum, may appoint a Director to
act in the place of such absent member.
The Directors may delegate to any of the committees appointed under this Section
4.6 any of the powers of the Directors, except the power to: (1) amend the
Declaration; (2) authorize the merger or consolidation of the Trust or the sale,
lease or exchange of all or substantially all of the Trust Property; (3) approve
the incorporation of the Trust; (4) approve the termination of the Trust; (5)
declare dividends or distributions on Shares; (6) issue Shares except pursuant
to a general formula or method specified by the Directors by resolution; (7)
amend these By-Laws; or (8) elect or appoint or remove Directors.
Each committee shall keep minutes or other appropriate written evidence of its
meetings or proceedings and shall report the same to the Directors as and when
requested by the Directors, and shall observe such other procedures with respect
to its meetings as may be prescribed by the Directors in the resolution
appointing such committee, or, if and to the extent not so prescribed, as are
prescribed in these By-Laws with respect to meetings of the Directors.
Section 4.7. Participation in Meetings by Telephone.
Any Director may participate in a meeting of the Directors or of any committee
of the Directors by means of conference telephone or similar communications
equipment if all persons participating in the meeting can hear each other at the
same time. Participation in a meeting by these means shall constitute presence
in person at the meeting.
Section 4.8. Informal Action by Directors.
Any action required or permitted to be taken at any meeting of the Directors or
of any committee of the Directors may be taken without a meeting, if a consent
in writing to such action is signed by each Director in the case of a meeting of
Directors, or each Director who is a member of the committee, in the case of a
meeting of a committee, and such written consent is filed with the minutes of
proceedings of the Directors or of the committee.
Section 4.9. Compensation.
The Directors shall determine and from time to time fix by resolution the
compensation payable to Directors for their services to the Trust in that
capacity. Such compensation may consist of a fixed annual fee or a fixed fee for
attendance at meetings of the Directors or of any committee of the Directors of
which the Directors receiving such fees are members, or a combination of a fixed
annual fee and a fixed fee for attendance. In addition, the Directors may
authorize the reimbursement of Directors for their expense for attendance at
meetings of the Directors or of any committee of the Directors of which they are
members. Nothing herein contained shall be construed to preclude any Director
from serving the Trust in any other capacity and receiving compensation
therefore.
ARTICLE V: WAIVER OF NOTICE
Whenever any notice is required to be given pursuant to law, the Declaration or
these By-Laws, a waiver thereof in writing signed by the person or persons
entitled to such notice, or, in the case of any waiver of notice of any meeting
of Shareholders, signed by the proxy for a person entitled to notice thereof,
whether before or after the time stated therein, shall be deemed equivalent to
the giving of such notice. Neither the business to be transacted at nor the
purpose of any meeting need be set forth in the waiver of notice, unless
specifically required by law, the Declaration or these By-Laws. The attendance
of any person at any meeting in person, or, in the case of a meeting of
Shareholders, by proxy, shall constitute a waiver of notice of such meeting,
except where such person attends a meeting for the express purpose of objecting
to the transaction of any business on the ground that the meeting is not
lawfully called or convened.
ARTICLE VI: OFFICERS
Section 6.1. Executive Officers.
The executive officers of the Trust shall be a president, a secretary and a
treasurer. If the Directors shall elect a chairman pursuant to Section 6.7, then
the chairman shall also be an executive officer of the Trust. If the Directors
shall elect one or more vice presidents, each such vice-president shall be an
executive officer. The chairman, if there be one, shall be elected from among
the Directors, but no other executive officer need be a Director. Any two or
more executive offices, except those of president and vice-president, may beheld
by the same person. A person holding more than one office may not act in more
than one capacity to execute, acknowledge or verify on behalf of the Trust an
instrument required by law to be executed, acknowledged or verified by more than
one officer. The executive officers of the Trust shall be elected at each annual
meeting of Directors.
Section 6.2. Other Officers and Agents.
The Directors may also elect or may delegate to the president authority to
appoint, remove, or fix the duties, compensation or terms of office of one or
more assistant vice presidents, assistant secretaries and assistant treasurers,
and such other officers and agents as the Directors shall at any time and from
time to time deem to be advisable.
Section 6.3. Tenure, Resignation and Removal.
Each officer of the Trust shall hold office until his successor is elected or
appointed or until his earlier displacement from office by resignation, removal
or otherwise; provided, that if the term of office of any officer elected or
appointed pursuant to Section 6.2 shall have been fixed by the Directors or by
the president acting under authority delegated by the Directors, such officer
shall cease to hold such office no later than the date of expiration of such
term, regardless of whether any other person shall have been elected or
appointed to succeed him. Any officer of the Trust may resign at any time by
written notice to the Trust. Any officer or agent of the Trust may be removed at
any time by the Directors or by the president acting under authority delegated
by the Directors pursuant to Section 6.2 if in its or his judgment the best
interests of the Trust would be served thereby, but such removal shall be
without prejudice to the contract rights, if any, of the person so removed.
Election or appointment of an officer or agent shall not of itself create
contract rights between the Director and such officer or agent.
Section 6.4. Vacancies.
If the office of any officer becomes vacant for any reason, the vacancy may be
filled by the Directors or by the president acting under authority delegated by
the Directors pursuant to Section 6.2. Each officer elected or appointed to fill
a vacancy shall hold office for the balance of the term for which his
predecessor was elected or appointed.
Section 6.5. Compensation.
The compensation, if any, of all officers of the Trust shall be fixed by the
Directors or by the president acting under authority delegated by the Directors
pursuant to Section 6.2.
Section 6.6. Authority and Duties.
All officers as between themselves and the Trust shall have such powers, perform
such duties and be subject to such restrictions, if any, in the management of
the Trust as may be provided in these By-Laws, or, to the extent not so
provided, as may be prescribed by the Directors or by the president acting under
authority delegated by the Directors pursuant to Section 6.2.
Section 6.7. Chairman.
When and if the Directors deem such action to be necessary or appropriate, they
may elect a chairman from among the Directors. The chairman shall preside at
meetings of the Shareholders and of the Directors, and he shall have such other
powers and duties as may be prescribed by the Directors. The chairman shall in
the absence or disability of the president exercise the powers and perform the
duties of the president.
Section 6.8. President.
The president shall be the chief executive officer of the Trust. He shall have
general and active management of the business of the Trust, shall see to it that
all orders, policies and resolutions of the Directors are carried into effect,
and, in connection therewith, shall be authorized to delegate to any vice
president of the Trust such of his powers and duties as president and at such
times and in such manner as he shall deem advisable. In the absence or
disability of the chairman, or if there be no chairman, the president shall
preside at all meetings of the Shareholders and of the Directors; and he shall
have such other powers and perform such other duties as are incident to the
office of a corporate president and as the Directors may from time to time
prescribe.
Section 6.9. Vice Presidents.
The vice president, if any, or, if there be more than one, then vice
presidents, shall assist the president in the management of the business of the
Trust and the implementation of orders, policies and resolutions of the
Directors at such times and in such manner as the president may deem to be
advisable. If there be more than one vice president, the Directors may designate
one as the executive vice president, in which case he shall be first in order of
seniority, and the Directors may also grant to other vice presidents such titles
as shall be descriptive of their respective functions or indicative of their
relative seniority. In the absence or disability of both the president and the
chairman, or in the absence or disability of the president if there be no
chairman, the vice president, or, if there be more than one, the vice presidents
in the order of their relative seniority, shall exercise the powers and perform
the duties of those officers; and the vice president or vice presidents shall
have such other powers and perform such other duties as from time to time may be
prescribed by the president or by the Directors.
Section 6.10. Assistant Vice Presidents.
The assistant vice president, if any, or, if there be more than one, the
assistant vice presidents, shall perform such duties as may from time to time be
prescribed by the Directors or by the president acting under authority delegated
by the Directors pursuant to Section 6.2.
Section 6.11. Secretary.
The secretary shall (a) keep the minutes of the meetings and proceedings and any
written consents evidencing actions of the Shareholders, the Directors and any
committees of the Directors in one or more books provided for that purpose; (b)
see that all notices are duly given in accordance with the provisions of these
By-Laws or as required by law; (c) be custodian of the corporate records and of
the seal of the Trust, and, when authorized by the Directors, cause the seal of
the Trust to be affixed to any document requiring it, and when so affixed
attested by his signature as secretary or by the signature of an assistant
secretary; and (d) in general, perform such other duties as from time to time
may be assigned to him by the president or by the Directors.
Section 6.12. Assistant Secretaries.
The assistant secretary, if any, or, if there be more than one, the assistant
secretaries in the order determined by the Directors or by the president, shall
in the absence or disability of the secretary exercise the powers and perform
the duties of the secretary, and he or they shall perform such other duties as
the Directors, the president or the secretary may from time to time prescribe.
Section 6.13. Treasurer.
The treasurer shall be the chief financial officer of the Trust. The treasurer
shall keep full and accurate accounts of receipts and disbursements in books
belonging to the Trust, shall deposit all moneys and other valuable effects in
the name and to the credit of the Trust in such depositories as may be
designated by the Directors, and shall render to the Directors and the
president, at regular meetings of the Directors or whenever they or the
president may require it, an account of all his transactions as treasurer and of
the financial condition of the Trust.
If required by the Directors, the treasurer shall give the Trust a bond in such
sum and with such surety or sureties as shall be satisfactory to the Directors
for the faithful performance of the duties of his office and for the restoration
to the Trust, in case of his death, resignation, retirement or removal from
office, all books, papers, vouchers, money and other property of whatever kind
in his possession or under his control belonging to the Trust.
Section 6.14. Assistant Treasurers.
The assistant treasurer, if any, or, if there be more than one, the assistant
treasurers in the order determined by the Directors or by the president, shall
in the absence or disability of the treasurer exercise the powers and perform
the duties of the treasurer, and he or they shall perform such other duties as
the Directors, the president or the treasurer may from time to time prescribe.
ARTICLE VII: CONTRACTS, CHECKS AND DRAFTS
Section 7.1. Contracts.
The Directors may authorize any officer or agent to enter into any contract or
to execute and deliver any instrument in the name and on behalf of the Trust,
and such authority may be general or confined to specific instances. All
contracts entered into on behalf of the Trust shall comply with Section 5.6 of
the Declaration.
Section 7.2. Checks and Drafts.
All checks, drafts or other orders for the payment of money, notes or other
evidences of indebtedness issued in the name of the Trust shall be signed by
such officer or officers or agent or agents of the Trust and in such manner as
shall from time to time be determined by the Directors.
ARTICLE VIII: SHARES OF BENEFICIAL INTEREST
Section 8.1. Certificates of Shares.
Each Shareholder shall be entitled, upon written request made to the Trust or
any Shareholder Servicing Agent for the Trust, to a certificate or certificates
which shall represent and certify the number of Shares held by him in the Trust.
Each certificate shall be signed by the chairman, if there be one, the president
or a vice president and countersigned by the secretary or an assistant secretary
or the treasurer or an assistant treasurer and may be sealed with the seal of
the Trust. The signatures and seal, if any, on a certificate may be either
manual or facsimile. A certificate is valid and may be issued whether or not an
officer who signed it is still an officer when it is issued. A full record of
the issuance of each certificate and the identifying number assigned thereto
shall be made on the books and records of the Trust usually kept for the purpose
or required by statute.
Section 8.2. Transfers of Shares.
Upon surrender to the Trust or the Shareholder Servicing Agent of the Trust of a
certificate duly endorsed or accompanied by proper evidence of succession,
assignment or authority to transfer, the Trust shall issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction upon its books. Shares of the Trust not represented by certificate
shall be transferred by recording the transaction on the books of the Trust
maintained by its Shareholder Servicing Agent upon presentation of proper
evidence of succession, assignment or authority to transfer.
The Trust shall be entitled to treat the holder of record of any Share or Shares
as the holder in fact thereof and, accordingly, shall not be bound to recognize
any equitable or other claim to or interest in such Shares on the part of any
other person, whether or not it shall have express or other notice thereof,
except as otherwise provided by applicable law.
Section 8.3. Lost Certificates.
The Directors may by resolution establish procedures pursuant to which a new
certificate or certificates may be issued in place of any certificate or
certificates theretofore issued by the Trust which have been mutilated or which
are alleged to have been lost, stolen or destroyed, upon presentation of each
such mutilated certificate, or the making by the person claiming any such
certificate to have been lost, stolen or destroyed of an affidavit as to the
fact and circumstances of the loss, theft or destruction thereof. The Directors,
in their discretion and as a condition precedent to the issuance of any new
certificate, may include among such procedures a requirement that the owner of
any certificate alleged to have been lost, stolen or destroyed, or his legal
representative, furnish the Trust with a bond, in such sum and with such surety
or sureties as they may direct, as indemnity against any claim that may be made
against the Trust in respect of such lost, stolen or destroyed certificate.
Section 8.4. Fixing of Record Date.
For the purpose of determining the Shareholders entitled to notice of, or to
vote at, any meeting of Shareholders or at any adjournment thereof in respect of
which a new record date is not fixed, or to express written consent to or
dissent from the taking of corporate action without a meeting, or for the
purpose of determining the Shareholders entitled to receive payment of any
dividend or other distribution or allotment of any rights, or to exercise any
rights in respect of any change, conversion or exchange of Shares, or for the
purpose of any other lawful action, the Directors may fix, in advance, a date as
the record date for any such determination of Shareholders. Such date shall not
be more than ninety (90) days, and in case of a meeting of Shareholders not less
than ten (10) days, before the date on which the meeting or particular action
requiring such determination of Shareholders is to be held or taken. If no
record date is fixed, (a) the record date for the determination of Shareholders
entitled to notice of or to vote at a meeting of Shareholders shall be the later
of: (i) the close of business on the day on which the notice of meeting is first
mailed to any Shareholder; or (ii) the thirtieth (30th) day before the meeting;
(b) the record date for determining the Shareholders entitled to express written
consent to the taking of any action without a meeting, when no prior action by
the Directors is necessary, shall be the day on which the first written consent
is expressed; and (c) the record date for the determination of Shareholders
entitled to receive payment of a dividend or other distribution or an allotment
of any other rights shall be at the close of business on the day on which the
resolution of the Directors, declaring the dividend, distribution or allotment
of rights, is adopted.
ARTICLE IX: FISCAL YEAR
The fiscal year of the Trust shall be fixed and may from time to time be changed
by resolution of the Directors; provided, that if a different fiscal year shall
not have been fixed by the Directors on or before December 31, 1996, the first
fiscal year of the Trust shall end on that date, and thereafter, unless the
Directors shall fix a different fiscal year, it shall be the period of twelve
(12) consecutive calendar months ending on the 31st day of December in each
year.
ARTICLE X: SEAL
The Directors shall adopt a seal, which shall be in such form and shall have
such inscription thereon as the Directors may from time to time provide. The
seal of the Trust may be affixed to any document, and the seal and its
attestation may be lithographed, engraved or otherwise printed on any document.
ARTICLE XI: INDEMNIFICATION AND INSURANCE
Section 11.1.
The Trust shall indemnify any individual who is a present or former Director,
officer, employee or agent of the Trust and who, by reason of his position as
such, was, is, or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than any action or suit by or in the right of the Trust)
against expenses, including attorneys' fees, judgments, fines, and amounts paid
in settlement, actually and reasonably incurred by him in connection with the
claim, action, suit or proceeding, if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the Trust,
and, with respect to any criminal action or proceeding, had no reasonable cause
to believe his conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction, or upon the plea of nolo
contendere or its equivalent, shall not, of itself, create a presumption that
the person did not act in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interests of the Trust, and, with
respect to any criminal action or proceeding, had reasonable cause to believe
that his conduct was unlawful.
Section 11.2.
The Trust shall indemnify any individual who is a present or former Director,
officer, employee or agent of the Trust and who, by reason of his position as
such, was, is, or is threatened to be made a party to any threatened, pending or
completed action or suit by or on behalf of the Trust to obtain a judgment or
decree in its favor against expenses, including attorneys' fees, actually and
reasonably incurred by him in connection with the defense or settlement of the
action or suit, if he acted in good faith and in a manner he reasonably believed
to be in or not opposed to the best interests of the Trust; except that no
indemnification shall be made in respect of any claim, issue or matter as to
which the individual has been adjudged to be liable for negligence or misconduct
in the performance of his duty to the Trust, except to the extent that the court
in which the action or suit was brought determines upon application that,
despite the adjudication of liability but in view of all circumstances of the
case, the person is fairly and reasonably entitled to indemnity for those
expenses which the court shall deem proper, provided such Director or officer is
not adjudged to be liable by reason of his willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
office.
Section 11.3.
To the extent that a Director, officer, agent or employee of the Trust has been
successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in Section 11.1 or Section 11.2 or in defense of any
claim, issue, or matter therein, he shall be indemnified against expenses,
including attorneys' fees, actually and reasonably incurred by him in connection
therewith.
Section 11.4.
<PAGE>
Unless a court orders otherwise, any indemnification under Section 11.1 or
Section 11.2 may be made by the Trust only as authorized in the specific case
after a determination that indemnification of the Director, officer, employee or
agent is proper in the circumstances because he has met the applicable standard
of conduct set forth in Section 11.1 or Section 11.2. The determination shall be
made by: (i) the Directors, by a majority vote of a quorum consisting of
Directors who were not parties to the action, suit or proceeding; or if the
required quorum is not obtainable, or if a quorum of disinterested Directors so
directs, (ii) an independent legal counsel in a written opinion.
<PAGE>
Nothing contained in this Article XI shall be construed to protect any Director,
officer, employee or agent of the Trust against any liability to the Trust or
its Shareholders to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence, or reckless disregard of the duties
involved in the conduct of his office (any such conduct being hereinafter called
"Disabling Conduct"). No indemnification shall be made pursuant to this Article
XI unless:
(a) There is a final determination on the merits by a court or other body
before whom the action, suit or proceeding was brought that the individual to be
indemnified was not liable by reason of Disabling Conduct; or
(b) In the absence of such a judicial determination, there is a reasonable
determination, based upon a review of the facts, that such individual was not
liable by reason of Disabling Conduct, which determination shall be made by:
(i) A majority of a quorum of Directors who are neither 'interested
persons' of the Trust, as defined in Section 2(a)(19) of the 1940 Act, nor
parties to the action, suit or proceeding; or
(ii) An independent legal counsel in a written opinion.
Section 11.5.
Notwithstanding any provision of this Article XI, any advance payment of
expenses by the Trust to any Director or officer of the Trust shall be made only
upon the undertaking by or on behalf of such Director, officer, employee or
agent to repay the advance unless it is ultimately determined that he is
entitled to indemnification as above provided, and only if one of the following
conditions is met:
(a) The Director, officer, employee or agent to be indemnified provides a
security for his undertaking; or
(b) The Trust is insured against losses arising by reason
of any lawful advances; or
(c) There is a determination, based on a review of readily available facts,
that there is reason to believe that the Director or officer to be indemnified
ultimately will be entitled to indemnification, which determination shall be
made by:
(i) A majority of a quorum of Directors who are neither "interested
persons" of the Trust, as defined in Section 2(a)(19) of the 1940 Act, nor
parties to the action, suit or proceeding; or
(ii) An independent legal counsel in a written opinion.
Section 11.6.
The indemnification provided by this Article XI shall continue as to an
individual who has ceased to be a Director, officer, employee or agent of the
Trust and inure to the benefit of the legal representatives of such individual
and shall not be deemed exclusive of any other rights to which any Director,
officer, employee or agent of the Trust may be entitled under any agreement,
vote of Directors or otherwise, both as to action in his official capacity and
as to action in another capacity while holding office as such; provided, that no
person may satisfy any right of indemnity granted herein or to which he may be
otherwise entitled, except out of the Trust Property, and no Shareholder shall
be personally liable with respect to any claim for indemnity.
Section 11.7.
The Trust may purchase and maintain insurance on behalf of any person who is or
was a Director, officer, employee or agent of the Trust, against any liability
asserted against him and incurred by him in any such capacity, or arising out of
his status as such. However, the Trust shall not purchase insurance to indemnify
any Director or officer against liability for any conduct in respect of which
the 1940 Act prohibits the Trust itself from indemnifying him.
ARTICLE XII: NET ASSET VALUE
The Directors shall by resolution prescribe the manner, frequency and time of
day for determining the net asset value per Share of the outstanding Shares of
the Trust.
ARTICLE XIII: FEDERAL SUPREMACY
If at a time when the Trust is registered as an investment company under the
1940 Act, any of the foregoing provisions of these By-Laws or of the Declaration
or the law of the Commonwealth of Massachusetts relating to business Trusts
shall conflict or be inconsistent with any applicable provision of the 1940 Act,
the applicable provision of the 1940 Act shall be controlling and the Trust
shall not take any action which is in conflict or inconsistent therewith.
ARTICLE XIV: AMENDMENTS
These By-Laws may be amended, altered or repealed, or new By-Laws may be
adopted, by the Directors. The Directors shall in no event adopt By-Laws which
are in conflict with the Declaration, and, subject to Article XIII of these
By-Laws, any apparent inconsistency shall be construed in favor of the
provisions in the Declaration.
ARTICLE XV: DECLARATION OF Trust
The Declaration of Trust establishing the Trust, dated May 20, 1996, a copy of
which, together with all amendments thereto, is on file in the office of the
Secretary of the Commonwealth of Massachusetts, provides that the name "PRECIOUS
METALS AND EQUITY TRUST" refers to the Directors under the Declaration
collectively as Directors, but not as individuals or personally; and no
Director, Shareholder, officer, employee or agent of the Trust shall be held
personally liable, nor shall resort be had to their private property for the
satisfaction of any obligation or claim or otherwise, in connection with the
affairs of the Trust, but the Trust Property only shall be liable.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholder and Trustees of
Precious Metals and Equity Trust
We have audited the accompanying statement of assets and liabilities of Precious
Metals and Equity Trust (the "Trust") as of __________________, 1996. This
financial statement is the responsibility of the Trust's management. Our
responsibility is to express an opinion on this financial statement based on our
audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan to perform the audit to obtain reasonable
assurance about whether this financial statement is free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statement. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial presentation. We believe
that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statement referred to above presents fairly, in
all material respects, the financial position of the Trust in conformity with
generally accepted accounting principles.
_________________, 1996
PRECIOUS METALS AND EQUITY TRUST
STATEMENT OF ASSETS AND LIABILITIES
___________________, 1996
Precious
Metals and
Equity Trust
ASSETS:
Cash $_____________
Deferred Organization
Expenses (Note 1) $_____________
LIABILITIES:
Organization costs
payable (Note 1) $_____________
NET ASSETS: (applicable to _______
shares of common stock issued
and outstanding, no par value,
unlimited shares authorized) $_____________
Net Asset Value and Redemption Price
per share $_____________
Note 1 - Organization
Precious Metals and Equity Trust (the "Trust") was organized as a Massachusetts
business trust on has had no operations other than those relating to
organizational matters and the sale to Societe D'Etude et de Gestion
Financieres, Meeschaert, S.A. of ____________ shares of its common stock for
$_____________ on _______, 1996. Costs incurred and to be incurred in connection
with its organization and registration will be deferred and amortized by the
Trust over the period of benefit not to exceed 60 months from the date the Trust
commences operations. The Adviser has agreed that if any of the initial shares
are redeemed by any holder thereof prior to amortization of the organization
costs, the proceeds of such redemption will be reduced by any unamortized
organizational costs in the same proportion as the number of initial shares
being redeemed bears to the number of initial shares outstanding at the time of
redemption.
EXHIBIT 1
<PAGE>
POWER OF ATTORNEY
We, the undersigned officers and Trustees of Precious Metals and Equity
Trust, hereby severally constitute David W.C. Putnam, David Y. Williams, and
Peter K. Blume, and each of them singly, our true and lawful attorneys, with
full power to them and each of them singly to sign for us, and in our names
and in the capacity mentioned below, any and all Registration Statements
and/or Amendments to the Registration Statements, filed with the Securities
and Exchange Commission, hereby ratifying and confirming our signatures as they
may be signed by our said attorneys to any and all amendments to said
Registration Statement, and all additional Registration Statements and
Amendments thereto.
Witness our hands and common seal on the dates set forth below.*
Signature Title Date
DAVID W.C. PUTNAM
____________________________ Chairman and Trustee June 14, 1996
David W.C. Putnam
J. STEPHEN PUTNAM
____________________________ Treasurer (Principle June 14, 1996
J. Stephen Putnam Financial Officer)
SPENCER H. LEMENAGER
____________________________ Secretary and Trustee June 14, 1996
Spencer H. LeMenager
MAURICE DONAHUE
____________________________ Trustee June 14, 1996
Maurice Donahue
DAVID Y. WILLIAMS
____________________________ President and Trustee June 14, 1996
David Y. Williams
* This Power of Attorney may be executed in several counterparts, each of
which shall be regarded as an original and all of which taken together shall
constitute one and the same Power of Attorney, and any of the parties hereto
may execute this Power of Attorney by signing any such counterpart.
