1933 Act File No. 2-16931
1940 Act File No. 811-0972
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. 49
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /X/
Amendment No. 27
(Check appropriate box or boxes)
PROGRESSIVE CAPITAL ACCUMULATION TRUST
(formerly ANCHOR CAPITAL ACCUMULATION TRUST)
(Exact Name of Registrant as Specified in Charter)
579 Pleasant Street, Suite 4
Paxton, Massachusetts 01612
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (508)831-1171
It is proposed that this filing will become effective:
(Check appropriate box)
___ immediately upon filing pursuant to paragraph (b) of Rule 485
/X/ on May 1, 1999 pursuant to paragraph (b)
___ 60 days after filing pursuant to paragraph (a)(1)
___ 75 days after filing pursuant to paragraph (a)(2)
___ on ____________ pursuant to paragraph (a)(1) of Rule 485
Peter K. Blume, Esq.
Thorp Reed & Armstrong
One Riverfront Center
Pittsburgh, PA 15222
(Name and Address of Agent for Service)
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PROSPECTUS
PROGRESSIVE CAPITAL ACCUMULATION TRUST
Progressive Capital Accumulation Trust is a diversified open-end management
company. The Trust seeks to provide long-term growth by investing primarily in a
diversified group of common and preferred stocks and options of United States
and foreign companies. These securities are selected on the basis of their
investment values and potential for growth.
Trust Shares are not bank deposits, federally insured, or guaranteed, and may
lose value.
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved these securities or passed upon the adequacy of this
prospectus. Any representation to the contrary is a criminal offense.
CONTENTS
Risk/Return Summary
Fees and Expenses of the Trust
What are the Trust's Investment Strategies?
What are the Specific Risks of Investing in
the Trust?
Management and Organization
Shareholder Information
Other Information
Financial Information
Application and Registration Form
PROSPECTUS DATED MAY 1, 2000
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RISK/RETURN SUMMARY
What is the Trust's Investment Objective?
The principal investment objective of the Trust is to obtain long-term capital
growth by investing primarily in a diversified group of common and preferred
stocks and options. The Trust invests in both United States and foreign
companies. The Trust's investment adviser, Progressive Investment Management,
Inc. (Investment Adviser), selects these securities on the basis of their
investment values and their potential for growth as characterized below. The
Trust relies on its Investment Adviser to make decisions about the Trust's
portfolio securities. In determining investment values, the Investment Adviser
places primary emphasis on the following financial characteristics:
o Above-average growth in earnings per share
o Strong balance sheet with an emphasis on a low
debt-to-equity ratio and adequate working capital
o A high return on invested capital with a high capital
reinvestment rate
o Strong product and market conditions compared to competition
within the issuer's industry group
While there is no assurance that the Trust will achieve its investment
objective, it will attempt to do so through the strategies and policies
described in this Prospectus.
What are the Trust's Main Investment Strategies?
The Trust invests primarily in common and preferred stocks of United States and
foreign issuers. In selecting investments, the Trust invests in companies that
have had above-average earnings growth and a strong balance sheet. The Trust
focuses on companies that are leaders in their industry groups based on such
factors as market capitalization, product innovation and/or dominant market
share.
To achieve its investment objectives, the Trust may engage in specialized
investment techniques. The Trust may purchase covered call options or covered
put options on portfolio securities and securities indices. The Trust may also
purchase put and call options on foreign currencies in closing sale
transactions. In addition, the Trust may lend portfolio securities and invest in
repurchase agreements.
What are the Main Risks of Investing in the Trust?
The Trust is intended for investors who seek long-term capital appreciation.
Therefore, investors in the Trust should have a long-term view and should
recognize that the value of securities in the Trust's portfolio will fluctuate.
An investment in the Trust is subject to risks, and it is possible to lose money
by investing in the Trust. Companies perceived by the Trust to have the
potential for above-average growth in earnings may fail to grow as anticipated,
resulting in losses on the Trust's investments in such companies. Changes in the
value of the Trust's portfolio may result from general changes in the market or
the economy. Also, growth-oriented stocks generally may fall out of favor with
the stock market. Events affecting individual issuers of the securities in the
Fund's portfolio may also cause fluctuations in the Trust's share price. In
addition, the Trust's portfolio includes foreign securities, which may be more
volatile and less liquid than securities of U.S. issuers.
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The principal risks of investing in the Trust are:
o Market Risk: This is the risk that the price of a security will rise or fall
due to changing economic, political or market conditions, or due to a
company's individual situation.
o Smaller companies: The securities of smaller companies may have more risks
than those of larger companies - they may be more susceptible to market
downturns and their prices may be more volatile.
o Foreign Securities: Investments in foreign securities
involve risks relating to political, social and economic
developments abroad as well as risks resulting from the
differences between the regulations to which U.S. and foreign
issuers and markets are subject.
o These risks may include expropriation, confiscatory taxation,
withholding taxes on dividends and interest, limitations on the use or
transfer of portfolio assets, and political or social instability.
o Enforcing legal rights may be difficult, costly and slow in foreign
countries, and there may be special problems enforcing claims against
foreign governments. In addition, foreign companies may not be subject
to accounting standards or governmental supervision comparable to U.S.
companies, and there may be less public information about their
operations.
o Foreign markets may be less liquid and more volatile than U.S. markets
and may offer less protection to investors such as the Trust. Equity
securities traded in certain foreign countries may trade at high
price-earnings multiples that are unsustainable.
o Since foreign securities often trade in currencies other that the U.S.
dollar, changes in currency exchange rates will affect the Trust's net
asset value, the value of dividends and interest earned, and gains and
losses realized on the sale of securities. An increase in the U.S.
dollar relative to these other currencies will adversely affect the
value of the Trust.
o The Trust may invest in issuers located in developing countries.
o Developing countries are generally defined as countries in the
initial stages of their industrialization cycles with low per capita
income.
o All the risks of investing in foreign securities are heightened by
investing in developing countries.
o The markets of developing countries have been more volatile than the
markets of developed countries with more mature economies. These
markets often have provided higher rates of return, and greater risks
to investors.
o Interest Rate Risk: In general, the prices of debt securities rise when
interest rates fall and fall when interest rates rise. Longer-term
obligations are usually more sensitive to interest rate changes.
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o Credit Risk: It is possible that some issuers will not make payments on debt
obligations held by the Trust. Or, an issuer may suffer adverse changes in
financial condition that could lower the credit quality of a security,
leading to greater volatility in the price of the security and in shares of
the Trust. A change in the quality rating of a bond can also affect the
bond's liquidity and make it more difficult for the Trust to sell the
security.
o Prepayment Risk: The issuers of securities held by the Trust may be able to
prepay principal due on the securities, particularly during periods of
declining interest rates. Securities subject to prepayment risk generally
offer less potential for gains when interest rates decline, and may offer
greater potential for loss when interest rates rise. In addition, rising
interest rates may cause prepayments to occur at a slower than expected rate,
thereby effectively lengthening the maturity of the security and making the
security more sensitive to interest rate changes. Prepayment risk is a major
risk of mortgage-backed securities.
o Special characteristics of convertible securities: Convertible securities are
subject to the market risk of stocks, while also subject to interest rate
risk and the credit risk of the issuers. Call provisions may allow the issuer
to repay the debt before it matures, with the attendant prepayment risks
noted above.
For a more detailed discussion of these and other risks, see "Specific Risks of
Investing in the Trust."
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Bar Chart and Performance Table
The bar chart and performance table below indicate the risks of investing in the
Trust. The chart shows the annual total returns of the Trust on a calendar year
basis for each of the past ten years.
[OBJECT OMITTED]
The total returns displayed for the Trust do not reflect the payment of any
sales charges or recurring shareholder account fees. If these charges or fees
were included, the returns shown would be lower.
Within the period shown in the chart, the Trust's highest quarterly return was
14.19% for the quarter ended December 31, 1998. Its lowest quarterly return was
(5.48%) for the quarter ended June 30. 1992.
Average Annual Total Return
for the periods ended December 31, 1999
1 Year 5 Years 10 Years
- ------------------------------------------------------
The Trust 26.10% 18.42% 11.81%
------ ------ ------
S&P 500 Index 19.53% 26.18% 15.31%
------ ------ ------
The table shows the Trust's total returns averaged over a period of years as
compared to the S&P 500 Index, a broad-based market index.
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The bar chart and the performance table provide you with historical performance
information so that you can analyze the potential fluctuations in the Trust's
returns and analyze the risks of investing in the Trust. Past results of the
Trust, however, do not necessarily indicate how the Trust will perform in the
future.
FEES AND EXPENSES OF THE TRUST
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Trust.
Shareholder Fees
(fees paid directly from your investment)
Maximum sales charge (load) imposed on
purchases (as a percentage of None
offering price)
Maximum deferred sales charge (load)
(as a percentage of offering price) None
Redemption fee (as a percentage
of amount redeemed) None
Exchange fee None
Annual Fund Operating Expenses
(expenses that are deducted from fund
assets)
Management fees 0.75%
Other expenses 0.91%
-----
Total annual Fund operating expenses 1.66%
-----
Example
The following example is intended to help you compare the cost of investing in
the Trust with the cost of investing in other mutual funds.
The example assumes that you invest $10,000 in the Trust for the time periods
indicated. The example also assumes that your investment has a 5% return each
year and that the Trust's operating expenses remain the same. Although your
actual costs may be higher or lower, under these assumptions your costs would
be:
Assuming redemption
at the end of each period
One Year $169
Three Years: $523
Five Years $902
Ten Years $1,965
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WHAT ARE THE TRUST'S INVESTMENT STRATEGIES?
The principal investment objective of the Trust is to obtain long-term capital
growth by investing primarily in a diversified group of common and preferred
stocks and options. The Trust invests in United States and foreign companies.
The Trust's investment adviser, Progressive Investment Management Corporation
(Investment Adviser), selects these securities on the basis of their investment
values and their potential for growth as characterized below. The Trust relies
on its Investment Adviser to make decisions about the Trust's portfolio
securities. In determining investment values, the Investment Adviser places
primary emphasis on the following financial characteristics:
o Above-average growth in earnings per share
o Strong balance sheet with an emphasis on a low
debt-to-equity ratio and adequate working capital
o A high return on invested capital with a high capital
reinvestment rate
o Strong product and market conditions compared to competition
within the issuer's industry group
To achieve its investment objective, the Trust may also use specialized
investment techniques by engaging in a variety of transactions using
"derivatives." Derivatives are financial instruments whose value depends upon,
or is derived from, the value of something else, such as one or more underlying
securities, indices or currencies. These include transactions in options or
securities, securities indices and currencies, transactions in financial futures
contracts and related options. The Trust may also make loans of portfolio
securities and enter into repurchase agreements. The use of derivatives and
other specialized investment techniques involves special risks and may result in
losses to the Trust. See "Specific Risks of Investing in the Trust."
Some of the specialized investment techniques that the Trust may use are
summarized below and are discussed further in the Statement of Additional
Information.
Options Transactions Involving Portfolio Securities and Securities Indices: When
the Investment Adviser decides it is appropriate, the Trust may write call
option contracts or purchase put or call options with respect to portfolio
securities and with respect to securities indices. A call option is a short-term
contract, usually nine months or less in duration, that gives the purchaser the
right to buy from the seller (writer) the underlying security at a specified
exercise price, regardless of the market price of the security. A put option is
a short-term contract that gives the purchaser of the option the right to sell
to the writer of the option the underlying security at a specified exercise
price. The purchaser of a put or call option also pays the writer a premium.
These options will be covered options (options as to securities which the Trust
owns). Options on U.S. securities are generally listed on a national securities
exchange. Options on foreign securities and on some U.S. securities may not be
listed on any U.S. 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 underlying security
(or representative securities, in the case of an index option) above the
option's exercise price. The Trust may not always be able to close out option
transactions at acceptable prices. The Trust pays a premium when it purchases
options, and the Trust may lose this premium if the option proves to have no
value.
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The Trust will write or purchase 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). The value of the Trust's purchases of options, including its
purchase of put and call options on foreign currencies, together will not exceed
50% of the value of the Trust's assets at the time of purchase.
Options on Foreign Currencies: The Trust may purchase put and call options on
foreign currencies. As noted above, these purchases, together with the Trust's
purchases of other options, will not exceed 50% of the Trust's total assets. The
Trust may purchase options on foreign currencies 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).
Financial Futures and Related Options: The Trust may purchase and sell financial
futures contracts and put and call options on financial futures contracts as a
hedge against anticipated changes in the market value of its portfolio
securities or securities which it intends to purchase.
Lending of Portfolio Securities: The Trust may seek to increase its income by
lending portfolio securities. Any loan will be continuously secured by
collateral at least equal to the market value of the security loaned. The total
value of the securities loaned at any time will not exceed 30% of the Trust's
total assets. The Trust will make loans only to U.S. entities which the Trust's
management deems to be creditworthy. In addition, in any loan transactions, the
Trust will have the right to call the loan and obtain the securities loaned at
any time on five days' notice.
Repurchase Agreements: The Trust may engage in transactions in repurchase
agreements. These are agreements under which the Trust acquires a money market
instrument (such as a security issued by the U.S. Government or one of its
agencies, a bankers' acceptance or a certificate of deposit) from a commercial
bank, subject to resale to the seller at a specified price and date (normally
the next business day). The resale price reflects an agreed-upon interest rate
effective for the period that the Trust holds the security and is not related to
the interest rate on the underlying instrument.
The Trust will enter into repurchase agreements only with 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 Trust will require that
repurchase agreements be secured by acceptable collateral. The Trust may not
invest more than 10% of its total assets in repurchase agreements having
maturities longer than seven days or other investments subject to legal or
contractual restrictions on resale or which are not readily marketable.
WHAT ARE THE SPECIFIC RISKS OF INVESTING IN THE TRUST?
Equity Securities
While stocks have historically outperformed other asset classes over the long
term, they tend to go up and down more dramatically over the shorter term. These
price movements may result from factors affecting individual companies or
industries or the securities market or the economy as a whole.
Because the stocks the Trust holds fluctuate in price, the value of your
investment in the Trust will go up and down. This means you could lose money
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over short or even extended periods of time. Moreover, companies perceived by
the Trust to have the potential for above-average growth in earnings may fail to
grow as anticipated, resulting in losses on the Trust's investments in such
companies. Also, growth-oriented stocks generally may fall out of favor with the
stock market.
Other principal risks of investing in the Trust are:
Convertible Securities
Convertible securities, including convertible bonds and debentures, are
convertible into common stock. Because of this conversion feature, the interest
or dividend rate on a convertible security is generally less than a security
which is not convertible. The value of a convertible security will be affected
by both its stated interest or dividend rate and the value of the underlying
debt or equity security. Its value will thus be affected by factors that affect
both debt securities (such as interest rates) and equity securities (such as
stock market movements generally). In addition, some convertible securities, by
their terms, permit the issuer to require the Trust to resell the convertible
security, which could occur at a time that is not favorable to the Trust based
on then-prevailing interest rates or equity values.
Foreign Investing
From time to time, 100% of the Trust's net asset value may be invested in debt
or equity securities of non-U.S. issuers. Such foreign securities pose
additional risks because foreign economic or political conditions may be less
favorable than those of the United States. There is usually less public
information available about foreign companies than U.S. companies. Foreign
financial markets may also have fewer investor protections. Securities in
foreign markets may also be subject to taxation policies that reduce returns for
U.S. investors. Due to these risk factors, foreign securities may be more
volatile and less liquid than similar securities traded in the U.S. In
particular, investments in foreign securities are subject to the following
specific risks:
Country Risk. General securities market movements in any country will
likely affect the value of the securities the Trust owns which trade in
that country. These movements will affect the Trust's share price.
The political, economic and social structures of some countries may be
less stable and more volatile than those in the U. S. The risks of
investing in these countries include the possibility of the imposition of
exchange controls, expropriation, restrictions on removal of currency or
other assets, nationalization of assets and punitive taxes.
The Trust's investments in developing or emerging markets are subject to
all of the risks of foreign investing generally, and have additional
heightened risks due to a lack of legal, business and social frameworks to
support securities markets.
Company Risk. Foreign companies are not subject to the
same accounting, auditing, and financial reporting
standards and practices as U. S. companies and their
stocks may not be as liquid as stocks of similar U.S.
companies. Foreign stock exchanges, brokers and
companies generally have less government supervision
and regulation than in the U.S. The Trust may have
greater difficulty voting proxies, exercising
shareholder rights, pursuing legal remedies and
obtaining judgments with respect to foreign investments
in foreign courts than with respect to U.S. companies
in U.S. courts.
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Currency. Many of the Trust's investments are
denominated in foreign currencies. Changes in foreign
currency exchange rates will affect the value of
securities the Trust owns and the Trust's share price.
Generally, when the U.S. dollar rises in value against
a foreign currency, an investment denominated in that
country's currency loses value because that currency is
worth fewer U.S. dollars.
Euro. On January 1, 1999, the European Monetary Union introduced a new
single currency, the euro. The euro will replace the national currency for
participating member countries. The Trust's investments in countries with
currencies replaced by the euro, the investment process, including
trading, foreign exchange, payments, settlements, cash accounts, custody
and accounting, will be affected.
Because this change to a single currency is new and untested, the
establishment of the euro may result in market volatility. Also, it is not
possible to predict the impact of the euro on the business or financial
condition of European issuers which the Trust may hold in its portfolio,
and their impact on the value of Trust shares. To the extent the Trust
holds non-U.S. dollar (euro or other) denominated securities, it will
still be exposed to currency risk due to fluctuations in those currencies
versus the U.S. dollar.
Derivatives
The Trust may engage in transactions using derivatives, including options and
futures. Derivatives allow the Trust to increase or decrease the level of risk
to which the Trust is exposed more quickly and efficiently than transactions in
other types of instruments. Derivatives, however, are volatile and involve
significant risks, including the following:
Credit Risk. There is the risk that the other party on a
derivative transaction will be unable to honor its financial
obligation to the Trust.
Currency Risk. There is the risk that changes in the
exchange rate between two currencies will adversely affect
the value (in U.S. dollar terms) of the investment.
Leverage Risk. Certain investments or trading strategies that involve
leverage can result in losses that greatly exceed the amount originally
invested because relatively small market movements may result in large
changes in the value of an investment.
Liquidity Risk. There is the risk that derivative securities may be
difficult or impossible to sell at the time the seller would like or at
the price that the seller believes the security is currently worth.
Index Risk. If the derivative is linked to the performance of an index, it
will be subject to the risks associated with changes in that index. If the
index changes, the Trust could receive lower interest payments (in the
case of a debt-related derivative) or experience a reduction in the value
of the derivative to below what the Trust paid. Certain indexed securities
may create leverage, to the extent that they increase or decrease in value
at a rate that is a multiple of the changes in the applicable index.
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Loans of Portfolio Securities and Repurchase Agreements
If the Trust makes loans of portfolio securities or uses repurchase agreements,
there is a risk that the other party to the transaction may not be able to
fulfill its obligations to the Trust. In the event of a default by the borrower
in a loan of portfolio securities, the Trust may not be able to recover its
securities. In the event of a default by the other party to a repurchase
agreement, the Trust may lose its interest in the underlying security.
MANAGEMENT AND ORGANIZATION
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
At a shareholders meeting held on November 30, 1998, the shareholders of the
Trust voted to enter into an investment advisory agreement with Progressive
Investment Management Inc., replacing Anchor Investment Management Corporation
as the Investment Adviser to the Trust. The new investment advisory agreement is
substantially similar to the Trust's agreement with its former investment
adviser, Anchor Investment Management Corporation. Under the new investment
advisory agreement, the same persons manage the Trust's investments, and there
is no change in the rate of investment advisory fees.
The Investment Adviser manages the Trust's investments and affairs, subject to
the supervision of the Trustees. Its principal services to the Trust are
managing the investment and reinvestment of the Trust's assets and providing,
either directly or through a sub-administrator, various administrative services
to the Trust, including the provision of all necessary office facilities,
equipment and personnel for administering the business of the Trust. The
Investment Adviser has been engaged continuously in the management of investment
company assets since 1983. The principal offices of both the Trust and the
Investment Adviser are located at 579 Pleasant Street, Suite 4, Paxton,
Massachusetts 01612.
The person who is primarily responsible for the day-to-day management of the
Trust's portfolio is Alain Jaspard, who is a Vice President of the Investment
Adviser. Alain Jaspard had co-managed the Trust's portfolio with his father,
Paul Jaspard, until his father's death in October, 1999, when he became sole
day-to-day manager of the Trust's portfolio. Alain Jaspard is President of
Linden Investment Advisors, S.A., an investment advisory firm headquartered in
Belgium. He has managed other portfolios for the Meeschaert organization
(described below) for more than two years. Mr. Jaspard has been engaged
continuously in the investment management business, including the management of
investment company assets, since September, 1997. From September, 1996 to
September, 1997, he was an investment analyst with Global Equity Managers, an
investment advisory firm based in Luxenbourg. From September, 1993, to
September, 1996, he was employed as the head of personnel recruitment and
training for a large Belgian transportation firm.
For its service under its Investment Advisory Contract with the Trust, the
Investment Adviser receives a fee, payable monthly, calculated at 0.75% per
annum of the average daily net assets of the Trust. This fee is higher than that
of most other investment companies. For the fiscal year ended December 31, 1999,
the Investment Adviser received investment advisory fees of $36,196 for its
services to the Trust. The Investment Adviser may voluntarily waive a portion of
its fee or reimburse the Trust for certain operating expenses.
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SHAREHOLDER INFORMATION
Purchase of Shares
You may purchase Trust shares directly from the Distributor,
Meeschaert & Co., Inc., 579 Pleasant Street, Suite 4, Paxton,
Massachusetts 01612. An application for your use in making an
initial investment in the Trust is included in the back of this
Prospectus.
Investment Minimums
o To establish a new account, the minimum investment is $500. There is no
minimum for shareholders who make additional investments to existing
accounts.
o To exchange other securities for Trust shares, the minimum investment is
$5,000. See "EXCHANGES" below.
Share Price
The Trust's share price is its net asset value next determined after the
Distributor receives and accepts your order. The Trust calculates its net asset
value as of 12:00 noon Eastern Time on each day on which the New York Stock
Exchange is open for trading.
In calculating net asset value, the Trust uses market prices of securities
traded on U.S. or foreign securities exchanges when available. The market price
of a security is equal to the last known sale price, or if there has been no
sale of the security, the known current bid price. If a particular security's
market price is not available, the Trust will determine the appropriate price
based on its "fair value." This means that the Trust may value such securities
at fair value as determined in good faith by or under the direction of the
Trust's Board of Trustees. The market prices of all of the Trust's investments
are added together, liabilities of the trust are deducted from the total, and
the resulting amount is divided by the number of shares outstanding.
Trading in foreign securities may be completed at times which vary from the
closing of the New York Stock Exchange (NYSE). In computing its net asset value,
the Trust values foreign securities at the latest closing price on the exchange
on which they are traded immediately prior to the time when the net asset value
of the Trust is calculated. All assets and liabilities of the Trust denominated
in foreign currencies are valued in U.S. dollars based on the exchange rate last
quoted by a major bank prior to the time when the net asset value of the Trust
is calculated.
Exchanges of Shares
The Trust will accept common or preferred stock of companies acceptable to the
Investment Adviser in exchange for shares of the Trust. The minimum value of
securities accepted for deposit is $5,000. The Trust will value securities
accepted for exchange in the same manner provided for valuing its portfolio
securities (see "Share Price" above).
If the Trust, upon acceptance of securities for exchange of fund shares,
determines to sell these securities, the Trust will pay any liquidation costs
involved in disposing of these securities.
You should forward securities for exchange, in proper form for transfer to the
Trust, together with a completed and signed letter of transmittal in approved
form (available from the Distributor) to the Trust's custodian as follows:
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Investors Bank & Trust Company
Financial Products Services Group
Attn: Progressive Capital Accumulation Trust
200 Clarendon Street, 18th Floor
Boston, Massachusetts 02116
Exchanges of shares must be done as follows:
1. You must forward all securities under a single Letter of Transmittal. In
certain instances indicated in the instructions to the Letter of
Transmittal, multiple Letters of Transmittal must be attached and
transmitted as a single exchange. The Trust may reject securities
presented for exchange for any reason, and will only accept securities
which are delivered in proper form.
2. If you wish to exchange securities for Trust shares, your securities must
not be subject to any restrictions that would affect their resale by the
Trust for any reason. The Trust will not accept securities for exchange
if, in the opinion of its counsel, acceptance would violate any federal or
other law affecting the Trust. The Trust may reject securities for any
reason.
3. If you are contemplating an exchange of securities for Trust shares, you
or your representative should contact the Distributor before you forward
the securities so that the Distributor can determine in advance whether
the securities are acceptable to the Trust.
4. If the Trust finds that securities presented for exchange
are in good order only in part, the Trust may issue the
appropriate number of Trust shares for that part and return
the balance to you. The Trust will issue a confirmation
for Trust shares to you after securities that it has
accepted for exchange have cleared for transfer to the
Trust. Certificates will not be issued unless you so
request.
5. By tendering securities for exchange, you agree to accept
the determination of their market value that the Trust makes
at the time it determines the Trust's net asset value per
share. The number of shares of the Trust to be issued in
exchange for other securities will be the value of the
accepted securities determined as described above, divided
by the net asset value per Trust share next determined after
the Trust's acceptance of the securities.
6. You may realize a gain for federal income tax purposes in connection with
your exchange of securities for Trust shares. You should consult your tax
advisor about the tax consequences of exchanging securities for Trust
shares.
Redemption and Repurchase of Shares
You may require the Trust to redeem your shares. The Trust also maintains a
continuous offer to repurchase its shares. Redemptions and repurchases will be
made in the following manner:
1. You may mail or present a written request that the Trust redeem your
shares to the Trust's transfer agent at 579 Pleasant Street, Suite 4,
Paxton, Massachusetts 01612. If you have share certificates, you should
properly endorse them and include them with your request. The redemption
price will be the net asset value next determined after the Trust receives
your request and/or certificates.
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2. Your broker may present your request for repurchase to the Trust. The
repurchase price will be the net asset value next determined after the
Trust receives the request. If the broker receives the request before
12:00 p.m. Eastern Time 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 p.m. Eastern Time that day. If the broker
receives the request after 12:00 p.m., the repurchase price will be the
net asset value determined as of 12:00 p.m. Eastern Time the following
day. If you use a broker, the broker may charge a reasonable fee for his
services.
The Trust will pay you for shares that it redeems or repurchases within seven
days after it receives your shares, or other required documents, properly
endorsed. Your signature on an issued certificate must be guaranteed by a
commercial bank or trust company or by a member of the New York, American,
Pacific, Boston or Chicago Stock Exchange. The Trust will not accept a signature
guarantee by a savings bank or savings and loan association or notarization by a
notary public.
To ensure proper authorization, the Trust's transfer agent may request
additional documents. These may include stock powers, trust instruments,
certificates of death, appointments as executor, certificates of corporate
authority or waiver of tax (required in some states from selling or exchanging
estates before redeeming shares).
There are no circumstances under which the Trust may redeem shares automatically
without action by the shareholder.
The right of redemption may be suspended or the payment date postponed at
certain times. These include days when the New York Stock Exchange is closed for
other than customary weekend and holiday closings, when trading on the New York
Stock Exchange is restricted, as determined by the Securities and Exchange
Commission, or 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 a suspension. In case of a suspension of the right of redemption, a
shareholder who has rendered a certificate for redemption through a broker may
withdraw his request or certificate. Otherwise, he will receive payment of the
net asset value determined next after the suspension has been terminated.
You may receive more or less than you paid for your shares, depending on the net
asset value of the shares at the time of redemption or repurchase.
Redemptions in Kind
Under unusual circumstances, when the Board of Trustees deems it in the best
interests of the Trust's shareholders, the Trust may pay for shares repurchased
or redeemed partly or entirely in securities or other assets of the Trust taken
at current values. If any such redemption in kind is to be made, the Trust
intends to make an election pursuant to Rule 18(f)(1) under the Investment
Company Act of 1940. This will 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 90-day period
during which such redemptions are in effect, if that amount is less than
$250,000). If payment is made in securities, the redeeming shareholder may incur
brokerage costs in converting his securities to cash.
Services for Shareholders
Open Accounts: For your convenience, all shares of the Trust registered in your
name are automatically credited to an Open Account maintained for you on the
15
<PAGE>
books of the Trust. All shares that you acquire will be credited to your Open
Account and share certificates will not be issued unless you request.
Certificates representing fractional shares will not be issued in any case. You
may surrender certificates previously acquired to the Trust's transfer agent.
These certificates will be canceled and the shares so represented will continue
to be credited to your Open Account.
Each time shares are credited to or withdrawn from your Open Account, you will
receive a statement showing the details of the transaction and your then current
balance of shares. Shortly after the end of each calendar year you will also
receive a complete annual statement of your 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.
You may transfer shares credited to an Open Account upon proper written
instructions to the Trust's transfer agent. You may also redeem or sell shares
in the manner shown under the "Redemption and Repurchase of Shares."
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.
You may purchase additional shares for your Open Account at any time by sending
a check (payable to the order of the Trust) to Shareholders Services, Attn:
Progressive Capital Accumulation Trust, 579 Pleasant Street, Suite 4, Paxton,
Massachusetts 01612 (giving the full name or names of your account). The Trust
will bear the cost of administering shareholders' Open Accounts as an expense of
all its shareholders.
Distributions
The Trust currently intends to distribute any income dividends and capital gains
distributions in additional Trust shares or, if you elect, in cash. You 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.
You may change your distribution option at any time by notifying the Trust's
transfer agent in writing. The new distribution option must be received by the
Trust's transfer agent at least 30 days prior to the close of the fiscal year.
If you have an account with a cash dividend option, and the Trust's transfer
agent discovers that your address of record is not current, your account will be
changed to reinvest both dividends and capital gains automatically.
Dividends and capital gain distributions received in shares will be made to the
Trust's transfer agent, as your agent, and credited to your Open Account in full
at the closing net asset value on the record date of the distributions.
Tax Consequences
Shareholders will be subject to federal income taxes on distributions made by
the Trust, whether you receive distributions 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 corporation. 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.
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<PAGE>
The Trust's foreign investments may be subject to foreign withholding taxes. The
Trust will be entitled to claim a deduction for foreign withholding taxes for
federal income tax purposes. However, any such taxes will reduce the income
available for distribution to shareholders.
You must provide the Trust with a certified correct taxpayer identification
number (generally your Social Security Number) or certify that you are not
subject to withholding. If you fail to do so, the Trust may be required to
withhold 20% of the distributions paid to you.
Please consult your tax adviser for further information regarding your federal,
state and local tax liability.
OTHER INFORMATION
Custodian, Transfer Agent and Paying Agent
Investors Bank & Trust Company, Financial Product Services, 200 Clarendon
Street, 18th Floor, Boston, Massachusetts 02116 is the Trust's custodian bank.
The custodian bank receives and holds securities, cash and other assets of the
Trust and also makes distributions on behalf of the Trust. If foreign securities
must, as a practical matter, be held abroad, the custodian bank and the Trust
will arrange for those securities to be held abroad. The Trust's custodian bank
does not decide on purchases or sales or portfolio securities or the making of
distributions. Cardinal Investment Services, Inc., 579 Pleasant Street, Suite 4,
Paxton, Massachusetts 01612, serves as the transfer agent and dividend-paying
agent for the Trust.
Capitalization
The capitalization of the Trust consists of an unlimited number of shares of
beneficial interest without par value. The Trust is authorized to issue two
separate classes of shares, Common Shares and Class A Common Shares. On December
23, 1987, all outstanding Class A Common Shares were exchanged for Common
Shares, and there are no longer any Class A common shares outstanding. The Trust
does not presently intend to issue any more Class A Common Shares. Both classes
of shares have the same privileges, limitations and rights, except that the
Trust paid dividends and distributions upon Class A Common Shares only in
additional Class A Common Shares. Also, Class A Common Shares could, at the
option of the shareholder, be exchanged at any time for an equal number of
Common Shares without any additional investment by the shareholder and without
any additional charges being imposed by the Trust. The Class A Common Shares
were issued only to certain foreign shareholders of the Trust.
Additional Information
You can find more detailed information about the Trust, its investment
strategies and risks of investing in the Trust in the Statement of Additional
Information.
Shareholder Inquiries
For further information about the Trust, you may call the Trust collect at
(508)831-1171. You may address any written inquiries to Progressive Capital
Accumulation Trust, 579 Pleasant Street, Suite 4, Paxton, Massachusetts 01612.
17
<PAGE>
FINANCIAL INFORMATION
Financial Highlights
The following financial highlights table is intended to help you understand the
Trust's financial performance for its past five fiscal years. Some of the
information is presented on a per share basis. The total returns in the table
represent the rate an investor would have earned (or lost) on an investment in
the Trust, assuming reinvestment of all dividends and distributions.
This information has been audited by Livingston & Haynes, P.C., independent
public accountants, whose report, along with the Trust's audited financial
statements, is included in the Annual Report.
Year ended December 31
---------------------------------------------
1999 1998 1997 1996 1995
---------------------------------------------
Net Asset Value,
Beginning of Year $21.32 $28.86 $26.30 $23.05 $20.07
- ------------------------------------------------------------------------
Income From Investment
Operations:
Net Investment Income (1.01) 2.91 0.12 0.41 (0.53)
Net realized and
unrealized 6.57 1.16 3.30 3.06 4.32
gain (loss) on investments
- ------------------------------------------------------------------------
Total income from
investment 5.56 4.07 3.42 3.47 3.79
Operations
- ------------------------------------------------------------------------
Less Distributions:
Dividends from net
investment (0.29) -- (0.07) (0.13) (0.19)
Income
Distributions from (0.23) (11.61) (0.79) (0.09) (0.62)
capital gains
- ------------------------------------------------------------------------
Total distributions (0.52) (11.61) (0.86) (0.22) (0.81)
Net Asset Value, End of $26.36 $21.32 $28.86 $26.30 $23.05
Year
- ------------------------------------------------------------------------
Total Return 26.10% 19.40% 13.04% 15.05% 18.91%
- ------------------------------------------------------------------------
Ratios/Supplemental Data:
Net assets, end of year $7.08 $4.2 $13.3 $12.3 $12.4
(in millions)
Ratio of expenses to
average 1.66% 1.29% 1.15% 1.10% 1.11%
net assets
Ratio of net income to
average (0.32%) (0.01%) 0.28% 0.49% 0.92%
Net assets
Portfolio turnover rate 28% 49% 4% 21% 40%
18
<PAGE>
PROGRESSIVE CAPITAL ACCUMULATION TRUST
(the "Trust")
MEESCHAERT & CO., INC.
("Distributor")
APPLICATION AND REGISTRATION FORM1
Send Application to
Meeschaert & Co., Inc., 579 Pleasant Street, Suite 4, Paxton,
Massachusetts 01612
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.)
- -----------------------------------------------
1 This Application and Registration Form is designed for cash purchases of
Trust shares. The procedure for exchange of securities for Trust shares
is described in the Trust Prospectus.
19
<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 Authorized Signature City State Zip
Number of Dealer
20
<PAGE>
Progressive Capital Accumulation Trust
For investors who want more information about the Trust, the following documents
are available free upon request:
Annual Reports: Additional information about the Trust's investments is
available in the Trust's annual report to shareholders. The Trust's annual
report includes a discussion of the market conditions and investment strategies
that significantly affected the Trust's performance during its last fiscal year.
Statement of Additional Information (SAI): The SAI provides more detailed
information and is incorporated into this Prospectus by reference.
You can get free copies of the Trust's annual reports and SAIs
by writing or calling the Trust collect at:
Progressive Capital Accumulation Trust
579 Pleasant Street, Suite 4
Paxton, Massachusetts 01612
Telephone (collect):(508) 831-1171
Fax: (508) 831-1191
You can also review the Trust's reports and SAIs at the Public Reference Room of
the Securities and Exchange Commission.
You can obtain copies from the Securities and Exchange Commission as follows:
For a fee, by writing to or calling the Commission's
Public Reference Room, Washington, D.C. 20549
Telephone: 1-800-SEC-0330
Free from the Commission's Internet website at
http://www.sec.gov.
Investment Company Act
File no. 811-0972
21
<PAGE>
PROGRESSIVE CAPITAL ACCUMULATION TRUST
579 Pleasant Street, Suite 4
Paxton, Massachusetts 01612
(508) 831-1171
STATEMENT OF ADDITIONAL INFORMATION
Dated May 1, 2000
This Statement of Additional Information (SAI) is not a prospectus but should be
read in conjunction with the current Prospectus of Progressive Capital
Accumulation Trust (formerly Anchor Capital Accumulation Trust) (the "Trust")
dated May 1, 2000, and the financial statements contained in the Trust's Annual
Report for the year ended December 31, 1999. The Trust's Annual Report is
incorporated by reference in this SAI. You may obtain the Trust's Prospectus and
Annual Report without charge by writing or calling the Trust collect at (508)
831-1171.
----------------------------------------
i
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TABLE OF CONTENTS
THE TRUST.......................................................B-1
INVESTMENT STRATEGIES AND RISKS.................................B-1
Foreign Securities .......................................B-1
Derivatives...............................................B-1
Option Transactions.......................................B-2
Index Options ............................................B-2
Risks of Options on Indices ..............................B-3
Options on Foreign Currencies ............................B-4
Risks of Foreign Currency Option Activities ..............B-6
Special Risks of Foreign Currency options ................B-7
Financial Futures Contracts and Related Options ..........B-8
Limitations on Futures Contracts and Related Options......B-9
Risks Relating to Futures Contracts and Related Options..B-10
PORTFOLIO TURNOVER.............................................B-11
INVESTMENT RESTRICTIONS........................................B-11
MANAGEMENT OF THE TRUST........................................B-14
Officers and Trustees.....................................B-14
Compensation of Officers and Trustees.....................B-16
Control Persons and Principal Holders of Trust Shares.....B-16
Investment Adviser........................................B-16
Investment Advisory Contract..............................B-17
Administrator.............................................B-18
Principal Underwriter.....................................B-18
Rule 12b-1 Plan...........................................B-18
CAPITALIZATION.................................................B-18
PURCHASE, REDEMPTION AND PRICING OF SHARES.....................B-19
Purchase of Shares.......................................B-19
Determination of Net Asset Value.........................B-20
Redemption and Repurchase of Shares......................B-20
Redemptions in Kind......................................B-21
DISTRIBUTIONS .................................................B-21
TAXES..........................................................B-21
General..................................................B-22
Tax Treatment of Options.................................B-22
PORTFOLIO SECURITY TRANSACTIONS ...............................B-25
OTHER INFORMATION..............................................B-26
Custodian, Transfer Agent and Dividend-Paying Agent .....B-26
Independent Public Accountants ..........................B-26
Registration Statement ..................................B-26
FINANCIAL STATEMENTS...........................................B-26
ii
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<PAGE>
THE TRUST
Progressive Capital Accumulation Trust was established as a business trust under
the laws of Massachusetts by a Declaration of Trust dated October 17, 1984. The
Trust is a diversified open-end management investment company. The name of the
Trust was changed from Meeschaert Capital Accumulation Trust to Anchor Capital
Accumulation Trust on December 5, 1990. The Trust's name was changed from Anchor
Capital Accumulation Trust to Progressive Capital Accumulation Trust on January
21, 1999.
INVESTMENT STRATEGIES AND RISKS
The Trust's Prospectus describes the investment objectives and policies of the
Trust. The Prospectus also briefly describes specialized techniques, including
the use of derivatives, that the Trust may use in order to achieve its
investment objectives. There can be no assurance that the Trust will achieve its
investment objectives. The following discussion is intended to provide further
information concerning investment techniques and risk considerations which the
Investment Adviser believes to be of interest to investors.
Foreign Securities
From time to time, up to 100% of the Trust's assets may be invested in foreign
securities, or securities of issuers based outside the United States. Foreign
securities are generally denominated in foreign currencies and traded outside of
the U.S. While foreign securities are subject to many of the same risks
associated with U.S. securities of the same type, investments in foreign
securities involve a number of special risks. First, there may be less public
information available about foreign companies than is available about United
States companies. Second, foreign companies are not generally subject to the
uniform accounting, auditing and financial reporting standards and practices
applicable to United States companies. Third, 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. In addition, foreign governments may not regulate their
countries' stock exchanges, brokers, listed companies and banks to the extent
regulated in the United States. Moreover, 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 the Trust may incur fees on currency exchanges when it changes
investments from one country to another. The Trust's foreign investments could
also be affected by expropriation, confiscatory taxation, nationalization of
bank deposits, establishment of exchange controls, political or social
instability, diplomatic developments or currency blockage. Finally, it may be
more difficult to obtain legal judgments abroad. As a result of these risks,
foreign securities may be more volatile and less liquid than U.S. securities.
Derivatives
To achieve its investment objective, the Trust may also use specialized
investment techniques by engaging in a variety of transactions using
"derivatives." Derivatives are financial instruments whose value depends upon,
or is derived from, the value of something else, such as one or more underlying
securities, indices or currencies. These include transactions in options on
securities, securities indices and currencies, transactions in financial futures
contracts and related options, loans of portfolio securities, transactions in
repurchase agreements. The use of derivatives involves special risks and may
result in losses to the Trust.
24
<PAGE>
Option Transactions
A call option is a short-term contract (normally having a duration of nine
months or less) which gives the holder of the option (the buyer) the right to
buy from the seller (writer) the underlying security at a specified exercise
price during the option period. The buyer pays a premium to the writer for
undertaking the obligations of the option contract. Because the writer foregoes
the opportunity to profit from an increase in the market price of the underlying
security above the exercise price, the premium may represent the profit. If the
price of the security declines, on the other hand, the premium represents an
offset to the loss.
A put option gives the holder of the option the right to sell the underlying
security to the writer at the exercise price during the option period. The Trust
may purchase a put option on an underlying security that the Trust owns as a
defensive technique to protect against an anticipated decline in the value of
the security. For example, the Trust may purchase a put option 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.
The writing of call options 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. The Investment
Adviser believes that the assets of the Trust can be increased by realizing
premiums on the writing of call options and by the purchasing of put options on
securities held by the Trust.
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 same exercise
price and expiration date. There is no assurance that there will be a liquid
secondary market on an exchange or otherwise for any particular option, or at
any particular time. There may not be a secondary market on an exchange for some
options. 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.
The Trust pays brokerage commissions in connection with the writing and
purchasing of options and effecting 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.
Index Options
The Trust may purchase put or call index options. A call option on a securities
index is similar to a call option on an individual security, except that the
option's value depends upon the weighted value of the group of securities
constituting the index. Also, all settlements on index options are made in cash.
When the Trust purchases index options, a "multiplier" is used to determine 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.
25
<PAGE>
The Trust has traded index options relating to the Standard & Poor's 100 and 500
Composite Stock Price Indices. In the future the Trust may also trade index
options relating to any of the following specific 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 generally represented
by the index. A call is "covered" if the writer, at all times while obligated as
a writer, either owns the underlying securities (or comparable securities
satisfying the cover requirements of the securities exchanges ), or has the
right to acquire such securities through immediate conversion of securities. The
Trust will not engage in options on a particular stock index unless more than
10% of the Trust's total assets are invested in shares of stock represented by
the index.
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 difference. In
addition, when the Trust writes a call on an index which is in the money (when
the market price of the index is above the exercise price of the call) at the
time the call is written, the Trust will segregate with its custodian bank 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 if 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 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.
Because the Trust intends to qualify as a regulated investment company under the
Internal Revenue Code, the Trust may be subject to other restrictions on the
Trust's ability to enter into option transactions. See "Taxes -- Tax Treatment
of Options and Futures Transactions."
Risks of Index Options
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, the value of the Trust's index options transactions 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
26
<PAGE>
to close out options which it has purchased or written. Also, if restrictions on
exercise were imposed, the Trust may be unable to exercise an option it
purchased. As a result, the Trust could incur substantial losses. 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. Further,
unlike call writing on portfolio securities, the writer 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. 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 will satisfy the exercise of a
call on an index, the Trust will have 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. 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. The
Trust may be able to minimize this 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. The Trust may not be
able to eliminate this risk entirely because the cutoff time for index options
may be earlier than those fixed for other types of options and may occur before
definitive closing index values are announced.
The Trust pays brokerage commissions in connection with the writing and
purchasing of options and effecting closing transactions, as well as for
purchases and sales of underlying securities. The writing of options may cause
significant increases in the Trust's portfolio turnover rate, especially during
periods when the market price of the underlying securities appreciate.
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Options on Foreign Currencies
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 similar 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 of Options Exchange. Foreign
currencies options are currently traded in British pounds, Swiss francs,
Japanese yen, Deutsche marks and Canadian dollars. The Trust may use foreign
currency options to protect against the decline in the 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 that foreign currency to hedge against the risk that the value of the foreign
currency might rise against the U. S. dollar, which would increase 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 U. S. dollars) from, for example, $.4780,
it might purchase Swiss franc June 48 call options for a premium of, for
example, $.50 (i.e. $.005 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 thus the maximum cost
in U.S. dollars for the Swiss securities. 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 $1,219.75) the
Trust could sell the option at a profit ($1,219.75 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 objective will depend on the exercise price
of the option held and the extent to which the value of such option will be
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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. The Trust will realize
a gain or loss, which will be offset by a loss or gain on the U.S. dollar,
depending on whether the sale price of the option is more or less than the
Trust's cost of establishing the position. If the transaction is not completed,
the option may be allowed to expire (causing loss of the option premium amount)
or liquidated for any remaining value.
Foreign currency options purchased for the Trust will 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.
Risks of Foreign Currency Option Activities
If a 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 that foreign currency may generate gains which would partially offset
the 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 the
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 may not correspond to the price
movements of the Trust's portfolio securities. In these cases, the Trust may
incur losses on the options transactions.
The Trust's success in using options on foreign currencies 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 general
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 using currency options, this technique may not produce its
intended results. 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 the options transactions.
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.
Options on foreign currencies are currently traded in the United States on the
Philadelphia Stock Exchange and the Chicago Board of 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. The ability to establish and close out positions in foreign
currency 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 the Trust intends to purchase
options only when there appears to be an active market for them, there can be no
assurance that there will be a liquid market 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.
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The Trust also may be generally restricted in the purchase and sale of options
because the Trust intends to qualify as a regulated investment company under
Subchapter M of the Internal Revenue Code. One of the requirements for this
qualification is that less than 30% of the Trust's gross income must be derived
from gains on securities held for less than three months. Accordingly, the Trust
will be restricted in the purchasing of options on foreign currencies which
expire in less than three months, and in effecting closing purchase or sale
transactions relating to put options on foreign currencies which were purchased
less than three months prior to such transactions. The Trust may also be
restricted in the purchase of put options for the purpose of hedging underlying
foreign currencies because of the application of the short sale holding period
rules as to the underlying hedged currencies. Thus, the extent to which the
Trust may engage in option transactions may be materially limited by this 30%
test, by the Internal Revenue Code requirement that at least 90% of the Trust's
gross income be derived from dividends, interest, and gains from the sale or
other disposition of securities, and by other Internal Revenue Code
requirements.
Special Risks of Foreign Currency Options
In addition to the risks described above, other special risks associated with
foreign currency options include the following:
1. The value of foreign currency options depends 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,
the Trust must consider carefully 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.
These factors include 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. Any 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. Reasonably current, representative bid and offer information is
available on the floor of the exchange on which foreign currency options are
traded, in certain brokers offices, in bank foreign currency trading offices,
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and to others who wish to subscribe for this 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 usually relates to 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 $5 million), available pricing information from
that market may not necessarily reflect prices pertinent to a single foreign
currency option contract. Investors who buy or sell foreign currency options
covering amounts of less than $5 million should 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 these restrictions or taxes would
prevent the orderly settlement of foreign currency option exercises or impose
undue burdens on parties to exercise settlements, it is authorized 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 remains open,
significant price and rate movements may take place in the underlying markets
that cannot be reflected in the options markets. The possibility of these
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
option 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 both U.S. and
foreign restrictions or regulations regarding foreign banking arrangements by
U.S. residents. The Trust may be required to pay any fees, taxes or charges
associated with such delivery which are assessed in the issuing country. Prior
to placing any assets with a foreign custodian in connection with the settlement
of foreign currency options, the Trustees of the Trust will determine that
maintaining these assets in a particular country or countries and with a
particular foreign custodian is consistent with the best interests of the Trust
and its shareholders. The Trustees will approve, as consistent with the best
interests of the Trust and its shareholders, a written contract between the
Trust and its foreign custodian. The Trustees will also establish a system to
monitor such foreign custody arrangements. The Trustees will, at least annually,
review and approve the continuance of these arrangements as consistent with the
best interests of the Trust and its shareholders.
Financial Futures Contracts and Related Options
The Trust may use financial futures contracts and related options to hedge
against changes in currency exchange rates or in the market value of its
portfolio securities or securities 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
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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, future contracts may protect against an
increase in the market price of securities which the Trust may wish to purchase
in the future.
The Trust may purchase or sell any financial futures contracts which are traded
on an exchange or board of trade or other market. Financial futures contracts
consist of interest rate futures contracts, securities index futures contracts
and foreign currency contracts. A United States 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 futures contracts are also traded on various
exchanges or board of trade.
In contrast to the situation where the Trust purchases or sells a security, the
Trust does not deliver or receive a security upon the purchase or sale of a
financial 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. The initial margin is like 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. The
Trust will make subsequent payments, called variation margin, 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
under 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 financial futures contracts by their terms call for actual delivery or
acceptance of currencies or securities, 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 is immediately paid the
difference and realizes a gain. If the offsetting purchase price exceeds the
sale price, the seller immediately pays the difference and realizes 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 realizes a gain.
If the purchase price exceeds the offsetting sale price, the purchaser realizes
a loss.
The Trust will pay commissions on financial futures contract and related options
transactions. These commissions may be higher than those which would apply to
purchases and sales of securities directly.
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Limitations on Futures Contracts and Related Options
The Trust may not currently engage in transactions in financial 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 securities which it intends to purchase. Also, the Trust
may not currently purchase or sell 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 option 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, the Trust must deposit 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, in a
segregated account with the Trust's custodian bank to collateralize fully the
position and ensure that it is not leveraged.
The Trust's ability to enter into financial futures contracts and related
options also may be limited by the requirements of the Internal Revenue Code
relating to the Trust's qualification as a regulated investment company. See
"Taxes-Tax Treatment of Options and Futures Transactions."
Risks Relating to Futures Contracts and Related Options
The Trust may close out positions in financial futures contracts and related
options 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
option positions only if there appears to be a liquid secondary market. However,
a liquid secondary market may not 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. If there are adverse price movements in
the Trust's futures positions, the Trust will 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 of currency exchange rate and market movements within a given time
frame. To the extent exchange rate and market prices remain stable during the
period that the Trust holds a futures contract or option, or 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.
The Trust's use of futures contracts involves the risk of imperfect correlation
in movements in the price of futures contracts and movements in the price of the
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currencies or securities which are being hedged. If the price of the futures
contract moves more or less than the price of the currencies or securities being
hedged, the Trust will experience a gain or loss which will not be completely
offset by movements in the price of the securities. It is possible that, where
the Trust has sold futures contracts to hedge its portfolio 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. Where futures are purchased to
hedge against a possible increase in the prices of securities 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 this
occurred, the Trust would lose money on the futures contract and the value of
its portfolio securities would decline. If the Trust purchases future to hedge
against a possible increase in the prices of securities before the Trust is able
to invest its cash (or cash equivalents) in securities (or options) in an
orderly fashion, 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 contracts 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 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.
The Trust will not invest more than 50% of its total assets in options,
including put or call options. The Trust also may be generally restricted in
dealing with options, futures contracts and related options because the Trust
intends to qualify as a regulated investment company under Subchapter M of the
Internal Revenue Code.
PORTFOLIO TURNOVER
The Trust will generally purchase securities for possible long-term appreciation
and not for short-term trading profits. However, when the Investment Adviser
deems changes appropriate, it will not be limited by the rate of portfolio
turnover. The Trust's annual portfolio turnover rate will normally not exceed
50%. However, 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).
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If the Trust has a high rate of portfolio turnover, it will pay greater
brokerage commissions and other costs. The Trust must bear these increased costs
directly and thus its shareholders will bear them indirectly. There may also be
the realization of larger amounts of short-term capital gains which are taxable
to shareholders as ordinary income.
The portfolio turnover rate for 1999 was 28%, and the portfolio turnover rate
for 1998 was 49%.
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. This 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 and the securities of one or more
domestic or foreign wholly-owned subsidiaries of the Trust) 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 act as underwriter of securities, or invest in real
estate, or in commodities or commodity contracts. The Trust may, however, invest
directly, or through one or more wholly-owned subsidiaries, in precious metals
and in numismatic items (including coins, tokens, paper money and other items
which have been used as money or a medium of exchange), if after any such
investment not more than 20% of the Trust's total assets (taken at market or
other fair value) in the aggregate will be invested directly or indirectly in
precious metals and numismatic items and not more than 10% of the Trust's total
assets (taken at market or other fair value) will be invested directly or
indirectly in numismatic items. As a matter of operating policy, the Trust does
not intend to make such investments [what investments?] The Trust may however,
write covered call options on securities, securities indices and currencies and
enter into closing purchase or sale transactions with respect to written
options. The Trust may also purchase put or call options with respect to
securities, securities indices and currencies. Finally, the Trust may engage in
financial and precious metals futures contracts and related option transactions.
3. The Trust will not make loans. The Trust may, however, purchase a portion of
an issue of 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 or recognized securities dealer
for a brief period and yields a return). In addition, the Trust may lend
portfolio securities upon conditions that the Securities and Exchange Commission
may impose from time to time provided that the value of securities loaned does
not exceed 30% of the Trust's total asset.
4. The Trust will not borrow in excess of 5% of its total assets (valued at
market or other fair value). Any borrowing must be from a bank and must be
repaid in full before the Trust may make any further investments. In addition,
the Trust may borrow funds only as a temporary measure for extraordinary or
emergency purposes. The Trust may not pledge or mortgage, its assets (valued at
market) to an extent greater than 15% of the Trust's gross assets (valued at
cost). (For the purpose of this restriction, collateral arrangements relating to
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the writing of options, futures contracts and collateral arrangements with
respect to initial and variation margin are not considered to be pledges of
assets. Neither these arrangements nor the purchase and sale of options,
futures, or related options are considered to be issuances of a senior
securities.
5. The Trust will not purchase any securities (other than the securities of one
or more or foreign wholly-owned subsidiaries) if such a purchase would cause
more than 10% of the total outstanding voting securities of the issuer to be
held by the Trust.
6. The Trust will not purchase or hold the securities of any issuer if the
officers and Trustees of the Trust or its Investment Adviser who own
beneficially more than 1/2 of 1% of the securities of that issuer together own
beneficially more than 5% of the securities of that issuer.
7. The Trust will not purchase the securities of any other investment company.
The Trust may, however, make such a purchase in the open market if there is no
commission or profit to a sponsor or dealer (other than the customary broker's
commission). Further, not more than 5% of the Trust's total assets (taken at
market or other fair value) may be invested in investment company securities
after the Trust has made such an investment. The Trust may purchase investment
company securities as part of a merger, consolidation or acquisition of assets.
8. The Trust will not purchase securities of companies that (including their
predecessors) have less than three years' continuous operation if such a
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). This
restriction shall not apply to any of the Trust's investments in its
wholly-owned subsidiaries.
9. The Trust will not participate in a joint venture or on a
joint and several basis in any securities trading account.
10. The Trust will not act as distributor of securities issued by it except
through an underwriter, acting as principal or agent, who may not be obligated
to sell or take up any specific amount of stock.
11. 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 the 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. Engaging in futures transactions and related options
will not be deemed a short sale or maintenance of a short position in
securities.
12. The Trust will not purchase shares on margin, but may obtain short-term
credits if necessary for the clearance of purchases and sales of securities. The
Trust's payment of initial or variation margin in connection with futures or
related options transactions, if applicable, shall not be considered the
purchase of a security on margin.
13. 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.
14. The Trust will not issue senior securities.
The Trust has not engaged in the practices described above relating to borrowing
(paragraph 4), investments in other investment companies (paragraph 7),
investments in companies with a record of less than three years' continuous
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operation (paragraph 8) and the making of short sales of securities (paragraph
11). within the last year. The Trust has no current intention of doing so in the
foreseeable future.
The Trust does not intend to invest in securities for which there is a limited
trading market, or which cannot be sold without registration or other action
under federal or state securities laws (commonly referred to as restricted
securities).
MANAGEMENT OF THE TRUST
Officers and Trustees
The Trustees of the Trust are responsible for managing the Trust's business
affairs and for exercising all the powers of the Trust, except those reserved to
the shareholders. The Trust's officers and Trustees, their positions with the
Trust and their principal occupations during the past five years are listed
below. Unless otherwise noted, the business address of each officer and Trustee
is 579 Pleasant Street, Suite 4, Paxton, Massachusetts 01612, which is also the
address of the Trust's Investment Adviser, Progressive Investment Management
Incorporated. An asterisk (*) indicates Trustees who are interested persons, as
defined in the Investment Company Act of 1940, of either the Trust or the
Investment Adviser.
Positions with Principal Occupation
Name, Address and Birth date the Trust During the Past 5
- ---------------------------- --------- -----------------
Years
-----
ERNEST BUTLER, Trustee President, I.E.
Born June 17, 1928 Butler Securities
11809 Hinson Road, Suite 400 (securities dealer);
Little Rock, AR 72212 formerly Senior
Executive Vice
President Stephens,
Inc. (securities
dealer)
(1982-February 1998).
SPENCER H. LEMENAGER, Trustee President, Equity,
Born January 25, 1938 Inc. (private
222 Wisconsin Avenue investment company)
P.O. Box 390
Lake Forest, IL 60045
DAVID W. C. Chairman Chairman and Trustee,
PUTNAM, and Trustee Progressive Capital
Born October 8, 1939 Accumulation Trust
10 Langley Road (formerly Anchor
Newton Centre, MA 02159 Capital Accumulation
Trust), 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. and subsidiaries
(investment advisor).
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J. STEPHEN PUTNAM, Vice President President, Robert
Born May 21, 1943 and Treasurer Thomas Securities,
880 Carillon Parkway Inc. (securities
P.O. Box 12749 dealer); Director,
St. Petersburg, FL 33733 F.L. Putnam
Securities Company,
Inc. (investment
advisor)
DAVID Y. WILLIAMS2*, Trustee, President and
Born November 24, 1930 President & Director, Anchor
579 Pleasant St., Suite 4 Secretary Investment Management
Paxton, MA 01612 Corporation
(investment adviser);
President and
Director, Meeschaert
& Co., Inc.
(securities dealer);
Vice President,
Secretary and
Treasurer,
Progressive
Investment
Management,
Inc.(investment
adviser)
CHRISTOPHER Y. WILLIAMS2, Vice President Vice President and
Born December 12, 1964 and Asst. Asst. Secretary,
579 Pleasant St., Suite 4 Secretary Progressive
Paxton, MA 01612 Investment Management
Inc. (investment
adviser),; Vice
President and
Secretary, Anchor
Investment Management
Corporation
(investment adviser);
Vice President and
Secretary, Meeschaert
& Co. Inc.
(securities dealer);
President and
Secretary, Cardinal
Investment Services,
Inc. (financial
administrative
services)
JOSEPH C. Vice President Vice President and
WILLIAMS2, and Asst. Asst. Treasurer,
Born January 13, 1971 Treasurer Progressive
579 Pleasant St., Suite 4 Investment Management
Paxton, MA 01612 Inc. (investment
adviser); Vice
President and
Treasurer, Anchor
Investment Management
Corporation; Vice
President and
Treasurer, Meeschaert
& Co. Inc.
(securities dealer);
Vice President and
Treasurer, Cardinal
Investment Services,
Inc. (financial
administrative
services)
1. David W.C. Putnam and J. Stephen Putnam are brothers.
2. David Y. Williams is the father of Christopher Y. Williams and
Joseph C. Williams. Christopher Y. Williams and Joseph C.
Williams are brothers.
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The Officers and Trustees of the Trust as group owned 1.73% of the Trust's
shares outstanding on December 31, 1999.
Messrs. David Putnam, Ernest Butler and Spencer LeMenager are the
Trustees who are not interested persons (as defined in the
Investment Company Act of 1940) of the Trust.
The standing audit committee is composed of Messrs. LeMenager and Butler. The
Trust does not have a nominating or compensation committee.
Compensation of Officers and Trustees
The Trust does not and will not pay any compensation to any of its officers or
Trustees who are interested persons (as defined in the Investment Company Act of
1940) of the Trust or of any investment adviser or distributor of the Trust. The
Trust pays an annual fee of up to $3,000 to each Trustee who is not an
interested person. The Trust did not pay any person, including directors,
officers, or employees, in excess of $60,000.00 during its most recent fiscal
year.
Principal Holders of Securities
As of the date of this SAI, Lazard Freres & Co., 120 Broadway,
New York, New York 10271, a New York Corporation, held of record
48.36% of the outstanding shares of the Trust. Fox & Co., c/o
Brown Brothers Harriman, P.O. Box 976, New York, New York 10268,
held of record 19.62% of the outstanding shares of the Trust.
Shareholders owning 25% or more of outstanding Trust shares may be in control
and be able to affect the outcome of certain matters presented for a vote of
shareholders.
Investment Adviser
At a shareholders meeting held on January 18, 2000, the shareholders of the
Trust voted to approve a new Investment Advisory Contract between the Trust and
Progressive Investment Management, Inc. as a result of the death of Paul
Jaspard, the former Chairman of the Board of Progressive, on October 30, 1999.
Mr. Jaspard had owned in excess of 25% of the outstanding voting shares of
Progressive. Upon his death, the shares of the Investment Adviser which had been
owned by Mr. Jaspard were held by his Estate. Under an agreement entered into by
his Estate, these shares were transferred by the Estate to Mr. Jaspard's son,
Alain Jaspard, on November 18, 1999.
The Investment Adviser manages the Trust's investments and affairs, subject to
the supervision of the Trustees. The new investment advisory agreement is
substantially similar to the Trust's previous agreement. Under the new
investment advisory agreement, Mr. Jaspard serves as the sole individual
responsible for the management the Trust's investments, and there is no change
in the rate of investment advisory fees. The principal offices of both the Trust
and the Investment Adviser are located at 579 Pleasant Street, Suite 4, Paxton,
Massachusetts 01612.
The Investment Adviser is a wholly-owned subsidiary of Macle, S.A., a Luxembourg
holding corporation, which is wholly owned by Alain Jaspard, who is the
President and a Director of the Investment Adviser and who has provided
investment management services to both foreign and U.S. investment companies for
the past two years.
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<PAGE>
The investment Adviser's directors and officers are as follows:
Alain Jaspard, President and Director - Mr. Jaspard is President
of Linden Investment Advisors, S.A. 67 Avenue Terlinden, La
Hulpe, Belgium B1310 (investment adviser). Mr. Jaspard manages
other portfolios for the Meeschaert organization. He is primarily
responsible for the investment decisions of the Trust.
David Y. Williams, Vice 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.
Guy J. Weistroffer, Director - Mr. Weistroffer is the legal
adviser and managing director of Citabel Sports, a sporting goods
retail store in Luxembourg.
Christopher Y. Williams, Vice President and Assistant Secretary - Mr. Williams
is also the Vice President and Assistant Secretary of the Trust and Vice
President and Secretary of the Distributor.
Joseph C. Williams, Vice President and Assistant Treasurer - Mr. Williams is
also the Vice President and Assistant Treasurer of the Trust and Vice President
and Treasurer of the Distributor.
Investment Advisory Contract
The Trust and the Investment Adviser entered into an Investment Advisory
Contract dated October 30, 1999. The Trust's Shareholders approved the
Investment Advisory Contract on January 18, 2000.
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. The Investment Advisor
also furnishes investment advisory, statistical and research facilities. The
Trust pays all its expenses not specifically assumed by the Investment Adviser
under the contract, including without limitation, the fees and expenses of the
Trust's 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; distributions 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 any
expenses incurred in connection with litigation in which the Trust is a party
and the related legal obligation that the Trust may have to indemnify its
officers and trustees.
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<PAGE>
The Trust pays the Investment Adviser, as compensation under the Investment
Advisory Contract, a monthly fee of .0625% (equivalent to 3/4 of 1% annually) of
the average daily net assets of the Trust. This fee may be higher than that paid
by other investment companies. The Trust paid the investment adviser,
Progressive Investment Management , Inc., a fee of $36,196 in 1999. In 1998, the
Trust paid the former investment advisor, Anchor Investment Management
Corporation, a fee of $78,252. The fee for 1998 was for eleven months of service
(through November 30, 1998) under the former investment advisory contract. For
its services in December, 1998, the Investment Advisor was paid $2,444. A fee a
$96,272 was paid to the former investment advisor, Anchor Investment Management
Corp., for its services in 1997. The Investment Adviser may voluntarily waive a
portion of its fee or reimburse the Trust for certain operating expenses.
The Investment Advisory Contract remains in effect until October 29, 2001. In
general, the contract may be extended from year to year upon its expiration 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 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
disinterested Trustees. The contract is terminable at any time without penalty
by the Trustees of the Trust or by vote of the holders 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 interest in the
Investment Adviser).
The Investment Advisory Contract provides that the Investment Advisory shall not
be liable to the Trust or its shareholders for anything other than willful
misfeasance, bad faith, gross negligence or reckless disregard of its
obligations or duties. The Investment Advisory Contract also provides that the
Investment Advisor and its officers, directors and employees may engage in other
business, devote time and attention to any other business whether of a similar
or dissimilar nature, and render investment advisory services to others.
Administrator
The Trust has entered into an administration agreement (the Administration
Agreement) with Progressive Investment Management, Inc. (the Administrator), 579
Pleasant Street, Paxton, Massachusetts 01612. Under the Administration
Agreement, the Administrator is required generally to administer the Trust's
business. The Administrator's duties, which may be assigned to a
sub-administrator, specifically include the following: The Administrator
calculates the Trust's net asset value and prepares and files all registration
or other material required by federal and state laws for the registration or
other qualification of the Trust and its shares for sale to the public as
required by those laws. The Administrator also prepares and files or mails all
reports and statements that the Trust is required by federal and state laws to
file or send to all authorities and shareholders of the Trust. The Administrator
maintains contact with and coordinates the Trust's public accountants, legal
counsel, custodian, transfer and service agent and other providers of services
to the Trust, all of whose fees shall be paid independently by the Trust. The
Administrator also coordinates the Trust's portfolio transactions and cash
management with the Trust's custodian and receives, confirms and pays over to
the Trust's custodian the proceeds of sales by the Trust of its shares. The
Administrator administers and confirms to the Trust's transfer agent and
shareholders the sales of Trust shares and prepares and maintains on behalf of
the Trust any records of the Trust's business transactions not maintained by
other service providers to the Trust. The Administrator is required, at its own
expense, to furnish office space, facilities, and equipment necessary for the
administration of the Trust. For its services under the Administration
Agreement, the Administrator receives a monthly fee at the annual rate of
$18,500. The Trust paid the Administrator fees of $18,500 in 1999. The Trust
paid the former administrator, Anchor Investment Management Corporation, fees of
$18,500, and $15,000 in 1997, 1998 respectively, for its services to the Trust.
The new Administration Agreement between the Trust and Progressive Investment
Management, Inc. went into effect January 1, 1999.
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<PAGE>
The Administration Agreement will remain in effect until terminated by either
party. The Administration Agreement may be terminated, without payment of
penalty, at any time upon mutual consent of the Trust and the Administrator or
by either party upon not more than 60 days' and not less than 30 days' written
notice to the other party.
The Administration Agreement also provides that the Administrator shall not be
liable to the Trust or its shareholders for anything other than willful
misfeasance, bad faith, gross negligence or reckless disregard of its
obligations or duties. The Administration Agreement also provides that the
Administrator and its officers, directors and employees may engage in other
business, devote time and attention to any other business whether of a similar
or dissimilar nature, and render investment advisory services to others.
Principal Underwriter
Meeschaert & Co., Inc. (the Distributor) is the principal
underwriter of the Trust's shares. The Distributor is located at
579 Pleasant Street, Suite 4, Paxton, Massachusetts 01612.
Several of the officers and directors of the Distributor are also
officers and Trustees of the Trust. See "MANAGEMENT OF THE FUND
- - Officers and Trustees" above.
CAPITALIZATION
The capitalization of the Trust consists of an unlimited number of shares of
beneficial interest without par value. The Trust is authorized to issue two
separate classes of shares, Common Shares and Class A Common Shares. On December
23, 1987, all outstanding Class A Common Shares were exchanged for Common Shares
and there are no Class A Common Shares outstanding. The Trust does not presently
intend to issue any more Class A Common Shares. Both classes of shares have the
same privileges, limitations and rights, except that the Trust paid dividends
and distributions upon Class A Common Shares only in additional Class A Common
Shares. Also, Class A Common Shares could, at the option of the shareholder, be
exchanged at any time for an equal number of Common Shares without any
additional investment by the shareholder and without any additional charges
being imposed by the Trust. The Class A Common Shares were issued only to
certain foreign shareholders of the Trust.
The Trust will normally 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. 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. 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.
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PURCHASE, REDEMPTION AND PRICING OF SHARES
Purchase of Shares
Investors may purchase shares of the Trust from the Distributor at 579 Pleasant
Street, Suite 4, Paxton, Massachusetts 01612. Investors pay no sales charge or
commission upon investment. 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 "SHAREHOLDER INFORMATION - Exchanges of
Shares" in the 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 Prospectus. The method for determining the applicable
price is described in the Prospectus under "SHAREHOLDER INFORMATION - Share
Price."
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
October 5, 1990. This is the date on which the Board of Trustees adopted the
contract in connection with the Distribution Plan described above under
"Distribution of Shares." The contract automatically terminates upon assignment
(which includes the transfer of a controlling interest in the Distributor) by
either party. The contract also provides that it may be continued from year to
year upon approval by a majority of the Trust's shares or by the Board of
Trustees as well as, 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 the
Trust's Prospectus delivered to investors. 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.
During the years ended December 31, 1999, December 31, 1998 and December 31,
1997, the Distributor received no sales commissions.
Determination of Net Asset Value
The Trust net asset value as of 12:00 noon Eastern Time on each business day on
which the New York Stock Exchange is open for trading. The Trust may determine
net asset value on any day that the Trust is open, but the New York Stock
Exchange is not open for business if an event occurs which might materially
affect the net asset value.
The manner of determination of the net asset value is briefly as follows.
Securities traded on a United States 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 United States and foreign securities for which market quotations are
readily available are valued at the last known sales price, or, if unavailable,
the known current bid price which most nearly represents current market value.
Other securities (including limited trade securities) and all other assets are
valued at market value as determined in good faith by the Trustees of the Trust.
The market prices of all of the Trust's investments are added together,
liabilities are deducted from the total, and the resulting amount is divided by
the number of shares outstanding.
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Redemption and Repurchase of Shares
Any shareholder may require the Trust to redeem his shares. The Trust also
maintains 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 service. Redemptions and repurchases
will be made in the following manner:
1. A shareholder may mail or present a written request that the Trust redeem his
shares to the Trust's transfer agent at 579 Pleasant Street, Suite 4, Paxton,
Massachusetts 01612. If a shareholder has share certificates, the investor
should properly endorse them and include them with the written request. The
redemption price will be the net asset value next determined after the Trust
receives the request and, if applicable, the certificates.
2. A shareholder's broker may present request for repurchase to the Trust. The
repurchase price will be the net asset value next determined after Trust
receives the request. 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.
The Trust will pay for shares redeemed or repurchased within seven days after it
receives the request and any required documents, properly endorsed. The
signature(s) on the share certificate or request 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. The Trust will not accept
signature guarantee by a savings bank, or savings and loan association or
notarization by a notary public.
To insure proper authorization, the Trust's transfer agent may request
additional documents, including stock powers, trust instruments, certificates of
death, appointments as executor, certificates of corporate authority or waiver
of tax forms (required in some states from selling or exchanging estates before
redeeming shares).
The right of redemption may be suspended or the payment date postponed at
certain times. These include days 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, or 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 a 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. Otherwise,
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.
Redemptions in Kind
Under unusual circumstances, when the Board of Trustees deems it in the best
interests of the Trust's shareholders, the Trust may pay for shares repurchased
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<PAGE>
or redeemed partly or entirely in securities or other assets of the Trust taken
at current values. If any such redemption in kind is to be made, the Trust
intends to make an election pursuant to Rule 18(f)(1) under the Investment
Company Act of 1940. This will 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 90-day period
during which such redemptions are in effect, if that amount is less than
$250,000). If payment is made in securities, the redeeming shareholder may incur
brokerage costs in converting his securities to cash.
DISTRIBUTIONS
The Trust is authorized to issue two classes of shares, Common Shares and Class
A Common Shares. Only Common Shares are currently issued and outstanding. The
Trust does not presently intend to issue any more of its Class A Common Shares.
The Trust distributes any income dividends and any capital gain distributions in
additional Common 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 Common Shares or (2)
to receive dividends in cash and capital gain distributions in additional Common
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 Trust's transfer agent must receive the new distribution
option 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 if the Trust's transfer agent determines that the address of
record for the account is not current.
Dividends and capital gain distributions received in shares will be made to the
Trust's transfer agent, as agent for the shareholder, and credited to the
shareholder's Open Account in full and fractional shares computed at the record
date closing net asset value.
TAXES
General
The Trust intends to qualify each year as a regulated investment company under
Subchapter M of the Internal Revenue Code, as subsequently amended or reenacted.
In order to so qualify, the Trust, must, among other things, do the following:
(i) derive at least 90% of its gross income from dividends, interest, payments
as 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,
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and other securities so 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 70%
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% excise tax in any calendar year
to the extent that its fails to distribute at least 98% of its ordinary income
for that calendar year and 98% of its capital gain net income for the one-year
period ending on October 31 of that calendar year. In addition, to the extent
that the Trust fails to distribute 100% of its ordinary and capital gain net
income for any calendar year, the amount of the shortfall is subject to the
excise tax unless distributed for the following calendar year. For a
distribution to qualify as a distribution for a calendar year under the
foregoing rules, the Trust must declare it before December 31 of the year and
pay it before the following February 1. These 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 and
other taxes at the source. The Trust will be entitled to claim a deduction for
any foreign withholding taxes for federal income tax purposes. Any such taxes,
however, 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 to any shareholder who fails to furnish the Trust
with a correct taxpayer identification number, who underreported 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
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 tax consequences of certain
of these transactions were changed or clarified by amendments made to the
Internal Revenue Code by the Deficit Reduction Act of 1984. Although final
regulations have not been adopted under the Deficit Reduction Act, the following
discussion reflects the Trust's interpretation of applicable changes made by the
Deficit Reduction Act.
The Trust will seek principally to purchase or write options that will be
classified as either equity options or non-equity options, to the extent
consistent with its investment objective and opportunities which appear
available. "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 as to any group of stocks or stock index if the Commodity Futures
Trading Commission has designated a contract market for a contract based on that
group of stocks or index, or the Secretary of the Treasury determines that the
option meets the requirements of law for such a designation.
"Non-equity options" are any listed options which are not equity options.
Non-equity options, defined as "Section 1256 Contracts" under the Deficit
Reduction Act, are subject to a marked-to-market rule for federal income tax
purposes. Under this rule, each such 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
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day or such fiscal year. As described below, up to 60% of the gain or loss
resulting from the sale, disposition, closing out, expiration or other
termination of such options will be treated as long-term capital gain or loss,
and up to 40% will be treated as short-term capital gain or loss (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 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 Trust
will recognize the premium received as a gain (60/40 gain or loss for a
non-equity call option or short-term for an equity call option). If a put option
purchased by the Trust expires without being exercised, the Trust will recognize
the premium paid as a loss (60/40 gain or loss for a non-equity put option or
short or 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 intended to be used in exercising the put, the premium
paid will be added to the basis of the underlying securities. If a non-equity or
equity call option written by the Trust is exercised (or a non-equity or equity
put option purchased by the Trust is sold), the Trust will recognize a short or
long-term capital gain or loss depending on the holding period of the underlying
securities. If a non-equity call option written by the Trust or non-equity 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. As a result of rules under that section, the Trust may be required
to postpone recognition of losses incurred in certain closing purchase
transactions until 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 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 other private rulings, the Internal Revenue Service has addressed other tax
issues arising from investments by regulated investment companies in options. In
particular, the Internal Revenue Service has stated in private rulings that the
gains recognized as a result of the deemed sale of 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 prior to year end.
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
47
<PAGE>
income be derived from gains from the sale or other disposition of securities
held for less than three months will restrict the Trust's ability to write
covered call options on securities that it has held less than three months, to
write options that expire in less than three months, to sell securities that
have been held less than three months, to effect closing purchase transactions
as to options that have been held less than three months, and to effect closing
purchase transactions as to options that have been written less than three
months prior to such transactions. Consequently, 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 revises 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 for $4 one-month call at $95 on stock it owns which is worth $100, the
stock declines in value to $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 the area. In particular, 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 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 Trust's 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. The Investment
Adviser uses its best judgment in evaluating the terms of a transaction and will
give consideration to various relevant factors, including 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.
The Trust expects that many broker-dealer firms will meet the foregoing criteria
for a particular transaction. In selecting among the 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
48
<PAGE>
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.
These brokerage and research services may be used for some of the Investment
Adviser's other advisory accounts. The Investment Adviser may not use all of
these services in managing the Trust. The term "brokerage and research services"
includes services as to the value of securities; the advisability of investing
in, purchasing or selling securities; the availability of securities, or
purchasers or sellers of securities; the furnishing of analyses and reports
concerning issuers, industries, securities, economic factors and trends;
portfolio strategy and the performance of account; and effecting securities
transactions and performing related functions (such as clearance and
settlement).
This policy of considering sales or 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 services may occasionally engage
in the purchase or sale of the same security at the same time. In this event,
the Investment Adviser will usually average the price and allocate the amount of
the security purchased or sold among the several clients or accounts in a manner
deemed equitable to all. In some cases this system could have a detrimental
effect on the price or volume of the security allocated to the Trust. In other
cases, however, the ability to participate in volume transactions may 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
Trust's Distributor, which is an affiliate of the Investment Adviser. If 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. The Board of Trustees has not considered whether or not any
portion of the brokerage commissions which may be received by the Trust's
portfolio transactions should be required to be applied in order to reduce
advisory fees paid by the Trust. In any event, no such practice shall be
required unless approved by the vote of a majority of the Independent Trustees.
The Distributor will not, as a principal, enter into any securities transactions
with the Trust.
During 1999, 1998, and 1997, the Trust paid commissions of $4,473, $35,274, and
$1,760 to broker-dealers. During 1999, 1998, and 1997 the Trust paid brokerage
commissions of $3,133, $32,154, and $1,760 to the Distributor. For the year
ended December 31, 1999, the percentage of total commissions paid to the
Distributor was 70.04%. During 1999, the Trust's purchases and sales of
securities, exclusive of United States government securities and short-term
notes, amounted to $2,597,927 and $1,215,750 respectively. Of these transactions
$2,437,000 in purchases and $1,023,842 in sales were effected through the
Distributor.
OTHER 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 the Trust's custodian bank, Investors Bank &
Trust Company, Financial Product Services, 200 Clarendon Street, 16th Floor,
Boston, Massachusetts 0211. 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 foreign securities may be legally held
abroad. The Trust's custodian bank does not decide on purchases or sales of
portfolio securities or the making of distributions. As of April 1, 1999,
Cardinal Investment Services, Inc., 579 Pleasant Street, Suite 4, Paxton,
Massachusetts 01612, succeeded Anchor Investment Management, Inc. as transfer
agent and dividend-paying agent for the Trust.
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Independent Public Accountants
For the fiscal year ending December 31, 1999, the Trust employed Livingston &
Haynes, P.C., 40 Grove Street, Wellesley, Massachusetts 02482, 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 and related report of Livingston & Haynes, P.C.,
independent public accountants, contained in Progressive Capital Accumulation
Trust's (formerly Anchor Capital Accumulation Trust) Annual Report to
shareholders for the year ended December 31, 1999, are hereby incorporated by
reference. A copy of the Trust's Annual Report may be obtained without charge by
writing to Progressive Investment Management, Inc., 579 Pleasant Street, Suite
4, Paxton, Massachusetts 01612, or by calling Progressive Investment Management,
Inc. at (508) 831-1171.
50
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PART C OTHER INFORMATION
Item 23. Exhibits
Exhibit Number Description of Exhibit
(1) Restated Declaration of Trust, as amended.
(Previously filed as Exhibit 1 to Amendment
No. 10)
(2) By-Laws of the Registrant, as amended.
(Previously filed as Exhibit 2 to Amendment
No. 10)
(3) Not applicable.
(4) Specimen Certificates representing Common
Shares and Class A Common Shares of
Beneficial Interest of the Registrant.
(Previously filed as Exhibit 4 to Amendment
No. 10)
(5) p. 58 Investment Advisory Agreement between the
Registrant and Progressive Investment
Management Corporation.
(6) Distributor's Contract between the
Registrant and Meeschaert & Co., Inc.
(Previously filed as Exhibit 6 to Amendment
No. 17)
(7) Not applicable.
(8) Custodian Agreement between the Registrant
and Investors Bank & Trust Company.
(Previously filed as Exhibit 8 to Amendment
No. 10)
(9) p. 61 Transfer Agency and Service Agreement
between the Registrant and Cardinal
Investment Services, Inc.
(10) Opinion and Consent of Counsel. (Previously
filed as Exhibit 10 to Amendment No. 10)
(11) p. 68 Consent of Independent Public Accountants.
(12) p. 69 Trust's Annual Report to Shareholders,
December 31, 1999.
(13) Not applicable.
(14) Not applicable.
(15) Distribution Plan of the Registrant.
(Previously filed as Exhibit 15 to Amendment
No. 10)
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(16) Not applicable.
(17) p. 85 Power of Attorney, dated March 8, 2000 and
Certified Resolution.
(27) p. 87 Financial Data Schedule
Item 25. Indemnification.
No amendment. The information was filed in Item 4 of
Amendment No. 4
Item 26. Business and Other Connections of Investment Advisor.
The information in the Statement of Additional Information under the
caption of "Management-Investment Adviser" is hereby incorporated herein
by reference to that section.
Item 27. Principal Underwriters.
(a) The Distributor currently acts as distributor for the
following investment companies:
Anchor Gold and Currency Trust
S.E.C. file # 811-4640
Anchor International Bond Trust
S.E.C. file # 811-4644
Anchor Resource and Commodity Trust
S.E.C. file # 811-8706
(b)
----------------------------------------------------------
Name and Principal Positions and Positions and the
Business Address Officers with Trust Offices
Underwriter
----------------------------------------------------------
David Y. Williams President and President,
579 Pleasant Director Secretary and
Street, Suite 4 Director
Paxton, MA 01612
----------------------------------------------------------
Christopher Y. Vice President Vice President
Williams and Secretary and Assistant
579 Pleasant Secretary
Street, Suite 4
Paxton, MA 01612
----------------------------------------------------------
Joseph C. Williams Vice President Vice President
579 Pleasant and Treasurer and Assistant
Street, Suite 4 Treasurer
Paxton, MA 01612
----------------------------------------------------------
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(c) Not applicable.
Item 28. 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 under that section include the Trust's
Secretary, David Y. Williams; Registrant's Investment Advisor, Progressive
Investment Management Corporation; and Registrant's custodian, Investors
Bank & Trust Company. The address of the Trust's Secretary is 579 Pleasant
Street, Suite 4, Paxton, Massachusetts 01612. The address of the
investment adviser and the transfer agent and dividend paying agent is 579
Pleasant St., Suite 4, Paxton, Massachusetts 01612. The address of the
custodian is c/o Financial Product Services, 200 Clarendon St., 18th
Floor, Boston, Massachusetts 02116.
Item 29. Management Services.
Not applicable.
Item 30. Undertakings.
Not applicable.
53
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, the Trust certifies that it has duly caused this Amendment
to the Registration Statement to be signed on its behalf by the undersigned,
duly authorized, in the City of Paxton and the Commonwealth of Massachusetts on
the 8th day of March, 2000.
PROGRESSIVE CAPITAL ACCUMULATION
TRUST
(formerly Anchor Capital
Accumulation Trust)
By: /s/ DAVID Y. WILLIAMS
----------------------
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
/s/DAVID W.C. PUTNAM* Chairman and Trustee March 8, 2000
David W. C. Putnam
/s/J. STEPHEN PUTNAM* Treasurer (Principal March 8, 2000
J. Stephen Putnam Financial Officer)
/s/SPENCER H. Trustee March 8, 2000
LEMENAGER* Secretary
-
and Trustee
Spencer H. LeMenager
/s/DAVID Y. WILLIAMS President, Secretary March 8, 2000
David Y. Williams and Trustee
/s/ERNIE BUTLER Trustee March 8, 2000
Ernie Butler
*By: PETER K. BLUME April 14, 2000
Peter K. Blume
Attorney-in-Fact
54
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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. 49 /x/
--
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT
OF 1940../x/
Amendment No. 27 /x/
--
===================================================================
PROGRESSIVE CAPITAL ACCUMULATION TRUST
(formerly Anchor Capital Accumulation Trust)
===================================================================
55
<PAGE>
EXHIBITS
INDEX TO EXHIBITS
Exhibit Number Description of Exhibit
(1) Restated Declaration of Trust, as amended.
(Previously filed as Exhibit 1 to Amendment
No. 10)
(2) By-Laws of the Registrant, as amended.
(Previously filed as Exhibit 2 to Amendment
No. 10)
(3) Not applicable.
(4) Specimen Certificates representing Common
Shares and Class A Common Shares of
Beneficial Interest of the Registrant.
(Previously filed as Exhibit 4 to Amendment
No. 10)
(5) p.58 Investment Advisory Agreement between the
Registrant and Progressive Investment
Management Corporation.
(6) Distributor's Contract between the
Registrant and Meeschaert & Co., Inc.
(Previously filed as Exhibit 6 to Amendment
No. 17)
(7) Not applicable.
(8) Custodian Agreement between the Registrant
and Investors Bank & Trust Company.
(Previously filed as Exhibit 8 to Amendment
No. 10)
(9) p. 61 Transfer Agency and Service Agreement
between the Registrant and Cardinal
Investment Services, Inc.
(10) Opinion and Consent of Counsel. (Previously
filed as Exhibit 10 to Amendment No. 10)
(11) p. 68 Consent of Independent Public Accountants.
(12) p. 69 Trust's Annual Report to Shareholders,
December 31, 1999.
(13) Not applicable.
(14) Not applicable.
(15) Distribution Plan of the Registrant.
(Previously filed as Exhibit 15 to Amendment
No. 10)
(16) Not applicable.
56
<PAGE>
(17) p. 85 Power of Attorney, dated March 8, 2000 and
Certified Resolution.
(27) p. 87 Financial Data Schedule
57
<PAGE>
PROPOSED INVESTMENT ADVISORY CONTRACT
AGREEMENT made this 30th day of October, 1999 by and between Progressive
Capital Accumulation Trust, a Massachusetts business trust (hereinafter
called the "Trust") and Progressive Investment Management Corporation,
a Massachusetts corporation (hereinafter sometimes called the "Advisor").
W I T N E S S E T H :
WHEREAS, the Trust and the Advisor wish to enter into an agreement setting
forth the terms on which the Advisor will perform certain investment advisory
and management services for the Trust;
NOW THEREFORE, in consideration of the premises and the covenants
hereinafter contained, the Trust and the Advisor agree as follows:
l. The Trust hereby employs the Advisor to manage the investment and
reinvestment of the assets of the Trust, subject to the supervision of the Board
of Trustees of the Trust, for the period and on the terms in this agreement set
forth. The Advisor hereby accepts such employment and agrees during such period,
at its own expense, to render the services and to assume the obligations herein
set forth, for the compensation herein provided. The Advisor shall for all
purposes herein be deemed to be an independent contractor and shall, unless
otherwise expressly provided or authorized, have no authority to act for or
represent the Trust in any way or otherwise be deemed an agent of the Trust.
2. The Advisor, at its own expense, shall furnish or cause to be furnished
to the Trust office space in the offices of the Advisor or in such other place
as may be agreed upon from time to time, and arrange for all necessary office
facilities, equipment and personnel for managing the investments of the Trust,
and shall arrange, if desired by the Trust, for members of the Advisor's
organization to serve without salaries from the Trust as officers or agents of
the Trust. The Advisor assumes and shall pay or reimburse the Trust for: (l) the
compensation (if any) of the Trustees of the Trust who are affiliated persons of
the Advisor and of all officers of the Trust as such and (2) all expenses
incurred by the Advisor or by the Trust in connection with the management of the
investment and reinvestment of the assets of the Trust, other than those
specifically assumed by the Trust herein. Except as otherwise expressly provided
above, the Trust assumes and shall pay, (l) all charges and expenses of any
custodian or depositary appointed by the Trust for the safekeeping of its cash,
securities and other property, (2) the charges and expenses of auditors and of
keeping the books of the Trust, (3) the charges and expenses of any transfer
agents and registrars appointed by the Trust, (4) the fees of all Trustees not
affiliated with the Advisor, (5) broader commissions and issue and transfer
taxes chargeable to the Trust in connection with securities transactions to
which the Trust is a party, (6) all taxes and corporate fees payable by the
Trust to federal, state or other governmental agencies, (7) the cost of stock
certificates representing shares of the Trust, (8) fees and expenses involved in
registering and maintaining registrations of the Trust and of its shares with
the Securities and Exchange Commission and qualifying its shares under state or
other securities laws including the preparation and printing of prospectuses for
filing with said Commission and other authorities, (9) all expenses of
shareholders' and trustees' meetings and of preparing and printing reports to
shareholders, (l0) charges and expenses of legal counsel for the Trust in
connection with legal matters relating to the Trust, including without
limitation, legal services rendered in connection with the Trust's corporate
existence, corporate and financial structure and relations with its
shareholders, registrations and qualifications of securities under federal,
state and other laws, issues of securities and expenses which the Trust has
herein assumed, and (11) the charges of the Trust's administrator for providing
and coordinating the foregoing administrative services to the Trust.
1
<PAGE>
The services of the Advisor to the Trust hereunder are not to be deemed
exclusive, and the Advisor shall be free to render similar services to others so
long as its services hereunder are not impaired thereby.
As compensation for the Advisor's services to the Trust, the Trust shall
pay to the Advisor a fee at the rate of 3/4 of 1% per annum of the average of
the daily aggregate net asset values of the Trust computed as of the close of
business of each business day.
Such compensation shall be payable in arrears at such intervals, not more
frequently than monthly and not less frequently than quarterly (except for an
additional fee), as the Board of Trustees of the Trust may from time to time
determine; provided that such compensation shall be paid proportionately for any
period ending with the termination of this agreement.
3. The Trust shall cause its books and accounts to be audited at least
once each year by a reputable, independent public accountant or organization of
public accountants who shall render a report to the Trust.
4. Subject to and in accordance with the Declaration of Trust of the Trust
and of the Advisor respectively, it is understood that the Trustees, officers,
agents and stockholders of the Trust are or may be interested in the Advisor (or
any successor thereof) as directors, officers or stockholders, or otherwise,
that directors, officers, agents and stockholders of the Advisor are or may be
interested in the Trust as Trustees, officers, stockholders or otherwise, that
the Advisor (or any such successor) is or may be interested in the Trust as
stockholder or otherwise and that the effect of any such adverse interests shall
be governed by said Declaration of Trust and the By-Laws.
5. No Trustee or shareholder of the Trust shall be personally liable under
this Agreement, all such liability being limited to the assets of the Trust.
6. The Advisor shall not be liable for any action taken, omitted or
suffered to be taken by it in its reasonable judgment, in good faith and
believed by it to be authorized or within the discretion or rights or powers
conferred upon it by this Agreement, or in accordance with (or in the absence
of) specific directions or instructions from the Trust, provided, however, that
such acts or omissions shall not have resulted from the Advisor's willful
misfeasance, bad faith or gross negligence or reckless disregard by it of its
obligations and duties under this Agreement.
7. This Agreement shall continue in effect from the date hereof until June
21, 2000 and from year to year thereafter (a) if its continuance is specifically
approved on or before said date and at least annually thereafter by vote of a
majority of the outstanding voting securities of the Trust or by the Board of
Trustees of the Trust and (b) if the terms and any renewal of this Agreement
have been approved by the vote of a majority of the Trustees of the Trust, who
are not parties to this Agreement 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 of voting on such approval, provided, however,
that (1) this Agreement may at any time be terminated without the payment of any
penalty either by vote of the Board of Trustees of the Trust or by vote of a
majority of the outstanding voting securities of the Trust, on not more than
sixty days' prior written notice to the Advisor, (2) this Agreement shall
immediately terminate in the event of its assignment (within the meaning of the
Investment Company Act of 1940) by either party to this Agreement, and (3) this
Agreement may be terminated by the Advisor on ninety days' prior written notice
to the Trust. Any notice under this Agreement shall be given in writing
addresses and delivered or mailed postpaid to the other party at any office of
such party.
This agreement may be amended at any time by mutual consent of the
parties, provided that such consent on the part of the Trust shall have been
approved by a vote of a majority of the outstanding voting securities of the
2
<PAGE>
Trust. A "majority of the outstanding voting securities of the Trust" shall
have, for all purposes of this Agreement, the meaning provided therefore in said
Investment Company Act.
IN WITNESS WHEREOF, the parties hereto have executed this agreement on the
day and year first above written.
PROGRESSIVE CAPITAL ACCUMULATION TRUST
By: /S/DAVID Y. WILLIAMS
President
PROGRESSIVE INVESTMENT MANAGEMENT, INC.
By: /S/PAUL L. JASPARD
President
3
<PAGE>
TRANSFER AGENCY AND SERVICE AGREEMENT
AGREEMENT made as of the 1st day of April, 1999 by and between PROGRESSIVE
CAPITAL ACCUMULATION TRUST, a Massachusetts business trust having its principal
office and place of business at 579 Pleasant Street, Suite 4, Paxton, MA 01612 (
the "Trust"), and CARDINAL INVESTMENT SERVICES, INC., an Illinois corporation
having its principal office and place of business at 579 Pleasant Street, Suite
4, Paxton, MA 01612 ( the "Company"),
W I T N E S S E T H:
WHEREAS, the Trust desires to appoint the Company as transfer agent,
dividend disbursing agent and agent in connection with certain other activities
and the Company desires to accept such appointment;
NOW, THEREFORE, in consideration of the mutual covenants herein contained,
the parties hereto agree as follows:
Article 1. Terms of Appointment; Duties of the Company
1.01 Subject to the terms and conditions set forth in this Agreement, the
Trust hereby employs and appoints the Company to act as, and the Company agrees
to act as, transfer agent for the Trust's authorized and issued shares of
beneficial interest without part value ("Shares"), dividend disbursing agent in
connection with any accumulation, open-account or similar plans provided to the
shareholders of the Trust ("Shareholders") and set out in the prospectus and
statement of additional information of the Trust corresponding to the date of
this Agreement.
1.02 The Company agrees that it will perform the following services:
(a) In accordance with procedures established from time to time by
agreement between the Trust and the Company, the Company shall:
(i) receive for acceptance and processing, order for the purchase of
Shares, and promptly deliver payment and appropriate documentation therefor to
the custodian of the Trust authorized pursuant to the Trust's governing
documents (the "Custodian");
(ii) pursuant to purchase orders or other appropriate instructions,
issue the appropriate number of Shares and hold such Shares in the appropriate
Shareholder account, and, if requested and properly authorized, issue
appropriate certificates therefor;
(iii) receive for acceptance and processing, redemption requests
and redemption directions, and deliver the appropriate documentation therefor
to the Custodian;
(iv) at the appropriate time as and when it receives monies paid to
it by the Custodian with respect to any redemption, pay over or cause to be paid
over in the appropriate manner such monies as instructed by the redeeming
Shareholders;
(v) effect transfer of Shares by the registered owners thereof upon
receipt of appropriate documentation;
61
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(vi) prepare and transmit payments for dividends and distributions
declared by the Trust; and
(vii) maintain records of account for and advise the Trust and
their Shareholders as to the foregoing.
(b) In addition to and not in lieu of the services set forth in paragraph
(a) above, the Company shall perform all of the customary services of a transfer
agent, dividend disbursing agent and, as relevant, agent in connection with
accumulation, open-account or similar plans (including without limitation any
periodic investment plan or periodic withdrawal program), including but not
limited to: (i) maintaining all Shareholder accounts, (ii) preparing Shareholder
meeting lists, (iii) mailing proxies, (iv) receiving and tabulating proxies, (v)
mailing of additional information to current Shareholders, (vi) withholding
taxes on U.S. residents and non-resident alien accounts where applicable, (vii)
preparing and filing U.S. Treasury Department Forms 1099 and other appropriate
forms required with respect to dividends and distributions by federal
authorities for all registered Shareholders, (viii) preparing and mailing
confirmation forms and statements of account to Shareholders for all purchases
and redemptions of Shares and other confirmable transactions in Shareholder
accounts, (ix) preparing and mailing activity statements for Shareholders, and
(x) providing Shareholder account information. The Trust shall provide the
Company with any information required in connection with the furnishing of the
foregoing services.
(c) Additionally, the Company shall:
(i) Utilize a system to identify all Share transactions which involve
purchase and redemption orders that are processed at a time other than the time
of the computation of net asset value per Share next computed after receipt of
such orders, and shall compute the net effect upon the Trust of such
transactions so identified on a daily and cumulative basis.
(ii) If on any day the cumulative net effect of such transactions
upon the Trust are negative and exceeds a dollar amount equivalent to 1/2 of 1
cent per Share, the Company shall promptly make a payment to the Trust in cash
or through the use of a credit, in the manner described in subparagraph (iv)
below, in such amount as may be necessary to reduce the negative cumulative net
effect to less than 1/2 of 1 cent per Share.
(iii) If on the last business day of any month the cumulative net
effect upon the Trust (adjusted by the amount of all prior payments and credits
by the Company and the Trust) are negative, the Trust shall be entitled to a
reduction in the fee next payable under this Agreement by an equivalent amount,
except as provided in subparagraph (iv) below. If on the last business day in
any month the cumulative net effect upon the Trust (adjusted by the amount of
all prior payments and credits by the Company and the Trust) is positive, the
Company shall be entitled to recover certain past payments and reductions in
fees, and to credit against all future payments and fee reductions that may be
required under subparagraph (iv) below.
(iv) At the end of each month, any positive cumulative net effect
upon the Trust shall be deemed to be a credit to the Company which shall first
be applied to permit the Company to recover any prior cash payments and fee
reductions made by it to the Trust under subparagraphs (ii) and (iii) above
during the calendar year, by increasing the amount of the monthly fee under this
Agreement next payable in an amount equal to prior payments and fee reductions
made by the Company during such calendar year, but not exceeding the sum of that
month's credit and credits arising in prior months during such calendar year to
62
<PAGE>
the extent such prior credits have not previously been utilized as contemplated
by this subparagraph (iv). Any portion of a credit to the Company not so used by
it shall remain as a credit to be used as payment against the amount of future
negative cumulative net effect that would otherwise require a cash payment or
fee reduction to be made to the Trust pursuant to paragraphs (ii) or (iii) above
(regardless of whether or not the credit or any portion thereof arose in the
same calendar year as that in which the negative cumulative net effects or any
portion thereof arose).
(v) The Company shall supply to the Trust from time to time, as
mutually agreed upon, reports summarizing the transactions identified pursuant
to subparagraph (i) above, and the daily and cumulative net effect of such
transactions, and shall advise the Trust at the end of each month of the net
cumulative effect at such time. The Company shall promptly advise the Trust if
at any time the cumulative net effect exceeds a dollar amount equivalent to 1/2
of 1 cent per Share.
(vi) In the event that this Agreement is terminated for whatever
cause, or this Section 1.02(c) is terminated pursuant to subparagraph (vii)
below, the Trust shall promptly pay to the Company an amount in cash equal to
the amount by which the cumulative net effect upon the Trust is positive or, if
the cumulative net effect upon the Trust is negative, the Company shall promptly
pay to the Trust an amount in cash equal to the amount of such cumulative net
effect.
(vii) This Section 1.02(c) may be terminated by the Company at any
time without cause, effective as of the close of business on the date written
notice (which may be by facsimile) is received by the Trust.
(d) Procedures applicable to the services provided under this Agreement
may be established from time to time by agreement between the Trust and the
Company.
Article 2. Fees and Expenses
2.01 For performance by the Company pursuant to this Agreement, the Trust
agrees to pay the Company monthly a fee at the annual rate of $12,000. Such fees
and out-of-pocket expenses and advances identified under Section 2.02 below may
be changed from time to time subject to mutual written agreement between the
Trust and the Company.
2.02 In addition to the fee paid under Section 2.01 above, the Trust
agrees to reimburse the Company for all out-of-pocket expenses or advances
incurred by the Company in performing its duties as Transfer Agent hereunder. In
addition, any other expenses incurred by the Company at the request or with the
consent of the Trust will be reimbursed by the Trust.
2.03 The Trust agrees to pay all fees and reimbursable expenses promptly.
Postage and cost of materials for mailing of dividends, proxies, Trust reports
and other mailings to all Shareholder accounts shall be advanced to the Company
by the Trust in immediately available funds prior to the mailing date of such
materials.
Article 3. Representations and Warranties of the Company
The Company represents and warrants to the Trust that:
3.01 It is a corporation duly organized and existing and in good standing
under the laws of State of Illinois.
63
<PAGE>
3.02 It is duly qualified to carry on its business in The
Commonwealth of Massachusetts.
3.03 It is empowered under applicable laws and by its charter and bylaws
to enter into and perform this Agreement.
3.04 All requisite corporate proceedings have been taken to authorize it
to enter into and perform this Agreement.
3.05 It has and will continue to have access to the necessary facilities,
equipment and personnel to perform its duties and obligations under this
Agreement.
Article 4. Representations and Warranties of the Trust
The Trust represents and warrants to the Company that:
4.01 It is an unincorporated business Trust duly organized and existing
and in good standing under the laws of The Commonwealth of Massachusetts.
4.02 It is empowered under applicable laws and by its governing documents
to enter into and perform this Agreement.
4.03 All proceedings required by said governing documents have been taken
to authorize it to enter into and perform this Agreement.
4.04 It is an investment company registered under the Investment Company
Act of 1940.
4.05 A registration statement under the Securities Act of 1933 is
currently effective and will remain effective, and appropriate state securities
law filings have been made and will continue to be made with respect to all
Shares of the Trust being offered for sale; information to the contrary will
result in immediate notification to the Company.
Article 5. Indemnification
5.01 The Company shall not be responsible for, and the Trust shall
indemnify and hold the Company harmless from and against, any and all losses,
damages, costs, charges, counsel fees, payments, expenses and liabilities
arising out of or attributable to:
(a) all actions of the Company or its agents or subcontractors required to
be taken pursuant to this Agreement, provided that such actions are taken in
good faith and without negligence or willful misconduct;
(b) the Trust's refusal or failure to comply with the terms of this
Agreement, or the Trusts' lack of good faith, negligence or willful misconduct,
or the breach of any representation or warranty of the Trust hereunder;
(c) the reliance on or use by the Company or its agents or subcontractors
of information, records or documents which (i) are received by the Company or
its agents or subcontractors and furnished to it by or on behalf of the Trust,
and (ii) have been prepared and/or maintained by the Trust or any other person
or firm (other than the Company or its agents or subcontractors) on behalf of
the Trust;
64
<PAGE>
(d) the reliance on, or the carrying out by the Company or its agents or
subcontractors of, any instructions or requests of the Trust's
representatives; or
(e) the offer or sale of Shares in violation of any requirement under the
federal securities laws or regulations or the securities laws or regulations of
any state that such Shares be registered in such state, or in violation of any
stop order or other determination or ruling by any federal agency or any state
with respect to the offer or sale of such Shares in such state.
5.02 The Company shall indemnify and hold the Trust harmless from and
against any and all losses, damages, costs, charges, counsel fees, payments,
expenses and liabilities arising out of or attributable to the Company's refusal
or failure to comply with the terms of this Agreement, or the Company's lack of
good faith, negligence or willful misconduct, or the breach of any
representation or warranty of the Company hereunder.
5.03 At any time the Company may apply to any officer of the Trust for
instructions, and may consult with the Trust's legal counsel with respect to any
matter arising in connection with the services to be performed by the Company
under this Agreement, and the Company and its agents or subcontractors shall not
be liable and shall be indemnified by the Trust for any action taken or omitted
by it in reliance upon such instructions or upon the opinion of such counsel.
The Company, its agents and subcontractors shall be protected and indemnified in
acting upon any papers or documents furnished by or on behalf of the Trust,
reasonably believed to be genuine and to have been signed by the proper person
or persons, or upon any instructions, information, data, records or documents
provided the Company or its agents or subcontractors by telephone, in person, or
by machine readable input, facsimile, CRT data entry or other similar means
authorized by the Trust, and the Company, its agents and subcontractors shall
not be held to have notice of any change of authority of any person until
receipt of written notice thereof from the Trust. The Company, its agents and
subcontractors shall also be protected and indemnified in recognizing Share
certificates which are reasonably believed to bear the proper manual or
facsimile signatures of the officers of the Trust, and the proper
countersignature of any former transfer agent or registrar, or of a co-transfer
agent or co-registrar.
5.04 In the event either party is unable to perform its obligations under
this Agreement because of acts of God, strikes, equipment or transmission
failure or damage reasonably beyond its control, or other causes reasonably
beyond its control, such party shall not be liable to the other for any damages
resulting from such failure to perform or otherwise from such causes.
5.05 Neither party to this Agreement shall be liable to the other party
for consequential damages under any provision of this Agreement or for any act
or failure to act hereunder.
5.06 In order that the indemnification provisions contained in this
Article 5 shall apply, upon the assertion of a claim for which either party may
be required to indemnify the other, the party seeking indemnification shall
promptly notify the other party of such assertion, and shall keep the other
party advised with respect to all developments concerning such claim. The party
who may be required to indemnify shall have the option to participate with the
party seeking indemnification in the defense of such claim. The party seeking
indemnification shall in no case confess any claim or make any compromise in any
case in which the other party may be required to indemnify it except with the
other party's prior written consent.
Article 6. Covenants of the Trust and the Company
6.01 The Trust shall promptly furnish to the Company the following:
65
<PAGE>
(a) a certified copy of the resolution of the Board of Trustees of the
Trust authorizing the appointment of the Company and the execution and delivery
of this Agreement.
(b) A copy of the Declaration of Trust and Bylaws of the Trust and all
amendments thereto.
6.02 The Company hereby agrees to establish and maintain facilities and
procedures reasonably acceptable to the Trust for safekeeping of Share
certificates, check forms and facsimile signature imprinting devices, if any;
and for the preparation or use, and for keeping account of, such certificates,
forms and devices.
6.03 The Company shall keep records relating to the services to be
performed hereunder in the form and manner as it may deem advisable. To the
extent required by Section 31 of the Investment Company Act of 1940, as amended,
and the rules and regulations promulgated thereunder, the Company agrees that
all such records prepared or maintained by the Company relating to the services
to be performed by the Company hereunder are the property of the Trust and will
be preserved, maintained at the expense of the Trust and made available in
accordance with such section, rules and regulations, and will be surrendered
promptly to the Trust at its request.
6.04 The Company and the Trust agree that all books, records, information
and data pertaining to the business of the other party which are exchanged or
received pursuant to the negotiation or the carrying out of this Agreement shall
remain confidential, and shall not be voluntarily disclosed to any other person,
except as may be required by law.
6.05 In case of any requests or demands for the inspection of the
Shareholder records of the Trust, the Company will endeavor to notify the Trust
and to secure instructions from an authorized officer of the Trust as to such
inspection. The Company reserves the right, however, to exhibit the Shareholder
records to any person whenever it is advised by its counsel that it may be held
liable for the failure to exhibit the Shareholder records to such person, unless
the Trust's indemnify the Company to its reasonable satisfaction against such
liability.
Article 7. Termination of Agreement
7.01 This Agreement may be terminated by either party upon one hundred
twenty (120) days written notice to the other.
7.02 Should the Trust exercise its right to terminate, all out-of-pocket
expenses associated with the movement of records and material will be borne by
the Trust. Additionally, the Company reserves the right to charge for any other
reasonable expenses associated with such termination, but not more than an
amount equivalent to the average of the most recent three (3) months' fees.
Article 8. Assignment
8.01 Neither this Agreement nor any rights or obligations hereunder may be
assigned by either party without the written consent of the other party.
8.02 This Agreement shall inure to the benefit of and be binding upon the
parties and their respective permitted successors and assigns.
66
<PAGE>
Article 9. Amendment
9.01 This Agreement may be amended or modified by a written agreement
executed by both parties.
Article 10 Massachusetts Law to Apply
10.01 This Agreement shall be construed and the provisions hereof
interpreted under and in accordance with the laws of The Commonwealth of
Massachusetts.
Article 11 Merger of Agreement
11.01 This Agreement constitutes the entire agreement between the parties
hereto and supersedes any prior agreement with respect to the subject hereof
whether oral or written.
Article 12. Limitation of Liability
12.01 A copy of the Declaration of Trust of the Trust is on file with the
Secretary of State of The Commonwealth of Massachusetts and notice is hereby
given that this Agreement is executed on behalf of the Trustees of the Trust as
trustees and not individually and that the obligations of this Agreement are not
binding upon the Trustees or holders of Shares individually but are binding only
upon the assets or property of the Trust.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in their names and on their behalf under their seals by and through
their duly authorized officers, as of the day and year first above written.
PROGRESSIVE INVESTMENT MANAGEMENT INC.
By:/s/ PAUL L. JASPARD
President
CARDINAL INVESTMENT SERVICES, INC.
By:/S/ CHRISTOPHER Y. WILLIAMS
President
67
<PAGE>
Livingston & Haynes, P.C.
Certified Public Accountants
40 Grove Street
Wellesley, MA 02482
(617) 237-3339
Member AICPA Division for CPA Firms
Private Companies Practice Section
SEC Practice Section
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of Progressive
Capital Accumulation Trust on the amended Form N-1A our report dated January
7, 2000, appearing in the prospectus, which is part of such Registration
Statement, and to the reference to us under the captions, "Condensed Financial
Information and Selected Per Share Data and Ratios".
/S/LIVINGSTON & HAYNES
Wellesley, Massachusetts
April 19, 2000
<PAGE>
PROGRESSIVE
CAPITAL
ACCUMULATION
TRUST
(formerly Anchor Capital Accumulation Trust)
ANNUAL REPORT
DECEMBER 31, 1999
<PAGE>
PROGRESSIVE CAPITAL ACCUMULATION TRUST
(formerly Anchor Capital Accumulation Trust)
Comparison of the Change in Value of a $10,000 Investment in the
Progressive Capital Accumulation Trust and the Standard & Poor's 500 Index
[GRAPHIC OMITTED]
===============================================================================
Progressive Capital Accumulation Trust
Average Annual Total Return
- -------------------------------------------------------------------------------
1 Year 5 Year 10 Year
26.10% 18.42% 11.81%
===============================================================================
2.
<PAGE>
PROGRESSIVE CAPITAL ACCUMULATION TRUST
(formerly Anchor Capital Accumulation Trust)
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
Assets:
Investments at quoted market value (cost $3,670,398;
see Schedule of Investments, Notes 1, 2, & 5)................. $ 6,173,282
Cash ......................................................... 505,583
Foreign time deposits (cost $434,048; maturing 01/05/00 at 3%) 434,998
Dividends and interest receivable.............................. 3,773
Other assets................................................... 1,769
------------
Total assets.............................................. 7,119,405
------------
Liabilities:
Accrued expenses and other liabilities (Note 3 )............... 37,069
------------
Total liabilities......................................... 37,069
------------
Net Assets:
Capital stock (unlimited shares authorized at $1.00 par value,
amount paid in on 268,628 shares outstanding) (Note 1)........ 3,949,361
Accumulated undistributed net investment income (Note 1)....... 1,028,479
Accumulated realized loss from security transactions,
net (Note 1).................................................. (399,338)
Net unrealized appreciation in value of investments (Note 2)... 2,503,834
------------
Net assets (equivalent to $26.36 per share, based on
268,628 capital shares outstanding)...................... $ 7,082,336
============
The accompanying notes are an integral part of these financial statements.
3.
<PAGE>
PROGRESSIVE CAPITAL ACCUMULATION TRUST
(formerly Anchor Capital Accumulation Trust)
STATEMENT OF OPERATIONS
DECEMBER 31, 1999
Income:
Dividends..................................................... $ 21,809
Interest...................................................... 50,703
-----------
Total income.............................................. 72,512
-----------
Expenses:
Management fees, net (Note 3)................................. 36,196
Pricing and bookkeeping fees (Note 4)......................... 18,500
Legal fees.................................................... 8,260
Audit and accounting fees..................................... 7,700
Transfer fees (Note 4)........................................ 12,000
Trustees' fees and expenses................................... 1,000
Custodian fees................................................ 1,800
Other expenses................................................ 4,700
-----------
Total expenses............................................ 90,156
-----------
Net investment loss............................................ (17,644)
-----------
Realized and unrealized gain on investments:
Realized gain on investments-net............................. 135,760
Increase in net unrealized appreciation in investments....... 1,274,310
-----------
Net gain on investments................................... 1,410,070
-----------
Net increase in net assets resulting from operations........... $ 1,392,426
===========
The accompanying notes are an integral part of these financial statements.
4.
<PAGE>
PROGRESSIVE CAPITAL ACCUMULATION TRUST
(formerly Anchor Capital Accumulation Trust)
STATEMENT OF CHANGES IN NET ASSETS
Year Ended Year Ended
December 31, December 31,
1999 1998
---------------------------
From operations:
Net investment loss ............................ $ (17,644) $ (1,020)
Realized gain on investments, net............... 135,760 5,239,438
Increase (decrease) in net unrealized
appreciation in investments.................... 1,274,310 (3,974,056)
------------ ------------
Net increase in net assets resulting
from operations............................ 1,392,426 1,264,362
------------ ------------
Distributions to shareholders:
From net investment income ($0.29 per share
in 1999)...................................... (75,666) --
From net realized gain on investments
($0.23 per share in 1999 and $11.61 per share
in 1998)...................................... (61,824) (5,249,366)
------------ ------------
Total distributions to shareholders......... (137,490) (5,249,366)
------------ ------------
From capital share transactions:
Number of Shares
1999 1998
---------- -----------
Proceeds from sale of
shares.................. 75,023 52,326 1,684,250 944,736
Shares issued to share-
holders in distributions
reinvested............... 5,003 277,950 130,628 5,236,575
Cost of shares redeemed... (12,145) (590,780) (267,842) (11,225,631)
-------- --------- ----------- ------------
Increase (decrease) in net
assets resulting from
capital share
transactions...... 67,881 (260,504) 1,547,036 (5,044,320)
========== =========== ------------ ------------
Net increase (decrease) in net assets............ 2,801,972 (9,029,324)
Net assets:
Beginning of period............................ 4,280,364 13,309,688
------------- -----------
End of period (including undistributed
net investment income of $1,028,479 and
$1,028,906, respectively).................. $ 7,082,336 $ 4,280,364
============ ============
The accompanying notes are an integral part of these financial statements.
5.
<PAGE>
PROGRESSIVE CAPITAL ACCUMULATION TRUST
(formerly Anchor Capital Accumulation Trust)
SELECTED PER SHARE DATA AND RATIOS (for a share
outstanding throughout each period)
Year Ended December 31,
1999 1998 1997 1996 1995
-----------------------------------------------------
Investment income........ $ 4.15 $ (378.95) $ 0.59 $ 1.33 $ (1.17)
Expenses, net............ 5.16 (381.86) 0.47 0.92 (0.64)
-----------------------------------------------------
Net investment (loss) (1.01) 2.91 0.12 0.41 (0.53)
income...................
Net realized and
unrealized
gain (loss) on
investments.............. 6.57 1.16 3.30 3.06 4.32
Distributions to
shareholders:
From net investment
income................. (0.29) -- (0.07) (0.13) (0.19)
From net realized gain
on investments......... (0.23) (11.61 ) (0.79) (0.09) (0.62)
---------------------------------------------------
Net increase (decrease)
in net asset value...... 5.04 (7.54) 2.56 3.25 2.98
Net asset value:
Beginning of period..... 21.32 28.86 26.30 23.05 20.07
-----------------------------------------------------
End of period........... $ 26.36 $ 21.32 $28.86 $26.30 $23.05
=====================================================
Total Return............. 26.10% 19.40% 13.04% 15.05% 18.91%
Ratio of expenses to
average net assets...... 1.66% 1.29% 1.15% 1.10% 1.11%
Ratio of net investment
income to average
net assets.............. (0.32)% (0.01)% 0.28% 0.49% 0.92%
Portfolio turnover....... 0.28 0.49 0.04 0.21 0.40
Average commission rate
paid..................... 0.0510 0.0654 0.0800 0.0650 0.040
Number of shares out-
standing at end of period 268,628 200,747 461,251 469,703 539,341
The accompanying notes are an integral part of these financial statements.
6.
<PAGE>
PROGRESSIVE CAPITAL ACCUMULATION TRUST
(formerly Anchor Capital Accumulation Trust)
SCHEDULE OF INVESTMENT
DECEMBER 31, 1999
Value
Quantity (Note 1)
-------- --------
COMMON STOCKS - 87.16%
Advertising Industry - 3.96%
5,000 Interpublic Group Of Companies Incorporated..............$ 280,937
-----------
Air Transport Industry - 1.89%
3,300 FDX Corporation.......................................... 134,063
-----------
Bank Industry - 3.00%
5,300 Bank of New York Company Incorporated.................... 212,662
-----------
Computer & Peripherals Industry - 5.40%
2,300 Cisco Systems Incorporated............................... 244,805
1,200 Hewlett Packard Company.................................. 137,625
-----------
382,430
Computer Software & Services Industry - 9.88%
4,600 Automatic Data Processing Incorporated................... 248,974
1,800 Computer Sciences........................................ 169,650
2,500 Oracle Corporation....................................... 280,781
-----------
699,405
Diversified Company Industry - 3.39%
89 Berkshire Hathaway Class B............................... 152,902
2,200 Tyco International Limited............................... 87,038
-----------
239,940
Drug Industry - 5.98%
6,800 Amgen Incorporated....................................... 423,724
-----------
Electrical Equipment Industry -- 3.93%
1,800 General Electric Company................................. 278,663
-----------
Financial Services Industry--0.10%
520 Gartner Group Incorporated, Class B...................... 6,858
-----------
Food Processing Industry - 2.42%
5,248 Tootsie Roll Industries Incorporated..................... 171,872
-----------
The accompanying notes are an integral part of these financial statements.
7.
<PAGE>
PROGRESSIVE CAPITAL ACCUMULATION TRUST
(formerly Anchor Capital Accumulation Trust)
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1999
(Continued)
Value
Quantity (Note 1)
-------- --------
Food Wholesalers Industry -- 2.89%
5,200 Sysco Corporation........................................ 204,425
-----------
Foreign Telecommunications -- 2.80%
2,000 Nortel Networks Corporation.............................. 198,625
-----------
Gold/Silver Mining Industry -- 2.12%
9,620 Franco Nevada Mining Corporation......................... 149,976
-----------
Insurance (Diversified) Industry -- 3.44%
2,250 American International Group............................. 243,422
-----------
Insurance (Life) Industry -- 2.40%
3,600 Aflac Incorporated....................................... 169,650
-----------
Manufacturing (Communications) Industry - 3.47%
3,600 JDS Uniphase............................................. 245,625
-----------
Medical Services Industry - 1.53%
4,000 IMS Health............................................... 108,250
-----------
Medical Supplies Industry - 5.00%
4,000 Abbott Laboratories...................................... 144,750
3,000 Stryker Corporation...................................... 209,438
-----------
354,188
-----------
Newspaper Industry - 3.18%
4,600 New York Times Cl A...................................... 225,113
-----------
Office Equipment & Supplies Industry - 1.95%
6,550 Staples Incorporated..................................... 137,959
-----------
Retail Building Supply Industry -- 3.98%
4,050 Home Depot Incorporated.................................. 281,981
-----------
The accompanying notes are an integral part of these financial statements.
8.
<PAGE>
PROGRESSIVE CAPITAL ACCUMULATION TRUST
(formerly Anchor Capital Accumulation Trust)
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1999
(Continued)
Value
Quantity (Note 1)
-------- --------
Retail Store Industry - 1.60%
5,000 Dollar General........................................... 113,125
-----------
Semiconductor Industry - 6.87%
2,000 Intel Corporation........................................ 166,500
2,300 Linear Technologies Corporation.......................... 164,738
1,600 Texas Instruments........................................ 155,500
-----------
486,738
Telecommunication Equipment Industry - 3.72%
1,800 Lucent Technologies Incorporated......................... 135,338
2,000 Tellabs Incorporated..................................... 128,375
-----------
263,713
Telecomunication Services Industry - 2.26%
3,000 MCI Worldcom Incorporated................................ 159,938
-----------
Total common stocks (cost $3,670,398).................... 6,173,282
-----------
CASH, FOREIGN TIME DEPOSITS & OTHER ASSETS,
LESS LIABILITIES - 12.84%......................................... 909,054
-----------
Total Net Assets........................................ $7,082,336
===========
The accompanying notes are an integral part of these financial statements.
9.
<PAGE>
PROGRESSIVE CAPITAL ACCUMULATION TRUST
(formerly Anchor Capital Accumulation Trust)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
1. Significant accounting policies:
On December 14, 1998, the Board of Trustees voted to change the name of the
Trust from Anchor Capital Accumulation Trust to Progressive Capital
Accumulation Trust. Subsequent to their vote the name change became effective
January 21, 1999.
Progressive Capital Accumulation Trust, a Massachusetts business trust (the
"Trust"), is registered under the Investment Company Act of 1940, as amended,
as a diversified, open-end investment management company. The following is a
summary of significant accounting policies followed by the Trust which are in
conformity with those generally accepted in the investment company industry.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
A.Investment securities-- Security transactions are recorded on the date the
investments are purchased or sold. Each day, at noon, securities traded on
national security exchanges are valued at the last sale price on the
primary exchange on which they are listed, or if there has been no sale by
noon, at the current bid price. Other securities for which market
quotations are readily available are valued at the last known sales price,
or, if unavailable, the known current bid price which most nearly
represents current market value. Options are valued in the same manner.
Temporary cash investments are stated at cost, which approximates market
value.
Dividend income is recorded on the ex-dividend date and interest income is
recorded on the accrual basis. Gains and losses from sales of investments
are calculated using the "identified cost" method for both financial
reporting and federal income tax purposes.
B.Income Taxes-- The Trust has elected to comply with the requirements of the
Internal Revenue Code applicable to regulated investment companies and to
distribute each year all of its taxable income to its shareholders. No
provision for federal income taxes is necessary since the Trust intends to
qualify for and elect the special tax treatment afforded a "regulated
investment company" under subchapter M of the Internal Revenue Code. Income
and capital gains distributions are determined in accordance with federal
tax regulations and may differ from those determined in accordance with
generally accepted accounting principles. To the extent these differences
are permanent, such amounts are reclassified within the capital accounts
based on their federal tax basis treatment; temporary differences do not
require such reclassification. During the current fiscal year permanent
differences, primarily due to short term gains and foreign currency losses
offset by net investment income, resulted in a net increase in
undistributed net investment income and an increase in accumulated realized
loss from security transactions. This reclassification had no effect on net
assets.
C.Capital Stock-- The Trust records the sales and redemptions of its capital
stock on trade date.
10.
<PAGE>
PROGRESSIVE CAPITAL ACCUMULATION TRUST
(formerly Anchor Capital Accumulation Trust)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
(Continued)
2. Tax basis of investments:
At December 31, 1999, the total cost of investments for federal income tax
purposes was identical to the total cost on a financial reporting basis.
Aggregate gross unrealized appreciation in investments in which there was an
excess of market value over tax cost was $2,600,017. Aggregate gross
unrealized depreciation in investments in which there was an excess of tax
cost over market value was $96,183. Net unrealized appreciation in
investments at December 31, 1999 was $2,503,834.
3. Investment advisory service agreements:
Pursuant to a shareholders meeting held on November 30, 1998, the
shareholders of Progressive Capital Accumulation Trust voted to enter into an
investment advisory agreement with Progressive Investment Management
Corporation, replacing Anchor Investment Management Corporation as the
Investment Adviser to the Trust effective November 30, 1998. The investment
advisory contract with Progressive Investment Management Corporation (the
"investment adviser") provides that the Trust will pay the adviser a fee for
investment advice based on 3/4 of 1% per annum of average daily net assets.
At December 31, 1999, investment advisory fees of $3,959 were due and were
included in "Accrued expenses and other liabilities" in the accompanying
Statement of Assets and Liabilities.
4. Certain transactions:
The Trust has entered into an agreement with Cardinal Investment Services,
Inc. for transfer agent and dividend disbursing agent services. Annual fees
for these services are $12,000.
Certain officers and trustees of the Trust are directors and/or officers
of the investment adviser and distributor. Meeschaert & Co., Inc., the
Trust's distributor, received $3,133 in brokerage commissions during the year
ended December 31, 1999. Fees earned by Progressive Investment Management
Corporation for expenses related to daily pricing of the Trust shares and for
bookkeeping services for the year December 31, 1999 were $18,500.
5. Purchases and sales:
Aggregate cost of purchases and the proceeds from sales and maturities on
investments for the year ended December 31, 1999 were:
Cost of securities acquired:
U.S. Government and investments backed by such
securities...................................... $ 3,900,575
Other investments................................ 8,396,743
---------------
$ 12,297,318
===============
Proceeds from sales and maturities:
U.S. Government and investments backed by such
securities...................................... $ 4,741,764
Other investments................................ 6,551,857
---------------
$ 11,293,621
===============
11.
<PAGE>
PROGRESSIVE CAPITAL ACCUMULATION TRUST
(formerly Anchor Capital Accumulation Trust)
Independent Auditors' Report
To the Shareholders and Trustees of Progressive Capital Accumulation Trust
(formerly Anchor Capital Accumulation Trust):
We have audited the accompanying statement of assets and liabilities of
Progressive Capital Accumulation Trust (formerly Anchor Capital Accumulation
Trust), a Massachusetts business trust, including the schedule of investments,
as of December 31, 1999, the related statement of operations for the year then
ended, the statements of changes in net assets for each of the two years in the
period then ended, and the selected per share data and ratios for each of the
five years in the period then ended. These financial statements and per share
data and ratios are the responsibility of the Trust's management. Our
responsibility is to express an opinion on these financial statements and per
share data and ratios based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and per share data
and ratios are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1999 by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and selected per share data and ratios
referred to above present fairly, in all material respects, the financial
position of Progressive Capital Accumulation Trust (formerly Anchor Capital
Accumulation Trust) as of December 31, 1999, the results of its operations for
the year then ended, the changes in its net assets for each of the two years in
the period then ended, and the selected per share data and ratios for each of
the five years in the period then ended, in conformity with generally accepted
accounting principles.
LIVINGSTON & HAYNES, P.C.
Wellesley, Massachusetts,
January 7, 2000
12.
<PAGE>
PROGRESSIVE CAPITAL ACCUMULATION TRUST
(formerly Anchor Capital Accumulation Trust)
OFFICERS AND TRUSTEES
ERNIE BUTLER Trustee
President, I.E. Butler Securities
SPENCER H. LEMENAGER Trustee
President, Equity Inc.
DAVID W.C. PUTNAM Chairman
President, F.L. Putnam and Trustee
Investment Management Company
J. STEPHEN PUTNAM Vice President and
President, Robert Thomas Securities Treasurer
DAVID Y. WILLIAMS President, Secretary
President and Director, Meeschaert & Co., Inc., and Trustee
President and Director, Anchor Investment
Management Corporation
13.
<PAGE>
PROGRESSIVE CAPITAL ACCUMULATION TRUST
(formerly Anchor Capital Accumulation Trust)
INVESTMENT ADVISER AND ADMINISTRATOR
Progressive Investment Management Corporation
579 Pleasant St., Suite 4, Paxton, Massachusetts 01612
(508) 831-1171
TRANSFER AGENT
Cardinal Investment Services Inc.
579 Pleasant St., Suite 4, Paxton, Massachusetts 01612
(508) 831-1171
DISTRIBUTOR
Meeschaert & Co., Inc.
579 Pleasant St., Suite 4, Paxton, Massachusetts 01612
CUSTODIAN
Investors Bank & Trust Company
200 Clarendon Street, Boston, Massachusetts 02116
INDEPENDENT PUBLIC ACCOUNTANT
Livingston & Haynes, P.C.
40 Grove St., Wellesley, Massachusetts 02482
LEGAL COUNSEL
Thorp Reed & Armstrong
One Riverfront Center, Pittsburgh, Pennsylvania 15222
This report is not authorized for distribution to prospective investors in the
Trust unless preceded or accompanied by an effective prospectus which includes
information concerning the Trust's record or other pertinent information.
14.
<PAGE>
POWER OF ATTORNEY
We, the undersigned officers and Trustees of Progressive Capital
Accumulation 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
/s/DAVID W.C. PUTNAM
David W. C. Putnam Chairman and Trustee March 8, 2000
/s/J. STEPHEN PUTNAM
J. Stephen Putnam Treasurer (Principle March 8, 2000
Financial Officer)
/s/SPENCER H. LEMENAGER
Spencer H. LeMenager Trustee March 8, 2000
/s/ERNIE BUTLER
I. Ernie Butler Trustee March 8, 2000
/s/DAVID Y. WILLIAMS
David Y. Williams President, Secretary March 8, 2000
and Trustee
* 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.
<PAGE>
CERTIFIED RESOLUTIONS
The undersigned, Christopher Y. Williams, Assistant Secretary of
Progressive Capital Accumulation Trust, DOES HEREBY CERTIFY that the
following resolutions were duly adopted by the Trustees of the Trust, and
that such resolutions have not been amended, modified or rescinded and
remain in full force and effect on the date hereof.
RESOLVED: That Peter K. Blume, Esquire, attorney for the
Trust, be and hereby is named and constituted agent
for service with respect to the aforesaid
Registration Statement to receive notices and
communication with respect to the 1993 Act and the
1940 Act, with all power consequent upon such
designation of and under the rules and regulations
of the Commission.
RESOLVED: That the signature of any officer of the Trust required
by law to be affixed to the Registration Statement, or
to any amendment thereof, may be affixed by said officer
personally or by an attorney-in-fact duly constituted in
writing by said officer to sign his name thereto.
IN WITNESS WHEREOF, I have executed this Certificate as of April 14, 2000.
/s/CHRISTOPHER Y. WILLIAMS
Christopher Y. Williams
<PAGE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
PROGRESSIVE CAPITAL ACCUMULATION TRUST DECEMBER 31, 1999 ANNUAL REPORT
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE ANNUAL REPORT.
Item Item Description
Number
1999
3(a) Net asset value:
Beginning of year $21.32
3(a) Net investment income
(loss)........... (1.01)
3(a) Net realized and
unrealized gain
(loss) on investments... 6.57
3(a) Distributions to
shareholders:
3(a) From net
investment
income.................. (0.29)
3(a) From net realized
gains on investments .... (0.23)
------
3(a) Net asset value:
End of year.... $26.36
======
3(a) Ratio of expenses to
average net
assets........... 1.66%
<PAGE>
</TABLE>
