1933 Act File No. 333-89281
1940 Act File No. 811-4640
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. 1
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /X/
Amendment No. 2
(Check appropriate box or boxes)
ANCHOR GOLD AND CURRENCY 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
Peter K. Blume, Esq.
Thorp Reed & Armstrong
One Riverfront Center
Pittsburgh, PA 15222
(Name and Address of Agent for Service)
Aproximate Date of Proposed Public Offering: As soon as practicle after
this Registration Statement becomes effective.
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PROSPECTUS
ANCHOR GOLD AND CURRENCY TRUST
Anchor Gold and Currency Trust (Trust) is a non-diversified, open-end management
investment company that was established as an unincorporated business trust
under the laws of Massachusetts by a Declaration of Trust dated April 10, 1986,
as amended and restated on September 3, 1986 and on October 18, 1999. The Trust
was operated as a closed-end management investment company until November
10, 1999. The shareholders of the Trust voted on October 18, 1999 to convert
the Trust from the closed-end form to the open-end form subject to the
effectiveness of this Prospectus pursuant to an order of the Securities and
Exchange Commission.
The primary investment objective of the Anchor Gold and Currency Trust (Trust)
is long-term capital appreciation and preservation of the purchasing power of
shareholders' capital. As a secondary investment objective, the Trust will seek
to generate current income consistent with the preservation of the shareholders'
purchasing power.
The Trust's investments will vary depending upon whether the Investment Adviser
anticipates an inflationary or deflationary economic cycle.
When the Investment Adviser expects an inflationary cycle, the Trust will invest
at least 65% of the value of its total assets in:
o gold bullion, gold certificates, and silver bullion;
o any other precious metals and any precious metal-backed or indexed securities,
which may be issued by either U. S. or foreign, private or governmental
issuers, including, without limitation, the government of South Africa and
South African companies;
o equity or convertible securities of U.S. or foreign companies primarily
engaged in business related to precious metals;
o options on securities, securities indices and currencies;
o precious metal and financial futures contracts and related options; and
o repurchase agreements.
When the Investment Adviser expects a deflationary cycle, the Trust will invest
up to 90% of its total assets in U.S. or foreign government and government
agency fixed-income securities of sufficient maturities to realize its objective
of long-term capital appreciation.
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.
The information in this Prospectus in not complete and may be changed. The
Trust may not sell these securities until the registration statement filed with
the Securities and Exchange Commission is effective. This Prospectus is not an
offer to sell these securities and is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
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TABLE OF CONTENTS
Risk/Return Summary.....................................................3
Fees and Expenses of the Trust..........................................5
What are the Trust's Investment Strategies?.............................8
What are the Principle Securities in Which the Trust Invests?...........9
What are the Specific Risks of Investing in the Trust?.................12
Management and Organization............................................17
Shareholder Information................................................17
Other Information......................................................21
Financial Information..................................................23
Applicaion and Registration Form.......................................24
PROSPECTUS DATED NOVEMBER 10, 1999
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RISK/RETURN SUMMARY
WHAT IS THE TRUST'S INVESTMENT OBJECTIVE?
The primary investment objective of the Trust is long-term capital appreciation
and preservation of the purchasing power of shareholders' capital. As a
secondary investment objective, the Trust will seek to generate current income
consistent with the preservation of the shareholders' purchasing power.
Protection of the purchasing power of its shareholders' capital means that the
Trust seeks to protect generally shareholders' invested capital against erosion
of the value of the U.S. dollar through inflation.
What are the Trust's Main Investment Strategies?
When, based on an analysis of numerous economic and monetary factors, the
Investment Adviser expects an inflationary cycle, the Trust will invest at least
65% of the value of its total assets in:
ogold bullion, gold certificates, and silver bullion; oany other precious metals
such as platinum and palladium; oindexed or precious metals-backed securities
(securities which are redeemable at a specified conversion rate for precious
metals or which are
guaranteed by precious metals), which may be issued by either U.S. or foreign
private or governmental issuers, including, without limitation, the government
of South Africa and South African companies; oequity or convertible securities
of U.S. or foreign companies primarily engaged in the exploration, mining or
processing of gold and other precious metals; ooptions on securities, securities
indices and currencies; oprecious metals and financial futures contracts and
related options; and orepurchase agreements.
As an integral part of this strategy, the Trust may:
oinvest up to 50% of its assets in the equity securities of companies (both
foreign and domestic) primarily engaged in gold exploration, mining or
processing; oinvest up to 35% of its total assets in bank deposits, bank
currency forward contracts and certificates of deposit; oinvest up to 50% of the
value of its assets in options on domestic and foreign securities and securities
indices.
In selecting equity securities for investment, the Trust's Investment Adviser
looks primarily for companies involved in gold operations which have established
records, as well as companies having low-cost reserves to bring into production.
The Investment Adviser also considers a company's potential for growth in
reserves and production.
When, based on an analysis of numerous economic and monetary factors, the
Investment Adviser expects a deflationary cycle, the Trust will invest up to 90%
of its total assets in U.S. or foreign government and government agency
fixed-income securities of sufficiently long maturities to realize its secondary
objective of current income. During such periods, the Trust will hold the
balance of its assets in short-term U.S. or foreign denominated securities.
The Trust selects fixed income securities for investment based on the Investment
Adviser's analysis of current economic and securities market conditions,
particularly changes in interest rates, which guide the selection of maturity
and duration of portfolio debt securities. When it is not discernable whether
there is an inflationary or deflationary economic environment, the Trust may
depart from the principal investment strategies discussed above by investing its
assets in cash, cash items, and shorter-term, U.S. government or other high
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quality debt securities. The Trust may also do this to minimize potential losses
and maintain liquidity to meet shareholder redemptions during adverse market
conditions. Such shorter-term investments may cause the Trust to give up greater
investment returns while maintaining the safety of principal (i.e., the original
amount invested by shareholders).
What are the Main Risks of Investing in the Trust?
An investment in the Trust is subject to risks, and it is possible to lose money
by investing in the Trust. The Trust is non-diversified. A non-diversified
investment portfolio does not have any limits with respect to the percentage of
assets which can be invested in any single issuer. An investment in the Trust,
therefore, will entail greater risk than investment in a diversified portfolio
of securities because the higher percentage of investments among fewer issuers
may result in greater fluctuation in the total market value of the Trust's
portfolio. Any economic, political, or regulatory developments affecting the
value of the securities in the Trust's portfolio will have a greater impact on
the total value of the portfolio than would be the case if the portfolio were
diversified among more issuers. Changes in the value of the Trust's portfolio
may result from general changes in the market or the economy.
The primary factors that may reduce the Trust's returns include:
oThe Investment Adviser may be incorrect in anticipating the onset and
termination of inflationary and deflationary economic cycles. This could
cause the Trust to be disproportionately invested in precious metals
during a deflationary cycle or in U.S. government securities during an
inflationary cycle.
oThe values of fixed income investments, including some of the debt
instruments in which the Trust invests, generally rise and fall in
response to changes in interest rates. Declining interest rates generally
raise the value of investments in debt instruments, while rising interest
rates generally lower the value of investments in debt instruments.
Changes in the values of the Trust's investments will affect the value of
the Trust's shares.
oIf the value of gold and precious metals and U.S. government
securities decrease during the same period of time, the value of a
shareholder's investment in the Trust will decrease.
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oBecause the price of gold fluctuates, the value of your investment in the
Trust will go up and down. This means you could lose money over short or
even extended periods of time. The price of gold is affected by how much
of the worldwide supply of gold is held among several major producers.
Economic, political, or other conditions affecting one of the major
sources could have a substantial effect on the world's gold supply in
countries throughout the world.
oBecause the stocks the Trust holds fluctuate in price, the value of your
investment in the Trust will go up and down. These fluctuations could be a
sustained trend or a dramatic movement. The Trust's portfolio will reflect
changes in prices of individual portfolio assets or general changes in
asset valuations. Consequently, the Trust's share price may decline and
you could lose money. Gold operation companies involve special
considerations. Prices of their securities will be affected by the price
of gold and precious metals. They may also be affected by changing costs
of production.
oCredit risk is the possibility that an issuer will default (the issuer
fails to repay interest and principal when due). If an issuer defaults,
the Trust will lose money. Many fixed income securities receive credit
ratings from companies such as Standard & Poor's and Moody's Investor
Services. Fixed income securities receive different credit ratings
depending on the rating company's assessment of the likelihood of default
by the issuer. The lower the rating of the fixed income security, the
greater the credit risk. Fixed income securities generally compensate for
greater credit risk by paying interest at a higher rate. The difference
between the yield of the security and the yield of a U.S. Treasury
security with a comparable maturity (the "spread") measures the additional
interest received for taking risk. Spreads may increase generally in
response to adverse economic or market conditions. A security's spread may
also increase if the security rating is lowered, or the security is
perceived to have an increased credit risk. An increase in the spread will
cause the price of the security to decline.
oCall risk is the possibility that an issuer may redeem a fixed income
security before maturity ("call") at a price below it's current market
price. An increase in the likelihood of the call may reduce the security's
price. If a fixed income security is called, the Trust may have to
reinvest the proceeds in other fixed income securities with lower interest
rates, higher credit risks, or other less favorable characteristics.
oForeign securities pose additional risks because foreign economic or
political conditions may be less favorable than those of the United
States. 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.
oDepending upon how they are used and the relationship between the market
value of a derivative contract and the underlying asset, options, futures
and forward contracts (derivative contracts) may be volatile and involve
credit risk, currency risk, leverage risk, liquidity risk and index risk.
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.
[GRAPHIC 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
23.84% for the quarter ended June 30, 1993. Its lowest quarterly return was
13.99% for the quarter ended December 31, 1997.
Average Annual Total Return
for the periods ended December 31, 1998
1 Year 5 Year 10 Year
- ------------------------------------------------------
The Trust (4.57%) (7.68%) (1.53%)
XAU Index (12.43%) (13.21%) (2.88%)
Gold Bullion (0.38%) (5.96%) (3.47%)
The table shows the Trust's total returns averaged over a period of years as
compared to XAU Index, which is a broad-based securities market index, and Gold
Bullion.
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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
offering price) None
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 0.52%
Total annual Fund operating expenses 1.27%
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 $129
Three Years: $403
Five Years $697
Ten Years $1,534
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WHAT ARE THE TRUST'S INVESTMENT STRATEGIES?
Historically, during periods of increasing inflation and during periods of
economic or monetary instability:
- -the prices of gold and silver and other precious metals have tended to increase
as rapidly or more rapidly than the rate of inflation;
- -currencies of countries not involved in inflationary circumstances may
increase in value relative to the U.S. dollar; and
- -interest rates have tended to increase, causing the market value of debt
instruments to decline.
Conversely, during periods of deflation (when inflationary forces are reversed):
- -the price of high grade debt instruments has tended to increase while the value
of precious metals has tended to decline; and
- -foreign currencies (relative to the U.S. dollar) may also decline in value at
such times.
Accordingly, the Investment Adviser will seek to anticipate oncoming
inflationary and deflationary economic cycles and will attempt to achieve the
Trust's investment objectives by following two distinct investment approaches
depending upon whether it perceives the economy as being in an inflationary or
deflationary environment, as follows:
1. When, by reason of a rising rate of change in the U.S. Consumer Price Index
(CPI), rising interest rates, and/or a decline in the value of the U.S. dollar,
the Investment Adviser expects an inflationary cycle, the Trust will invest at
least 65% of the value of its total assets in:
o gold bullion, gold certificates, and silver bullion;
o any other precious metals and any precious metal-backed or indexed securities,
which may be issued by either U. S. or foreign, private or governmental
issuers, including, without limitation, the government of South Africa and
South African companies;
o equity or convertible securities of U.S. or foreign companies primarily
engaged in business related to precious metals;
o options on securities, securities indices and currencies;
o precious metal and financial futures contracts and related options; and
o repurchase agreements.
As an integral part of this strategy, the Trust may:
oinvest up to 50% of its assets in the equity securities of companies (both
foreign and domestic) that have devoted at least 50% of their assets to, or have
obtained 50% of their revenue from, gold exploration, mining or processing;
oinvest up to 35% of its total assets in bank deposits, bank currency forward
contracts and certificates of deposit; and oinvest up to 50% of the value of its
assets in options on domestic and foreign securities and securities indices.
In selecting equity securities for investment, the Trust's Investment Adviser
looks primarily for companies involved in gold operations which have established
records, as well as companies having low-cost reserves to bring into production.
The Investment Adviser also considers a company's potential for growth in
reserves and production.
2. When, by reason of a declining rate of change in the CPI, declining interest
rates, and/or an increase in the value of the U.S. dollar, a deflationary cycles
is anticipated by the Investment Adviser the Trust will invest up to 90% of its
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total assets in U.S. or foreign government and government agency fixed-income
securities of sufficiently long maturities to realize its secondary objective of
current income. During such periods, the Trust will hold the balance of its
assets in short-term U.S. or foreign denominated securities.
It should be emphasized that the Investment Adviser will not apply a rigid,
mechanical determination in assessing whether the economy is in an inflationary
or disinflationary environment. Rather, its determination will be the result of
its subjective judgment of all factors it considers to be relevant. These
factors include:
-actual and anticipated rates of change in the CPI over specified periods
of time;
-actual and anticipated changes and rates of change in the U.S.
dollar in relation to other key currencies, e.g., the German mark, the
British pound and the Japanese yen;
-actual and anticipated changes, and rates of change, in short and
long-term interest rates and real interest rates, i.e., inflation
adjusted interest rates;
-actual and anticipated changes in the money supply; and
-actual and anticipated governmental fiscal and monetary policy.
If, in the opinion of the Investment Adviser, there are periods of less
favorable economic and/or market conditions, such as when there is no
discernible trend in the rate of change in the Consumer Price Index and other
leading economic indicators offer no evidence of inflationary or deflationary
trends, the Trust may depart from the principal investment strategies discussed
above by investing its assets in cash, cash items, and shorter-term, higher
quality debt securities.
Temporary Investments. The Trust may make temporary investments to minimize
potential losses and maintain liquidity to meet shareholder redemptions during
adverse market conditions. Investing in temporary investments may cause the
Trust to give up greater investment returns while maintaining the safety of
principal (i.e., the original amount invested by shareholders).
WHAT ARE THE PRINCIPAL SECURITIES IN WHICH THE TRUST INVESTS?
Inflationary Cycle:
Gold bullion, gold certificates, silver bullion, precious metals, and any
precious metals-backed or indexed securities issued by either U.S. or foreign
private or governmental issuers, including, without limitation, the government
of South Africa and South African companies.
oPrecious metals-backed securities means securities which are redeemable
at a specified conversion rate for precious metals or which are guaranteed by
precious metals.
oIndexed securities means securities comprising one of the exchange-listed
stock indices on which precious metals-related futures contracts and options can
be purchased and sold, e.g., Gold/Silver Index listed on the Philadelphia Stock
Exchange.
Equity or convertible securities of U.S. or foreign companies primarily
engaged in business related to precious metals.
oEquity securities means common or preferred shares in a corporation,
whether or not
transferable or denominated "stock," or similar security, interests of a
limited partnership in a limited partnership, or warrants or rights other than
rights to convert, purchase, sell or subscribe to a share, security or interest
of a kind previously specified.
oConvertible securities means debentures or preferred stock that may be
exchanged by the owner for common or preferred stock, usually of the same
company, or precious metals bullion, in accordance with the terms of the issue.
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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. such as options on securities and securities
indices, or currencies. These include transactions in options on securities,
securities indices and currencies, and precious metals, and transactions in
financial futures contracts and related options. The use of derivatives involves
special risks and may result in losses to the Trust. See "Specific Risks of
Investing in the Trust."
oOptions on securities and securities indices. When the Investment Adviser
decides it is appropriate, the Trust may writ call options 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.
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 is 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. These options will be covered options (options
relating to securities which the Trust owns).
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.
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 will write or purchase options only as a hedging technique to
reduce the risks in management of its portfolio and not for speculative
purposes (i.e., not for profit).
oOptions 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 analogous to
the purchase of puts and calls on stocks. The Trust will purchase such
options 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.
oPrecious metals and financial futures contracts and related options. To
the extent permitted by relevant provisions of the Commodity Exchange Act,
the Trust may engage in option transactions and futures transactions.
Financial futures contracts consist of interest rate futures contracts,
securities index futures contracts and currency futures contracts.
Precious metal futures contracts consist of futures contracts for the
purchase or sale of gold, silver and other precious metals.
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A futures contract obligates the seller of the contract to deliver, and
the purchaser to take delivery of, the subject assets called for in the
contract at a specified future time and at a specified price. Futures
contracts traded Over-The Counter (OTC) are frequently referred to as
"forward contracts."
An option on the futures contract gives the purchaser the right to assume
a position in the contract (a long position if the option is a call and a
short position if the option is a put) at a specified exercise price at
any time during the period of the option. Futures are considered to be
commodity contracts.
The Trust may purchase or sell any financial or precious metals futures
contracts which are traded on an exchange or board of trade or other
market.
The Trust may, following written notice thereof to its shareholders, take
advantage of opportunities in the area of precious metals related index
options and futures contracts and options on futures contracts which are
not currently available but which may be developed, to the extent such
opportunities are consistent with the Trust' investment objectives and
legally permissible for the Trust.
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
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 or 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 the
repurchase agreements be secured by acceptable collateral. The Trust may not
invest more than 10% of its 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.
Deflationary Cycle:
U.S. or foreign government and government agency fixed-income securities of
sufficiently long maturities to realize the Trust's secondary objective of
current income. U.S. government securities include U.S. Treasury bills, notes
and bonds and obligations of agencies and instrumentalities of the U.S.
government. Such agencies include Federal Land Banks; Farmers Home
Administration; Central Bank of Cooperatives; Federal Intermediate Credit
Banks; Federal Home Loan Banks; and Federal National Mortgage Association.
Some obligations of the U.S. government agencies and instrumentalities, such as
Treasury bills and Government National Mortgage Association (GNMA) certificates,
are supported by the full faith and credit of the United States. Other
government related debt securities are not supported by the full faith and
credit of the United States. Such securities include those issued by Federal
Home Loan Banks; which are supported by the right of the issuer to borrow from
the U.S. Treasury, and bonds issued by the Federal National Mortgage
Association, a private corporation, supported only by the credit of the
instrumentality. There can be no assurance that the U.S. government will support
an instrumentality it sponsors.
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Foreign government securities generally consist of fixed income securities
supported by national, state or provincial governments or similar political
subdivisions. Foreign government securities also include debt obligations of
supranational entities, such as international organizations designed or
supported by governmental entities to promote economic reconstruction or
development, international banking institutions and related government
agencies. Examples of these include, but are not limited to, the International
Bank for Reconstruction and Development (the World Bank), the Asian Development
Bank, the European Investment Bank and the Inter-American Development Bank.
Foreign government securities also include fixed income securities of
"quasi-governmental agencies" which are either issued by entities that are owned
by a national, state or equivalent government or are obligations of a political
unit that are not backed by the national government's full faith and credit and
general taxing powers. Further, foreign government securities include mortgage-
related securities issued or guaranteed by national, state or provincial
governmental instrumentalities, including quasi-governmental agencies.
Temporary Investment Strategy: (when neither an inflationary nor deflationary
cycle is discernable)
Short-term U.S. or foreign denominated securities. For temporary defensive
purposes, the Trust may invest in short-term U.S. government securities and
other money market instruments, cash or cash equivalents. Money market
instruments include high-grade commercial paper (promissory notes issued by
corporations to finance their short-term credit needs), negotiable certificates
of deposit, non-negotiable fixed time deposits, bankers' acceptances and
repurchase agreements.
WHAT ARE THE SPECIFIC RISKS OF INVESTING IN THE TRUST?
The Trust is non-diversified. A non-diversified investment portfolio does not
have any limits with respect to the percentage of assets which can be invested
in any single issuer. An investment in the Trust, therefore, will entail greater
risk than investment in a diversified portfolio of securities because the higher
percentage of investments among fewer issuers may result in greater fluctuation
in the total market value of the Trust's portfolio. Any economic, political, or
regulatory developments affecting the value of the securities in the Trust's
portfolio will have a greater impact on the total value of the portfolio than
would be the case if the portfolio were diversified among more issuers.
Investment Strategy
The success of the Trust's investment program will be dependent to a high degree
on:
-the Investment Adviser's ability to anticipate the onset and termination
of inflationary and deflationary cycles. A failure to anticipate a
deflationary cycle could result in the Trust's assets being
disproportionately invested in precious metals, in which case the Trust
will lose money, and failure to predict an inflationary cycle could result
in the Trust's assets being disproportionately invested in U.S. government
securities, in which case the Trust could generate less capital
appreciation.
-the validity of the premise that the value of gold and other precious
metals will move in a different direction than the value of U.S.
government securities during periods of inflation or deflation. If the
value of both precious metals and U.S. government securities move down
during the same period of time, the value of the shareholder's investment
will decline rather than stabilize or increase, as anticipated, regardless
of whether the Trust is primarily invested in precious metals or U.S.
government securities.
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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. If the stocks the
Trust holds fluctuate in price, the value of an investment in the Trust will go
up and down. This means you could lose money over short or even extended periods
of time. Natural resource-related companies involve special considerations which
are discussed below.
Gold and Precious Metals
The profits of the companies in which the Trust invests, and thus the value of
the Trust's securities, are directly affected by the price of gold and other
precious metals.
Historically, the price of gold has been more volatile than the price of equity
securities, generally. The price of gold may fluctuate substantially over short
periods of time so the Trust's share price may be more volatile than other types
of investments.
The price of gold and other precious metals is affected by several factors,
including:
ohow much of the worldwide supply of gold is held among four major
producers: Republic of South Africa; United States; Australia; and Russia.
Economic, political, or other conditions affecting one of the major
sources could have a substantial effect on the world's gold supply in
countries throughout the world; oincreased environmental, labor or other
costs in mining; ochanges in laws relating to mining or gold production or
sales; and ounpredictable monetary policies and economic and political
conditions in countries throughout the world; for example, if Russia
decides to sell some of its gold reserves, the supply would go up, and the
price would generally go down.
Changes in U.S. or foreign tax, currency or mining laws may make it more
expensive and/or difficult to pursue the Trust's investment strategies.
In addition, gold bullion does not generate income, and offers only the
potential for capital appreciation or depreciation.
Convertible Securities
Convertible securities, including convertible bonds and preferred stock, are
convertible into common stock. Because of the conversion feature, the interest
or dividend rate on a convertible security is generally less than would be the
case for 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 security. Its value will thus be affected by the factors
that affect both debt securities (such as interest rates) and equity security
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
During certain periods, the Trust may invest up to 100% of its assets in foreign
securities. Foreign securities pose additional risks because foreign economic or
political conditions may be less favorable than those of the United States.
Foreign financial markets may also have fewer investor protections. Securities
in foreign markets may also be subject to taxation policies that reduce returns
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<PAGE>
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 where the
Trust has investments are likely to affect the value of the Trust's
securities which trade in that country. These movements will affect the
Trust's share price.
The political, economic and social structures of some countries in which
the Trust invests 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.
Typically, investments by the Trust in developing or emerging markets
constitute less than 25% of the Trust's total assets.
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 judgements with respect to foreign
investments in foreign courts than with respect to U.S. companies
in U.S. courts.
Currency. Many of the Trust's investments are denominated in foreign
currencies. Changes in foreign currency exchange rates will affect the
value of what 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, which replaced 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.
Fixed Income Securities
The values of fixed income investments, including some of the debt
instruments in which the Trust invests, usually rise and fall in response
to changes in interest rates. Declining interest rates generally raise the
value of debt instruments, while rising interest rates generally lower the
value of debt instruments. Debt instruments with longer maturities are
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<PAGE>
usually subject to a greater risk of an adverse movement in interest rates
and a decline in the price of the instruments. Changes in the values of
the Trust's investments will affect the value of the Trust's shares.
Traditional debt instruments typically pay a fixed rate of interest until
maturity, when the entire principal amount is due. An issuer may redeem
its debt securities before maturity at a price below its current market
price. An issuer may also prepay its debt instruments voluntarily or as a
result of a refinancing, or the instruments may be prepaid as a result of
a foreclosure. The Trust may have to invest proceeds that it receives from
prepayment on its investments in debt securities with lower interest
rates, higher credit risks or other less favorable terms.
Call Risk. Traditional debt instruments typically pay a fixed rate of
interest until maturity, when the entire principal amount is due. An
issuer may redeem its debt securities before maturity at a price below its
current market price. An issuer may also prepay its debt instruments
voluntarily or as a result of a refinancing, or the instruments may be
prepaid as a result of a foreclosure. The Trust may have to invest
proceeds that it receives from prepayment on its investments in debt
securities with lower interest rates, higher credit risks or other less
favorable terms.
Credit Risk. Credit risk is the possibility that an issuer will default
(the issuer fails to pay interest and principal when due). If an issuer
defaults, the Trust will lose money.
Many fixed income securities receive credit ratings from companies such as
Standard & Poor's and Moody's Investor Services. Fixed income securities
receive different credit ratings depending on the rating company's
assessment of the likelihood of default by the issuer. The lower the
rating of the fixed income security, the greater the credit risk.
Fixed income securities generally compensate for greater credit risk by
paying interest at a higher rate. The difference between the yield of the
security and the yield of a U.S. Treasury security with a comparable
maturity (the "spread") measures the additional interest received for
taking risk. Spreads may increase generally in response to adverse
economic or market conditions. A security's spread may also increase if
the security's rating is lowered, or the security is perceived to have an
increased credit risk. An increase in the spread will cause the price of
the security to decline.
Foreign fixed income securities pose additional risks because of fewer
investor protections, adverse tax policies, less public information
regarding issues, and more volatile political and economic conditions and
currency exchange rates.
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.
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<PAGE>
Leverage Risk. Leverage risk is created when an investment exposes the
Trust to a level of risk that exceeds the amount invested. Changes in the
value of such an investment magnify the Trust's risk of loss and potential
for gain. Investments can have these same results if their returns are
based on a multiple of a specified index, security or other benchmark.
Liquidity Risk. There is the risk that certain 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 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 vale at a rate that is a multiple of the
changes in the applicable index.
The Trust may use the following types of derivative instruments:
oFutures. Futures may involve leverage risk and currency risk.
oForwards. Forwards involve credit risk and leverage risk, and may
involve currency risk.
oOptions. Options may involve leverage risk. Private options also
involve credit risk and liquidity risk. Options may also involve
currency risk.
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 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.
Year 2000
The "Year 2000" problem is the potential for computer errors or failures because
certain computer systems may be unable to interpret dates after December 31,
1999. The Year 2000 problem may cause systems to process information incorrectly
and could disrupt businesses that rely on computers, like the Trust.
While it is impossible to determine in advance all of the risks to the Trust,
the Trust could experience interruptions in basic financial and operational
functions. Trust shareholders could experience errors or disruptions in Trust
share transactions or Trust communications.
The Trust's service providers are making changes to their computer systems to
fix any Year 2000 problems. In addition, they are working to gather information
from third-party providers to determine their Year 2000 readiness.
Year 2000 problems could also increase the risks of the Trust's investments. To
assess the potential effect of the Year 2000 problem, the Investment Adviser is
reviewing information regarding the Year 2000 readiness of issuers of securities
that the Trust may purchase.
The financial impact of these issues for the Trust is still being determined.
There can be no assurance that potential Year 2000 problems would not have a
material adverse effect on the Trust.
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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
The Investment Adviser, Anchor Investment Management Corporation (formerly known
as Meeschaert Investment Management Corporation), 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 investment management business, including 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 with his father, PaulJaspard, until his
father's death in October, 1999, when he became the 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, 1998,
the Investment Adviser received investment advisory fees of $98,895 for its
services to the Trust.
The Investment Adviser and Meeschaert & Co., Inc., the Trust's principal
underwriter, are affiliated through common control with Societe D'Etudes et de
Gestion Financieres Meeschaert, S.A., one of France's largest privately-owned
investment management firms. The Meeschaert organization was established in
Roubiax, France in 1935 by Emile C. Meeschaert, and presently manages, with full
discretion, approximately $1.5 billion (including $250 million in French mutual
funds) for about 8,000 individual and institutional customers.
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 the Prospectus.
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Investment Minimums
To establish a new account, the minimum investment is $500. There is no
minimum for shareholders who make additional investments to existing
accounts.
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. The Trust may determine net asset value on a day
on which the New York Stock Exchange is closed but the Trust is open for
business if an event occurs that might materially affect net asset value.
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:
Investors Bank & Trust Company
Financial Product Services Group
Attn: Anchor Gold and Currency Trust
200 Clarendon Street, 16th Floor
Boston, Massachusetts 02116
Exchanges of shares must be done as follows:
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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 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.
2. The Trust may impose a redemption fee of .50%, payable to the Trust, on
cash redemptions and exchanges of all Trust shares occurring during the
one year period following the initial date of this Prospectus. This
redemption fee will be imposed if the Trust's Board of Trustees determines
that the fee is necessary to reimburse the Trust and non-redeeming
shareholders for materially increased administrative and transactional
expenses arising from substantial redemption requests during the first
year of the Trust's conversion from closed-end to open-end status.
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3. 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
next 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
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 so 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 cancelled 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.
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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 Anchor Investment Management
Corp. Shareholders Services, Attn: Anchor Gold and Currency 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 they are received in cash or additional Trust shares.
Distributions of net investment income and short-term capital gains, if any,
will be taxable to shareholders as ordinary income. Distributions of long-term
capital gains, if any, will be taxable to shareholders as long-term capital
gains, without regard to how long a shareholder has held shares of the Trust.
Dividends paid by the Trust will generally not qualify for the dividends
received deductions for corporations. The Trust will notify shareholders each
year of the amount of dividends and distributions, including the amount of any
distribution of long-term capital gains.
The Trust's foreign investments may be subject to foreign withholding taxes. The
Trust will be entitled to claim a deduction for such foreign withholding taxes
for federal income tax purposes. However, any such taxes will reduce the income
available for distribution to shareholders.
The Trust is required to withhold 20% of the dividends paid with respect to any
shareholder who fails to furnish the Trust with a correct taxpayer
identification number, who under-reported dividend or interest income, or who
fails to certify to the Trust that he or she is not subject to such withholding.
An individual's tax identification is his or her social security number.
Please consult your tax adviser for further information regarding your federal,
state, and local tax liability.
OTHER INFORMATION
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Custodian, Transfer Agent and Paying Agent
Investors Bank & Trust Company, Financial Product Services, 200 Clarendon
Street, 16th 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. In cases where
foreign securities must, as a practical matter, be held abroad, the Trust's
custodian bank and the Trust will make appropriate arrangements so that such
securities may legally be so held abroad. The Trust's custodian bank does not
decide on purchases or sales or 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 Corporation, 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, designated Common Shares, which
participate equally in dividends and distributions. Issued shares are fully paid
and non-assessable and transferable on the books of the Trust. The shares have
no preemptive rights. The shares each have one vote and proportionate
liquidation rights.
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 Anchor Gold and Currency
Trust, 579 Pleasant Street, Suite 4, Paxton, Massachusetts 01612.
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FINANCIAL INFORMATION
FINANCIAL HIGHLIGHTS
The following financial highlights will 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., whose report,
along with the Trust's audited financial statements, is included in the Annual
Report.
Year ended December 31
---------------------------------------------
1998 1997 1996 1995 1994
---------------------------------------------
Net Asset Value,
Beginning of Year $4.60 $6.26 $5.69 $5.60 $6.56
- -----------------------------------------------------------------------
Income From Investment
Operations:
Net Investment Income (0.10) 0.03 (0.04) (0.02) (0.06)
Net realized and
unrealized gain (loss)
on investments (0.11) (1.68) 0.61 0.11 (0.90)
- -----------------------------------------------------------------------
Total income from
investment Operations (0.21) (1.65) 0.57 0.09 (0.96)
- -----------------------------------------------------------------------
Less Distributions::
Dividends from net
investment Income (0.20) (0.01) -- -- --
Distributions from
capital gains -- -- -- -- --
- -----------------------------------------------------------------------
Total distributions (0.20) (0.01) -- -- --
Net Asset Value, End of
Year $4.19 $4.60 $6.26 $5.69 $5.60
- -----------------------------------------------------------------------
Total Return (4.57%) (26.36%) 10.02%) 1.61% (14.63%)
- -----------------------------------------------------------------------
Ratios/Supplemental Data:
Net assets, end of year
(in millions) $12.7 $13.4 $23.1 $20.9 $20.6
Ratio of expenses to
average net assets 1.27% 1.12% 1.10% 1.10% 1.12%
Ratio of net income to
average Net assets 1.20% 0.78% (0.60%) (0.47%) (0.68%)
Portfolio turnover rate 53% 24% 18% 17% 32%
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ANCHOR GOLD AND CURRENCY 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.
25
<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
26
<PAGE>
ANCHOR GOLD AND CURRENCY 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:
Anchor Gold and Currency 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. 811-4640
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<PAGE>
ANCHOR GOLD AND CURRENCY TRUST
579 Pleasant Street, Suite 4
Paxton, Massachusetts 01612
(508) 831-1171
STATEMENT OF ADDITIONAL INFORMATION
Dated November 10, 1999
This Statement of Additional Information (SAI) is not a prospectus but should be
read in conjunction with the current Prospectus of Anchor Gold and Currency
Trust (the "Trust") dated November 10, 1999, and the financial statements
contained in the Trust's Annual Report for the year ended December 31, 1998. 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.
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<PAGE>
TABLE OF CONTENTS
THE TRUST.......................................................B-1
INVESTMENT STRATEGIES AND RISKS.................................B-1
Investment Strategy ......................................B-1
Option Transactions Involving Portfolio Securities and
Securities Indices........................................B-2
Index Options ............................................B-4
Risks of Options on Indices ..............................B-4
Options on Foreign Currencies ............................B-5
Risks of Foreign Currency Option Activities ..............B-7
Special Risks of Foreign Currency options ................B-8
Financial and Precious Metals Futures Contracts and
Related Options...........................................B-9
Limitations on Futures Contracts and Related Options.....B-11
Risks Relating to Futures Contracts and Related Option...B-11
Other Investment Companies...............................B-13
Lending..................................................B-13
Repurchase Agreements....................................B-13
Investment Risks.........................................B-13
Investment Strategy......................................B-14
Foreign Investments......................................B-14
Precious Metals..........................................B-14
Risks Relating to Repurchase Agreements..................B-16
Prepayments Risks Associated with GNMA Certificates......B-16
PORTFOLIO TURNOVER.............................................B-16
INVESTMENT RESTRICTIONS........................................B-17
MANAGEMENT OF THE TRUST........................................B-18
Officers and Trustees.....................................B-18
Compensation of Officers and Trustees.....................B-20
Principal Holders of Securities...........................B-20
Investment Adviser........................................B-20
Investment Advisory Contract..............................B-21
Administrator.............................................B-22
Principal Underwriter.....................................B-23
Rule 12b-1 Plan...........................................B-23
CAPITALIZATION.................................................B-24
PURCHASE, REDEMPTION AND PRICING OF SHARES.....................B-25
Purchase of Shares.......................................B-25
Determination of Net Asset Value.........................B-25
Redemption and Repurchase of Shares......................B-26
Redemptions in Kind......................................B-26
DISTRIBUTIONS .................................................B-27
TAXES..........................................................B-27
General..................................................B-27
Tax Treatment of Options.................................B-28
PORTFOLIO SECURITY TRANSACTIONS ...............................B-30
OTHER INFORMATION..............................................B-31
Custodian, Transfer Agent and Dividend-Paying Agent .....B-31
Independent Public Accountants ..........................B-32
Registration Statement ..................................B-32
FINANCIAL STATEMENTS...........................................B-32
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THE TRUST
Anchor Gold and Currency Trust (Trust) is a non-diversified, open-end management
investment company that was established as an unincorporated business trust
under the laws of Massachusetts by a Declaration of Trust dated April 10, 1986,
as amended and restated on September 3, 1986 and on October 18, 1999. The Trust
was operated as a closed-end management investment company until November 10,
1999. The shareholders of the Trust voted on October 18, 1999 to convert
the Trust from the closed-end form to the open-end form subject to the
effectiveness of this Prospectus pursuant to an order of the Securities and
Exchange Commission.
INVESTMENT STRATEGIES AND RISKS
The Trust's Prospectus describes the investment objectives and policies of the
Trust. The Prospectus also briefly describes specialized techniques 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.
Investment Strategy
The Trust's investments will vary depending upon whether the Investment Adviser
anticipates an inflationary or deflationary economic cycle.
The Investment Adviser's determination as to whether the economy is inflationary
or deflationary will be made based upon constant study of numerous economic and
monetary factors. These factors will include, but not necessarily be limited to:
oactual and anticipated rates of change in the Consumer Price Index (CPI) over
specified periods of time; oactual and anticipated changes and rates of changes
in the U.S. dollar in relation to other key currencies, e.g., the German mark,
the British pound and the Japanese yen; oactual and anticipated changes, and
rates of change, in short and long-term interest rates and real interest rates,
i.e., inflation adjusted interest rates; oactual and anticipated changes in the
money supply; and oactual and anticipated governmental fiscal and monetary
policy.
Investment in precious metals and related securities in anticipation of
inflationary periods is intended not only to preserve capital in the projected
ensuing inflationary period, but also to provide opportunity for capital
appreciation of the precious metals and related investments during such
inflationary period. The broad range of precious metals and currency related
investment vehicles that may be utilized by the Trust during such inflationary
periods is intended to allow the Trust the widest possible latitude in
attempting to determine the most attractive investment posture for the current
period.
Investment in U.S. and other government securities in anticipation of
deflationary periods is intended to preserve capital, while providing a
relatively secure income, and to provide an opportunity for capital appreciation
if interest rates decline in such deflationary periods.
The Investment Adviser believes that by not remaining fully invested in gold and
silver and other precious metals or securities tied to their value during
periods of deflation, the Trust can avoid declines in the price of precious
metals that typically occur during such periods and, at the same time, obtain
the benefit of the increase in value of debt instruments that typically occurs
when interest rates decline during such periods, thereby enhancing the Trust's
potential to achieve its investment objective of capital appreciation.
Investment in U.S. and other government securities in anticipation of
deflationary periods is intended to preserve capital, while providing a
relatively secure income, and to provide an opportunity for capital appreciation
if interest rates decline in such deflationary periods.
B-1
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<PAGE>
U. S. government securities include Treasury bills, notes and bonds, which
differ in their interest rates, maturities, and times of issuance. Treasury
bills have maturities of one year or less. Treasury notes have maturities of one
to ten years and Treasury bonds have maturities of greater than ten years at the
date of issuance. U.S. government securities also include obligations of
agencies and instrumentalities of the U.S. government. Agencies and
instrumentalities of the U.S. government include, but are not limited to:
Federal Land Banks; Farmers Home Administration; Central Bank of Cooperatives;
Federal Intermediate Credit Banks; Federal Home Loan Banks; and Federal National
Mortgage Association. Some obligations of the U.S. government agencies and
instrumentalities, such as Treasury bills, government National Mortgage
Association (GNMA) certificates, are supported by the full faith and credit of
the United States; others, such as securities of Federal Home Loan Banks, are
supported by the right of the issuer to borrow from the U.S. Treasury; still
others, such as bonds issued by the Federal National Mortgage Association, a
private corporation, are supported only by the credit of the instrumentality.
These securities are not insured by the U.S. government and there can be no
assurance that the U.S. government will support an instrumentality it sponsors.
The Trust will invest in the securities issued by such an instrumentality only
when its Investment Adviser determines that the credit risk with respect to the
instrumentality does not make its securities unsuitable investments.
If, in the opinion of the Investment Adviser, there are periods of less
favorable economic and/or market conditions, such as when there is no
discernible trend in the rate of change in the Consumer Price Index and other
leading economic indicators offer no evidence of inflationary or deflationary
trends, then, for temporary defensive purposes, the Trust may invest in
short-term U.S. government securities and other money market instruments, cash
or cash equivalents. Money market instruments include high-grade commercial
paper (promissory notes issued by corporation to finance their short-term credit
needs), negotiable certificates of deposit, non-negotiable fixed time deposits,
bankers' acceptances and repurchase agreements. Investments in commercial paper
will be rated Prime-1 by Moody's Investors Services, Inc. or A-1 by Standard &
Poor's or F-1 by Fitch Investors Service, Inc., which are the highest ratings
assigned by these agencies. Money market instruments will be limited to U.S.
dollar denominated instruments which are rated in the top two categories by an
independent nationally recognized rating organization or, if not rated, are of
comparable quality as determined by the Trustees. Investments in bank
instruments will be in instruments which are issued by U.S. or foreign banks
having capital and undivided surplus at the time of investment of $200,000,000
or more and which mature in one year or less from the date of acquisition.
To achieve its investment objective, the Trust may also use specialized
investment techniques by engaging in a variety of transactions including
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.
A portion of the Trust's net asset value may be invested in debt securities of
non-U.S. issuers. 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 about 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. Debt 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 in which
the Trust invests 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. Typically, investments by the Trust in
developing or emerging markets constitute less than 5% of the Trust's
total assets.
B-2
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<PAGE>
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 that in the U.S. The Trust may
have greater difficulty voting proxies, exercising shareholder rights,
pursuing legal remedies and obtaining judgements with respect to foreign
investments in foreign courts than with respect to U.S.
companies in U.S. courts.
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.
oOptions Transactions Involving Portfolio Securities and Securities Indices
The writing of call option contracts and the purchasing of put options is a
highly specialized activity which involves investment techniques and risks
different from those ordinarily associated with investment companies. The
Investment Adviser believes that the assets of the Trust may be increased by
realizing premiums from the writing of call options and by purchasing put
options with respect to securities held by the Trust.
The Trust may write call option contracts or purchase put or call options with
respect to portfolio securities and with respect to securities indices at such
times as its management determines to be appropriate.
Call options are written and put options are purchased solely as covered options
(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, and such options
(which generally correspond to the securities represented by the index in the
case of index options) on domestic securities are generally listed on a national
securities exchange.
Exchanges on which such options currently are traded are the Chicago Board of
Options Exchange and the American, Pacific, and Philadelphia Stock Exchanges.
Options on foreign securities and some domestic securities may not be listed on
any domestic or foreign exchange.
The Trust receives a premium on the sale of an option, but gives up the
opportunity to profit from any increase in the price of the security or
representative securities in the case of an index option above the exercise
price of the option. The Trust pays a premium upon the purchase of an option,
which may be lost if the option proves to be of no ultimate value.
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<PAGE>
There can be no assurance that the Trust will always be able to close out
options positions at acceptable prices. The Trust will write or purchase such
options only where economically appropriate as a hedging technique to reduce the
risks in management of its portfolio, and to preserve the Trust's net asset
value, and not for speculative purposes (i.e., not for profit). In no event will
the Trust purchase such options where the value of the options, either singly or
in the aggregate, would exceed 50% of the value of the Trust's assets at the
time of purchase.
The Trust may also purchase put and call options for a premium. The Trust may
sell a put or call option which it has previously purchased prior to the sale of
the underlying security. Such a sale would result in a net gain or loss
depending on whether the amount received on the sale is more or less than the
premium and other transaction costs paid.
When a security is sold from the Trust's portfolio, the Trust effects a closing
call purchase or put sale transaction so as to close out any existing option on
the security. A closing transaction may be made only on an Exchange or other
market which provides a secondary market for an option with the main exercise
price and expiration date. There is no assurance that a liquid secondary market
on an Exchange or otherwise will exist for any particular option or at any
particular time, and for some options no secondary market on an Exchange or
otherwise may exist. If the Trust is unable to effect a closing transaction, in
the case of a call option, the Trust will not be able to sell the underlying
security until the option expires or the Trust delivers the underlying security
upon exercise.
The Trust pays brokerage commissions in connection with the writing and
purchasing of options and efficient closing transactions, as well as for
purchases and sales of underlying securities. The writing of options could
result in significant increases in the Trust's portfolio turnover rate,
especially during periods when market prices of the underlying securities
appreciate.
If a call option expires on its stipulated expiration date or if the Trust
enters into a closing purchase transaction, the Trust will realize a gain (or
less if the cost of a closing purchase transaction exceeds the premium received
when the option was sold) without regard to any unrealized gain or loss on the
underlying security, and the liability related to such option will be
extinguished. If a call option is exercised, the Trust will realize a gain or
loss from the sale of the underlying security and the proceeds of the sale will
be increased by the premium originally received.
Because the Trust intends to qualify as a regulated investment company under the
Internal Revenue Code of 1986, the Trust may be subject to other restrictions on
the Trust's ability to enter into option transactions may apply from time to
time. See "Taxes--Tax Treatment of Options and Futures Transactions."
oIndex 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 on 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. A multiplier for
an index option performs a function similar to the unit of trading for an option
on an individual security. It determines the total dollar value per contract of
each point between the exercise price of the option and the current level of the
underlying index. A multiplier of 100 means that a one-point difference will
yield $100. Options on different indices may have different multipliers.
The Trust currently trades index options relating to, among others, the Standard
& Poor's 100 and 500 Composite Stock Price Indices and Gold/Silver Index. The
Trust may write call options and purchase put and call options on any other
traded indices. Call options on securities indices written by the Trust will be
"covered' by identifying the specific portfolio securities being utilized. 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.
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
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liquid assets equal in value to the amount by which the call is "in-the-money"
(when the market price of the index is above the exercise price of the call)
times the multiplier times the number of contracts. Any amount segregated may be
applied to the Trust's obligation to segregate additional amounts in the event
that the market value of the qualified securities falls below 100% of the
contract index value times the multiplier times the number of contracts.
oRisks of Options on Portfolio Securities and Indices
Because the value of an index option depends upon movements in the level of the
index rather than the price of a particular security, whether the Trust will
realize a gain or loss on the purchase or sale of an option on an index depends
upon movements in the level of prices in the market generally or in an industry
or market segment, rather than movements in the price of an individual security.
Accordingly, successful use by the Trust of options on indices will be subject
to the Investment Adviser's ability to predict correctly movements in the
direction of the market generally or of a particular industry. This requires
different skills and techniques than predicting changes in the price of
individual securities.
Index prices may be distorted if trading of certain securities included in the
index is interrupted. Trading in index options also may be interrupted in
certain circumstances, such as if trading were halted in a substantial number of
securities included in the index. If this occurred, the Trust would not be able
to close out options which it has purchased or written and, if restriction on
exercise were imposed, might be unable to exercise an option it purchased, which
could result in substantial losses to the Trust. However, it is the Trust's
policy to purchase or write options only on indices which include a sufficient
number of securities so that the likelihood of a trading halt in the index is
minimized.
Because the exercise of an index option is settled in cash, an index call writer
cannot determine the amount of its settlement obligation in advance. 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 the risk by withholding exercise
instructions until just before the daily cutoff time or by selling rather than
exercising an option when the index level is close to the exercise price. The
Trust may not be able to eliminate this risk entirely because the cutoff times
for index options may be earlier than those fixed for other types of options and
may occur before definitive closing index values are announced.
The Trust pays brokerage commissions in connection with the writing and
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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 prices of the underlying securities appreciate.
oOptions on Foreign Currencies
The Trust may purchase put and call options on foreign currencies. The Trust may
purchase such options where economically appropriate as a hedging technique to
reduce the risks in management of its portfolio, and to preserve the Trust's net
asset value, and not for speculative purposes (i.e., not for profit). In no
event will the Trust purchase such options where the value of the options,
either singly or in the aggregate, would exceed 50% of the value of the Trust's
assets at the time of purchase.
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. 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.
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 additional 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.
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oSpecial Risks of Foreign Currency Options
In addition to the risks described above, there are special risks associated
with foreign currency options, including the following:
1. The value of foreign currency options is dependent upon the value of foreign
currencies relative to the U.S. dollar. As a result, the prices of foreign
currency options may vary with changes in the value of either or both
currencies. Thus, fluctuations in the value of the U.S. dollar will affect
exchange rates and the value of foreign currency options, even in the case of an
otherwise stable foreign currency. Conversely, fluctuations in the value of a
foreign currency will affect exchange rates and the value of foreign currency
options even if the value of the U.S. dollar remains relatively constant. Thus,
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
available on the floor of the exchange on which foreign currency options are
traded, in certain brokers' offices, in bank foreign trading offices, and to
others who wish to subscribe for their information. There is, however, no
regulatory requirement that those quotations be firm or revised on a timely
basis. The absence of last sale information and the limited availability of
quotations to individual investors may make it difficult for many investors to
obtain timely, accurate data about the state of the underlying market. In
addition, the quotation information that is available is representative of very
large transactions in the interbank market and does not reflect exchange rates
for smaller transactions. Since the relatively small amount of currency
underlying a single foreign currency option would be treated as an odd lot in
the interbank market (i.e., less than $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 can expect to deal in the
underlying market at prices that are less favorable than for round lots.
6. Foreign governmental restrictions or taxes could result in adverse changes in
the cost of acquiring or disposing of foreign currencies. If the Options
Clearing Corporation ("OCC") determines that 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
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are closed while the market for the underlying currencies remain open,
significant price and rate movements may take place in the underlying market
that cannot be reflected in the options markets. The possibility of such
movements should be taken into account in (a) relating closing prices in the
options and underlying markets, and (b) determining whether to close out a short
options position that might be assigned in an exercise that takes place after
the options market is closed on the basis of underlying currency price movements
at a later hour.
8. Since settlement of foreign currency options must occur within the country
issuing that currency, investors through their brokers, must accept or make
delivery of the underlying foreign currency in conformity with any U.S. or
foreign restrictions or regulations regarding the maintenance of foreign banking
arrangements by U.S. residents. 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 the placing of any assets with a foreign custodian in
connection with the settlement of foreign currency options, the Trustees of the
Trust will determine that maintaining such assets in a particular country or
countries is consistent with the best interests of the Trust and its
shareholders, and that maintaining such assets with a particular foreign
custodian is consistent with the best interests of the Trust and its
shareholders. The Trust 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. A majority of the Trustees, at least annually,
will review and approve the continuance of such arrangements as consistent with
the best interests of the Trust and its shareholders.
oFinancial and Precious Metals Futures Contracts and Related
Options
While the Trust's fundamental policies permit the Trust to engage in financial
and precious metals futures transactions, including the writing of covered call
options and the purchase and sale of put and call options in connection
therewith, the Trust may engage in such futures and related option transactions
only for hedging purposes.
The Trust may not currently purchase or sell precious metals or financial
futures contracts or related options if, immediately thereafter, the sum of the
amount of initial margin deposits on the Trust's existing futures and related
options positions and the premiums paid for related options would exceed 5% of
the market value of the Trust's total assets after taking into account
unrealized profits and losses on any such contracts. At the time of purchase of
a futures contract or an option on a futures contract, an amount of cash, U.S.
government securities or other appropriate high-grade debt obligations equal to
the market value of the futures contract, minus the Trust's initial margin
deposit with respect thereto, will be deposited in a segregated account with the
Trust's custodian bank to collateralize fully the position and thereby ensure
that it is not leveraged.
The Trust may use financial and precious metals futures contracts and related
options to hedge against changes in currency exchange rates or in the market
value of its portfolio assets or assets which it intends to purchase. Hedging is
accomplished when an investor takes a position in the futures market opposite to
his cash market position. There are two types of hedges--long (or buying) and
short (or selling) hedges. Historically, prices in the futures market have
tended to move in concert with cash market prices and prices in the futures
market have maintained a fairly predictable relationship to prices in the cash
market. Thus, a decline in the market value of securities in the Trust's
portfolio may be protected against to a considerable extent by gains realized on
futures contracts sales. Similarly, futures contracts may protect against an
increase in the market price of assets which the Trust may wish to purchase in
the future.
The Trust may purchase or sell any financial or precious metals futures
contracts which are traded on an exchange or board of trade or other market. A
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
contact trades assumes responsibility for the completion of transactions and
also guarantees that open futures contracts will be performed. Currency and
precious metals futures contracts are also traded on various U.S. Exchanges or
boards of trade. Options relating to U.S. futures contracts are generally also
traded on the same exchanges or boards of trade.
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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
futures contract. Initially, the Trust will be required to deposit in a
segregated account with its custodian bank an amount of cash or U.S. Treasury
bills. This amount is known as initial margin and is in the nature of a
performance bond or good faith deposit on the contract. The current initial
margin deposit on the contract is approximately 5% of the contract amount.
Brokers may establish deposit requirements higher than this minimum. Subsequent
payments, called variation margin, will be made to and from the account on a
daily basis as the price of the futures contract fluctuates.
This process is known as marking to market.
The writer of an option on a futures contract is required to deposit margin
pursuant to requirements similar to those applicable to futures contracts. Upon
exercise of an option on a futures contract, the delivery of the futures
position by the writer of the option to the holder of the option will be
accompanied by delivery of the accumulated balance in the writer's margin
account. This amount will be equal to the amount by which the market price of
the futures contract at the time of exercise exceeds, in the case of a call, or
is less than, in the case of a put, the exercise price of the option on the
futures contract.
Although futures contracts by their terms call for actual delivery or acceptance
of currencies or securities or other assets, in most cases the contracts are
closed out before the settlement date without the making or taking of delivery.
Closing out is accomplished by effecting an offsetting transaction.
A futures contract sale is closed out by effecting a futures contract purchase
for the same aggregate amount of securities and the same delivery date. If the
sale price exceeds the offsetting purchase price, the seller 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 futures contracts and related options
transactions. These commissions may be higher than those which would apply to
purchases and sales of securities directly.
oLimitations on Futures Contracts and Related Options
The Trust may not currently engage in transactions in futures contracts or
related options for speculative purposes, but only as a hedge against
anticipated changes in exchange rates or the market value of its portfolio
securities or other assets or securities or other assets which it intends to
purchase. Also, the Trust may not currently purchase or sell precious metals or
financial futures contracts or related options if, immediately thereafter, the
sum of the amount of initial margin deposits on the Trust's existing futures and
related options positions and the premiums paid for related options would exceed
5% of the market value of the Trust's total assets after taking into account
unrealized profits and losses on any such contracts. At the time of purchase of
a futures contract or an option on a futures contract, 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 with respect thereto in a segregated account with the
Trust's custodian bank to collateralize fully the Trust's position and thereby
ensure that it is not leveraged.
The Trust's ability to enter into futures contracts and related
options also may be limited by the requirements of the Internal
Revenue Code of 1986 for qualification as a regulated investment
company. See "Taxes--Tax Treatment of Options and Futures
Transactions."
oRisks Relating to Futures Contracts and Related Options
The Trust may close out positions in 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 options
positions only if there appears to be a liquid secondary market. However, there
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can be no assurance that a liquid secondary market will exist for any particular
futures or related option contract at any specific time. Thus, it may not be
possible to close out a futures or related option position. 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 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
currencies or securities or other assets which are being hedged. If the price of
the futures contract moves more or less than the price of the currencies or
securities or other assets being hedged, the Trust will experience a gain or
loss which will not be completely offset by movements in the price of the
currencies or securities or other assets. It is possible that, where the Trust
has sold futures contracts to hedge its portfolio securities and other assets
against a decline in the market, the market may advance and the value of
securities held in the Trust's portfolio (or related currencies) may decline. If
this occurred, the Trust would lose money on the futures contract and would also
experience a decline in value in its portfolio securities and other assets.
Where futures are purchased to hedge against a possible increase in the prices
of securities or other assets before the Trust is able to invest its cash (or
cash equivalents) in securities (or options) in an orderly fashion, it is
possible that the market may decline. If this occurred, the Trust would lose
money on the futures contract and the value of its portfolio securities would
decline. If the Trust futures 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 contract through offsetting transactions
rather than to meet margin deposit requirements. In such case, distortions in
the normal relationship between the cash and futures markets could result. Price
distortions could also result if investors in futures contracts opt to make or
take delivery of the underlying securities rather than to engage in closing
transactions due to the resultant reduction in the liquidity of the futures
market. In addition, due to the fact that, from the point of view of
speculators, the deposit requirements in the futures markets are less onerous
than margin requirements in the cash market, increased participation by
speculators in the futures market could cause temporary price distortions. Due
to the possibility of price distortions in the futures market and because of the
imperfect correlation between movements in the prices of currencies and
securities and other assets and movements in the prices of futures contracts, a
correct forecast of market trends may still not result in a successful hedging
transaction.
Compared to the purchase or sale of futures contracts, the purchase of put or
call options on futures contracts involves less potential risk for the Trust
because the maximum amount at risk is the premium paid for the options plus
transaction costs. However, there may be circumstances when the purchase of an
option on a futures contract would result in a loss to the Trust while the
purchase or sale of the futures contract would not have resulted in a loss, such
as when there is no movement in the price of the underlying securities.
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oOther Investment Companies
The Trust's purchase of securities of other investment companies results in the
layering of expenses such that investors indirectly bear a proportionate share
of the expenses of such investment companies including operating costs and
advisory and administrative fees. The Trust will not invest more than 10% of its
total assets in such securities.
oLending
The Trust may seek to increase its income by lending portfolio securities. Any
such loan will be continuously secured by collateral at least equal to the
market value of the security loaned. The Trust would have the right to call a
loan and obtain the securities loaned at any time upon five days' notice. During
the existence of a loan, the Trust would continue to receive the equivalent of
the interest or dividends paid by the issuer on the securities loaned and would
also receive a fee, or the interest on investment of the collateral, if any.
The total value of the securities loaned at any time will not be permitted to
exceed 30% of the Trust's total assets. As with other extensions of credit,
there are risks of delay in recovery or even loss of rights in the collateral
should the borrower of the securities fail financially. However, the loans would
be made only to U.S. domestic organizations deemed by the Trust's management to
be of good standing and when, in the judgment of the Trust's management, the
consideration to be earned justified the attendant risk.
oRepurchase Agreements
Repurchase Agreements are transactions in which the Trust buys a security from a
dealer or bank and agrees to sell the security back at a mutually agreed upon
time and price. The resale price reflects an agreed upon interest rate effective
for the period the instrument is held by the Trust and is unrelated to the
interest rate on the underlying instrument.
The Trust will effect repurchasing agreements only with large well-capitalized
banks whose deposits are insured by the Federal Deposit Insurance Corporation
and which have the capital and undivided surplus of at least $200,000,000. The
instrument acquired by the Trust in these transactions (including accrued
interest) must have a total value in excess of the value of the repurchase
agreement and will be held by the Trust's custodian bank until repurchased.
The Trustees of the Trust will monitor the Trust's repurchase agreement
transactions on a continuous basis and will require that the applicable
collateral will be retained by the Trust's custodian bank. No more than an
aggregate of 10% of the Trust's total assets, at the time of investment, will be
invested in repurchase agreements having maturities longer than seven days and
other investments subject to legal or contractual restrictions on resale, or
which are not readily marketable. There is no limitation on the Trust's assets
with respect to investments in repurchase agreements having maturities of less
than seven days.
Investment Risks
Because of the following considerations, an investment in the Trust should not
be considered a complete investment program (additional risk considerations are
discussed below).
Investment Strategy
The success of the Trust's investment program will be dependent to a high degree
on the Investment Adviser's ability to anticipate the onset and termination of
inflationary and deflationary cycles. A failure to anticipate a deflationary
cycle could result in the Trust's assets being disproportionately invested in
precious metals. Conversely, a failure to predict an inflationary cycle could
result in the Trust's assets being disproportionately invested in U.S.
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government securities. The success of the Trust's investment program will also
be dependent to a high degree on the validity of the premise that the values of
gold and other precious metals will move in a different direction than the
values of U.S. government securities during period of inflation or deflation. If
values of both precious metals and U.S. government securities move down during
the same period of time, the value of the shareholder's investment will decline
rather than stabilize or increase, as anticipated, regardless of whether the
Trust is primarily invested in precious metals or U.S. government securities.
oForeign Investments
Investment on an international basis involves certain risks not involved in
domestic investments, including fluctuations in foreign exchange rates, higher
foreign brokerage costs, costs of currency conversion, currency blockage,
different accounting standards, difficulty in obtaining foreign court judgments,
future political and economic developments, and the possible imposition of
exchange controls or other foreign governmental laws or restrictions.
Since the Trust may invest in securities denominated or quoted in currencies
other than the U.S. dollar, changes in foreign currency exchange rates will
affect the value of securities in the portfolio and the unrealized appreciation
or depreciation of investments.
In addition, with respect to certain foreign countries there is the possibility
of expropriation and nationalization of assets, confiscatory taxation, political
or social instability or diplomatic developments which could affect investments
in those countries. Interest and dividends, and possibly other amounts receive
by the Trust in respect of foreign investments, may be subject to withholding
and other taxes at the source, depending upon the laws of the county in which
the investment is made.
oPrecious Metals
Any investment in gold and silver bullion and other precious metals is subject
to certain risks. For example, dramatic upward or downward price movements may
occur in gold or silver over short periods of time, influenced by many factors
such as international tensions, oil price changes, interest rate policies,
political uncertainties, rumors, supply and demand factors and lack of
regulation. Furthermore, the value of these investments may be affected by such
factors as the following:
1. Price Fluctuations: The price of gold has recently been subject to dramatic
upward and downward price movements over short periods of time. Such prices have
ranged from a low $37.39 per troy ounce on January 7, 1971 to a high of over
$800 per troy ounce in 1980. Such prices have been influenced by, among other
things, industrial and commercial demand, investment and speculation, and
monetary and fiscal policies of central banks and governments and their
agencies, including gold auctions conducted by the U.S. Treasury Department and
the International Monetary Fund.
2. Concentration of Source of Supply and Control of Sales: At the current time
there are only four major sources of supply of primary gold production, and
their market shares cannot be readily ascertained. The Republic of South Africa,
the United States, Australia and Russia are the four largest producers.
Political and economic conditions affecting either country may have a direct
impact on that country's sales of gold. The only legally authorized sales agent
for gold produced in South Africa is the Reserve Bank of South Africa, which
controls the time and place of any sale of South African bullion in accordance
with its retention policies. The South African Ministry of Mines determines gold
mining policy and has required mining companies to produce lower grades of ore
when gold prices are rising. South Africa depends predominantly on gold sales
for the foreign exchange necessary to finance its imports, so that its sales
policy is necessarily subject to national economic and political developments.
3. Tax and Currency Laws: Changes in the tax or currency laws
of the U.S. or of foreign countries may inhibit the Trust's
ability to pursue, or may increase the cost of pursing, its
precious metals investment program.
4. Unpredictable Monetary Policies, Economic and Political Conditions: The
Trust's precious metals assets may be less liquid or the change in the value of
such assets may be more volatile (and less related to general price movements in
the United States securities markets) than would be the case with investments in
the securities of larger U.S. companies, particularly because the price of gold
and other precious metals may be affected by unpredictable international
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monetary policies, conditions of scarcity and surplus and speculation. For
instance, major civil strife in South Africa could seriously influence the price
of gold. In addition, the use of gold or Special Drawing Rights (which are also
used by members of the International Monetary Fund for international
settlements) to settle net deficits and surpluses in trade and capital movements
between nations subjects the supply and demand of gold and therefore its price,
to a variety of economic factors which normally would not affect other types of
commodities.
5. New and Developing Market: Between 1933 and December 31, 1974, a gold market
did not exist in the United States for individual investment purposes. Since the
latter date, markets have been developing. Certain entities, including the U.S.
Treasury and the International Monetary Fund, have from time to time conducted
sales of relatively large amounts of gold bullion and may continue to do so from
time to time in the future. Large purchases or sales of gold bullion, including
sales by such banks and agencies or by the U.S. government, are likely to affect
the price of gold bullion.
6. Lack of Regulation: The trading of gold bullion in the United States is not
currently subject to existing rules which govern the trading of agricultural and
certain other commodities and commodity futures. The absence of such regulation
may adversely affect the continued development of an orderly market in gold
bullion. The development of a regulated futures market in gold bullion might
also affect the development of the market in and the price of gold bullion in
the United States.
In addition to being affected by many of the same factors influencing the
pricing of gold, silver prices may also be affected by labor relations in the
silver and copper mining industries (a significant portion of U.S. silver ore
production is a by-product of copper). Prices of other precious metals may be
similarly and otherwise affected.
Since investments in precious metals do not generate any interest or dividends,
the only source of return from such investments will be from any gains (less any
losses) realized from sales of such metals. It is expected that any such income
will be taxable as capital gain in the manner applicable to ordinary business
corporations.
Prices at which gold and silver bullion and other precious metals are purchased
or sold normally include dealer markups or markdowns, insurance expenses, assay
charges and shipping costs. For example, all such charges under current market
conditions for 400 troy ounces of gold bullion of at least 995/1000 purity do
not generally in the aggregate exceed 2% of the price. Such costs and expenses
may be a grater or lesser percentage of the price from time to time, depending
on whether the price of gold bullion decreases or increases. Such charges will
vary in respect of other precious metals. In addition, the Trust will incur
ongoing storage costs for its precious metals.
oRisks Relating to Repurchase Agreements
The use of repurchase agreements involves certain risks. For example, if the
seller under a repurchase agreement defaults on its obligation to repurchase the
underlying instrument at a time when the value of the instrument has declined,
the Trust may incur a loss upon its disposition. If the seller becomes insolvent
and subject to liquidation or reorganization under bankruptcy or other laws, a
bankruptcy court may determine that the underlying instrument is collateral for
a loan by the Trust and therefore is subject to sale by the trustee in
bankruptcy.
Finally, it is possible that the Trust may not be able to substantiate its
interest in the underlying instrument. While the Trust's Trustees acknowledge
these risks, it is expected that they can be controlled through careful
monitoring procedures.
oPrepayment Risks Associated with GNMA Certificates
GNMA certificates have yield and maturity characteristics corresponding to the
underlying mortgage loans. Thus, unlike U.S. Treasury bonds, which pay a fixed
rate of interest until maturity when the entire principal amount comes due,
payments on GNMA certificates include both interest and a partial prepayment of
principal. Additional prepayments of principal may result from the prepayment,
refinancing or foreclosure of the underlying mortgage loans. Although maturities
of the underlying mortgage loans range up to 30 years, such prepayments shorten
the effective maturities to approximately 12 years (based upon current
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government statistics). GNMA certificates currently offer yields higher than
those available from other types of U.S. government securities, but because of
the prepayment feature may be less effective than other types of securities as a
means of "locking in" attractive long-term interest rates. This is caused by the
need to reinvest prepayments of principal generally and the possibility of
significant unscheduled prepayments resulting from declines in mortgage interest
rates. As a result, GNMA certificates may have less potential for capital
appreciation during periods of declining interest rates than other investments
of comparable maturities, while having a comparable risk of decline during
periods of rising interest rates.
There are certain other risks associated with GNMA certificates. Prepayments and
scheduled payments of principal will be reinvested at prevailing interest rates
which may be less than the rate of interest for the securities on which such
payments are made. When prevailing interest rates rise, the value of the GNMA
security may decrease as do other debt securities, but when prevailing interest
rates decline, the value of GNMA securities is not likely to rise on a
comparable basis with other debt securities because of the prepayment feature of
GNMA securities. If a GNMA certificate is purchased at a premium above principal
because its fixed rate of interest exceeds the prevailing level of yields, the
premium is not guaranteed and a decline in value to par may result in a loss of
the premium especially in the event of prepayments.
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%. 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).
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 rates for the years 1998 and 1997 were 53%
and 24%, respectively.
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) if as a result more than 5% of
the Trust's total assets (taken at current value) would then be invested in
securities of a single issuer.
2. The Trust will not make loans, except that the Trust may (a) purchase a
portion of an issue or publicly distributed bonds, debentures, or similar debt
securities (including so called "repurchase agreements" whereby the Trust's cash
is, in effect, deposited on a secured basis with a bank for a period and yields
a return; provided, however, that no more than an aggregate of 10% of the
Trust's total assets, immediately after such investment, will be invested in
repurchase agreements having maturities longer than seven days and other
investments subject to legal or contractual restrictions on resale, or which are
not readily marketable), and (b) lend portfolio securities upon such conditions
as may be imposed from time to time by the Securities and Exchange Commission,
provided that the value of securities loaned at any time may not exceed 30% of
the Trust's total assets.
3. The Trust will not borrow in excess of 5% of its total assets, taken at
market or other fair value, at the time such borrowing is made, and any such
borrowing may be undertaken only as a temporary measure for extraordinary or
emergency purposes; and the Trust may not pledge, mortgage, or hypothecate its
assets taken at market to an extent greater than 15% of the Trust's gross assets
taken at cost.
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4. The Trust will not purchase any securities if such purchase would cause more
than 10% of the total outstanding voting securities of such issuer (other than
any wholly-owned subsidiary of the Trust) to be held by the Trust.
5. The purchase or retention of the securities of any issuer is prohibited if
the officers and Trustees of the Trust or its Investment Adviser owning
beneficially more than 1/2 of 1% of the securities of such issuer together own
beneficially more than 5% of the securities of such issuer.
6. The purchase of the securities of any other investment company is prohibited,
except that the Trust may make such a purchase in the open market involving no
commission or profit to a sponsor or dealer (other than the customary broker's
commission), provided that not more than 10% of the Trust's total assets (taken
at market or other fair value) would be invested in such securities and not more
than 3% of the voting stock of another investment company would be owned by the
Trust immediately after the making of any such investment, and the Trust may
make such a purchase as part of a merger, consolidation or acquisition of
assets.
7. The purchase of securities of companies with a record (including that of
their predecessors) of less than three years' continuous operation is prohibited
if such purchase would cause the Trust's investments in such companies taken at
cost to exceed 5% of the total assets of the Trust taken at current values,
except that this restriction shall not apply to any of the Trust's investments
in any of its wholly-owned subsidiaries.
8. The Trust will not participate in a joint venture or on a
joint and several basis in any securities trading account.
9. The Trust will not act as an underwriter of securities issued by others,
except to the extent it may be deemed such in connection with the disposition of
securities owned by it.
10. The Trust will not make short sales of securities unless at all times when a
short position is open, it owns an equal amount of such securities or owns
securities convertible into or exchangeable for, without payment of any further
consideration, securities of the same issue as, and at least equal in amount to,
the securities sold short.
11. The Trust will not purchase securities on margin, but may obtain such
short-term credits as may be necessary for the clearance of purchases and sales
of securities.
12. The Trust will not invest in a company in any single industry, if,
immediately after such investment, more than 25% of the Trust's total assets
would be invested in an industry other than gold mining, silver mining,
companies mining other precious metals, gold manufacturing and industrial
production and silver manufacturing and industrial production.
13. The Trust will not make investments in real estate or
indirect interests in real estate.
14. The Trust will not write, purchase or sell puts, calls or combinations
thereof or take positions in commodities or commodity futures contracts or
related options except that the Trust may (a) write covered call options with
respect to securities, securities indices and currencies and enter into closing
purchase or sale transactions with respect to such written options, (b) purchase
put or call options with respect to securities, securities indices and
currencies, and (c) engage in financial and precious metals futures contracts
and related options transactions, all as described in the Prospectus and above
under "Investment Strategies and Risks."
15. The Trust will not issue senior securities, borrow money or pledge its
assets, except that the Fund may borrow money as permitted under the 1940 Act,
as may be amended from time to time, and may also pledge its assets to secure
such borrowings. For the purposes of this investment restriction, collateral
arrangements with respect to the entry into currency transactions, the writing
of options or the purchase or sale of futures contracts or options on futures
contracts are not deemed a pledge of assets or the issuance of a senior
security.
MANAGEMENT OF THE TRUST
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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, Anchor Investment Management
Corporation. 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 the Trust During the Past 5
date Years
ERNEST BUTLER, Trustee President, I.E.
Born June 17, 1928 Butler Securities
11809 Hinson Road, Suite (securities dealer);
400 formerly Senior
Little Rock, AR 72212 Executive Vice
President Stephens,
Inc. (securities
dealer)
(1982-February 1998).
SPENCER H. Trustee President, Equity,
LEMENAGER, Inc. (private
Born January 25, 1938 investment company)
222 Wisconsin Avenue
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 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).
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. WILLIAMS 2*, 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)
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CHRISTOPHER Y. WILLIAMS 2, 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. WILLIAMS 2 Vice President Vice President and
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.
The Officers and Trustees of the Trust as group owned less than one percent (1%)
of the Trust's shares outstanding on December 31, 1998.
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 $1,000 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 Statement of Additional Information, Wendel & Co., c/o
Bank of New York, P.O. Box 1066, Wall Street Station, New York, NY 10268, as
indirect nominees of Societe D'Etudes, et de Gestion Financieres S.A., a
privately-owned corporation organized under the laws of France, 23 Rue Drouot,
75009, Paris, France, held of record 94.82% of the outstanding shares of the
Trust.
Shareholders owing 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.
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Investment Adviser
The Investment Adviser, Anchor Investment Management Corporation
(formerly Meeschaert Investment Management Corporation), is
located at 579 Pleasant Street, Suite 4, Paxton, Massachusetts
01612.
The Investment Adviser and Meeschaert & Co., Inc., the Trust's principal
underwriter, are affiliated through common control with Societe D'Etudes et de
Gestion Financieres Meeschaert, S.A., one of France's largest privately-owned
investment management firms. The Meeschaert organization was established in
Roubaix, France in 1935 by Emile C. Meeschaert. The Meeschaert organization
presently manages, with full discretion, an aggregate amount of approximately
$1.5 billion, including $250 million in French mutual funds, for about 8,000
individual and institutional customers.
On September 7, 1983, Emile C. Meeschaert and David Y. Williams
purchased the Investment Adviser from F. L. Putnam Securities
Company Incorporated ("Putnam Securities"). As of November 14,
1990, Luc E. Meeschaert purchased all of the outstanding shares
of the Investment Adviser previously owned by Emile C. Meeschaert.
The Investment Adviser's Directors and Officers are as follows:
Luc E. Meeschaert, Chairman - Mr. Meeschaert is Chief Executive
Officer of Societe D'Etudes et de Gestion Financieres Meeschaert,
S.A., 23 Rue Druout, 75009, Paris, France.
David Y. Williams, President and Director - Mr. Williams is also a Trustee of
the Trust and President and a Director of Meeschaert & Co., Inc., the Trust's
Distributor.
Alain Jaspard, Vice President - Alain Jaspard manages the Trust's portfolio.
He also manages other portfolios for the Meeschaert organization.
Christopher Y. Williams, Vice President and 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. 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 June 22, 1998 which was approved by the shareholders of the Trust
on the same date.
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 Adviser
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. For the fiscal year ended December 31, 1998, the Trust
paid expenses of $168,251, which represented 1.27% of the Trust's average net
assets.
The Trust pays the Investment Adviser, as compensation under the Investment
Advisory Contract, a monthly fee of 075% (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. For the Investment Adviser's services to the
Trust, Trust paid the Investment Adviser fees of $180,058 in 1996, $149,063 in
1997 and $98,895 in 1998. 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 June 21, 2000. 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
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<PAGE>
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 Advisor 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 Anchor Investment Management Corporation (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, 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 service providers, all of whose
fees are 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 such records of the Trust's
business transactions as are not maintained by other service providers to the
Trust. The Administrator is also 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 $21,722. The Trust paid the administrator,
Anchor Investment Management Corporation, fees of $28,000, $17,500 and $16,000
in 1996, 1997 and 1998, respectively, for its services to the Trust.
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
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<PAGE>
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, designated as Common Shares, which
participate equally in dividends and distributions. Issued shares are fully paid
and non-assessable and are transferable on the books of the Trust. The shares
have no preemptive rights. The shares each have one vote and proportionate
liquidation rights.
The Trust 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.
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.
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
July 21, 1993. 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.
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<PAGE>
During the years ended December 31, 1998, December 31,1997 and December 31,
1996, the Distributor received no sales commission from the Trust.
Determination of Net Asset Value
The Trust's net asset value is determined as of 12:00 p.m. 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.
Each day investment securities traded on a national securities exchange are
valued at the noon sales price; securities traded in the over-the-counter market
are valued at the last sale price as of 12:00 p.m. Eastern Time. Gold bullion is
valued each day at 12:00 p.m. Eastern Time based on the New York spot gold
price. Gold coins, foreign currencies, and foreign denominated securities for
which market quotations are readily available are valued at the known bid prices
as of 12:00 p.m. Eastern Time. Temporary cash investments are stated at cost. In
the absence of a reliable market for a particular metal, security or currency,
an investment therein will be valued at fair value as determined in good faith
by the Trustees.
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, Anchor Investment Management Corporation,
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 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 an investor uses the services of a
broker in having his shares repurchased, the broker may charge a reasonable fee
for his services.
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<PAGE>
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
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 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.
Interest and dividends, and possible other amounts received by the Trust in
respect of foreign investments, may be subject to withholding and other taxes at
the source, depending upon the laws of the country in which the investment is
made.
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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,
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
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 and Futures Transactions
In connection with its operations, the Trust may write and purchase options. The
tax consequences of transactions in options will vary depending upon whether the
option expires or is exercised, sold or closed. The Trust may also affect
transactions in financial futures contracts and related options. The tax
consequences of certain of these transactions were 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 futures contracts and
options that will be classified as regulated futures contracts, equity options
or non-equity options, to the extent consistent with its investment objective
and opportunities which appear available.
"Regulated Contracts" are contracts which are marked-to-market under a daily
cash flow system of the type used by United States futures exchanges to
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<PAGE>
determine the amount which must be deposited (in the case of losses) and the
amount which may be withdrawn (in the case of gains) as a result of price
changes with respect to the contract during the day, and which are traded on and
subject to the rules of a qualified board of trade or exchange.
"Equity options" are any options to buy or sell stock, or any option, the value
of which is determined directly or indirectly by reference to any stock (or
group of stocks) or stock index. Equity options do not include any options 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.
"Regulated futures contracts" and "non-equity options" are 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 contract and option held by the Trust at the end of each fiscal year will
be treated as sold for fair market value on the last business day 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 regulated futures contract or 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 and in financial futures (and related options). As a result of rules
under that section, the Trust may be required to postpone recognition of losses
incurred in certain closing purchase transactions 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 contrast, the Internal Revenue Service has ruled privately that the issuer of
a broad-based financial futures option such as a stock index futures contract
(or an option on such a contract) is the writer of the instrument and not the
issuers of the group of stocks or securities which comprise the index.
Accordingly, the Trust must treat such a futures contract (or option on it) as
issued by a single issuer for purposes of meeting the diversification tests.
In other private rulings, the Internal Revenue Service has addressed other tax
issues arising from investments by regulated investment companies in options and
futures contracts. 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 Internal Revenue Service has also stated in private rulings that
gains or losses with respect to index futures contracts on securities (and
related options) are gains and losses from the sale or exchange of securities.
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The legislative history of the Tax Reform Act of 1986 provides that income
realized in connection with writing covered and uncovered put and call options
is intended by Congress to be qualifying income for purposes of the 90% passive
income test. However, the requirement that less than 30% of the Trust's gross
income be derived from gains from the sale or other disposition of securities
held for less than three months will restrict the Trust'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, the Internal Revenue
Service has declined to determine whether any gain is derived from securities
held less than three months if a taxpayer buys a regulated futures contract just
prior to the end of its taxable year, has the contract marked-to-market at year
end, and then actually closes the contract within three months of its initial
purchase in the following taxable year. Furthermore, since taxpayers other than
the taxpayer requesting a particular private ruling are not entitled to rely on
it, the Trust intends to keep its activity in options at a low volume until the
Service rules publicly, or the Treasury Department issues final regulations, on
open issues.
If, in any taxable year, the Trust fails to qualify as a regulated investment
company, the Trust would be taxed in the same manner as an ordinary corporation
and 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
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.
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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.
During 1998, 1997 and 1996, the Trust paid commissions paid to broker-dealers of
$57,227, $63,941 and $53,627. During 1998, 1997 and 1996 the Trust paid
brokerage commissions of $32,480, $28,106 and $7,543 to the Distributor. For the
year ended December 31, 1998, the percentage of total commissions paid to the
Distributor was 56.76%. During 1998, the Trust's purchases and sales of
securities, exclusive of United States government securities and short-term
notes, amounted to $3,504,340 and $7,262,434, respectively. Of these
transactions $1,754,841 in purchases and $5,588,904 in sales were effected
through the Distributor.
The Trust's portfolio turnover rates were 53% for 1998 and 24%
for 1997.
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 Products Services, 200 Clarendon Street, 16th Floor,
Boston, Massachusetts 02116. 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. 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.
Independent Public Accountants
For the fiscal year ending December 31, 1998, the Trust employed Livingston &
Haynes, P.C., 40 Grove Street, Wellesley, Massachusetts 02181, to certify its
financial statements and to prepare its federal and state income tax returns.
Registration Statement
This Statement of Additional Information does not contain all the information
set forth in the Registration Statement and the exhibits and schedules relating
thereto, which the Trust has filed with, and which are available at the
Securities and Exchange Commission, Washington, D.C., under the Securities Act
of 1933, as amended, and the Investment Company Act of 1940, as amended, to
which reference is hereby made.
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FINANCIAL STATEMENTS
The financial statements and related report of Livingston & Haynes, P.C.,
independent public accountants, contained in Anchor Gold and Currency Trust's
Annual Report to shareholders for the year ended December 31, 1998, are hereby
incorporated by reference. A copy of the Trust's Annual Report may be obtained
without charge by writing to Anchor Investment Management Corporation, 579
Pleasant Street, Suite 4, Paxton, Massachusetts 01612, or by calling Anchor
Investment Management Corporation collect at (508) 831-1171.
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PART C. OTHER INFORMATION
Item 23. Exhibits
Exhibit Description of Exhibit
Number
(1) P. 64 Restated Declaration of Trust, as amended.
(2) P. 82 By-Laws of the Registrant, as amended.
(3) Not applicable
(4) Specimen Certificates representing Common
Shares of Beneficial Interest of the
Registrant.*
(5) p. 104 Investment Advisory Agreement between the
Registrant and Anchor Investment Management
Corporation.
(6) P. 107 Distributor's Contract between the
Registrant and Meeschaert & Co., Inc.
(7) Not applicable.
(8) p. 114 Custodian Agreement between the Registrant
and Investors Bank & Trust Company.
(9) P. 138 Transfer Agency and Service Agreement
between the Registrant and Cardinal Investment
Services, Inc.
(10) P. 146 Opinion and Consent of Counsel.
(11) p. 147 Consent of Independent Public Accountants.
(12) p. 148 Trust's Annual Report to Shareholders,
December 31, 1998.
(13) Not applicable.
(14) Not applicable
(15) Not applicable
(16) Not applicable
(17) p. 164 Power of Attorney, dated September 13, 1999
and Certified Resolution.
(27) p. 166 Financial Data Schedule
Item 24. Persons Controlled by or Under Common Control with the Trust.
Not applicable.
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Item 25. Indemnification.
No amendment. The information was filed in Item 27 of
Amendment No. 1.
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 thereto.
Item 27. Principal Underwriters.
(a) The Distributor currently acts as distributor for the
following investment companies:
Progressive Capital Accumulation Trust (formerly,
Anchor Capital Accumulation Trust)
S.E.C. file # 811-00972
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
---------------------------------------------------------
(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 Adviser, Anchor
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., 16th
Floor, Boston, Massachusetts 02116.
Item 29. Management Services.
Not applicable.
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Item 30. Undertakings.
Not applicable.
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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
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
18th day of November, 1999.
ANCHOR GOLD AND CURRENCY 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 September 13, 1999
David W. C. Putnam
/s/J. STEPHEN PUTNAM* Treasurer (Principal September 13, 1999
J. Stephen Putnam Financial Officer)
/s/SPENCER H. LEMENAGER Trustee September 13, 1999
Spencer H. LeMenager
/s/DAVID Y. WILLIAMS President, Secretary September 13, 1999
David Y. Williams and Trustee
/s/ ERNIE BUTLER Trustee September 13, 1999
Ernie Butler
*By: PETER K. BLUME October 18, 1999
/s/ Peter K. Blume
Peter K. Blume
Attorney-in-Fact
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<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /x/
Pre-Effective Amendment No. / /
Post-Effective Amendment No. 1 /x/
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT
OF 1940 /x/
Amendment No.2 / /
===================================================================
ANCHOR GOLD AND CURRENCY TRUST
===================================================================
62
<PAGE>
EXHIBITS
INDEX TO EXHIBITS
Exhibit Description of Exhibit
Number
(1) P. 64 Restated Declaration of Trust, as amended.
(2) P. 82 By-Laws of the Registrant, as amended.
(3) Not applicable
(4) Specimen Certificates representing Common
Shares of Beneficial Interest of the
Registrant.
(5) p. 104 Investment Advisory Agreement between the
Registrant and Anchor Investment Management
Corporation.
(6) P. 107 Distributor's Contract between the
Registrant and Meeschaert & Co., Inc.
(7) Not applicable.
(8) p. 114 Custodian Agreement between the Registrant
and Investors Bank & Trust Company.
(9) P. 138 Transfer Agency and Service Agreement
between the Registrant and Cardinal Investment
Services, Inc.
(10) P. 146 Opinion and Consent of Counsel.
(11) p. 147 Consent of Independent Public Accountants.
(12) p. 148 Trust's Annual Report to Shareholders,
December 31, 1998.
(13) Not applicable.
(14) Not applicable
(15) Not applicable
(16) Not applicable
(17) p. 164 Power of Attorney, dated September 13, 1999
and Certified Resolution.
(27) p. 166 Financial Data Schedule
63
<PAGE>
AMENDED AND RESTATED
DECLARATION OF TRUST
OF
ANCHOR GOLD AND CURRENCY TRUST
DECLARATION OF TRUST of Anchor Gold and Currency Trust made this 18th
day of October, 1999, by the persons named at the foot of this Declaration of
Trust, as trustees (such individuals, so long as they shall continue in office
in accordance with the provisions of this Declaration of Trust, and all other
individuals who may hereafter be duly elected or appointed, qualified and
serving as trustees in accordance with the provisions hereof, being hereinafter
called 'Trustees"), for the purpose of enabling the Trustees to hold and manage
the Trust estate and to carry on business as hereinafter provided:
THE TRUSTEES hereby declare that all money and property contributed
to the trust established hereby shall be held and managed in trust for the
benefit of the holders from time to time of the shares of beneficial interest
issued hereunder and subject to the provisions hereof, to wit:
ARTICLE I.
NAME AND DEFINITIONS
Section 1.1 Name and Location. The name of the trust established
hereby (the 'Trust") is the "Anchor Gold and Currency Trust" and so far as may
be practicable the Trustees shall conduct the Trust's activities, execute all
documents and sue or be sued under that name, which name (and the word 'Trust"
wherever herein used) shall refer to the Trustees as trustees, and not as
individuals, or personally, and shall not refer to the officers, agents,
employees or Shareholders of the Trust. If the Trustees determine that the
Trust's use of such name is not advisable or if the Trust is required to
discontinue the use of such name pursuant to Section 11.7 hereof, then subject
to that section the Trustees may adopt such other name for the Trust as they
deem proper and the Trust may hold its property and conduct its activities under
such other name.
The principle office of the Trust shall be at 579 Pleasant Street,
Suite 4, Paxton, Massachusetts 01612, unless and until it is changed by the
Trustees as they may do with such branch offices or places of business as the
Trustees may
establish.
Section 1.2 Definition. Wherever they are used
herein, the following have the respective meanings assigned to
them below:
(a) The terms "Affiliated Person"
"Commission" have the meanings assigned to them in the 1940 Act.
(b) "By-Laws" means the By-Laws referred to
in Section 3.11 hereof, as amended and in effect from time to
time.
64
<PAGE>
(c) "Declaration" means this Declaration of
Trust, as amended and in effect from time to time. Reference in this Declaration
of Trust to "Declaration,"hereof," "herein," "hereby," and "hereunder" shall be
deemed to refer to this Declaration rather than the article or section in which
such words appear.
(d) "Distributor" means the party, other
than the Trust, to the agreement described in Section 4.2 hereof.
(e) "Fundamental Policies" means the
investment policies and restrictions which are set forth in the Prospectus or
the Statement of Additional Information of the Trust and are designated therein
as fundamental policies.
(f) "Investment Adviser" means the party,
other than the Trust, to the a described in Section 4.1 hereof.
(g) "Majority Shareholder Vote," as used
with respect to the election of any Trustee at a meeting of Shareholders, means
the vote for the election of such Trustee of a plurality of all outstanding
Shares of the Trust represented in person or by proxy and entitled to vote
thereon, provided that a quorum (as determined in accordance with the By-Laws)
is present, and as used with respect to any other action required or permitted
to be taken by Shareholders, means the vote for such action of the holders of
that majority of all outstanding Shares of the Trust which consists of: (i) a
majority of all Shares represented in person or by proxy and entitled to vote on
such action at the meeting of Shareholders at which such action is to be taken,
provided that a quorum (as determined in accordance with the By-Laws) is
present; or (ii) if such action is to be taken by written consent of
Shareholders, a majority of all Shares issued and outstanding and entitled to
vote on such action; provided, that (iii) as used with respect to any action
requiring the affirmative vote of "a majority of the outstanding voting
securities" of the Trust, as the quoted phrase is defined in the 1940 Act,
"Majority Shareholder Vote" means the vote for such action at a meeting of
Shareholders of the smallest majority of all outstanding Shares of the Trust
entitled to vote on such action which satisfies such 1940 Act voting
requirement.
(h) "1940 Act" means the provisions of the
Investment Company Act of 1940 and the rules and regulations thereunder as
amended from time to time and any order or orders thereunder which may from time
to time be applicable to the Trust.
(i) "Person" means and includes individuals,
corporations, partnerships, trusts, associations, joint ventures and other
entities, whether or not legal entities, and governments and agencies and
political subdivisions thereof.
(j) "Prospectus" means the prospectus which
constitutes part of the Registration Statement of the Trust under the Securities
Act of 1933, as such prospectus may be amended or supplemented from time to
time.
(k) "Shareholder" means a record holder of
outstanding Shares.
(l) "Shareholder Servicing Agent" means the
party other than the Trust, to the agreement described in Section
4.3 hereof.
(m) "Shares" means the units of interest
into which the beneficial interest in the Trust shall be divided from time to
time, and includes fractions of Shares as well as whole Shares.
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(n) "Statement of Additional Information"
means the statement of additional information which constitutes part of the
Registration Statement of the Trust under the Securities Act of 1933, as such
statement of additional information may be amended or supplemented from time to
time.
(o) "Trust" means the trust established
hereby by whatever name it may then be known.
(p) "Trust Property" means any and all
assets and property, real or personal, tangible or intangible, which is owned or
held by or for the account of the Trust or the Trustees.
(q) "Trustees" means the individuals who
have signed this Declaration, so long as they shall continue in office in
accordance with the provisions hereof, and all other individuals who may from
time to time be duly elected or appointed, qualified and serving as Trustees in
accordance with the provisions hereof, and reference herein to a Trustee or the
Trustees shall refer to such individual or individuals in their capacity as
trustees hereunder.
ARTICLE II.
TRUSTEES
Section 2.1 Number of Trustees. The number of Trustees shall be such
number as shall be fixed from time to time by a written instrument signed by a
majority of the Trustees, provided, however, that the number of Trustees shall
not be less than three (3) nor more than nine (9).
Section 2.2 Election or Appointment and Term. The initial Trustees
shall be the individuals signing this Declaration in that capacity. Thereafter,
subject to Section 16(a) of the 1940 Act, the Trustees may elect themselves or
their successors at such regular intervals, if any, as they deem proper, and may
appoint Trustees to fill vacancies as provided in Section 2.4 hereof; provided,
that Trustees shall be elected by a Majority Shareholder Vote and at such time
or times as the Trustees shall determine that such action is required under
Section 16(a) of 1940 Act or, if not so required, that such action is advisable.
The election or appointment of any Trustee by the Trustees or the Shareholders
shall not become effective until - the individual so elected or appointed shall
have agreed in writing to accept such election or appointment and to be bound by
the terms of this Declaration. Subject to Section 2.3 hereof, the Trustees shall
have the power to set and alter the terms of office of the Trustees, and they
may at any time lengthen or shorten their own terms or make their terms of
unlimited duration; provided, that the term of office of any incumbent Trustee
shall continue until terminated as provided in Section 2.4 hereof, or, if not so
terminated until the election of such Trustee's successor in office has become
effective in accordance with this Section 2.2.
Section 2.3 Resignation and Removal. Any Trustee may resign his trust
(with-out need for prior or subsequent accounting) by an instrument in writing
signed by him and delivered to the other Trustees, and such resignation shall be
effective upon such delivery or at any later date according to the terms of the
instrument. Any of the Trustees may be removed by the action of two-thirds of
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the remaining Trustees; provided, that if the removal of one or more Trustees
would have the effect of reducing the number of remaining Trustees below the
minimum number prescribed by Section 2.1 hereof, then subject to Section 16(a)
of the 1940 Act, at the time of the removal of such Trustee or Trustees, the
remaining Trustees shall elect or appoint a number of additional Trustees at
least sufficient to increase the number of Trustees holding office to the
minimum number prescribed by Section 2.1 hereof. Upon the resignation or removal
of a Trustee, or his otherwise ceasing to be a Trustee, he shall execute and
deliver such documents as the remaining Trustees shall require for the purpose
of conveying to the Trust or the remaining Trustees any Trust Property held in
his name. Upon the incapacity or death of any Trustee, his legal representative
shall execute and deliver on his behalf such documents as the remaining Trustees
shall require as provided in the preceding sentence. However, the execution and
delivery of such documents by a former Trustee or his legal representative shall
not be requisite to the vesting of title to the Trust Property in the remaining
Trustees as provided in Section 3.3 hereof.
Section 2.4 Vacancies. The term of office of a Trustee shall
terminate and a vacancy shall occur in the event of such Trustee's death,
resignation, removal, bankruptcy, adjudicated incompetence or other incapacity
to perform the duties of the office of Trustee. No such vacancy shall operate to
annul this Declaration or to revoke any existing agency created pursuant to the
terms of this Declaration. In the case of an existing vacancy, including a
vacancy exiting by reason of an increase in the number of Trustees, subject to
the provisions of Section 16(a) of the 1940 Act, the remaining Trustees, or, if
only one Trustee shall then remain in office, the sole remaining Trustee, shall
appoint such individual to fill such vacancy as they or he, in their or his
discretion, shall see fit. An appointment of a Trustee may be made in
anticipation of a vacancy to occur at a later date by reason of retirement or
resignation of a Trustee or an increase in the number of Trustees; provided,
that such appointment shall not become effective prior to such retirement or
resignation or such increase in the number of Trustees. Whenever a vacancy in
number of Trustees shall occur, until such vacancy is filled as provided in this
Section 2.4, the Trustees in office, regardless of their number, shall have all
the powers granted to the Trustees and shall discharge all the duties imposed
upon the Trustees and shall discharge all the duties imposed upon the Trustees
by this Declaration. A written instrument certifying the existence of such
vacancy signed by a majority of the Trustees shall be conclusive evidence of the
existence of such vacancy.
ARTICLE III.
POWERS OF TRUSTEES
Section 3.1 General. The Trustees shall have exclusive and absolute
control over the Trust Property and over the business of the Trust to the same
extent as if the Trustees were the sole owners of the Trust Property and
business in their own right, but with such powers of delegation as may be
permitted by this Declaration. The Trustees shall have power to conduct the
business of the Trust and carry on its operations in any and all of its branches
and maintain offices both within and without The Commonwealth of Massachusetts,
in any and all states of the United States of America, in the District of
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Columbia, and in any and all commonwealths, territories, dependencies, colonies,
possessions, agencies or instrumentalities of the United States of America and
of foreign governments, and to do all such other things and execute all such
instruments as they deem necessary, proper or desirable in order to promote the
interests of the Trust although such things are not herein specifically
mentioned. Any determination as to what is in the interests of the Trust made by
the Trustees in good faith shall be conclusive. In construing the provisions of
this Declaration, the presumption shall be in favor of a grant of power to the
Trustees. The enumeration of any specific power herein shall not be construed as
limiting the aforesaid power. Such powers of the Trustees may be exercised
without order of or resort to any court.
Section 3.2 Business and Investments. The Trustees
shall have the power with respect to the Trust:
(a) to conduct, operate and carry on the
business of an open-end investment company under the 1940 Act, either directly
or through one or more wholly owned subsidiaries, and, in connection therewith:
(i) to subscribe for, purchase or
otherwise acquire and invest and reinvest in, to hold for investment or
otherwise, to sell, transfer, assign, negotiate, ex-change, lend or otherwise
dispose of, and to turn to account or realize upon and generally deal in and
with (a) securities (which term, "securities," shall include without limitation
any and all bills, notes, bonds, debentures or other obligations or evidences of
indebtedness, certificates of deposit, bankers acceptances, commercial paper,
repurchase agreements or other money market instruments; stocks, shares or other
equity ownership interest; and warrants, options or other instruments
representing rights to subscribe for, purchase, receive or otherwise acquire or
to sell, transfer, assign or otherwise dispose of, and scrip, certificates,
receipts or other instruments evidencing any ownership rights or interests in,
any of the foregoing), "when issued" and "delayed delivery" contracts for
securities, issued, guaranteed or sponsored by any governments, political
subdivisions or governmental authorities, agencies or instrumentalities, by any
individuals, firms, companies, corporations, syndicates, associations or trusts,
or by any other organizations or entities whatsoever, irrespective of their
forms or the names by which they may be described, whether or not they be
organized and operated for profit, and whether they be domestic or foreign with
respect to The Commonwealth of Massachusetts or the United States of American,
and options or other instruments entered into on a national securities exchange
relating to foreign currencies (b) precious metals and other minerals, contracts
to purchase and sell, and other interests of every nature and kind in, such
metals or minerals and (c) rare coins and other numismatic items; and
(ii) to acquire and become the owner of
or interested in any securities by delivering or issuing in exchange or payment
therefore, in any lawful manner, any of the Trust Property belonging to the
Trust or any Shares of the Trust; and
(iii)to exercise while the owner of any
securities or interests therein any and all of the rights, powers and privileges
or ownership of such securities or interests, including without limitation any
and all voting rights and rights of assent, consent or dissent pertaining
thereto, and to do any and all acts and things for the preservation, protection,
improvement and enhancement in value thereof.
The Trustees shall not be limited to investing in securities maturing
before the possible termination of the Trust, nor shall the Trustees be limited
by any law limiting the investments which may be made by fiduciaries; and
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(b) to conduct, operate and carry on any other lawful business
and engage in any other lawful business activity which the Trustees, in their
sole and absolute discretion, consider to be (i) incidental to the business of
the Trust as an investment company, (ii) conducive to or expedient for the
benefit or protection of the Trust, or (iii) calculated in any other manner to
promote the interests of the Trust or the Shareholders of the Trust.
Section 3.3 Legal Title. Legal title to all the Trust Property shall
be vested in the Trustees as joint tenants, except that the Trustees shall have
power to cause legal title to any Trust Property to be held by or in the name of
one or more of the Trustees, or in the name of the Trust, or in the name of any
other Person as nominee, on such terms as the Trustees may determine, provided
that the interest of the Trust therein is appropriately protected. The right,
title and interest of the Trustees in the Trust Property shall vest
automatically in each Person who may hereafter become a Trustee. Upon the
termination of the term of office of a Trustee as provided in Section 2.2 or 2.4
hereof, such Trustee shall automatically cease to have any right, title or
interest in any of the Trust Property, and the right, title and interest of such
Trustee in the Trust Property shall vest automatically in the remaining
Trustees. Such vesting and cessation of title shall be effective whether or not
conveyancing documents have been executed and delivered as provided in Section
2.3 hereof.
Section 3.4 Issuance and Repurchase of Securities. The Trustees shall
have the power to issue, sell, repurchase, redeem, retire, cancel, acquire,
hold, resell, reissue, dispose of, transfer, and otherwise deal in Shares of the
Trust, and, subject to Article VII, VIII and IX hereof, to apply to any such
repurchase, redemption, retirement, cancellation or acquisition of Shares of the
Trust, any funds or other assets of the Trust, whether constituting capital or
surplus or otherwise, to the full extent now or hereafter permitted by
applicable law.
Section 3.5 Borrowing Money; Lending Trust Assets. Subject to any
applicable Fundamental Policies of the Trust or any applicable provision of the
By-Laws, the Trustees shall have power to borrow money or otherwise obtain
credit and to secure the same by mortgaging, pledging or otherwise subjecting as
security the assets of the Trust, to endorse, guarantee, or undertake the
performance of any obligation, contract or engagement of any other Person and to
lend Trust Property.
Section 3.6 Delegation; Committees. The Trustees shall have power,
consistent with their continuing exclusive authority over the management of the
Trust and the Trust Property, to delegate from time to time to such committee or
committees as they may from time to time appoint from among their own number or
to such officers, employees or agents of the Trust as they may from time to time
designate the doing of such things and the execution of such instruments either
in the name of the Trust or the names of the Trustees or otherwise as the
Trustees may deem expedient.
Section 3.7 Collection and Payment. The Trustees shall have power to
collect all property due to the Trust; to pay all claims, including taxes,
against the Trust Property; to prosecute, defend, compromise or abandon any
claims relating to the Trust Property; to foreclose any security interest
securing any obligations by virtue of which any property is owed to the Trust;
and to enter into releases, agreements and other instruments.
Section 3.8 Expenses. The Trustees shall have the power to incur and
pay any expenses which, in the opinion of the Trustees, are necessary or
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incidental to carry out any of the purposes of this Declaration, and to pay
reasonable compensation from the funds of the Trust to themselves as Trustees.
The Trustees shall fix the compensation of all officers, employees and Trustees
of the Trust.
Section 3.9 Litigation. The Trustees shall have the power to engage
in and to prosecute, defend, compromise, abandon, or adjust, by arbitration or
otherwise, any actions, suits, proceedings, disputes, claims, and demands
relating to the Trust or the Trust Property, and, out of the Trust Property, to
pay or to satisfy any debts, claims or expenses incurred in connection
therewith, including those of litigation, and such power shall include without
limitation the power of the Trustees or any appropriate committee thereof, in
the exercise of their or its good faith business judgment, consenting to dismiss
any action, suit, proceeding, dispute, claim, or demand, derivative or
otherwise, brought by any person, including a Shareholder in such Shareholder's
own name or in the name of the Trust, whether or not the Trust or any of the
Trustees may be named individually therein or the subject matter arises by
reason of business for or on behalf of the Trust.
Section 3.10 Miscellaneous Powers. The Trustees shall have the power
to: (a) employ or contract with such Persons as the Trustees may deem desirable
for the transaction of the business of the Trust; (b) enter into joint ventures,
partnerships and any other combinations or associations; (c) remove Trustees or
fill vacancies in or add to their number, subject to and in accordance with
Sections 2.3 and 2.4 hereof; elect and remove at will such officers and appoint
and terminate such agents or employees as they consider appropriate; and appoint
from their own number and terminate at will any one or more committees which may
exercise some or all of the power and authority of the Trustees as the Trustees
may determine; (d) purchase, and pay for out of Trust Property, insurance
policies insuring the Trust Property, and, to the extent permitted by law and
not inconsistent with any applicable provision of this Declaration or the
By-Laws, insuring the Shareholders, Trustees, officers, employees, agents,
investment advisers, distributors, selected dealers or independent contractors
of the Trust against all claims arising by reason of holding any such position
or by reason of any action taken or omitted to be taken by any such Person in
such capacity, whether or not constituting negligence, or whether or not the
Trust would have the power to indemnify such Person against such liability; (e)
establish pension, profit sharing, Share purchase, and other retirement,
incentive and benefit plans for any Trustees, officers, employees and agents of
the Trust; (f) indemnify any person with whom the Trust has dealings, including
the Shareholders, Trustees, officers, employees, agents, investment advisers,
distributors, selected dealers and independent contractors of the Trust, to such
extent permitted by law and not inconsistent with any applicable provision of
the By-Laws as the Trustees shall determine; (g) guarantee indebtedness or
contractual obligations of others; (h) determine and change the fiscal year of
the Trust and the method by which its accounts shall be kept; and (i) adopt a
seal for the Trust, but the absence of such seal shall not impair the validity
of any instrument executed on behalf of the Trust.
Section 3.11 Manner of Acting; By-Laws. Except as otherwise provided
herein, in the By-Laws or in any applicable provision of law, any action to be
taken by the Trustees may be taken by a majority of the Trustees present at a
meeting of Trustees (a quorum being present), including any meeting held by
means of a conference telephone circuit or similar communications equipment by
means of which all persons participating in the meeting can hear each other, or
by written consent or consents of all the Trustees. The Trustees shall adopt
By-Laws not inconsistent with this Declaration to provide for the conduct of the
business of the Trust and may amend or repeal such By-Laws to the extent such
power is not reserved to the Shareholders by express provision of such By-Laws.
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ARTICLE IV.
INVESTMENT ADVISER, DISTRIBUTOR, CUSTODIAN
AND SHAREHOLDER SERVICING AGENT
Section 4.1 Investment Adviser. The Trustees may in their discretion
from time to time enter into an investment advisory or management agreement
whereby the Investment Adviser which is the other party to such contract shall
undertake to furnish the Trust such management, investment advisory or
supervisory, administrative, accounting, legal, statistical and research
facilities and services, and such other facilities and services, if any, as the
Trustees shall from time to time consider desirable, all upon such terms and
conditions as the Trustees may in their discretion determine to be not
inconsistent with this Declaration, the applicable provisions of the 1940 Act
and any applicable provisions of the By-Laws of the Trust. Any such advisory or
management agreement and any amendment thereto shall be subject to approval by a
Majority Shareholder Vote at a meeting of the Shareholders of the Trust.
Notwithstanding any provisions of this Declaration, the Trustees may authorize
the Investment Adviser (subject to such general or specific instructions as the
Trustees may from time to time adopt) to effect purchases, sales, loans or
exchanges of portfolio securities of the Trust on behalf of the Trustees or may
authorize any officer or employee of the Trust or any Trustee to effect such
purchases, sales, loans or exchanges pursuant to recommendations of the
Investment Adviser (and all without further action by the Trustees). Any such
purchases, sales, loans and exchanges shall be deemed to have been authorized by
all of the Trustees. The Trustees may, in their sole discretion, call a meeting
of Shareholders in order to submit to a vote of Shareholders at such meeting the
approval of continuance of any such investment advisory or management agreement.
Section 4.2 Distributor. The Trustees may in their discretion from
time to time enter into an agreement providing for the sale of Shares to net the
Trust not less than the net asset value per Share (as described in Article VIII
hereof) and pursuant to which the Trust may appoint the other party to such
agreement as its sales agent for the distribution of such Shares. The agreement
shall contain such terms and conditions as the Trustees may in their discretion
determine to be not inconsistent with this Declaration, the applicable
provisions of the 1940 Act and any applicable provisions of the By-Laws of the
Trust.
Section 4.3 Shareholder Servicing Agent. The Trustees may in their
discretion from time to time enter into a shareholder servicing agreement
whereby the other party to such agreement shall undertake to furnish transfer
agency, shareholder and dividend disbursing services to the Trust and its
Shareholders. The agreement shall contain such terms and conditions as the
Trustees may in their discretion determine to be not inconsistent with this
Declaration and any applicable provisions of the 1940 Act and the By-Laws of the
Trust.
Section 4.4 Custodian. The Trustees may appoint a bank or trust
company having an aggregate capital, surplus and undivided profits (as shown in
its last published report) of at least two million dollars ($2,000,000), or such
higher amount as may be required by the 1940 Act, as custodian of the securities
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and cash of the Trust. The agreement shall contain such terms and conditions as
the Trustees in their discretion determine to be not inconsistent with this
Declaration, the applicable provisions of the 1940 Act and any applicable
provisions of the By-Laws of the Trust.
Section 4.5 Parties to Agreements. The Trustees may enter into any
agreement of the character described in Section 4.1, 4.2, 4.3 or 4.4 of this
Article IV and into any other agreement although one or more of the Trustees or
officers of the Trust may be an officer, director, trustee, shareholder or
member of, or otherwise interested in, any other party to the agreement, and no
such agreement shall be invalidated or rendered voidable by reason of the
existence of any such relationship; nor shall any Person holding such
relationship be liable merely by reason of such relationship for any loss or
expense to the Trust under or by reason of said agreement or accountable for any
profit realized directly or indirectly therefrom. The same Person or an
Affiliated Person of any Person may be the other party to two or more of the
agreements entered into pursuant to Sections 4.1,4.2,4.3 or 4.4 above or
otherwise, and any individual may be financially interested in or otherwise
affiliated with any Person who is party to any of the agreements mentioned in
this Section 4.5.
ARTICLE V..
LIMITATIONS OF LIABILITY OF SHAREHOLDERS,
TRUSTEES AND OTHER
Section 5.1 No Personal Liability of Shareholders, Trustees, etc. No
Shareholder shall be subject to any personal liability whatsoever to any Person
in connection with Trust Property or the acts, obligations or affairs of the
Trust. Subject to Section 5.4 hereof, no Trustee, officer, employee or agent of
the Trust shall be subject to any personal liability whatsoever to any Person,
other than the Trust or its Shareholders, in connection with Trust Property or
the affairs of the Trust, and all such Persons shall look solely to the Trust
Property for satisfaction of claims of any nature arising in connection with the
affairs of the Trust. If any Shareholder, Trustee, officer, employee or agent,
as such, of the Trust is made a party to any suit or proceeding to enforce any
such liability, he shall not, on account thereof, be held to any personal
liability. The Trust shall indemnify and hold each Shareholder harmless from and
against all claims and liabilities to which such Shareholder may become subject
by reason of his being or having been a Shareholder, and shall reimburse such
Shareholder for all legal and other expenses reasonably incurred by him in
connection with any such claim or liability. The rights accruing to a
Shareholder under this Section 5.1 shall not exclude any other right to which
such Shareholder may be lawfully entitled, nor shall anything herein contained
restrict the right of the Trust to indemnify or reimburse a Shareholder in any
appropriate situation even though not specifically provided herein.
Section 5.2 Non-Liability of Trustees, etc. Subject to Section 5.4
hereof, no Trustee, officer, employee or agent of the Trust shall be liable to
the Trust or to any Shareholder, Trustee, officer, employee or agent of the
Trust for any action or failure to act (including without limitation the failure
to compel in any way any former or acting Trustee to redress any breach of
trust).
Section 5.3 Indemnification.
(a) Subject to Section 5.4 hereof, the
Trustees shall provide for indemnification by the Trust of every Person who is,
or has been, a Trustee, officer, employee or agent of the Trust against all
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liability and against all expenses reasonably incurred or paid by him in
connection with any claim, action, suit or proceeding in which he becomes
involved as a party or otherwise by virtue of his being or having been a
Trustee, officer, employee or agent and against amounts paid or incurred by him
in the settlement thereof, in such manner, to such extent and subject to such
conditions and limitations as the Trustees may provide from time to time in the
By-Laws.
(b) The words "claim," "action. "suit," or
"proceeding" shall apply to all claims, actions, suits or proceedings (civil,
criminal, or other, including appeals), actual or threatened; and the words
"liability" and "expenses" shall include, without limitation, attorneys' fees,
costs, judgments, amounts paid in settlement, fines, penalties and other
liabilities.
Section 5.4 No Protection Against Certain 1940 Act Liabilities.
Nothing contained in Sections 5.1, 5.2 or 5.3 hereof or in any provision of the
By-Laws described in Section 5.3 hereof shall protect any Trustee or officer of
the Trust from any liability to the Trust or its Shareholders for which he would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
office. Nothing contained in Sections 5.1, 5.2 or 5.3 hereof or in any agreement
of the character described in Section 4.1 or 4.2 hereof shall protect any
Investment Adviser to the Trust or Distributor of its Shares against any
liability to the Trust or its Shareholders to which he or it would otherwise be
subject by reason of willful misfeasance, bad faith, or gross negligence in the
performance of his or its duties to the Trust, or by reason of his or its
reckless disregard of his or its obligations and duties under the agreement
pursuant to which he or it serves as Investment Adviser to the Trust or
Distributor of its Shares.
Section 5.5 No Bond Required of Trustees. No Trustee shall be
obligated to give any bond or other security for the performance of any of his
duties hereunder.
Section 5.6 No Duty of Investigation; Notice in Trust Instruments,
etc. No purchaser, lender or other Person dealing with the Trustees or with any
officer, employee or agent of the Trust shall be bound to make any inquiry
concerning the validity of any transaction purporting to be made by the Trustees
or by said officer, employee or agent or be liable for the application of money
or property paid, loaned, or delivered to or on the order of the Trustees or of
said officer, employee or agent. Every contract, undertaking, instrument,
certificate, Share of obligation or other security of the Trust, and every other
act or thing whatsoever executed in connection with the Trust, shall be
conclusively presumed to have been executed or done by the executors thereof
only in their capacity as Trustees under this Declaration or in their capacity
as officers, employees or agents of the Trust. Every written agreement,
contract, instrument, undertaking, certificate, Share or other security of the
Trust executed, made or issued by the Trustees shall recite that the same is
executed, made or issued by them not individually, but as Trustees under this
Declaration, and that the obligations created or evidenced thereby are not
binding upon any of the Trustees or Shareholders individually, but bind only the
Trust Property, and may contain any further recital which they or he may deem
appropriate, but the omission of such recital shall not operate to bind the
Trustees or Shareholders individually.
Section 5.7 Reliance on experts, etc. Each Trustee, officer or
employee of the Trust shall, in the performance of his duties, be fully and
completely justified and protected with regard to any act or any failure to act
resulting from reliance in good faith upon the books of account or other records
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of the Trust, upon an opinion of counsel, or upon reports made to the Trust by
any of its officers or employees or by the Investment Adviser, the Distributor,
Shareholder Servicing Agent, selected dealers, accountants, appraisers or other
experts or consultants selected with reasonable care by the Trustees, officers
or employees of the Trust, regardless of whether such counsel or expert may also
be a Trustee.
ARTICLE VI.
SHARES OF BENEFICIAL INTEREST
Section 6.1 Beneficial Interest. The interest of the Trust shall be
divided into transferable units to be called Shares of Beneficial Interest,
without par value. The number of such Shares of Beneficial Interest authorized
hereunder is unlimited. Each Share shall represent an equal proportionate share
in the net assets of the Trust. The Trustees may divide or combine the Shares
into a greater or lesser number of Shares without thereby changing the
proportionate interests in the assets of the Trust. All Shares issued hereunder
including, without limitation, Shares issued in connection with a dividend in
Shares or a division of Shares, shall be fully paid and nonassessable. The
Shares shall consist of and be issuable as Common Shares and have the
privileges, limitations and rights set forth for and/or applicable to shares of
Beneficial Interest in this Article VI of the Trust.
Section 6.2 Rights of Shareholders. The ownership of the Trust
Property of every description and the right to conduct any business hereinbefore
described shall be vested exclusively in the Trustees, and the Shareholders
shall have no interest therein other than the beneficial interest conferred by
their Shares, and they shall have no right to call for any partition or division
of any property, profits, rights or interests of the Trust nor can they be
called upon to assume any losses of the Trust or suffer an assessment of any
kind by virtue of their ownership of Shares. The Shares shall be personal
property giving only the rights specifically set forth in this Declaration.
Shares shall not entitle any holder thereof to preference, preemptive,
appraisal, conversion or exchange rights, except as the Trustees may determine.
Section 6.3 Trust Only. It is the intention of the Trustees to create
only the relationship of Trustee and beneficiary between the Trustees and each
Shareholder from time to time. It is not the intention of the Trustees to create
a general partnership, limited partnership, joint stock association,
corporation, bailment or any form of legal relationship other than a trust.
Nothing in this Declaration shall be construed to make the Shareholders, either
by themselves or with the Trustees, partners or members of a joint stock
association.
Section 6.4 Issuance of Shares. The Trustees in their discretion may,
from time to time without vote of the Shareholders, issue Shares in addition to
the then issued and outstanding Shares and Shares held in the Treasury, to such
party or parties and for consideration in such amount not less than the greater
of the par value and the net asset value per Share (determined as set forth in
Article VIII hereof) and of such type, including cash or property, at such time
or times and on such terms as the Trustees may deem fitting, and may in such
manner acquire other assets (including the acquisition of assets subject to, and
in connection with, the assumption of liabilities) and businesses. In connection
with any issuance of Shares, the Trustees may issue fractional Shares.
Contributions to the Trust may be accepted for, and Shares shall be redeemed as,
whole Shares and fractions of a Share as described in the Prospectus or the
Statement of Additional Information.
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Section 6.5 Voting Powers. The Shareholders shall have power to vote
only (i) for the election of Trustees as provided in Section 2.2 hereof and the
removal of Trustees to the extent provided in Section 16(c) of the 1940 Act,
(ii) with respect to approval or termination in accordance with the 1940 Act of
any investment advisory or management agreement described in Section 4.1 hereof,
(iii) with respect to termination of the Trust as provided in Section 9.2
hereof, (iv) with respect to any amendment of this Declaration to the extent and
as provided in Section 9.3 hereof, (v) with respect to any merger, consolidation
or sale of assets as provided in Section 9.4 hereof, (vi) with respect to
incorporation of the Trust to the extent and as provided in Section 9.5 hereof,
(vii) to the same extent as the stockholders of a Massachusetts business
corporation as to whether or not a court action, proceeding or claim should or
should not be brought to maintained derivatively or as a class action on behalf
of the Trust or the Shareholders, and (viii) with respect to such additional
matters relating to the Trust as may be required by this Declaration, the
By-Laws or any undertaking filed by the Trust with the Commission (or any
successor agency) or with any state, or as to which the Trustees in their
discretion shall determine such Shareholder vote to be required by law or
otherwise to be necessary, appropriate or advisable. Each whole Share shall be
entitled to one vote as to any matter on which it is entitled to vote and each
fractional Share shall be entitled to a proportionate fractional vote, except
that Shares held in the treasury of the Trust as of the record date, as
determined in accordance with the By-Laws, shall not be voted. The Trustees
shall cause each matter required or permitted to be voted upon at a meeting or
by written consent of Shareholders to be submitted to a vote of outstanding
Shares entitled to vote thereon; provided, that there shall be no cumulative
voting of Shares in any election of Trustees. Until Shares are issued, the
Trustees may exercise all rights of Shareholders and may take any action
required by law, this Declaration or the By-Laws to be taken by Shareholders.
The By-Laws may include further provisions relating to Shareholders' votes and
meetings and related matters.
ARTICLE VII.
REDEMPTIONS
Section 7.1 Redemptions. Each Shareholder shall have the right, at
such times as may be permitted by the Trust, to require the Trust to redeem all
or any part of his Shares, upon and subject to the terms and conditions provided
in this Article VII. The Trust shall, upon application of or pursuant to
authorization from any Shareholder, redeem from such Shareholder outstanding
Shares for an amount per Share determined by the Trustees in accordance with the
1ss.40 Act; provided, that (a) such amount per Share shall not exceed the cash
equivalent of the proportionate interest of each Share or in the Trust Property
at the time of the redemption, and (b) if so authorized by the Trustees, the
Trust may, at any time and from time to time, charge fees for effecting such
redemption, at such rates as the Trustees may establish, if and to the extent
permitted under the 1940 Act, and may, at any time and from time to time,
pursuant to the 1940 Act, suspend such right of redemption. Redemption and
suspension and resumption of redemption of Shares shall be effected in
accordance with the procedures, and payment for Shares redeemed shall be made in
the manner, set forth in the Prospectus or the Statement of Additional
Information.
Section 7.2 Redemption of Shares for Tax Purposes; Disclosure of
Holding. If the Trustees shall, at any time and in good faith, be of the opinion
that direct or indirect ownership of Shares of the Trust has or may become
concentrated in any Person to an extent which would disqualify the Trust as a
regulated investment company under the Internal Revenue Code, then the Trustees
shall have the power by lot or other means deemed equitable by them (i) to call
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for redemption from any such Person a number, or principal amount, of Shares of
the Trust sufficient, in the opinion of the Trustees, to maintain or bring the
direct or indirect ownership of Shares of the Trust into conformity with the
requirements for such qualification, and (ii) to refuse to transfer or issue
Shares of the Trust to any Person whose acquisition of the Shares of the Trust
would, in the opinion of the Trustees, result in such disqualification. The
redemption shall be effected at a redemption price determined in accordance with
Section 7.1 hereof.
The holders of Shares of the Trust shall upon demand disclose to the
Trustees in writing such information with respect to direct and indirect
ownership of Shares of the Trust as the Trustees deem necessary to comply with
the provisions of the Internal Revenue Code, or to comply with the requirements
of any other authority.
Section 7.3 Redemptions to Reimburse Trust for Loss on Nonpayment for
Shares or for Other Charges. The Trustees shall have the power to redeem Shares
owned by any Shareholder to the extent necessary (i) to reimburse the Trust for
any loss it has sustained by reason of the failure of such Shareholder to make
full payment for Shares purchased by such Shareholder, or (ii) to collect any
charge relating to a transaction effected for the benefit of such Shareholder
which is applicable to Shares as provided in the Prospectus. Any such redemption
shall be effected at the redemption price determined in accordance with Section
7.1. hereof.
Section 7.4 Payment for Redeemed Shares in Kind. Subject to any
applicable provisions of the 1940 Act, payment for any Shares redeemed pursuant
to Section 7.1 or 7.2 hereof may, at the option of the Trustees or such officer
or officers of the Trust as they may authorize for the purpose, be made in cash
or in kind, or partially in cash and partially in kind, and, in case of full or
partial payment in kind, the Trustees or such authorized officer or officers
shall have absolute discretion to determine the securities or other assets of
the Trust and the amount thereof to be distributed in kind. For such purpose,
the value of any securities or other non-cash assets delivered in payment for
Shares redeemed shall be determined in the same manner as the value of such
securities or other non-cash assets are determined in accordance with Section
8.1 hereof for purposes of determining the net asset value per Share applicable
to such Shares, as of the same time that the net asset value per Share
applicable to such Shares is determined.
Section 7.5 Repurchase of Shares by Agreement with Shareholder. The
Trust may repurchase its Shares from any Shareholder directly or through an
agent designated by it for the purpose, by agreement with such Shareholder, at a
price not exceeding the redemption price of such Shares determined pursuant to
Section 7.1 hereof.
ARTICLE VIII.
DETERMINATION OF NET ASSET VALUE,
NET INCOME AND DIVIDENDS AND DISTRIBUTIONS
Section 8.1 Net Asset Value. Subject to the applicable provisions of
the 1940 Act, the Trustees shall have the power and duty to cause the net asset
value per Share of the Trust to be determined in such manner, with such
frequency and at such specific time of day as shall be set forth in or
prescribed by the Trustees in accordance with the By-Laws. The Trustees may
delegate the power and duty to determine the net asset value per Share to one or
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more of their number, or to one or more officers of the Trust, or to any
Investment Adviser, custodian, Shareholder Servicing Agent, or other agent
appointed for the purpose by the Trust.
Section 8.2 Net Income. Subject to any applicable provisions of the
1940 Act, the Trustees shall have the power and duty to cause the net income of
the Trust to be determined on an accrual basis with the same frequency and at
the same time of day as the net asset value per Share of the Trust is determined
in accordance with Section 8.1 hereof. The Trustees shall have full discretion,
to the extent not inconsistent with the 1940 Act, to determine whether any cash
or property of the Trust shall be treated as income or as principal and whether
any item of expense shall be charged to the income or the principal account, and
their determination made in good faith shall be conclusive upon the
Share-holders. In the case of stock dividends received, the Trustees shall have
full discretion to determine, in the light of the particular circumstances, how
much, if any, of the value thereof shall be treated as income, and the balance,
if any, shall be treated as principal.
Section 8.3 Dividends and Distributions. The Trustees shall have the
power to declare and pay ratably to the Shareholders, as dividends or
distributions on their Shares, such proportion of the net income, capital gains,
surplus (including paid-in surplus), capital or assets of the Trust as the
Trustees may deem proper. Dividends and distributions on Shares of the Trust may
be paid with such frequency (which may be daily or at such other intervals as
shall be specified in a standing resolution or resolutions adopted by the
Trustees) and may be paid in cash or other property, or in additional Shares, in
such manner, at such times, and on such terms as the Trustees shall determine.
Dividends and distributions may be paid to the Shareholders of record at the
time of declaring the dividend or distribution or to the Shareholders of record
at such later date as the Trustees shall determine. The Trustees may always
retain from the net income of the Trust such amount as they may deem necessary
to pay debts or expenses or to meet obligations of the Trust or as they may deem
desirable to use in the conduct of the affairs or to retain for future
requirements of the business of the Trust.
Inasmuch as the computation of net income and gains for Federal
income tax purposes may vary from the computation thereof on the books of the
Trust, the foregoing provisions of this Section 8.3 shall be interpreted to give
the Trustees the power in their discretion to distribute for any fiscal year as
income dividends and as capital gains distributions, respectively, additional
amounts sufficient to enable the Trust to avoid or reduce liability for taxes.
Section 8.4 Power to Modify Foregoing Procedures. Notwithstanding any
of the foregoing provisions of this Article VIII, the Trustees may prescribe, in
their absolute discretion, such other bases and times for determining the net
asset value per Share of outstanding Shares, the net income of the Trust, or for
the declaration and payment of dividends and distributions, as they may deem
necessary or desirable to enable the Trust to comply with any provision of the
1940 Act, including without limitation any rule or regulation adopted pursuant
to Section 22 of the 1940 Act by the Commission.
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ARTICLE IX.
DURATION: TERMINATION OF TRUST:
AMENDMENT: MERGERS, ETC,
Section 9.1 Duration. The Trust shall continue without limitation of
time but subject to the provisions of this Article IX.
Section 9.2 Termination of Trust.
(a) The Trust may be terminated upon the
recommendation of a majority of the Trustees, subject to approval by the
affirmative vote of "a majority of the outstanding voting securities" of the
Trust, as the quoted phrase is defined in the 1940 Act, taken by Majority
Shareholder Vote at a meeting of Shareholders. Upon the termination of the
Trust:
(i) The Trust shall carry on no
business except for the purpose of winding up its affairs.
(ii) The Trustees shall proceed to wind
up the affairs of the Trust and all of the powers of the Trustees under this
Declaration shall continue until the affairs of the Trust shall have been wound
up, including the power to fulfill or discharge the contracts of the Trust,
collect its assets, sell, convey, assign, exchange, transfer or otherwise
dispose of all or any part of the remaining Trust Property to one or more
persons at public or private sale for consideration which may consist in whole
or in part of cash, securities or other property of any kind, discharge or pay
its liabilities, and to do all other acts appropriate to liquidate its business;
provided, that any sale, conveyance, assignment, exchange, transfer or other
disposition of all or substantially all the Trust Property shall require
Shareholder approval in accordance with Section 9.4 hereof.
(iii)After paying or adequately
providing for the payment of all liabilities, and upon receipt of such releases,
indemnities and refunding agreements, as they deem necessary for their
protection, the Trustees may distribute the remain-ing Trust Property, in cash
or in kind or partly each, among the Shareholders according to their respective
rights and interests.
(b) After termination of the Trust and
distribution to the Shareholders as herein provided, a majority of the Trustees
shall execute and lodge among the records of the Trust an instrument in writing
setting forth the fact of such termination, and the Trustees shall thereupon be
discharged from all further liabilities and duties hereunder, and the rights and
interests of all Shareholders shall thereupon cease.
Section 9.3 Amendment Procedures.
(a) This Declaration may be amended by a
vote or written consent of the Trustees, subject to and upon approval of such
amendment by a Majority Shareholder Vote. The Trustees may amend this
Declaration without such Shareholder approval to change the name of the Trust,
to supply any omission, to cure, correct or supplement any ambiguous, defective
or inconsistent provision hereof, or, if they deem it necessary, to conform this
Declaration to the requirements of applicable federal laws or regulations or the
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requirements of the regulated investment company provisions of the Internal
Revenue Code, or to eliminate or reduce any federal, state or local taxes which
are or may be payable by the Trust or the Shareholders, but the Trustees shall
not be liable for failing to do so.
(b) No amendment may be made under this
Section 9.3 which would change any rights with respect to any Shares of the
Trust by reducing the amount payable thereon upon liquidation of the Trust or by
diminishing or eliminating any voting rights pertaining thereto, except with the
vote or written consent of the holders of two-thirds of the Shares outstanding
and entitled to vote. Nothing contained in this Declaration shall permit the
amendment of this Declaration to impair the exemption from personal liability of
the Shareholders, Trustees, officers, employees and agents of the Trust or to
permit assessments upon Shareholders.
(c) A certificate signed by a majority of
the Trustees or by the Secretary or any Assistant Secretary of the Trust,
setting forth an amendment and reciting that it was duly adopted by the
Shareholders or by the Trustees aforesaid or a copy of the Declaration, as
amended, and executed by a majority of the Trustees or certified by the
Secretary or any Assistant Secretary of the Trust, shall be conclusive evidence
of such amendment when lodged among the records of the Trust.
Section 9.4 Merger, Consolidation and Sale of Assets. The Trust may
merge into or consolidate with any other corporation, association, trust or
other organization or may sell, lease or exchange all or substantially all of
the Trust Property, including its good Will, upon such terms and conditions and
for such consideration when as authorized by vote or written consent of the
Trustees and approved by the affirmative vote of not less than two-thirds of the
Shares outstanding and entitled to vote, or by an instrument or instruments in
writing without a meeting consented to by the holders of not less than
two-thirds of such Shares, and by the vote or written consent of the holders of
two-thirds of the Shares of each of the Series of Shares; provided, however,
that, if such merger, consolidation, sale, lease or exchange is recommended by
the Trustees, a Majority Shareholder Vote shall be sufficient authorization.
Section 9.5 Incorporation. Subject to approval by a Majority
Shareholder Vote, the Trustees may cause to be organized or assist in organizing
a corporation or corporations under the laws of any jurisdiction or any other
trust, partnership, association, or other organization to take over all of the
Trust Property or to carry on any business in which the Trust shall directly or
indirectly have any interest, and to sell, convey and transfer the Trust
Property to any such corporation, trust, partnership, association or
organization in ex-change for the shares or securities thereof or otherwise, and
to lend money to subscribe for the shares or securities of, and enter into any
contracts with any such corporation, trust, partnership, association or
organization in which the Trust holds or is about to acquire shares or any other
interest. The Trustees may also cause a merger or consolidation between the
Trust or any successor thereto and any such corporation, trust, partnership,
association or other organization if and to the extent permitted by law, as
provided under the law then in effect. Nothing contained herein shall be
construed as requiring approval of Shareholders for the Trustees to organize or
assist in organizing one or more corporations, trusts, partnerships,
associations or other organizations and selling, conveying or transferring a
portion of the Trust Property to such organization or entities.
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ARTICLE X.
REPORTS TO SHAREHOLDERS
The Trustees shall at least semi-annually submit to the Shareholders
of each Series a written financial report meeting the requirements of the 1940
Act. Shareholders shall be entitled to inspect the books and records of the
Trust at the discretion of the Trustees.
ARTICLE XI.
MISCELLANEOUS
Section 11.1 Filing. This Declaration and any amendment hereto shall
be filed in the office of the Secretary of the Commonwealth of Massachusetts and
in such other places as may be required under the laws of the Commonwealth of
Massachusetts and may also be filed or recorded in such other places as the
Trustees deem appropriate. Each amendment so filed shall be accompanied by a
certificate signed and acknowledged by a Trustee or by the Secretary or any
Assistant Secretary of the Trust stating that such action was duly taken in a
manner provided herein, and unless such amendment or such certificate sets forth
some later time for the effectiveness of such amendment, such amendment shall be
effective upon its filing with the Secretary of the Commonwealth of
Massachusetts. A restated Declaration, integrating into a single instrument all
of the provisions of this Declaration which are then in effect and operative,
may be executed from time to time by a Trustee duly authorized to execute such a
restatement by a majority of the Trustees and shall, upon filing with the
Secretary of the Commonwealth of Massachusetts, be conclusive evidence of all
amendments contained therein and may thereafter be referred to in lieu of the
original Declaration and the various amendments thereto.
Section 11.2 Resident Agent. To the extent required, the Trustees
shall have power to appoint a resident agent for the Trust in the Commonwealth
of Massachusetts, and from time to time to replace the resident agent so
appointed.
Section 11.3 Governing Law. This Declaration is executed by the
Trustees with reference to the laws of the Commonwealth of Massachusetts, and
the rights of all parties and the validity and construction of every provision
hereof shall be subject to and construed according to the laws of said
Commonwealth.
Section 11.4 Counterparts. The Declaration maybe simultaneously
executed in several counterparts, each of which shall be deemed to be an
original, and such counter-parts, together, shall constitute one and the same
instrument, which shall be sufficiently evidenced by any such original
counterpart.
Section 11.5 Reliance by Third Parties. Any certificate executed by
an individual who, according to the records of the Trust, appears to be a
Trustee hereunder, or Secretary or Assistant Secretary to the Trust, certifying
to: (a) the number or identity of Trustees or Shareholders, (b) the due
authorization of the execution of any instrument or wiring, (c) the form of any
vote passed at a meeting of Trustees or Shareholders, (d) the fact that the
number of Trustees or Shareholders present at any meeting or executing any
written instrument satisfies the requirements of this Declaration, (e) the form
of any By-Laws adopted by or the identity of any officers elected by the
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Trustees, or (f) the existence of any fact or facts which in any manner relate
to the affairs of the Trust, shall be conclusive evidence as to the matters so
certified in favor of any Person dealing with the Trustees and their successors.
Section 11.6 Provisions in Conflict with Law or
Regulations.
(a) The provisions of this Declaration are
severable, and if the Trustees shall determine, with the advice of counsel, that
any of such provisions-in conflict with the 1940 Act, the regulated investment
company provisions of the Internal Revenue Code or with other applicable laws
and regulations, the conflicting provisions shall be deemed superseded by such
law or regulation to the extent necessary to eliminate such conflict; provided,
however, that such determination shall not affect any of the remaining
provisions of this Declaration or render invalid or improper any action taken or
omitted prior to such determination.
(b) If any provision of this Declaration
shall be held invalid or unenforceable in any jurisdiction, such invalidity or
unenforceability shall pertain only to such provision in such jurisdiction and
shall not in any manner affect such provision in any other jurisdiction or any
other provision of this Declaration in any jurisdiction.
IN WITNESS WHEREOF, the undersigned have executed this instrument
this 18th day of October, 1999.
/s/ David W.C. Putnam /s/ David Y. Williams
as Trustee as Trustee
and not individually and not individually
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BY-LAWS
OF
MEESCHAERT GOLD AND CURRENCY TRUST
ARTICLE I
DEFINITIONS
The terms "Affiliated Person," "Commission," "Declaration," "Distributor,"
"Investment Adviser," "Majority Shareholder Vote," "1940 Act," "Person,"
"Shareholder," "Shareholder Servicing Agent," "Shares," "Trust," "Trust
Property," and "Trustees" have the respective meanings given them in the
Declaration of Trust of the Meeschaert Gold and Currency Trust dated April 10,
1986, as amended from time to time.
ARTICLE II
OFFICES
Section 2.1.
Principal Office.
The principal office of the Trust in the Commonwealth of Massachusetts shall be
located at the principal place of business in the Commonwealth of the
individual, firm or corporation acting as the Trust's resident agent in the
Commonwealth of Massachusetts.
Section 2.2.
Other Offices.
In addition to its principal office in the Commonwealth of Massachusetts, the
Trust may have an office or offices at such other places within or without the
Commonwealth of Massachusetts as the Trustees may from time to time designate or
the business of the Trust may require.
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ARTICLE III
SHAREHOLDERS' MEETINGS
Section 3.1.
Time and Place of Meetings.
All meetings of Shareholders shall be held at such time and place, whether
within or without the Commonwealth of Massachusetts, as shall be stated in the
notice of the meeting or in a duly executed waiver of notice thereof.
Section 3.2.
Meetings.
Meetings of Shareholders of the Trust shall be held whenever a vote of
Shareholders is required by the Declaration and at such other times as the
Trustees may deem necessary, appropriate or advisable. Meetings of Shareholders
to consider any matter as to which a vote of Shareholders is required by the
1940 Act or is permitted by Section 15(a)(3), 16(a) or 32(a)(3) of, or Rule
12b-1(b)(3)(iii) under, the 1940 Act and as to which the Trustees have not
called a meeting of Shareholders shall be called by the secretary upon the
written request of the holders of Shares entitled to cast not less than twenty
five percent (25%) of all the votes then entitled to be cast at a meeting of
Shareholders. Such request shall state the purpose or purposes of such meeting
and the matters proposed to be acted on thereat. The secretary shall inform such
Shareholders of the estimated reasonable cost of preparing and mailing such
notice of the meeting. Upon payment to the Trust of such costs, the secretary
shall give notice stating the purpose or purposes of the meeting to each
Shareholder entitled to vote at such meeting. Unless requested by Shareholders
entitled to cast a majority of all votes entitled to be cast by the holders of
Shares of the Trust, a meeting need not be called to consider any matter which
is substantially the same as a matter voted on at any meeting of Shareholders
held during the preceding twelve (12) months.
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Section 3.3.
Notice of Meetings.
Written notice of each meeting of Shareholders stating the place, date and hour
thereof, and in the case of special meetings, specifying the purpose or purposes
thereof, shall be given to each Shareholder entitled to vote thereat, not less
than ten (10) nor more than ninety (90) days prior to the meeting either by mail
or by presenting it to such Shareholder personally or by leaving it at his
residence or usual place of business. If mailed, such notice shall be deemed to
be given when deposited in the United States mail, postage prepaid, addressed to
the Shareholder at his post office address as it appears on the records of the
Trust.
Section 3.4.
Quorum; Adjournments.
Except as otherwise provided by law, by the Declaration or by these By-Laws, at
all meetings of Shareholders the holders of a majority of the shares issued and
outstanding and entitled to vote thereat present in person or represented by
proxy, shall be requisite and shall constitute a quorum for the transaction of
business; but this section shall not affect any applicable requirement of law or
the Declaration for the vote necessary for the adoption of any measure. In the
absence of a quorum, the Shareholders present in person or represented by proxy
and entitled to vote thereat shall have power to adjourn the meeting from time
to time without notice other than announcement at the meeting until such quorum
shall be present; and at any meeting at which a quorum shall be present, the
holders of Shares entitled to cast not less than a majority of all the votes
entitled to be cast at such meeting shall have the power to adjourn the meeting
from time to time without notice other than announcement at such meeting;
provided, however, that written notice shall be given as required by Section 3.3
if such meeting is adjourned to a date more than one hundred twenty (120) days
after the record date originally scheduled with respect to the meeting. At any
such adjourned meeting at which a quorum shall be present, any business may be
transacted which might have been transacted had a quorum been present at the
time originally fixed for the meeting.
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Section 3.5.
Vote Required.
Except as otherwise provided by law, by the Declaration or by these By-Laws, at
each meeting of Shareholders at which a quorum is present, all matters shall be
decided by Majority Shareholder Vote.
Section 3.6.
Voting.
At any meeting of Shareholders, each Shareholder having the right to vote shall
be entitled to vote in person or by proxy, and each Shareholder of record shall
be entitled to one vote for each Share of beneficial interest of the Trust and
for the fractional portion of one vote for each fractional Share entitled to
vote so registered in his name on the records of the Trust on the date fixed as
the record date for the determination of Shareholders entitled to vote at such
meeting.
Section 3.7.
Proxies.
Each proxy shall be in writing executed by the Shareholder giving the proxy or
by his duly authorized attorney. No proxy shall be valid after the expiration of
three years from its date, unless a longer period is provided for in the proxy.
Section 3.8.
Procedures at Meetings.
At all meetings of Shareholders, all questions relating to the qualification of
voters, the validity of proxies, the acceptance or rejection of votes, the order
and manner in which matters are submitted to a vote, and all other matters
relating to questions of procedure shall be decided by the chairman of the
meeting, in a manner consistent with these By-Laws.
Section 3.9.
Informal Action by Shareholders.
Any action required or permitted to be taken at a meeting of Shareholders may be
taken without a meeting if a consent in writing, setting forth such action, is
signed by each Shareholder entitled to vote on the matter, and such consents are
filed with the records of the Trust.
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ARTICLE IV
TRUSTEES
Section 4.1.
Annual Meetings of the Trustees.
An annual meeting of the Trustees, commencing with the year 1989, shall be held
on such date, not less than sixty (60) nor more than one hundred eighty (180)
days after the end of the Trust's last preceding fiscal year, as the Trustees
shall prescribe. At each annual meeting, the Trustees shall elect officers,
appoint committees, consider approving the continuation of any agreement between
the Trust and an Investment Adviser or Distributor and of any distribution plan
of the Trust pursuant to Rule 12b-1 under the 1940 Act, take any action which
the Trustees are required to take annually by the 1940 Act and transact such
other business as may properly come before the meeting.
Section 4.2.
Regular and Special Meetings of the Trustees.
The Trustees may in their discretion provide for regular or special meetings of
the Trustees. Regular meetings of the Trustees may be held without further
notice at such time and place as shall be fixed in advance by the Trustees.
Special meetings of the Trustees may be called at any time by the president and
shall be called by the president or the secretary upon the written request of
any two (2) Trustees.
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Section 4.3.
Notice of Special Meetings.
Notice of any special meeting of the Trustees shall be given by written notice
delivered personally, telegraphed or mailed to each Trustee at his business or
residence address. Personally delivered or telegram notices shall be given at
least forty-eight (48) hours prior to the meeting. Notice by mail shall be given
at least five (5) days prior to the meeting. If mailed, such notice will be
deemed to be given when deposited in the United States mail properly addressed,
with postage thereon prepaid. If notice be given by telegram, such notice shall
be deemed given when the telegram is delivered to the telegraph company. Neither
the business to be transacted at, nor the purpose of, any special meeting of the
Trustees need be stated in the notice, unless specifically required by the 1940
Act.
Section 4.4.
Quorum; Adjournments.
A majority of the number of Trustees (but not fewer than two (2) Trustees) shall
constitute a quorum for transaction of business at any meeting of the Trustees;
provided, that if less than a majority of such number of Trustees is present at
any such meeting, a majority of the Trustees present or the sole Trustee present
may adjourn the meeting from time to time without further notice until a quorum
is present.
Section 4.5.
Voting.
The action of a majority of the Trustees present at a meeting at which a quorum
is present shall be the action of the Trustees, unless the concurrence of a
greater proportion or of any specified group of Trustees is required for such
action by law, the Declaration or these By-Laws.
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Section 4.6.
Executive and Other Committees.
The Trustees may designate one or more committees, each committee to consist of
two (2) or more Trustees and to have such title as the Trustees may consider to
be properly descriptive of its function, except that not more than one committee
shall be designated as the Executive Committee. Each such committee shall serve
at the pleasure of the Trustees.
In the absence of any member of such committee, the members thereof present at
any meeting, whether or not they constitute a quorum, may appoint a Trustee to
act in the place of such absent member.
The Trustees may delegate to any of the committees appointed under this Section
4.6 any of the powers of the Trustees, except the power to: (1) amend the
Declaration; (2) authorize the merger or consolidation of the Trust or the sale,
lease or exchange of all or substantially all of the Trust Property; (3) approve
the incorporation of the Trust; (4) approve the termination of the Trust; (5)
declare dividends or distributions on Shares; (6) issue Shares except pursuant
to a general formula or method specified by the Trustees by resolution; (7)
amend these By-Laws; or (8) elect or appoint or remove Trustees.
Each committee shall keep minutes or other appropriate written evidence of its
meetings or proceedings and shall report the same to the Trustees as and when
requested by the Trustees, and shall observe such other procedures with respect
to its meetings as may be prescribed by the Trustees in the resolution
appointing such committee, or, if and to the extent not so prescribed, as are
prescribed in these By-Laws with respect to meetings of the Trustees.
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Section 4.7.
Participation in Meetings by Telephone.
Any Trustee may participate in a meeting of the Trustees or of any committee of
the Trustees by means of conference telephone or similar communications
equipment if all persons participating in the meeting can hear each other at the
same time. Participation in a meeting by these means shall constitute presence
in person at the meeting.
Section 4.8.
Informal Action by Trustees.
Any action required or permitted to be taken at any meeting of the Trustees or
of any committee of the Trustees may be taken without a meeting, if a consent in
writing to such action is signed by each Trustee in the case of a meeting of
Trustees, or each Trustee who is a member of the committee, in the case of a
meeting of a committee, and such written consent is filed with the minutes of
proceedings of the Trustees or of the committee.
Section 4.9.
Compensation.
The Trustees shall determine and from time to time fix by resolution the
compensation payable to Trustees for their services to the Trust in that
capacity. Such compensation may consist of a fixed annual fee or a fixed fee for
attendance at meetings of the Trustees or of any committee of the Trustees of
which the Trustees receiving such fees are members, or a combination of a fixed
annual fee and a fixed fee for attendance. In addition, the Trustees may
authorize the reimbursement of Trustees for their expense for attendance at
meetings of the Trustees or of any committee of the Trustees of which they are
members. Nothing herein contained shall be construed to preclude any Trustee
from serving the Trust in any other capacity and receiving compensation
therefore.
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ARTICLE V
WAIVER OF NOTICE
Whenever any notice is required to be given pursuant to law, the Declaration or
these By-Laws, a waiver thereof in writing signed by the person or persons
entitled to such notice, or, in the case of any waiver of notice of any meeting
of Shareholders, signed by the proxy for a person entitled to notice thereof,
whether before or after the time stated therein, shall be deemed equivalent to
the giving of such notice. Neither the business to be transacted at nor the
purpose of any meeting need be set forth in the waiver of notice, unless
specifically required by law, the Declaration or these By-Laws. The attendance
of any person at any meeting in person, or, in the case of a meeting of
Shareholders, by proxy, shall constitute a waiver of notice of such meeting,
except where such person attends a meeting for the express purpose of objecting
to the transaction of any business on the ground that the meting is not lawfully
called or convened.
ARTICLE VI
OFFICERS
Section 6.1.
Executive Officers.
The executive officers of the Trust shall be a president, a secretary and a
treasurer. If the Trustees shall elect a chairman pursuant to Section 6.7, then
the chairman shall also be an executive officer of the Trust. If the Trustees
shall elect one or more vice presidents, each such vice-president shall be an
executive officer. The chairman, if there be one, shall be elected from among
the Trustees, but no other executive officer need be a Trustee. Any two or more
executive offices, except those of president and vice-president, may beheld by
the same person. A person holding more than one office may not act in more than
one capacity to execute, acknowledge or verify on behalf of the trust an
instrument required by law to be executed, acknowledged or verified by more than
one officer. The executive officers of the Trust shall be elected at each annual
meeting of Trustees.
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Section 6.2.
Other Officers and Agents.
The Trustees may also elect or may delegate to the president authority to
appoint, remove, or fix the duties, compensation or terms of office of one or
more assistant vice presidents, assistant secretaries and assistant treasurers,
and such other officers and agents as the Trustees shall at any time and from
time to time deem to be advisable.
Section 6.3.
Tenure, Resignation and Removal.
Each officer of the Trust shall hold office until his successor is elected or
appointed or until his earlier displacement from office by resignation, removal
or otherwise; provided, that if the term of office of any officer elected or
appointed pursuant to Section 6.2 shall have been fixed by the Trustees or by
the president acting under authority delegated by the Trustees, such officer
shall cease to hold such office no later than the date of expiration of such
term, regardless of whether any other person shall have been elected or
appointed to succeed him. Any officer of the Trust may resign at any time by
written notice to the Trust. Any officer or agent of the Trust may be removed at
any time by the Trustees or by the president acting under authority delegated by
the Trustees pursuant to Section 6.2 if in its or his judgment the best
interests of the Trust would be served thereby, but such removal shall be
without prejudice to the contract rights, if any, of the person so removed.
Election or appointment of an officer or agent shall not of itself create
contract rights between the Trustee and such officer or agent.
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Section 6.4.
Vacancies.
If the office of any officer becomes vacant for any reason, the vacancy may be
filled by the Trustees or by the president acting under authority delegated by
the Trustees pursuant to Section 6.2. Each officer elected or appointed to fill
a vacancy shall hold office for the balance of the term for which his
predecessor was elected or appointed.
Section 6.5.
Compensation.
The compensation, if any, of all officers of the Trust shall be fixed by the
Trustees or by the president acting under authority delegated by the Trustees
pursuant to Section 6.2.
Section 6.6.
Authority and Duties.
All officers as between themselves and the Trust shall have such powers, perform
such duties and be subject to such restrictions, if any, in the management of
the Trust as may be provided in these By-Laws, or, to the extent not so
provided, as may be prescribed by the Trustees or by the president acting under
authority delegated by the Trustees pursuant to Section 6.2.
Section 6.7.
Chairman.
When and if the Trustees deem such action to be necessary or appropriate, they
may elect a chairman from among the Trustees. The chairman shall preside at
meetings of the Shareholders and of the Trustees, and he shall have such other
powers and duties as may be prescribed by the Trustees. The chairman shall in
the absence or disability of the president exercise the powers and perform the
duties of the president.
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Section 6.8.
President.
The president shall be the chief executive officer of the Trust. He shall have
general and active management of the business of the Trust, shall see to it that
all orders, policies and resolutions of the Trustees are carried into effect,
and, in connection therewith, shall be authorized to delegate to any vice
president of the Trust such of his powers and duties as president and at such
times and in such manner as he shall deem advisable. In the absence or
disability of the chairman, or if there be no chairman, the president shall
preside at all meetings of the Shareholders and of the Trustees; and he shall
have such other powers and perform such other duties as are incident to the
office of a corporate president and as the Trustees may from time to time
prescribe.
Section 6.9.
Vice Presidents.
The vice president, if any, or, if there be more than one, then vice presidents,
shall assist the president in the management of the business of the Trust and
the implementation of orders, policies and resolutions of the Trustees at such
times and in such manner as the president may deem to be advisable. If there be
more than one vice president, the Trustees may designate one as the executive
vice president, in which case he shall be first in order of seniority, and the
Trustees may also grant to other vice presidents such titles as shall be
descriptive of their respective functions or indicative of their relative
seniority. In the absence or disability of both the president and the chairman,
or in the absence or disability of the president if there be no chairman, the
vice president, or, if there be more than one, the vice presidents in the order
of their relative seniority, shall exercise the powers and perform the duties of
those officers; and the vice president or vice presidents shall have such other
powers and perform such other duties as from time to time may be prescribed by
the president or by the Trustees.
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Section 6.10.
Assistant Vice Presidents.
The assistant vice president, if any, or, if there be more than one, the
assistant vice presidents, shall perform such duties as may from time to time be
prescribed by the Trustees or by the president acting under authority delegated
by the Trustees pursuant to Section 6.2.
Section 6.11.
Secretary.
The secretary shall (a) keep the minutes of the meetings and proceedings and any
written consents evidencing actions of the Shareholders, the Trustees and any
committees of the Trustees in one or more books provided for that purpose; (b)
see that all notices are duly given in accordance with the provisions of these
By-Laws or as required by law; (c) be custodian of the corporate records and of
the seal of the Trust, and, when authorized by the Trustees, cause the seal of
the Trust to be affixed to any document requiring it, and when so affixed
attested by his signature as secretary or by the signature of an assistant
secretary; and (d) in general, perform such other duties as from time to time
may be assigned to him by the president or by the Trustees.
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Section 6.12.
Assistant Secretaries.
The assistant secretary, if any, or, if there be more than one, the assistant
secretaries in the order determined by the Trustees or by the president, shall
in the absence or disability of the secretary exercise the powers and perform
the duties of the secretary, and he or they shall perform such other duties as
the Trustees, the president or the secretary may from time to time prescribe.
Section 6.13.
Treasurer.
The treasurer shall be the chief financial officer of the Trust. The treasurer
shall keep full and accurate accounts of receipts and disbursements in books
belonging to the Trust, shall deposit all moneys and other valuable effects in
the name and to the credit of the Trust in such depositories as may be
designated by the Trustees, and shall render to the Trustees and the president,
at regular meetings of the Trustees or whenever they or the president may
require it, an account of all his transactions as treasurer and of the financial
condition of the Trust.
If required by the Trustees, the treasurer shall give the Trust a bond in such
sum and with such surety or sureties as shall be satisfactory to the Trustees
for the faithful performance of the duties of his office and for the restoration
to the Trust, in case of his death, resignation, retirement or removal from
office, all books, papers, vouchers, money and other property of whatever kind
in his possession or under his control belonging to the Trust.
Section 6.14.
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Assistant Treasurers.
The assistant treasurer, if any, or, if there be more than one, the assistant
treasurers in the order determined by the Trustees or by the president, shall in
the absence or disability of the treasurer exercise the powers and perform the
duties of the treasurer, and he or they shall perform such other duties as the
Trustees, the president or the treasurer may from time to time prescribe.
ARTICLE VII
CONTRACTS, CHECKS AND DRAFTS
Section 7.1.
Contracts.
The Trustees may authorize any officer or agent to enter into any contract or to
execute and deliver any instrument in the name and on behalf of the Trust, and
such authority may be general or confined to specific instances. All contracts
entered into on behalf of the Trust shall comply with Section 5.6 of the
Declaration.
Section 7.2.
Checks and Drafts.
All checks, drafts or other orders for the payment of money, notes or other
evidences of indebtedness issued in the name of the Trust shall be signed by
such officer or officers or agent or agents of the Trust and in such manner as
shall from time to time be determined by the Trustees.
ARTICLE VIII
SHARES OF BENEFICIAL INTEREST
Section 8.1.
Certificates of Shares.
Each Shareholder shall be entitled, upon written request made to the Trust or
any Shareholder Servicing Agent for the Trust, to a certificate or certificates
which shall represent and certify the number of Shares held by him in the Trust.
Each certificate shall be signed by the chairman, if there be one, the president
or a vice president and countersigned by the secretary or an assistant secretary
or the treasurer or an assistant treasurer and may be sealed with the seal of
the Trust. The signatures and seal, if any, on a certificate may be either
manual or facsimile. A certificate is valid and may be issued whether or not an
officer who signed it is still an officer when it is issued. A full record of
the issuance of each certificate and the identifying number assigned thereto
shall be made on the books and records of the Trust usually kept for the purpose
or required by statute.
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Section 8.2.
Transfers of Shares.
Upon surrender to the Trust or the Shareholder Servicing Agent of the Trust of a
certificate duly endorsed or accompanied by proper evidence of succession,
assignment or authority to transfer, the Trust shall issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction upon its books. Shares of the Trust not represented by certificate
shall be transferred by recording the transaction on the books of the Trust
maintained by its Shareholder Servicing Agent upon presentation of proper
evidence of succession, assignment or authority to transfer.
The Trust shall be entitled to treat the holder of record of any Share or Shares
as the holder in fact thereof and, accordingly, shall not be bound to recognize
any equitable or other claim to or interest in such Shares on the part of any
other person, whether or not it shall have express or other notice thereof,
except as otherwise provided by applicable law.
Section 8.3.
Lost Certificates.
The Trustees may by resolution establish procedures pursuant to which a new
certificate or certificates may be issued in place of any certificate or
certificates theretofore issued by the Trust which have been mutilated or which
are alleged to have been lost, stolen or destroyed, upon presentation of each
such mutilated certificate, or the making by the person claiming any such
certificate to have been lost, stolen or destroyed of an affidavit as to the
fact and circumstances of the loss, theft or destruction thereof. The Trustees,
in their discretion and as a condition precedent to the issuance of any new
certificate, may include among such procedures a requirement that the owner of
any certificate alleged to have been lost, stolen or destroyed, or his legal
representative, furnish the Trust with a bond, in such sum and with such surety
or sureties as they may direct, as indemnity against any claim that may be made
against the Trust in respect of such lost, stolen or destroyed certificate.
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Section 8.4.
Fixing of Record Date.
For the purpose of determining the Shareholders entitled to notice of, or to
vote at, any meeting of Shareholders or at any adjournment thereof in respect of
which a new record date is not fixed, or to express written consent to or
dissent from the taking of corporate action without a meeting, or for the
purpose of determining the Shareholders entitled to receive payment of any
dividend or other distribution or allotment of any rights, or to exercise any
rights in respect of any change, conversion or exchange of Shares, or for the
purpose of any other lawful action, the Trustees may fix, in advance, a date as
the record date for any such determination of Shareholders. Such date shall not
be more than ninety (90) days, and in case of a meeting of Shareholders not less
than ten (10) days, before the date on which the meeting or particular action
requiring such determination of Shareholders is to be held or taken. If no
record date is fixed, (a) the record date for the determination of Shareholders
entitled to notice of or to vote at a meeting of Shareholders shall be the later
of: (i) the close of business on the day on which the notice of meeting is first
mailed to any Shareholder; or (ii) the thirtieth (30th) day before the meeting;
(b) the record date for determining the Shareholders entitled to express written
consent to the taking of any action without a meeting, when no prior action by
the Trustees is necessary, shall be the day on which the first written consent
is expressed; and (c) the record date for the determination of Shareholders
entitled to receive payment of a dividend or other distribution or an allotment
of any other rights shall be at the close of business on the day on which the
resolution of the Trustees, declaring the dividend, distribution or allotment of
rights, is adopted.
ARTICLE IX
FISCAL YEAR
The fiscal year of the Trust shall be fixed and may from time to time be changed
by resolution of the Trustees; provided, that if a different fiscal year shall
not have been fixed by the Trustees on or before December 31, 1989, the first
fiscal year of the Trust shall end on that date, and thereafter, unless the
Trustees shall fix a different fiscal year, it shall be the period of twelve
(12) consecutive calendar months ending on the 31st day of December in each
year.
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ARTICLE X
SEAL
The Trustees shall adopt a seal, which shall be in such form and shall have such
inscription thereon as the Trustees may from time to time provide. The seal of
the Trust may be affixed to any document, and the seal and its attestation may
be lithographed, engraved or otherwise printed on any document.
ARTICLE XI
INDEMNIFICATION AND INSURANCE
Section 11.1.
The Trust shall indemnify any individual who is a present or former Trustee,
officer, employee or agent of the Trust and who, by reason of his position as
such, was, is, or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than any action or suit by or in the right of the Trust)
against expenses, including attorneys' fees, judgments, fines, and amounts paid
in settlement, actually and reasonably incurred by him in connection with the
claim, action, suit or proceeding, if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the Trust,
and, with respect to any criminal action or proceeding, had no reasonable cause
to believe his conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement, conviction, or upon the plea of nolo
contendere or its equivalent, shall not, of itself, create a presumption that
the person did not act in good faith and in a manner which he reasonably
believed to be in or not opposed to the best interests of the Trust, and, with
respect to any criminal action or proceeding, had reasonable cause to believe
that his conduct was unlawful.
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Section 11.2.
The Trust shall indemnify any individual who is a present or former Trustee,
officer, employee or agent of the Trust and who, by reason of his position as
such, was, is, or is threatened to be made a party to any threatened, pending or
completed action or suit by or on behalf of the Trust to obtain a judgment or
decree in its favor against expenses, including attorneys' fees, actually and
reasonably incurred by him in connection with the defense or settlement of the
action or suit, if he acted in good faith and in a manner he reasonably believed
to be in or not opposed to the best interests of the Trust; except that no
indemnification shall be made in respect of any claim, issue or matter as to
which the individual has been adjudged to be liable for negligence or misconduct
in the performance of his duty to the Trust, except to the extent that the court
in which the action or suit was brought determines upon application that,
despite the adjudication of liability but in view of all circumstances of the
case, the person is fairly and reasonably entitled to indemnity for those
expenses which the court shall deem proper, provided such Trustee or officer is
not adjudged to be liable by reason of his willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct of his
office.
Section 11.3.
To the extent that a Trustee, officer, agent or employee of the Trust has been
successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in Section 11.1 or Section 11.2 or in defense of any
claim, issue, or matter therein, he shall be indemnified against expenses,
including attorneys' fees, actually and reasonably incurred by him in connection
therewith.
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Section 11.4.
Unless a court orders otherwise, any indemnification under Section 11.1 or
Section 11.2 may be made by the Trust only as authorized in the specific case
after a determination that indemnification of the Trustee, officer, employee or
agent is proper in the circumstances because he has met the applicable standard
of conduct set forth in Section 11.1 or Section 11.2. The determination shall be
made by: (i) the Trustees, by a majority vote of a quorum consisting of Trustees
who were not parties to the action, suit or proceeding; or if the required
quorum is not obtainable, or if a quorum of disinterested Trustees so directs,
(ii) an independent legal counsel in a written opinion.
Nothing contained in this Article XI shall be construed to protect any Trustee,
officer, employee or agent of the Trust against any liability to the Trust or
its Shareholders to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence, or reckless disregard of the duties
involved in the conduct of his office (any such conduct being hereinafter called
"Disabling Conduct"). No indemnification shall be made pursuant to this Article
XI unless:
(a) There is a final determination on the merits by a court or other body
before whom the action, suit or proceeding was brought that the individual to be
indemnified was not liable by reason of Disabling Conduct; or
(b) In the absence of such a judicial determination, there is a reasonable
determination, based upon a review of the facts, that such individual was not
liable by reason of Disabling Conduct, which determination shall be made by:
(i) A majority of a quorum of Trustees who are neither 'interested persons'
of the Trust, as defined in Section 2(a)(19) of the 1940 Act, nor parties to the
action, suit or proceeding; or
(ii) An independent legal counsel in a written opinion.
Section 11.5.
Notwithstanding any provision of this Article XI, any advance payment of
expenses by the Trust to any Trustee or officer of the Trust shall be made only
upon the undertaking by or on behalf of such Trustee, officer, employee or agent
to repay the advance unless it is ultimately determined that he is entitled to
indemnification as above provided, and only if one of the following conditions
is met:
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(a) The Trustee, officer, employee or agent to be indemnified provides a
security for his undertaking; or
(b) The Trust is insured against losses arising by reason of any lawful
advances; or
(c) There is a determination, based on a review of readily available facts,
that there is reason to believe that the Trustee or officer to be indemnified
ultimately will be entitled to indemnification, which determination shall be
made by:
(i) A majority of a quorum of Trustees who are neither "interested persons"
of the Trust, as defined in Section 2(a)(19) of the 1940 Act, nor parties to the
action, suit or proceeding; or
(ii) An independent legal counsel in a written opinion.
Section 11.6.
The indemnification provided by this Article XI shall continue as to an
individual who has ceased to be a Trustee, officer, employee or agent of the
Trust and inure to the benefit of the legal representatives of such individual
and shall not be deemed exclusive of any other rights to which any Trustee,
officer, employee or agent of the Trust may be entitled under any agreement,
vote of Trustees or otherwise, both as to action in his official capacity and as
to action in another capacity while holding office as such; provided, that no
person may satisfy any right of indemnity granted herein or to which he may be
otherwise entitled, except out of the Trust Property, and no Shareholder shall
be personally liable with respect to any claim for indemnity.
Section 11.7.
The Trust may purchase and maintain insurance on behalf of any person who is or
was a Trustee, officer, employee or agent of the Trust, against any liability
asserted against him and incurred by him in any such capacity, or arising out of
his status as such. However, the Trust shall not purchase insurance to indemnify
any Trustee or officer against liability for any conduct in respect of which the
1940 Act prohibits the Trust itself from indemnifying him.
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ARTICLE XII
NET ASSET VALUE
The Trustees shall by resolution prescribe the manner, frequency and time of day
for determining the net asset value per Share of the outstanding Shares of the
Trust.
ARTICLE XIII
FEDERAL SUPREMACY
If at a time when the Trust is registered as an investment company under the
1940 Act, any of the foregoing provisions of these By-Laws or of the Declaration
or the law of the Commonwealth of Massachusetts relating to business trusts
shall conflict or be inconsistent with any applicable provision of the 1940 Act,
the applicable provision of the 1940 Act shall be controlling and the Trust
shall not take any action which is in conflict or inconsistent therewith.
ARTICLE XIV
AMENDMENTS
These By-Laws may be amended, altered or repealed, or new By-Laws may be
adopted, by the Trustees. The Trustees shall in no event adopt By-Laws which are
in conflict with the Declaration, and, subject to Article XIII of these By-Laws,
any apparent inconsistency shall be construed in favor of the provisions in the
Declaration.
ARTICLE XV
DECLARATION OF TRUST
The Declaration of Trust establishing the Trust, dated April 10, 1986, a copy of
which, together with all amendments thereto, is on file in the office of the
Secretary of the Commonwealth of Massachusetts, provides that the name
"Meeschaert Gold and Currency Trust" refers to the Trustees under the
Declaration collectively as Trustees, but not as individuals or personally; and
no Trustee, Shareholder, officer, employee or agent of the Trust shall be held
personally liable, nor shall resort be had to their private property for the
satisfaction of any obligation or claim or otherwise, in connection with the
affairs of the Trust, but the Trust Property only shall be liable.
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INVESTMENT ADVISORY CONTRACT
AGREEMENT made this 22nd day of June, 1998 by and between Anchor Gold and
Currency Trust, a Massachusetts business trust (hereinafter called the "Trust")
and Anchor 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.
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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
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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.
ANCHOR GOLD AND CURRENCY TRUST
Attest: By:
/s/DAVID W.C. PUTNAM
Chairman
ANCHOR INVESTMENT MANAGEMENT CORP.
Attest: By:
/s/DAVID Y. WILLIAMS
President
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MEESCHAERT GOLD AND CURRENCY TRUST
Distributor's Contract
Contract dated as of 17 November, 1989 between MEESCHAERT GOLD AND
CURRENCY TRUST, a Massachusetts business trust (hereinafter called the
"Trust") and MEESCHAERT & CO., INC., an Illinois corporation (hereinafter
called the "Distributor").
W I T N E S S E T H:
1. Appointment of Trust Distributor
The Trust hereby appoints the Distributor as a distributor pursuant to the
terms of the Plan of Distribution (the "Plan") adopted by the Trust pursuant to
Rule 12b-1 under the Investment Company Act of 1940, and a distributor and agent
of the Trust to sell shares of beneficial interest of the Trust during the term
of this Contract.
2. Sale through Distributor of Shares of the Trust
The Trust hereby agrees to sell through the Distributor as its agent, from
time to time during the term of this Contract, shares of beneficial interest
(either original issue or treasury stock in the discretion of the Trust) for the
basic retail price, which basic retail price shall be the public offering price
as from time to time stated in the current prospectus of the Trust. Such sales
shall be made only on the terms and conditions stated in the current prospectus
of the Trust.
3. Distributor's Commissions
On all sales of shares of beneficial interest, the Trust shall receive the
current net asset value and the Distributor shall be entitled to receive the
commissions provided under the Plan (12b-1 commissions") and as set forth in the
then current prospectus of the Trust. The Distributor may reallow all or a part
of the 12b-1 commissions to such of its representatives, or to such brokers or
dealers, as the Distributor may determine. (The term, "net asset value", as used
herein, means said value as determined from time to time by the Board of
Trustees, Executive Committee, or certain officers of the Trust in the manner
provided in the Trust's Declaration of Trust or By-Laws as from time to time
amended.)
4. Reduction of Retail Price in Certain Cases
It is the intention of the parties that the price of shares of beneficial
interest for all sales through the Distributor (other than to its dealers) and
for all sales through the Distributor's dealers, shall be the basic retail price
herein provided, except that other retail or public offering prices (in no case,
however, lower than the "net asset value" of the shares) may apply to specified
sales of shares, as may be agreed upon between the Distributor and the Trust
from time to time. On sales at such other prices, the commission payable to the
Distributor shall be the difference between the public offering price and the
"net asset value."
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5. Trust to Supply Net Asset Value
The "net asset value" of shares of beneficial interest is determined as of
12:00 Noon on the New York Stock Exchange on each business day on which the New
York Stock Exchange is open and, at the option of the Trust, may be determined
at more frequent intervals during Exchange trading hours. The Trust agrees to
give to the Distributor notice of each "net asset value" so determined, such
"net asset value" (and the related public offering price) to be effective for
sale of Trust shares pursuant to orders received prior to the determination
thereof (and subsequent to the next preceding determination of "net asset
value") by the Distributor, or by a dealer, provided that the dealer
communicates the order to the Distributor prior to 1:00 P.M. Boston time on the
date of the determination of such "net asset value" or prior to the time as of
which the "net asset value" is next determined, whichever occurs first. The
Trust may at any time withdraw all offerings by notice to the Distributor.
6. Delivery of Certificates
In connection with sales of shares of beneficial interest through the
Distributor pursuant to paragraphs 2 to 4 inclusive above, the Trust will
deliver shares in such names and denominations as the Distributor shall from
time to time direct, such deliveries, however, to be made only upon receipt by
the Trust of the net sale price of the shares involved.
7. Distributor to Use Best Efforts to Sell
The Distributor hereby agrees to use its best efforts to find purchasers
who shall purchase such shares through the Distributor. The Distributor does not
undertake hereby to sell any specific number of shares of beneficial interest.
8. Distributor Not Agent of Trust in Respect of Dealers; Repurchases
In making agreements with its dealers or others, the Distributor shall act
only in its own behalf as principal and in no sense as agent for the Trust and
shall be agent for the Trust only in respect of sales and repurchases of Trust
shares.
The Distributor agrees to maintain a bid for and to repurchase shares of
the Trust, as agent for the Trust, at prices prescribed by the Trust from time
to time, if so requested by the Trust.
9. Issue or Sale of Shares by Trust to Shareholders
Nothing herein shall prevent the Trust from issuing, or issuing and
selling, or transferring or selling, shares of beneficial interest, whether
treasury or newly issued shares, at any time to its stockholders as stock
dividends, or for not less than "net asset value."
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10. Allocation of Expense
The Trust agrees to execute such papers and do such acts and things as
shall from time to time be reasonably requested by the Distributor for the
purpose of registering or qualifying the shares of beneficial interest for sale
under the federal securities laws and the securities laws of any state or other
jurisdiction in which the Distributor may wish to arrange for the sale of the
same or for registering the same or the Trust under the Federal Securities Act
of 1933, the Investment Company Act of l940 and the securities laws of any State
or other jurisdiction. The expense of such federal and other registrations and
qualifications, the expenses of other reports and acts required by and under the
Federal Securities Act of 1933 and the Investment Company Act of l940 and the
securities laws of States and other jurisdictions and all expenses in connection
with any issue of stock shall be borne by the Trust, and expenses of preparing,
printing and distributing advertising and sales literature shall be paid by the
Distributor.
11. Effective Period and Termination of this Contract
Unless sooner terminated or continued as provided below, the term of this
Contract shall begin on the date hereof and expire on , 1992. This Contract
shall continue in effect after said term if its continuance is specifically
approved by a vote of a majority of the outstanding voting securities of the
Trust, and by a majority of the l2b-1 Trustees referred to in the Plan ("Plan
l2b-1 Trustees") at least annually in accordance with the l940 Act and the rules
and regulations thereunder. This Contract may be terminated at any time, without
payment of any penalty, by a vote of a majority of the outstanding voting
securities of the Trust or by a vote of a majority of the Rule l2b-1 Trustees on
not more than sixty days prior written notice to the Distributor; and on ninety
days prior written notice to the Trust this Contract may be terminated at any
time by the Distributor, without payment of any penalty. This Contract shall
automatically terminate upon its assignment (as that term is defined in the
Investment Company Act of l940); and this Contract may be amended only if (1)
the amendment is approved by the Trustees and (2) the terms of the amendment
have been approved by the vote of a majority of the l2b-1 Trustees cast in
person at a meeting called for the purpose of voting on such approval. Any
notice under this Contract shall be given in writing, addressed and delivered,
or mailed prepaid, to the other party at any office of such party. A "majority
of the outstanding voting securities of the Trust" shall have, for all purposes
of this Contract, the meaning provided therefore in the l940 Act.
IN WITNESS WHEREOF, Meeschaert Capital Accumulation Trust and Meeschaert &
Co., Inc. have each caused this instrument to be signed in several counterparts,
each of which shall be an original and which together shall constitute one and
the same contract, by an officer or officers thereunto duly authorized, the day
and year first above written.
MEESCHAERT GOLD AND CURRENCY TRUST
Attest: By: /S/DAVID W.C. PUTNAM
President
Secretary
MEESCHAERT & CO., INC.
Attest: By: /S/ DAVID Y. WILLIAMS
President
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MEESCHAERT & CO., INC
28 Hill Farm Road
St. Johnsbury, Vermont 05819
(802) 748-2400
Dealer No.
Effective Date
Dealer: Please indicate Exchange Membership(s), if any.
GENTLEMEN;
Meeschaert & Co., Inc. ("the Company"), Distributor, invites you to
participate in the distribution of shares of Meeschaert Gold and Currency
Trust (the "Trust"), subject to the following terms:
1. In the distribution and sale of shares, you shall not have authority to
act as agent for the Trust, the Company or any other dealer in any respect in
such transactions. All orders are subject to acceptance by us and become
effective only upon confirmation by us. The Company reserves the unqualified
right not to accept any specific order for the purchase or exchange of shares.
2. You will offer and sell shares of the Trust only at their respective net
asset values in accordance with the terms and conditions of a current prospectus
of the Trust. Orders for the purchase or repurchase of shares accepted by you
prior to 12:00 noon placed with us the same day prior to 1:00 noon that business
day. You agree to place orders for shares only with us and at such price. You
further agree to confirm the transaction with your customer at the price
confirmed in writing by us. In the event of difference between verbal and
written price confirmations, the written confirmations shall be considered
final. Prices of the Trust's shares are computed by and are subject to
withdrawal by the Trust in accordance with its current prospectus.
You agree to place orders with us only through your central order
department unless we accept your written Power of Attorney authorizing others to
place orders on your behalf.
3. So long as this agreement remains in effect, we will pay you commissions
on sales of shares of the Trust at the rate of 4% of the net asset value of each
sale, which rate may be modified from time to time by us without prior notice,
and such continuing maintenance fees as we may notify you of from time to time.
You shall have no vested right to receive any continuing maintenance fees, other
fees, or other commissions which we may elect to pay to you from time to time on
shares previously sold by you. You agree not to share or rebate any portion of
such commissions or to otherwise grant any concessions, discounts or other
allowances to any person who is not a broker or dealer actually engaged in the
investment banking or securities business. You will receive commissions in
accordance with the attached Schedule of Commissions on all purchase
transactions in shareholder accounts (excluding reinvestment of income dividends
and capital gains distributions) for which you are designated as Dealer of
Record except where we determine that any such purchase was made with the
proceeds of a redemption or repurchase of shares of the Trust. Commissions will
be paid to you monthly, less a $5.00 monthly statement charge.
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You hereby authorize us to act as your agent in connection with all
transactions in shareholder accounts in which you are designated as Dealer of
Record. All designations of Dealer of Record and all authorizations of the
Company to act as your Agent shall cease upon the termination of this Agreement
or upon the shareholder's instructions to transfer his or her account to another
Dealer of Record.
4. Payment for all shares purchased from us shall be made to the Company and
shall be received by the Company within ten business days after the acceptance
of your order or such shorter time as may be required by law. If such payment is
not received by us, we reserve the right, without notice, forthwith to cancel
the sale, or, at our option, to sell the shares of the Trust ordered by you back
to the Trust, in which latter case we may hold you responsible for any loss,
including loss of profit, suffered by us or by the Trust resulting from your
failure to make payment aforesaid.
5. You agree to purchase shares of the Trust only from us or from your
customers. If you purchase shares from us, you agree that all such purchases
shall be made only to cover orders already received by you from your customers,
or for your own bonafide investment without a view to resale. If you purchase
shares from your customers, you agree to pay such customers the applicable net
asset value per share less any contingent deferred sales charge that would be
applicable if such shares were then tendered for redemption in accordance with
the then current applicable prospectus ("repurchase price").
6. You shall sell shares only --
(a) to your clients at the prices described in paragraph 2 above; or
(b) to us as agent for the Trust at the repurchase price. In such a
sale to us, you may act either as principal for your own account or as agent for
your customer. If you act as principal for your own account in purchasing shares
for resale to us, you agree to pay your customer not less than nor more than the
repurchase price which you receive from us. If you act as agent for your
customer in selling shares to us, you agree not to charge your customer more
than a fair commission for handling the transaction.
7. You shall not withhold placing with us orders received from your
customers so as to profit yourself as a result of such withholding.
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8. We will not accept from you any conditional orders for shares.
9. If any shares sold to you under the terms of this agreement are
repurchased by the Trust, or are tendered for redemption, within seven business
days after the date of our confirmation of the original purchase by you, it is
agreed that you shall forfeit your right to any commissions on such sales even
though the shareholder may be charged a contingent deferred sales charge by the
Trust.
We will notify you of any such repurchase or redemption within the next ten
business days after the date on which the certificate or written request for
redemption is delivered to us or to the Trust, and you shall forthwith refund to
us the full amount of any commission you received on such sale. We agree, in the
event of any such repurchase or redemption, to refund to the Trust any
commission we retained on such sale and upon receipt from you of the commissions
paid to you to pay such commissions forthwith to the Trust.
l0. Shares sold to you hereunder shall not be issued in certificate form or
otherwise until payment has been received by the Trust. If transfer instructions
are not received from you within 15 days after our acceptance of your order, the
Company reserves the right to instruct the transfer agent for the Trust to
register a certificate for the shares sold to you in your name and forward such
certificate to you. You agree to hold harmless and indemnify the Company, the
Trust and its transfer agent for any loss or expense resulting from such
registration.
11. No person is authorized to make any representations concerning shares
of the Trust except those contained in the current prospectus and in sales
literature issued by us supplemental to such prospectus. In purchasing shares
from us you shall rely solely on the representations contained in the prospectus
and in such sales literature. We will furnish additional copies of the current
prospectus and such sales literature and other releases and information issued
by us in reasonable quantities upon request. You agree that you will in all
respects duly conform with all laws and regulations applicable to the sale of
shares of the Trust and will indemnify and hold harmless the Trust, its
Directors and officers and the Company from any damage or expenses on account of
any wrongful act by you, your representatives, agents or sub-agents in
connection with any orders or solicitation of orders of Trust shares by you,
your representatives, agents or sub-agents.
12. Each party hereto represents that it is a member of the National
Association of Securities Dealers, Inc. and agrees to notify the other should it
cease to be a member of such Association and agrees to the automatic termination
of this agreement at that time. It is further agreed that all rules or
regulations of said Association now in effect or hereafter adopted, which are
binding upon underwriters and dealers in the distribution of the securities of
open-end investment companies, shall be deemed to be a part of this agreement to
the same extent as if set forth in full herein.
13. You will not offer any shares of the Trust for sale in any State where
it is not qualified for sale under the Blue Sky Laws and regulations of such
State or where you are not qualified to act as a dealer, except for States in
which the Trust is exempt from qualification.
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14. This agreement supersedes and cancels any prior agreement with respect
to the sales of shares of the Trust underwritten by the Company, and the Company
reserves the right to amend this agreement at any time and from time to time or
to terminate the same at any time without prior notice.
l5. This agreement shall be effective upon acceptance by us in St.
Johnsbury, Vermont and all sales hereunder are to be made, and title to shares
of any Series shall pass, in St. Johnsbury.
This agreement is made in the State of Vermont and shall be interpreted in
accordance with the laws of Vermont.
16. All communications to the Company should be sent to the above address.
Any notice to you shall be duly given if mailed or telegraphed to you at the
address specified by you below.
SIGNED: ACCEPTED:
___________________________
Broker or Dealer Name St. Johnsbury, VT (USA) as of
___________________________
Street Address Meeschaert & Co., Inc.
28 Hill Farm Road
___________________________ St. Johnsbury, VT 05819
City State Zip Code
___________________________ ________________________________
Authorized Signature Authorized Signature
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Gentlemen:
This Schedule of Commissions and Maintenance Fees is hereby made a part of
our Dealer Agreement with you ("Dealer Agreement") effective , 1992, for
Meeschaert Capital Accumulation Trust (the "Trust") and will remain in effect
until modified or rescinded by us:
1. Commissions
Except as otherwise provided for in our Dealer Agreement, we will pay you
commissions on sales of shares of the Trust at the rate of 4% of the aggregate
net asset value of such shares sold in each eligible sale. Such commission rate
may be modified by us from time to time without prior notice.
- -
CUSTODIAN AGREEMENT
BETWEEN
ANCHOR GOLD & CURRENCY TRUST
AND
INVESTORS BANK & TRUST COMPANY
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TABLE OF CONTENTS
Page
1. Bank Appointed Custodian ...........................1
2. Definitions.........................................1
2.1 Authorized Person ..................................1
2.2 Board ..............................................1
2.3 Security ...........................................1
2.4 Portfolio Security .................................1
2.5 Officers' Certificate ..............................1
2.6 Book-Entry System ..................................2
2.7 Depository .........................................2
2.8 Proper Instructions ................................2
3. Separate Accounts ..................................2
4. Certification as to Authorized Persons .............2
5. Custody of Cash ....................................2
5.1 Purchase of Securities .............................3
5.2 Redemptions ........................................3
5.3 Distributions and Expenses of Fund .................3
5.4 Payment in Respect of Securities ...................3
5.5 Repayment of Loans .................................3
5.6 Repayment of Cash ..................................3
5.7 Foreign Exchange Transactions ......................4
5.8 Other Authorized Payments ..........................4
5.9 Termination ........................................4
6. Securities .........................................4
6.1 Segregation and Registration ......................4
6.2 Voting and Proxies ................................5
6.3 Corporate Action ..................................5
6.4 Book-Entry System .................................5
6.5 Use of a Depository................................6
6.6 Use of Book-Entry System for Commercial Paper .....7
6.7 Use of Immobilization Programs ....................8
6.8 Eurodollar CDs ....................................8
6.9 Options and Futures Transactions ..................8
(a) Puts and Calls Traded on Securities Exchanges,
NASDAQ or Over-the-Counter ........................8
(b) Puts, Calls, and Futures Traded
on Commodities Exchanges ..........................9
6.10 Segregated Account ................................9
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Page
6.11 Interest Bearing Call or Time Deposits ...........10
6.12 Transfer of Securities ...........................10
7. Redemptions .......................................12
8. Merger, Dissolution, etc. of Fund .................12
9. Actions of Bank Without Prior Authorization .......12
10. Collection and Defaults ...........................13
11. Maintenance of Records and Accounting Services ....13
12. [Reserved]
13. Additional Services ...............................13
14. Duties of the Bank.................................13
14.1 Performance of Duties and Standard of Care........13
14.2 Agents and Subcustodians with Respect to Property
of the Fund Held in the United States ............14
14.3 Duties of the Bank with Respect to Property Held
Outside of the United States......................17
14.4 Insurance ........................................17
14.5 Fees and Expenses of Bank ........................17
14.6 Advances by Bank..................................17
15. Limitation of Liability ...........................17
16. Termination .......................................18
17. Confidentiality ...................................19
18. Notices ...........................................19
19. Amendments ........................................20
20. Parties ...........................................20
21. Governing Law .....................................20
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Page
22. Counterparts .............................................20
23. Entire Agreement .........................................20
24. Limitation of Liability ..................................20
APPENDICES
Appendix A...............................................Fee Schedule
Appendix B...............................................Additional Services
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CUSTODIAN AGREEMENT
AGREEMENT made as of this 1st day of January, 1998, between ANCHOR GOLD &
CURRENCY TRUST, a business trust organized under the laws of the state of
Massachusetts, and INVESTORS BANK & TRUST COMPANY, a Massachusetts trust
company (the "Bank").
The Fund, an open-end management investment company, desires to place and
maintain all of its portfolio securities and cash in the custody of the Bank.
'Me Bank has at least the minimum qualifications required by Section 17(f)(1)
of the Investment Company Act of 1940 (the " 1940 Act") to act as custodian of
the portfolio securities and cash of the Fund, and has indicated its
willingness to so act, subject to the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements contained herein, the parties hereto agree as follows:
1. Bank Appointed Custodian. The Fund hereby appoints the Bank as
custodian of its portfolio securities and cash delivered to the Bank as
hereinafter described and the Bank agrees to act as such upon the terms and
conditions hereinafter set forth. For the services rendered pursuant to this
Agreement the Fund agrees to pay to the Bank the fees set forth on Appendix A
hereto.
2. Definitions. Whenever used herein, the terms listed below will
have the following meaning:
2.1 Authorized Person. Authorized Person will mean any of the persons
duly authorized to give Proper Instructions or otherwise act on behalf of the
Fund by appropriate resolution of its Board, and set forth in a certificate as
required by Section 4 hereof.
2.2 Board. Board will mean the Board of Directors or the
Board of Trustees of the Fund, as the case may be.
2.3 Security. The term security as used herein will have the same meaning
assigned to such term in the Securities Act of 1933, as amended, including,
without limitation, any note, stock, treasury stock, bond, debenture, evidence
of indebtedness, certificate of interest or participation in any profit sharing
agreement, collateral-trust certificate, preorganization certificate or
subscription, transferable share, investment contract, voting-trust
certificate, certificate of deposit for a security, fractional undivided
interest in oil, gas, or other mineral rights, any put, call, straddle, option,
or privilege on any security, certificate of deposit, or group or index of
securities (including any interest therein or based on the value thereof), or
any put, call, straddle, option, or privilege entered into on a national
securities exchange relating to a foreign currency, or, in general, any
interest or instrument commonly known as a it security", or any certificate of
interest or participation in, temporary or interim certificate for, receipt
for, guarantee of, or warrant or right to subscribe to, or option contract to
purchase or sell any of the foregoing, and futures, forward contracts and
options thereon.
2.4 Portfolio Security. Portfolio Security will mean any security
owned by the Fund.
2.5 Officers' Certificate. Officers' Certificate will mean,
unless otherwise indicated, any request, direction, instruction,
or certification in writing signed by any two Authorized Persons
of the Fund.
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2.6 Book-Enja System. Book-Entry System shall mean the Federal Reserve
-Treasury Department Book Entry System for United States government,
instrumentality and agency securities operated by the Federal Reserve Bank,
its successor or successors and its nominee or nominees.
2.7 Depository. Depository shall mean The Depository Trust Company
("DTC"), a clearing agency registered with the Securities and Exchange
Commission under Section 17A of the Securities Exchange Act of 1934 ("Exchange
Act"), its successor or successors and its nominee or nominees. The term
"Depository" shall further mean and include any other person authorized to act
as a depository under the 1940 Act, its successor or successors and its nominee
or nominees, specifically identified in a certified copy of a resolution of the
Board.
2.8 Proper Instructions. Proper Instructions shall mean (i) instructions
regarding the purchase or sale of Portfolio Securities, and payments and
deliveries in connection therewith, given by an Authorized Person, such
instructions to be given in such form and manner as the Bank and the Fund shall
agree upon from time to time, and (ii) instructions (which may be continuing
instructions) regarding other matters signed or initialed by an Authorized
Person. Oral instructions will be considered Proper Instructions if the Bank
reasonably believes them to have been given by an Authorized Person. The Fund
shall cause all oral instructions to be promptly confirmed in writing. The Bank
shall act upon and comply with any subsequent Proper Instruction which modifies
a prior instruction and the sole obligation of the Bank with respect to any
follow-up or confirmatory instruction shall be to make reasonable efforts to
detect any discrepancy between the original instruction and such confirmation
and to report such discrepancy to the Fund. The Fund shall be responsible, at
the Fund's expense, for taking any action, including any reprocessing,
necessary to correct any such discrepancy or error, and to the extent such
action requires the Bank to act, the Fund shall give the Bank specific Proper
Instructions as to the action required. Upon receipt by the Bank of an
Officers' Certificate as to the authorization by the Board accompanied by a
detailed description of procedures approved by the Fund, Proper Instructions
may include communication effected directly between electro-mechanical or
electronic devices provided that the Board and the Bank agree in writing that
such procedures afford adequate safeguards for the Fund's assets.
3. Separate Accounts. If the Fund has more than one series or portfolio,
the Bank will segregate the assets of each series or portfolio to which this
Agreement relates into a separate account for each such series or portfolio
containing the assets of such series or portfolio (and all investment earnings
thereon). Unless the context otherwise requires, any reference in this
Agreement to any actions to be taken by the Fund shall be deemed to refer to
the Fund acting on behalf of one or more of its series, any reference in this
Agreement to any assets of the Fund, including, without limitation, any
portfolio securities and cash and earnings thereon, shall be deemed to refer
only to assets of the applicable series, any duty or obligation of the Bank
hereunder to the Fund shall be deemed to refer to duties and obligations with
respect to such individual series and any obligation or liability of the Fund
hereunder shall be binding only with respect to such individual series, and
shall be discharged only out of the assets of such series.
4. Certification as to Authorized Persons. The Secretary or Assistant
Secretary of the Fund will at all times maintain on file with the Bank his or
her certification to the Bank, in such form as may be acceptable to the Bank,
of (i) the names and signatures of the Authorized Persons and (ii) the names of
the members of the Board, it being understood that upon the occurrence of any
change in the information set forth in the most recent certification on file
(including without limitation any person named in the most recent certification
who is no longer an Authorized Person as designated therein), the Secretary or
Assistant Secretary of the Fund will sign a new or amended certification
setting forth the change and the new, additional or omitted names or
signatures. The Bank will be entitled to rely and act upon any Officers'
Certificate given to it by the Fund which has been signed by Authorized Persons
named in the most recent certification received by the Bank.
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5. Custody of Cash. As custodian for the Fund, the Bank will open and
maintain a separate account or accounts in the name of the Fund or in the name
of the Bank, as Custodian of the Fund, and will deposit to the account of the
Fund all of the cash of the Fund, except for cash held by a subcustodian
appointed pursuant to Sections 14.2 or 14.3 hereof, including borrowed funds,
delivered to the Bank, subject only to draft or order by the Bank acting
pursuant to the terms of this Agreement. Pursuant to the Bank's internal
policies regarding the management of cash accounts, the Bank may segregate
certain portions of the cash of the Fund into a separate savings deposit
account upon which the Bank reserves the right to require seven (7) days notice
prior to withdrawal of cash from such an account. Upon receipt by the Bank of
Proper Instructions (which may be continuing instructions) or in the case of
payments for redemptions and repurchases of outstanding shares of common stock
of the Fund, notification from the Fund's transfer agent as provided in Section
7, requesting such payment, designating the payee or the account or accounts to
which the Bank will release funds for deposit, and stating that it is for a
purpose permitted under the terms of this Section 5, specifying the applicable
subsection, the Bank will make payments of cash held for the accounts of the
Fund, insofar as funds are available for that purpose, only as permitted in
subsections 5.1-5.9 below.
5.1 Purchase of Securities. Upon the purchase of securities for the Fund,
against contemporaneous receipt of such securities by the Bank or against
delivery of such securities to the Bank in accordance with generally accepted
settlement practices and customs in the jurisdiction or market in which the
transaction occurs registered in the name of the Fund or in the name of, or
properly endorsed and in form for transfer to, the Bank, or a nominee of the
Bank, or receipt for the account of the Bank pursuant to the provisions of
Section 6 below, each such payment to be made at the purchase price shown on a
broker's confirmation (or transaction report in the case of Book Entry Paper
(as that term is defined in Section 6.6 hereof)) of purchase of the securities
received by the Bank before such payment is made, as confirmed in the Proper
Instructions received by the Bank before such payment is made.
5.2 Redemptions. In such amount as may be necessary for the repurchase or
redemption of common shares of the Fund offered for repurchase or redemption in
accordance with Section 7 of this Agreement.
5.3 Distributions and Expenses of Fund. For the payment on the account of
the Fund of dividends or other distributions to shareholders as may from time
to time be declared by the Board, interest, taxes, management or supervisory
fees, distribution fees, fees of the Bank for its services hereunder and
reimbursement of the expenses and liabilities of the Bank as provided
hereunder, fees of any transfer agent, fees for legal, accounting, and auditing
services, or other operating expenses of the Fund.
5.4 Payment in Respect of Securities. For payments in connection with the
conversion, exchange or surrender of Portfolio Securities or securities
subscribed to by the Fund held by or to be delivered to the Bank.
5.5 Repayment of Loans. To repay loans of money made to the Fund, but, in
the case of final payment, only upon redelivery to the Bank of any Portfolio
Securities pledged or hypothecated therefor and upon surrender of documents
evidencing the loan;
5.6 Repayment of Cash. To repay the cash delivered to the Fund for the
purpose of collateralizing the obligation to return to the Fund certificates
borrowed from the Fund representing Portfolio Securities, but only upon
redelivery to the Bank of such borrowed certificates.
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5.7 Foreign Exchange Transactions.
(a) For payments in connection with foreign exchange contracts or
options to purchase and sell foreign currencies for spot and future delivery
(collectively, "Foreign Exchange Agreements")which may be entered into by the
Bank on behalf of the Fund upon the receipt of Proper Instructions, such Proper
Instructions to specify the currency broker or banking institution (which may
be the Bank, or any other subcustodian or agent hereunder, acting as principal)
with which the contract or option is made, and the Bank shall have no duty with
respect to the selection of such currency brokers or banking institutions with
which the Fund deals or for their failure to comply with the terms of any
contract or option.
(b) In order to secure any payments in connection with Foreign
Exchange Agreements which may be entered into by the Bank pursuant to Proper
Instructions, the Fund agrees that the Bank shall have a continuing lien and
security interest, to the extent of any payment due under any Foreign Exchange
Agreement, in and to any property at any time held by the Bank for the Fund's
benefit or in which the Fund has an interest and which is then in the Bank's
possession or control (or in the possession or control of any third party
acting on the Bank's behalf). The Fund authorizes the Bank, in the Bank's sole
discretion, at any time to charge any such payment due under any Foreign
Exchange Agreement against any balance of account standing to the credit of the
Fund on the Bank's books.
5.8 Other Authorized Payments. For other authorized transactions of the
Fund, or other obligations of the Fund incurred for proper Fund purposes;
provided that before making any such payment the Bank will also receive a
certified copy of a resolution of the Board signed by an Authorized Person
(other than the Person certifying such resolution) and certified by its
Secretary or Assistant Secretary, naming the person or persons to whom such
payment is to be made, and either describing the transaction for which payment
is to be made and declaring it to be an authorized transaction of the Fund, or
specifying the amount of the obligation for which payment is to be made,
setting forth the purpose for which such obligation was incurred and declaring
such purpose to be a proper corporate purpose.
5.9 Termination: Upon the termination of this Agreement as hereinafter
set forth pursuant to Section 8 and Section 16 of this Agreement.
6. Securities.
6.1 Segregation and Registration. Except as otherwise provided herein,
and except for securities to be delivered to any subcustodian appointed
pursuant to Sections 14.2 or 14.3 hereof, the Bank as custodian will receive
and hold pursuant to the provisions hereof, in a separate account or accounts
and physically segregated at all times from those of other persons, any and all
Portfolio Securities which may now or hereafter be delivered to it by or for
the account of the Fund. All such Portfolio Securities will be held or disposed
of by the Bank for, and subject at all times to, the instructions of the Fund
pursuant to the terms of this Agreement. Subject to the specific provisions
herein relating to Portfolio Securities that are not physically held by the
Bank, the Bank will register all Portfolio Securities (unless otherwise
directed by Proper Instructions or an Officers' Certificate), in the name of a
registered nominee of the Bank as defined in the Internal Revenue Code and any
Regulations of the Treasury Department issued thereunder, and will execute and
deliver all such certificates in connection therewith as may be required by
such laws or regulations or under the laws of any state.
The Fund will from time to time furnish to the Bank appropriate
instruments to enable it to hold or deliver in proper form for transfer, or to
register in the name of its registered nominee, any Portfolio Securities which
may from time to time be registered in the name of the Fund.
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6.2 Voting and Proxies. Neither the Bank nor any nominee of the Bank will
vote any of the Portfolio Securities held hereunder, except in accordance with
Proper Instructions or an Officers' Certificate. The Bank will execute and
deliver, or cause to be executed and delivered, to the Fund all notices,
proxies and proxy soliciting materials delivered to the Bank with respect to
such Securities, such proxies to be executed by the registered holder of such
Securities (if registered otherwise than in the name of the Fund), but without
indicating the manner in which such proxies are to be voted.
6.3 Co1porate Action. If at any time the Bank is notified that an issuer
of any Portfolio Security has taken or intends to take a corporate action (a
"Corporate Action") that affects the rights, privileges, powers, preferences,
qualifications or ownership of a Portfolio Security, including without
limitation, liquidation, consolidation, merger, recapitalization,
reorganization, reclassification, subdivision, combination, stock split or
stock dividend, which Corporate Action requires an affirmative response or
action on the part of the holder of such Portfolio Security (a "Response"), the
Bank shall notify the Fund promptly of the Corporate Action, the Response
required in connection with the Corporate Action and the Bank's deadline for
receipt from the Fund of Proper Instructions regarding the Response (the
"Response Deadline"). The Bank shall forward to the Fund via telecopier and/or
overnight courier all notices, information statements or other materials
relating to the Corporate Action within twenty-four (24) hours of receipt of
such materials by the Bank.
(a) The Bank shall act upon a required Response only after receipt by
the Bank of Proper Instructions from the Fund no later than 5:00 p.m. on the
date specified as the Response Deadline and only if the Bank (or its agent or
subcustodian hereunder) has actual possession of all necessary Securities,
consents and other materials no later than 5:00 p.m. on the date specified as
the Response Deadline.
(b) The Bank shall have no duty to act upon a required Response if
Proper Instructions relating to such Response and all necessary Securities,
consents and other materials are not received by and in the possession of the
Bank no later than 5:00 p.m. on the date specified as the Response Deadline.
Notwithstanding, the Bank may, in its sole discretion, use its best efforts to
act upon a Response for which Proper Instructions and/or necessary Securities,
consents or other materials are received by the Bank after 5:00 p.m. on the
date specified as the Response Deadline, it being acknowledged and agreed by
the parties that any undertaking by the Bank to use its best efforts in such
circumstances shall in no way create any duty upon the Bank to complete such
Response prior to its expiration.
(c) In the event that the Fund notifies the Bank of a Corporate
Action requiring a Response and the Bank has received no other notice of such
Corporate Action, the Response Deadline shall be 48 hours prior to the Response
expiration time set by the depository processing such Corporate Action.
(d) Section 14.3(g) of this Agreement shall govern any Corporate
Action involving Foreign Portfolio Securities held by a Selected Foreign
Sub-Custodian.
6.4 Book-Enja System. Provided (i) the Bank has received a certified copy
of a resolution of the Board specifically approving deposits of Fund assets in
the Book-Entry System, and (ii) for any subsequent changes to such arrangements
following such approval, the Board has reviewed and approved the arrangement
and has not delivered an Officer's Certificate to the Bank indicating that the
Board has withdrawn its approval:
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(a) The Bank may keep
Portfolio Securities in the Book-Entry System provided that such Portfolio
Securities are represented in an account ("Account") of the Bank (or its agent)
in such System which shall not include any assets of the Bank (or such agent)
other than assets held as a fiduciary, custodian, or otherwise for customers;
(b) The records of the Bank (and any such agent) with respect to the
Fund's participation in the Book-Entry System through the Bank (or any such
agent) will identify by book entry the Portfolio Securities which are included
with other securities deposited in the Account and shall at all times during
the regular business hours of the Bank (or such agent) be open for inspection
by duly authorized officers, employees or agents of the Fund. Where securities
are transferred to the Fund's account, the Bank shall also, by book entry or
otherwise, identify as belonging to the Fund a quantity of securities in a
fungible bulk of securities (i) registered in the name of the Bank or its
nominee, or (ii) shown on the Bank's account on the books of the Federal
Reserve Bank;
(c) The Bank (or its agent) shall pay for securities purchased for
the account of the Fund or shall pay cash collateral against the return of
Portfolio Securities loaned by the Fund upon (i) receipt of advice from the
Book-Entry System that such Securities have been transferred to the Account,
and (ii) the making of an entry on the records of the Bank (or its agent) to
reflect such payment and transfer for the account of the Fund. The Bank (or its
agent) shall transfer securities sold or loaned for the account of the Fund
upon
(i) receipt of advice from the Book-Entry System that payment
for securities sold or payment of the initial cash collateral against the
delivery of securities loaned by the Fund has been transferred to the Account;
and
(ii) the making of an entry on the records of the Bank (or its
agent) to reflect such transfer and payment for the account of the Fund. Copies
of all advices from the Book-Entry System of transfers of securities for the
account of the Fund shall identify the Fund, be maintained for the Fund by the
Bank and shall be provided to the Fund at its request. The Bank shall send the
Fund a confirmation, as defined by Rule l7f-4 of the 1940 Act, of any transfers
to or from the account of the Fund;
(d) The Bank will promptly provide the Fund with any report obtained
by the Bank or its agent on the Book-Entry System's accounting system, internal
accounting control and procedures for safeguarding securities deposited in the
Book-Entry System;
6.5 Use of a Depository. Provided (i) the Bank has received a certified
copy of a resolution of the Board specifically approving deposits in DTC or
other such Depository and (ii) for any subsequent changes to such arrangements
following such approval, the Board has reviewed and approved the arrangement
and has not delivered an Officer's Certificate to the Bank indicating that the
Board has withdrawn its approval:
(a) The Bank may use a Depository to hold, receive, exchange,
release, lend, deliver and otherwise deal with Portfolio Securities including
stock dividends, rights and other items of like nature, and to receive and
remit to the Bank on behalf of the Fund all income and other payments thereon
and to take all steps necessary and proper in connection with the collection
thereof,
(b) Registration of Portfolio Securities may be made
in the name of any nominee or nominees used by such Depository;
(c) Payment for securities purchased and sold may be made through the
clearing medium employed by such Depository for transactions of participants
acting through it. Upon any purchase of Portfolio Securities, payment will be
made only upon delivery of the securities to or for the account of the Fund and
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the Fund shall pay cash collateral against the return of Portfolio Securities
loaned by the Fund only upon delivery of the Securities to or for the account
of the Fund; and upon any sale of Portfolio Securities, delivery of the
Securities will be made only against payment therefor or, in the event
Portfolio Securities are loaned, delivery of Securities will be made only
against receipt of the initial cash collateral to or for the account of the
Fund; and
(d) The Bank shall use its best efforts to provide that:
(i) The Depository obtains replacement of any certificated
Portfolio Security deposited with it in the event such Security is lost,
destroyed, wrongfully taken or otherwise not available to be returned to the
Bank upon its request;
(ii) Proxy materials received by a Depository with respect to
Portfolio Securities deposited with such Depository are forwarded immediately
to the Bank for prompt transmittal to the Fund;
(iii)Such Depository promptly forwards to the Bank confirmation
of any purchase or sale of Portfolio Securities and of the appropriate book
entry made by such Depository to the Fund's account;
(iv) Such Depository prepares and delivers to the Bank such
records with respect to the performance of the Bank's obligations and duties
hereunder as may be necessary for the Fund to comply with the recordkeeping
requirements of Section 3 1 (a) of the 1940 Act and Rule 3 1 (a) thereunder;
and
(v) Such Depository delivers to the Bank all internal accounting
control reports, whether or not audited by an independent public accountant, as
well as such other reports as the Fund may reasonably request in order to
verify the Portfolio Securities held by such Depository.
6.6 Use of Book-Entry System for Commercial P . Provided (i) the Bank has
received a certified copy of a resolution of the Board specifically approving
participation in a system maintained by the Bank for the holding of commercial
paper in book-entry form ("Book-Entry Paper") and (ii) for each year following
such approval the Board has received and approved the arrangements, upon
receipt of Proper Instructions and upon receipt of confirmation from an Issuer
(as defined below) that the Fund has purchased such Issuer's Book-Entry Paper,
the Bank shall issue and hold in book-entry form, on behalf of the Fund,
commercial paper issued by issuers with whom the Bank has entered into a
book-entry agreement (the "Issuers"). In maintaining procedures for Book-Entry
Paper, the Bank agrees that:
(a) The Bank will maintain all Book-Entry Paper held by the Fund in
an account of the Bank that includes only assets held by it for customers;
(b) The records of the Bank with respect to the Fund's purchase of
Book-Entry Paper through the Bank will identify, by book-entry, commercial
paper belonging to the Fund which is included in the Book-Entry System and
shall at all times during the regular business hours of the Bank be open for
inspection by duly authorized officers, employees or agents of the Fund;
(c) The Bank shall pay for Book-Entry Paper purchased for the account
of the Fund upon contemporaneous (i) receipt of advice from the Issuer that
such sale of Book-Entry Paper has been effected, and (ii) the making of an
entry on the records of the Bank to reflect such payment and transfer for the
account of the Fund;
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(d) The Bank shall cancel such Book-Entry Paper obligation upon the
maturity thereof upon contemporaneous (i) receipt of advice that payment for
such Book-Entry Paper has been transferred to the Fund, and (ii) the making of
an entry on the records of the Bank to reflect such payment for the account of
the Fund; and
(e) 'Me Bank will send to the Fund such reports on its system of
internal accounting control with respect to the Book-Entry Paper as the Fund
may reasonably request from time to time.
6.7 Use of Immobilization Programs. Provided (i) the Bank has received a
certified copy of a resolution of the Board specifically approving the
maintenance of Portfolio Securities in an immobilization program operated by a
bank which meets the requirements of Section 26(a)(1) of the 1940 Act, and (ii)
for each year following such approval the Board has reviewed and approved the
arrangement and has not delivered an Officer's Certificate to the Bank
indicating that the Board has withdrawn its approval, the Bank shall enter into
such immobilization program with such bank acting as a subcustodian hereunder.
6.8 Eurodollar CDs. Any Portfolio Securities which are Eurodollar CDs may
be physically held by the European branch of the U.S. banking institution that
is the issuer of such Eurodollar CD (a "European Branch"), provided that such
Portfolio Securities are identified on the books of the Bank as belonging to
the Fund and that the books of the Bank identify the European Branch holding
such Portfolio Securities. Notwithstanding any other provision of this
Agreement to the contrary, except as stated in the first sentence of this
subsection 6.8, the Bank shall be under no other duty with respect to such
Eurodollar CDs belonging to the Fund.
6.9 Options and Futures Transactions.
(a) Puts and Calls Traded on Securities Exchanges, NASDAQ or Over the
Counter.
(i) The Bank shall take action as to put options ("puts") and
call options ("calls") purchased or sold (written) by the Fund regarding escrow
or other arrangements (i) in accordance with the provisions of any agreement
entered into upon receipt of Proper Instructions among the Bank, any
broker-dealer registered with the National Association of Securities Dealers,
Inc. (the "NASD"), and, if necessary, the Fund, relating to the compliance with
the rules of the Options Clearing Corporation and of any registered national
securities exchange, or of any similar organization or organizations.
(ii) Unless another agreement requires it to do so, the Bank
shall be under no duty or obligation to see that the Fund has deposited or is
maintaining adequate margin, if required, with any broker in connection with
any option, nor shall the Bank be under duty or obligation to present such
option to the broker for exercise unless it receives Proper Instructions from
the Fund. The Bank shall have no responsibility for the legality of any put or
call purchased or sold on behalf of the Fund, the propriety of any such
purchase or sale, or the adequacy of any collateral delivered to a broker in
connection with an option or deposited to or withdrawn from a Segregated
Account (as defined in subsection 6. 10 below). The Bank specifically, but not
by way of limitation, shall not be under any duty or obligation to: (i)
periodically check or notify the Fund that the amount of such collateral held
by a broker or held in a 'Segregated Account is sufficient to protect such
broker or the Fund against any loss; (ii) effect the return of any collateral
delivered to a broker; or (iii) advise the Fund that any option it holds, has
or is about to expire. Such duties or obligations shall be the sole
responsibility of the Fund.
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(b) Puts, Calls and Futures Traded on Commodities Exchanges
(i) 'Me Bank shall take action as to puts, calls and futures
contracts ("Futures") purchased or sold by the Fund in accordance with the
provisions of any agreement entered into upon the receipt of Proper
Instructions among the Fund, the Bank and a Futures Commission Merchant
registered under the Commodity Exchange Act, relating to compliance with the
rules of the Commodity Futures Trading Commission and/or any Contract Market,
or any similar organization or organizations, regarding account deposits in
connection with transactions by the Fund.
(ii) The responsibilities of the Bank as to futures, puts and
calls traded on commodities exchanges, any Futures Commission Merchant account
and the Segregated Account shall be limited as set forth in subparagraph (a)(2)
of this Section 6.8 as if such subparagraph referred to Futures Commission
Merchants rather than brokers, and Futures and puts and calls thereon instead
of options.
6. 10 Segregated Account. The Bank shall upon receipt of
Proper Instructions establish and maintain a Segregated Account
or Accounts for and on behalf of the Fund.
(a) Cash and/or Portfolio Securities may be transferred into a
Segregated Account upon receipt of Proper Instructions in the following
circumstances:
(i) in accordance with the provisions of any agreement among the
Fund, the Bank and a broker-dealer registered under the Exchange Act and a
member of the NASD or any Futures Commission Merchant registered under the
Commodity Exchange Act, relating to compliance with the rules of the Options
Clearing Corporation and of any registered national securities exchange or the
Commodity Futures Trading Commission or any registered Contract Market, or of
any similar organizations regarding escrow or other arrangements in connection
with transactions by the Fund;
(ii) for the purpose of segregating cash or securities in
connection with options purchased or written by the Fund or commodity futures
purchased or written by the Fund;
(iii)for the deposit of liquid assets, such as cash, U.S.
Government securities or other high grade debt obligations, having a market
value (marked to market on a daily basis) at all times equal to not less than
the aggregate purchase price due on the settlement dates of all the Fund's then
outstanding forward commitment or "when-issued" agreements relating to the
purchase of Portfolio Securities and all the Fund's then outstanding
commitments under reverse repurchase agreements entered into with broker-dealer
firms;
(iv) for the purposes of compliance by the Fund with the
procedures required by Investment Company Act Release No. 10666, or any
subsequent release or releases of the Securities and Exchange Commission
relating to the maintenance of Segregated Accounts by registered investment
companies;
(v) for other proper corporate purposes, but only, in the case
of this clause (e), upon receipt of, in addition to Proper Instructions, a
certified copy of a resolution of the Board, or of the executive committee of
the Board signed by an officer of the Fund and certified by the Secretary or an
Assistant Secretary, setting forth the purpose or purposes of such Segregated
Account and declaring such purposes to be proper corporate purposes.
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(b) Cash and/or Portfolio Securities may be withdrawn from a
Segregated Account pursuant to Proper Instructions in the following
circumstances:
(i) with respect to assets deposited in accordance with the
provisions of any agreements referenced in (a)(i) or (a)(h) above, in
accordance with the provisions of such agreements;
(ii) with respect to assets deposited pursuant to (a)(iii) or
(a)(iv) above, for sale or delivery to meet the Fund's obligations under
outstanding forward commitment or when-issued agreements for the purchase of
Portfolio Securities and under reverse repurchase agreements;
(iii) for exchange for other liquid assets of
equal or greater value deposited in the Segregated Account;
(iv) to the extent that the Fund's outstanding for-ward
commitment or when-issued agreements for the purchase of portfolio securities
or reverse repurchase agreements are sold to other parties or the Fund's
obligations thereunder are met from assets of the Fund other than those in the
Segregated Account;
(v) for delivery upon settlement of a forward commitment or
when-issued agreement for the sale of Portfolio Securities; or
(vi) with respect to assets deposited pursuant to (e) above, in
accordance with the purposes of such account as set forth in Proper
Instructions.
6.11 Interest Bearing Call or Time Deposits. The Bank shall, upon receipt
of Proper Instructions relating to the purchase by the Fund of interest-bearing
fixed-term and call deposits, transfer cash, by wire or otherwise, in such
amounts and to such bank or banks as shall be indicated in such Proper
Instructions. 'Me Bank shall include in its records with respect to the assets
of the Fund appropriate notation as to the amount of each such deposit, the
banking institution with which such deposit is made (the "Deposit Bank"), and
shall retain such forms of advice or receipt evidencing the deposit, if any, as
may be forwarded to the Bank by the Deposit Bank. Such deposits shall be deemed
Portfolio Securities of the Fund and the responsibility of the Bank therefore
shall be the same as and no greater than the Bank's responsibility in respect
of other Portfolio Securities of the Fund.
6.12 Transfer of Securities. The Bank will transfer, exchange, deliver or
release Portfolio Securities held by it hereunder, insofar as such Securities
are available for such purpose, provided that before making any transfer,
exchange, delivery or release under this Section only upon receipt of Proper
Instructions. The Proper Instructions shall state that such transfer, exchange
or delivery is for a purpose permitted under the terms of this Section 6.11,
and shall specify the applicable subsection, or describe the purpose of the
transaction with sufficient particularity to permit the Bank to ascertain the
applicable subsection. After receipt of such Proper Instructions, the Bank will
transfer, exchange, deliver or release Portfolio Securities only in the
following circumstances:
(a) Upon sales of Portfolio Securities for the account of the Fund,
against contemporaneous receipt by the Bank of payment therefor in full, or
against payment to the Bank in accordance with generally accepted settlement
practices and customs in the jurisdiction or market in which the transaction
occurs, each such payment to be in the amount of the sale price shown in a
broker's confirmation of sale received by the Bank before such payment is made,
as confirmed in the Proper Instructions received by the Bank before such
payment is made;
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(b) In exchange for or upon conversion into other securities alone or
other securities and cash pursuant to any plan of merger, consolidation,
reorganization, share split-up, change in par value, recapitalization or
readjustment or otherwise, upon exercise of subscription, purchase or sale or
other similar rights represented by such Portfolio Securities, or for the
purpose of tendering shares in the event of a tender offer therefor, provided,
however, that in the event of an offer of exchange, tender offer, or other
exercise of rights requiring the physical tender or delivery of Portfolio
Securities, the Bank shall have no liability for failure to so tender in a
timely manner unless such Proper Instructions are received by the Bank at least
two business days prior to the date required for tender, and unless the Bank
(or its agent or subcustodian hereunder) has actual possession of such Security
at least two business days prior to the date of tender;
(c) Upon conversion of Portfolio Securities pursuant to their terms into
other securities;
(d) For the purpose of redeeming in-kind shares of the Fund upon
authorization from the Fund;
(e) In the case of option contracts owned by the Fund, for
presentation to the endorsing broker;
(f) When such Portfolio Securities are called, redeemed or
retired or otherwise become payable;
(g) For the purpose of effectuating the pledge of Portfolio
Securities held by the
Bank in order to collateralize loans made to the Fund by any bank, including
the Bank; provided, however, that such Portfolio Securities will be released
only upon payment to the Bank for the account of the Fund of the moneys
borrowed, provided further, however, that in cases where additional collateral
is required to secure a borrowing already made, and such fact is made to appear
in the Proper Instructions, Portfolio Securities may be released for that
purpose without any such payment. In the event that any pledged Portfolio
Securities are held by the Bank, they will be so held for the account of the
lender, and after notice to the Fund from the lender in accordance with the
normal procedures of the lender and any loan agreement between the fund and the
lender that an event of deficiency or default on the loan has occurred, the
Bank may deliver such pledged Portfolio Securities to or for the account of the
lender;
(h) for the purpose of releasing certificates representing Portfolio
Securities, against contemporaneous receipt by the Bank of the fair market
value of such security, as set forth in the Proper Instructions received by the
Bank before such payment is made;
(i) for the purpose of delivering securities lent by the Fund to a
bank or broker dealer, but only against receipt in accordance with street
delivery custom except as otherwise provided herein, of adequate collateral as
agreed upon from time to time by the Fund and the Bank, and upon receipt of
payment in connection with any repurchase agreement relating to such securities
entered into by the Fund;
j) for other authorized transactions of the Fund or for other proper
corporate purposes; provided that before making such transfer, the Bank will
also receive a certified copy of resolutions of the Board, signed by an
authorized officer of the Fund (other than the officer certifying such
resolution) and certified by its Secretary or Assistant Secretary, specifying
the Portfolio Securities to be delivered, setting forth the transaction in or
purpose for which such delivery is to be made, declaring such transaction to be
an authorized transaction of the Fund or such purpose to be a proper corporate
purpose, and naming the person or persons to whom delivery of such securities
shall be made; and
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(k) upon termination of this Agreement as hereinafter set forth
pursuant to Section 8 and Section 16 of this Agreement.
As to any deliveries made by the Bank pursuant to this Section 6.12,
securities or cash receivable in exchange therefor shall be delivered to the
Bank.
7. Redemptions. In the case of payment of assets of the Fund held by the
Bank in connection with redemptions and repurchases by the Fund of outstanding
common shares, the Bank will rely on notification by the Fund's transfer agent
of receipt of a request for redemption and certificates, if issued, in proper
form for redemption before such payment is made. Payment shall be made in
accordance with the Articles of Incorporation or Declaration of Trust and
By-laws of the Fund (the "Articles"), from assets available for said purpose.
8. Merger, Dissolution, etc. of Fund. In the case of the following
transactions, not in the ordinary course of business, namely, the merger of the
Fund into or the consolidation of the Fund with another investment company, the
sale by the Fund of all, or substantially all, of its assets to another
investment company, or the liquidation or dissolution of the Fund and
distribution of its assets, the Bank will deliver the Portfolio Securities held
by it under this Agreement and disburse cash only upon the order of the Fund
set forth in an Officers' Certificate, accompanied by a certified copy of a
resolution of the Board authorizing any of the foregoing transactions. Upon
completion of such delivery and disbursement and the payment of the fees,
disbursements and expenses of the Bank, this Agreement will terminate and the
Bank shall be released from any and all obligations hereunder.
9. Actions of Bank Without Prior Authorization. Notwithstanding anything
herein to the contrary, unless and until the Bank receives an Officers'
Certificate to the contrary, the Bank will take the following actions without
prior authorization or instruction of the Fund or the transfer agent:
9.1 Endorse for collection and collect on behalf of and in the name of
the Fund all checks, drafts, or other negotiable or transferable instruments or
other orders for the payment of money received by it for the account of the
Fund and hold for the account of the Fund all income, dividends, interest and
other payments or distributions of cash with respect to the Portfolio
Securities held thereunder;
9.2 Present for payment all coupons and other income items held by it for
the account of the Fund which call for payment upon presentation and hold the
cash received by it upon such payment for the account of the Fund;
9.3 Receive and hold for the account of the Fund all securities received
as a distribution on Portfolio Securities as a result of a stock dividend,
share split-up, reorganization, recapitalization, merger, consolidation,
readjustment, distribution of rights and similar securities issued with respect
to any Portfolio Securities held by it hereunder.
9.4 Execute as agent on behalf of the Fund all necessary ownership and
other certificates and affidavits required by the Internal Revenue Code or the
regulations of the Treasury Department issued thereunder, or by the laws of any
state, now or hereafter in effect, inserting the Fund's name on such
certificates as the owner of the securities covered thereby, to the extent it
may lawfully do so and as may be required to obtain payment in respect thereof.
'Me Bank will execute and deliver such certificates in connection with
Portfolio Securities delivered to it or by it under this Agreement as may be
required under the provisions of the Internal Revenue Code and any Regulations
of the Treasury Department issued thereunder, or under the laws of any State;
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9.5 Present for payment all Portfolio Securities which are called,
redeemed, retired or otherwise become payable, and hold cash received by it
upon payment for the account of the Fund; and
9.6 Exchange interim receipts or temporary securities for
definitive securities.
10. Collections and Defaults. The Bank will use reasonable efforts to
collect any funds which may to its knowledge become collectible arising from
Portfolio Securities, including dividends, interest and other income, and to
transmit to the Fund notice actually received by it of any call for redemption,
offer of exchange, right of subscription, reorganization or other proceedings
affecting such Securities. If Portfolio Securities upon which such income is
payable are in default or payment is refused after due demand or presentation,
the Bank will notify the Fund in writing of any default or refusal to pay
within two business days from the day on which it receives knowledge of such
default or refusal.
11. Maintenance of Records and Accounting Services. The Bank will maintain
records with respect to transactions for which the Bank is responsible pursuant
to the terms and conditions of this Agreement, and in compliance with the
applicable rules and regulations of the 1940 Act. The books and records of the
Bank pertaining to its actions under this Agreement and reports by the Bank or
its independent accountants concerning its accounting system, procedures for
safeguarding securities and internal accounting controls will be open to
inspection and audit at reasonable times by officers of or auditors employed by
the Fund and will be preserved by the Bank in the manner and in accordance with
the applicable rules and regulations under the 1940 Act.
The Bank shall perform fund accounting and shall keep the books of account
and render statements or copies from time to time as reasonably requested by
the Treasurer or any executive officer of the Fund.
The Bank shall assist generally in the preparation of reports to
shareholders and others, audits of accounts, and other ministerial matters of
like nature.
12. [Reserved]
13. Additional Services. The Bank shall perform the additional services
for the Fund as are set forth on Appendix B hereto. Appendix B may be amended
from time to time upon agreement of the parties to include further additional
services to be provided by the Bank to the Fund, at which time the fees set
forth in Appendix A shall be appropriately increased.
14. Duties of the Bank.
14.1 Performance of Duties and Standard of Care. In performing its duties
hereunder and any other duties listed on any Schedule hereto, if any, the Bank
will be entitled to receive and act upon the advice of independent counsel of
its own selection, which may be counsel for the Fund, and win be without
liability for any action taken or thing done or omitted to be done in
accordance with this Agreement in good faith in conformity with such advice.
The Bank will be under no duty or obligation to inquire into and will not be
liable for:
(a) the validity of the issue of any Portfolio
Securities purchased by or for the Fund, the legality of the
purchases thereof or the propriety of the price incurred therefor;
(b) the legality of any sale of any Portfolio Securities by or for
the Fund or the propriety of the amount for which the same are sold;
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(c) the legality of an issue or sale of any common
shares of the Fund or the sufficiency of the amount to be
received therefor;
(d) the legality of the repurchase of any common
shares of the Fund or the propriety of the amount to be paid
therefor;
(e) the legality of the declaration of any dividend by
the Fund or the legality of the distribution of any Portfolio
Securities as payment in kind of such dividend; and
(f) any property or moneys of the Fund unless and until received by
it, and any such property or moneys delivered or paid by it pursuant to Proper
Instructions and in accordance with the provisions of this Agreement.
Moreover, the Bank will not be under any duty or obligation to ascertain
whether any Portfolio Securities at any time delivered to or held by it for the
account of the Fund are such as may properly be held by the Fund under the
provisions of its Articles, By-laws, any federal or state statutes or any rule
or regulation of any governmental agency.
14.2 Agents and Subcustodians with Respect to Property of the Fund Held
in the United States. 'Me Bank may employ agents in the performance of its
duties hereunder and shall be responsible for the acts and omissions of such
agents as if performed by the Bank hereunder. Without limiting the foregoing,
certain duties of the Bank hereunder may be performed by one or more affiliates
of the Bank.
Upon receipt of Proper Instructions, the Bank may employ subcustodians
selected by the Fund, provided that any such subcustodian meets at least the
minimum qualifications required by Section 17(f)(1) of the 1940 Act to act as a
custodian of the Fund's assets with respect to property of the Fund held in the
United States. The Bank shall have no liability to the Fund or any other person
by reason of any act or omission of any such subcustodian and the Fund shall
indemnify the Bank and hold it harmless from and against any and all actions,
suits and claims, arising directly or indirectly out of the performance of any
subcustodian. Upon request of the Bank, the Fund shall assume the entire
defense of any action, suit, or claim subject to the foregoing indemnity. The
Fund shall pay all fees and expenses of any subcustodian.
14.3 Duties of the Bank with Respect to Propgrty of the Fund Held
Outside of the United States.
(a) Appointment of Foreign Custody Manager
(i) If the Fund has appointed the Bank Foreign Custody Manager
(as that term is defined in Rule 17f-5 under the 1940 Act), the Bank's duties
and obligations with respect to the Fund's Portfolio Securities and other
assets maintained outside the United States shall be, to the extent not set
forth herein, as set forth in the Delegation Agreement between the Fund and the
Bank (the "Delegation Agreement").
(ii) If the Fund has appointed any other person or entity
Foreign Custody Manager, the Bank shall act only upon Proper Instructions from
the Fund with regard to any of the Fund's Portfolio Securities or other assets
held or to be held outside of the United States, and the Bank shall be without
liability for any Claim (as that term is defined in Section 15 hereof) arising
out of maintenance of the Fund's Portfolio Securities or other assets outside
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of the United States. The Fund also agrees that it shall enter into a written
agreement with such Foreign Custody Manager that shall obligate such Foreign
Custody Manager to provide to the Bank in a timely manner all information
required by the Bank in order to complete its obligations hereunder. The Bank
shall not be liable for any Claim arising out of the failure of such Foreign
Custody Manager to provide such information to the Bank
(b) Segregation of Securities. The Bank shall identify on its books
as belonging to the Fund the Foreign Portfolio Securities held by each foreign
sub-custodian (each an "Eligible Foreign Custodian") selected by the Foreign
Custody Manager, subject to receipt by the Bank of the necessary information
from such Eligible Foreign Custodian if the Foreign Custody Manager is not the
Bank.
(c) Access of Independent Accountants of the Fund. If the Bank is the
Fund's Foreign Custody Manager, upon request of the Fund, the Bank will use its
best efforts to arrange for the independent accountants of the Fund to be
afforded access to the books and records of any foreign banking institution
employed as an Eligible Foreign Custodian insofar as such books and records
relate to the performance of such foreign banking institution with regard to
the Fund's Portfolio Securities and other assets.
(d) Reports by Bank. If the Bank is the Fund's Foreign Custody
Manager, the Bank will supply to the Fund the reports required under the
Delegation Agreement.
(e) Transactions in Foreign Custody Account. Transactions with
respect to the assets of the Fund held by an Eligible Foreign Custodian shall
be effected pursuant to Proper Instructions from the Fund to the Bank and shall
be effected in accordance with the applicable agreement between the Foreign
Custody Manager and such Eligible Foreign Custodian. If at any time any Foreign
Portfolio Securities shall be registered in the name of the nominee of the
Eligible Foreign Custodian, the Fund agrees to hold any such nominee harmless
from any liability by reason of the registration of such securities in the name
of such nominee.
Notwithstanding any provision of this Agreement to the contrary,
settlement and payment for Foreign Portfolio Securities received for the
account of the Fund and delivery of Foreign Portfolio Securities maintained for
the account of the Fund may be effected in accordance with the customary
established securities trading or securities processing practices and
procedures in the jurisdiction or market in which the transaction occurs,
including, without limitation, delivering securities to the purchaser thereof
or to a dealer therefor (or an agent for such purchaser or dealer) against a
receipt with the expectation of receiving later payment for such securities
from such purchaser or dealer.
In connection with any action to be taken with respect to the
Foreign Portfolio Securities held hereunder, including, without limitation, the
exercise of any voting rights, subscription rights, redemption rights, exchange
rights, conversion rights or tender rights, or any other action in connection
with any other right, interest or privilege with respect to such Securities
(collectively, the "Rights"), the Bank shall promptly transmit to the Fund such
information in connection therewith as is made available to the Bank by the
Eligible Foreign Custodian, and shall promptly forward to the applicable
Eligible Foreign Custodian any instructions, forms or certifications with
respect to such Rights, and any instructions relating to the actions to be
taken in connection therewith, as the Bank shall receive from the Fund pursuant
to Proper Instructions. Notwithstanding the foregoing, the B ank shall have no
further duty or obligation with respect to such Rights, including, without
limitation, the determination of whether the Fund is entitled to participate in
such Rights under applicable U.S. and foreign laws, or the determination of
whether any action proposed to be taken with respect to such Rights by the Fund
or by the applicable Eligible Foreign Custodian will comply with all applicable
terms and conditions of any such Rights or any applicable laws or regulations,
or market practices within the market in which such action is to be taken or
omitted.
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(f) Tax Law. The Bank shall have no responsibility or liability for
any obligations now or hereafter imposed on the Fund or the Bank as custodian
of the Fund by the tax laws of any jurisdiction, and it shall be the
responsibility of the Fund to notify the Bank of the obligations imposed on the
Fund or the Bank as the custodian of the Fund by the tax law of any non-U.S.
jurisdiction, including responsibility for withholding and other taxes,
assessments or other governmental charges, certifications and governmental
reporting. The sole responsibility of the Eligible Foreign Custodian with
regard to such tax law shall be to use reasonable efforts to assist the Fund
with respect to any claim for exemption or refund under the tax law of
jurisdictions for which the Fund has provided such information.
14.4 Insurance. The Bank shall use the same care with respect to the
safekeeping of Portfolio Securities and cash of the Fund held by it as it uses
in respect of its own similar property and and shall maintain general liability
policies and errors and omissions policy in accordance with general industry
standards, but it need not maintain any special insurance for the benefit of
the Fund.
14.5. Fees and Expenses of the Bank. The Fund will pay or reimburse the
Bank from time to time for any transfer taxes payable upon transfer of
Portfolio Securities made hereunder, and for all necessary proper
disbursements, expenses and charges made or incurred by the Bank in the
performance of this Agreement (including any duties listed on any Schedule
hereto, if any) including any indemnities for any loss, liabilities or expense
to the Bank as provided above. For the services rendered by the Bank hereunder,
the Fund will pay to the Bank such compensation or fees at such rate and at
such times as shall be agreed upon in writing by the parties from time to time.
The Bank will also be entitled to reimbursement by the Fund for all reasonable
expenses incurred in conjunction with termination of this Agreement.
14.6 Advances by the Bank. The Bank may, in its sole discretion, advance
funds on behalf of the Fund to make any payment permitted by this Agreement
upon receipt of any proper authorization required by this Agreement for such
payments by the Fund. Should such a payment or payments, with advanced funds,
result in an overdraft (due to insufficiencies of the Fund's account with the
Bank, or for any other reason) this Agreement deems any such overdraft or
related indebtedness a loan made by the Bank to the Fund payable on demand.
Such overdraft shall bear interest at the current rate charged by the Bank for
such loans unless the Fund shall provide the Bank with agreed upon compensating
balances. The Fund agrees that the Bank shall have a continuing lien and
security interest to the extent of any overdraft or indebtedness, in and to any
property at any time held by it for the Fund's benefit or in which the Fund has
an interest and which is then in the Bank's possession or control (or in the
possession or control of any third party acting on the Bank's behalf). The Fund
authorizes the Bank, in the Bank's sole discretion, at any time to charge any
overdraft or indebtedness, together with interest due thereon, against any
balance of account standing to the credit of the Fund on the Bank's books.
15. Limitation of Liabili1y.
15.1 Notwithstanding anything in this Agreement to the contrary, in no
event shaH the Bank or any of its officers, directors, employees or agents
(collectively, the "Indemnified Parties") be liable to the Fund or any third
party, and the Fund shall indemnify and hold the Bank and the Indemnified
Parties harmless from and against any and all loss, damage, liability, actions,
suits, claims, costs and expenses, including legal fees, (a "Claim") arising as
a result of any act or omission of the Bank or any Indemnified Party under this
Agreement, except for any Claim resulting solely from the negligence, willful
misfeasance or bad faith of the Bank or any Indemnified Party. Without limiting
the foregoing, neither the Bank nor the Indemnified Parties shall be liable
for, and the Bank and the Indemnified Parties shall be indemnified against, any
Claim arising as a result of:
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(a) Any act or omission by the Bank or any Indemnified Party in good
faith reliance upon the terms of this Agreement, any Officer's Certificate,
Proper Instructions, resolution of the Board, telegram, telecopier, notice,
request, certificate or other instrument reasonably believed by the Bank to
genuine;
(b) Any act or omission of any subcustodian selected
by or at the direction of the Fund;
(c) Any act or omission of any Foreign Custody Manager other than the
Bank or any act or omission of any Eligible Foreign Custodian if the Bank is
not the Foreign Custody Manager;
(d) Any Corporate Action requiring a Response for which the Bank has
not received Proper Instructions or obtained actual possession of all necessary
Securities, consents or other materials by 5:00 p.m. on the date specified as
the Response Deadline;
(e) Any act or omission of any European Branch of a
U.S. banking institution that is the issuer of Eurodollar CDs in
connection with any Eurodollar CDs held by such European Branch;
(f) Information relied on in good faith by the Bank and supplied by
any Authorized Person in connection with the calculation of (i) the net asset
value and public offering price of the shares of capital stock of the Fund or
(ii) the Yield Calculation; or
15.2 Neither party shall be liable to the other for any Claim arising
from any acts of God, earthquakes, fires, floods, storms or other disturbances
of nature, epidemics, strikes, riots, nationalization, expropriation, currency
restrictions, acts of war, civil war or terrorism, insurrection, nuclear
fusion, fission or radiation, the interruption, loss or malfunction of
utilities, transportation or computers (hardware or software) and computer
facilities, the unavailability of energy sources and other similar happenings
or events.
15.3 Notwithstanding anything to the contrary in this Agreement, in no
event shall the Bank or the Indemnified Parties be liable to the Fund or any
third party for lost profits or lost revenues or any special, consequential,
punitive or incidental damages of any kind whatsoever in connection with this
Agreement or any activities hereunder.
16. Termination.
16.1 Either party may terminate this Agreement upon sixty days written
notice to the other party. Any termination pursuant to this paragraph 16.1
shall be effective upon expiration of such sixty days, provided, however, that
the effective date of such termination may be postponed to a date not more than
ninety days after delivery of the written notice: (i) at the request of the
Bank, in order to prepare for the transfer by the Bank of all of the assets of
the Fund held hereunder; or (ii) at the request of the Fund, in order to give
the Fund an opportunity to make suitable arrangements for a successor
custodian.
16.2 In the event of the termination of this Agreement, the Bank will
immediately upon receipt or transmittal, as the case may be, of notice of
termination, commence and prosecute diligently to completion the transfer of
all cash and the delivery of all Portfolio Securities duly endorsed and all
records maintained under Section 11 to the successor custodian when appointed
by the Fund. The obligation of the Bank to deliver and transfer over the assets
of the Fund held by it directly to such successor custodian will commence as
soon as such successor is appointed and will continue until completed as
aforesaid. If the Fund does not select a successor custodian within ninety (90)
days from the date of delivery of notice of termination the Bank may, subject
to the provisions of subsection (16.3),
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deliver the Portfolio Securities and cash of the Fund held by the Bank to a
bank or trust company of the Bank's own selection which meets the requirements
of Section 17(f)(1) of the 1940 Act and has a reported capital, surplus and
undivided profits aggregating not less than $2,000,000, to be held as the
property of the Fund under terms similar to those on which they were held by
the Bank, whereupon such bank or trust company so selected by the Bank will
become the successor custodian of such assets of the Fund with the same effect
as though selected by the Board. Thereafter, the Bank shall be released from
any and all obligations under this Agreement.
16.3 Prior to the expiration of ninety (90) days after notice of
termination has been given, the Fund may furnish the Bank with an order of the
Fund advising that a successor custodian cannot be found willing and able to
act upon reasonable and customary terms and that there has been submitted to
the shareholders of the Fund the question of whether the Fund will be
liquidated or will function without a custodian for the assets of the Fund held
by the Bank. In that event the Bank will deliver the Portfolio Securities and
cash of the Fund held by it, subject as aforesaid, in accordance with one of
such alternatives which may be approved by the requisite vote of shareholders,
upon receipt by the Bank of a copy of the minutes of the meeting of
shareholders at which action was taken, certified by the Fund's Secretary and
an opinion of counsel to the Fund in form and content satisfactory to the Bank.
Thereafter, the Bank shall be released from any and all obligations under this
Agreement.
16.4 The Fund shall reimburse the Bank for any reasonable expenses
incurred by the Bank in connection with the termination of this Agreement.
16.5 At any time after the termination of this Agreement, the Fund may,
upon written request, have reasonable access to the records of the Bank
relating to its performance of its duties as custodian.
17. Confidentiality. Both parties hereto agree than any non-public
information obtained hereunder concerning the other party is confidential and
may not be disclosed without the consent of the other party, except as may be
required by applicable law or at the request of a governmental agency. The
parties further agree that a breach of this provision would irreparably damage
the other party and accordingly agree that each of them is entitled, in
addition to all other remedies at law or in equity to an injunction or
injunctions without bond or other security to prevent breaches of this
provision.
18. Notices. Any notice or other instrument in writing authorized or
required by this Agreement to be given to either party hereto will be
sufficiently given if addressed to such party and delivered via (1) United
States Postal Service registered mail, (ii) telecopier with written
confirmation, (iii) hand delivery with signature to such party at its office at
the address set forth below, namely:
(a) In the case of notices sent to the Fund to:
Anchor Investment Management Corp.
579 Pleasant Street, Suite 4
Paxton, Massachusetts 01612
Attn: Christopher Y. Williams
(b) In the case of notices sent to the Bank to:
Investors Bank & Trust Company
200 Clarendon Street
Boston, Massachusetts 02116
Attention: Stephen C. Peacock
With a copy to: John E. Henry, General Counsel
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or at such other place as such party may from time to time designate in
writing.
19. Amendments. This Agreement may not be altered or amended, except by
an instrument in writing, executed by both parties.
20. Parties. This A2reement will be binding upon and shall inure to the
benefit of the parties hereto and their respective successors and assigns;
provided, however, that this Agreement will not be assignable by the Fund
without the written consent of the Bank or by the Bank without the written
consent of the Fund, authorized and approved by its Board; and provided further
that termination proceedings pursuant to Section 16 hereof will not be deemed
to be an assignment within the meaning of this provision.
21. Governing Law. This Agreement and all performance hereunder will be
governed by the laws of the Commonwealth of Massachusetts, without regard to
conflict of laws provisions.
22. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but such
counterparts shall, together, constitute only one instrument
23. Entire Agreement. This Agreement, together with its Appendices,
constitutes the sole and entire agreement between the parties relating to the
subject matter herein and does not operate as an acceptance of any conflicting
terms or provisions of any other instrument and terminates and supersedes any
and all prior agreements and undertakings between the parties relating to the
subject matter herein.
24. Limitation of Liability. The Bank agrees that the obligations assumed
by the Fund hereunder shall be limited in all cases to the assets of the Fund
and that the Bank shall not seek satisfaction of any such obligation from the
officers, agents, employees, trustees, or shareholders of the Fund, none of
whom shall have any personal liability whatsoever under this Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the day
and year first written above.
ANCHOR GOLD & CURRENCY TRUST
By:/s/ DAVID Y. WILLIAMS
Name: David Y. Williams
Title: President
INVESTORS BANK &TRUST COMPANY
By: /s/ ANDREW M. NESVET
Name: Andrew M. Nesvet
Title: Director, Client Management
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TRANSFER AGENCY AND SERVICE AGREEMENT
AGREEMENT made as of the 1st day of April, 1999 by and between ANCHOR
GOLD AND CURRENCY 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;
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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
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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.
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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;
142
<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:
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<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.
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<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.
ANCHOR GOLD AND CURRENCY TRUST
By:/s/ DAVID Y. WILLIAMS
President
CARDINAL INVESTMENT SERVICES, INC.
By:/S/ CHRISTOPHER Y. WILLIAMS
President
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<PAGE>
Peter K. Blume
Direct Dial 412 394 7762
Email: [email protected]
October 18, 1999
Anchor Gold & Currency Trust
579 Pleasant Street, Suite 4
Paxton, Massachusetts 01612
Re: Registration Statement on Form N-1A
Gentlemen:
We have represented Anchor Gold and Currency Trust (the "Trust"), an
unincorporated business trust organized under the laws of the Commonwealth of
Massachusetts pursuant to a Declaration of Trust dateD April 10, 1986, as
amended and restated on September 3, 1986 and October 18, 1999 (the "Declaration
of Trust"), in connection with the filing on the date hereof of a Registration
Statement on Form N-1A (as amended, the "Registration Statement"), in order to
register under the Securities Act of 1933, as amended, an indefinite number of
the Trust's shares of beneficial interest without par value (the "Shares").
We have made such investigations and have relied upon originals or copies,
certified or otherwise identified to our satisfaction, of such records,
instruments, certificates, memoranda and other documents as we have deemed
necessary or advisable for the purposes of this opinion. In that examination, we
have assumed the genuiness of all signatures, the authenticity of all documents
purporting to be originals, and the conformity to the originals of all documents
purporting to be copies. As to various questions of fact material to our
opinion, we have relied on statements and certificates of officers and
representatives of the Trust and others.
On the basis of the foregoing, we are of the opinion that: (1) the Trust is duly
organized and validly existing as an unincorporated business trust in good
standing under the laws of the Commonwealth of Massachusetts; and (2) the
Shares, when issued in accordance with the Declaration of Trust, and when duly
sold, issued and paid for in accordance with the terms of the Prospectus
included as part of the Registration Statement, will be validly and legally
issued and will be fully paid and nonassessable. For purposes of this letter, we
express no opinion as to compliance with the Securities Act of 1933, as amended,
applicable state laws regulating the sale of securities, or the Investment
Company Act of 1940, as amended.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the reference to us in the Prospectus included as
part of the Registration Statement.
Very truly yours,
/s/ Thorp Reed & Armstrong, LLP
PKB/tmm
146
<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 Anchor Gold and
Currency Trust on the amended Form N-1A our report dated January 19, 1999,
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
October 19, 1999
147
<PAGE>
ANCHOR
GOLD AND
CURRENCY
TRUST
ANNUAL REPORT
DECEMBER 31, 1998
1
148
<PAGE>
- --------------------------------------------------------------------------------
ANCHOR GOLD AND CURRENCY TRUST
- --------------------------------------------------------------------------------
Comparison of the Change in Value of a $10,000 Investment in the Anchor Gold
& Currency Trust and Gold Bullion and the XAU Index
[GRAPHIC OMITTED]
2
149
<PAGE>
- --------------------------------------------------------------------------------
ANCHOR GOLD AND CURRENCY TRUST
- --------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
Assets:
Investments at quoted market value (cost $15,291,714;
see Schedule of Investments, Notes 1, 2, & 5)................. $ 12,277,630
Cash ......................................................... 508,332
Dividends and interest receivable.............................. 10,964
Other assets................................................... 1,809
------------
Total assets.............................................. 12,798,735
------------
Liabilities:
Accrued expenses and other liabilities (Note 3)................ 64,531
------------
Total liabilities......................................... 64,531
------------
Net Assets:
Capital stock (9,829,269 shares of no par value stock authorized,
amount paid in on 3,036,896 shares outstanding) (Note 1)...... 19,632,947
Accumulated undistributed net investment income (Note 1)....... (851,097)
Accumulated realized loss from security transactions, net (Note 1) (3,033,562)
Net unrealized depreciation in value of investments (Note 2).. (3,014,084)
------------
Net assets (equivalent to $4.19 per share, based on
3,036,896 capital shares outstanding).................... $ 12,734,204
=============
3
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================================================================================
ANCHOR GOLD AND CURRENCY TRUST
================================================================================
CONSOLIDATED STATEMENT OF OPERATIONS
DECEMBER 31, 1998
Income:
Dividends..................................................... $ 48,587
Interest......................................................
278,664
------------
Total income.............................................. 327,251
------------
Expenses:
Management fees (Note 3)...................................... 98,895
Pricing and bookkeeping fees (Note 4)......................... 20,230
Legal fees.................................................... 14,000
Audit and accounting fees..................................... 9,500
Transfer fees (Note 4)........................................ 6,500
Custodian fees................................................ 4,803
Trustees' fees and expenses................................... 4,000
Printing expense.............................................. 1,600
Chicago Stock Exchange listing fees........................... 1,250
Other expenses................................................ 7,473
------------
Total expenses............................................ 168,251
------------
Net investment income.......................................... 159,000
------------
Realized and unrealized loss on investments:
Realized loss on investments-net............................. (654,950)
Decrease in net unrealized appreciation in investments....... (85,345)
------------
Net loss on investments................................... (740,295)
------------
Net decrease in net assets resulting from operations........... $ (581,295)
============
4
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================================================================================
ANCHOR GOLD AND CURRENCY TRUST
================================================================================
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
Year Ended Year Ended
December 31, December 31,
1998 1997
------------------------------
From operations:
Net investment income........................... $ 159,000 $ 155,423
Realized loss on investments, net............... (654,950) (1,742,176)
Decrease in net unrealized
appreciation in investments................... (85,345) (4,327,754)
-------------- -------------
Net decrease in
net assets resulting from operations.......... (581,295) (5,914,507)
-------------- -------------
Distributions to shareholders:
From net investment income
($0.20 per share in 1998 and $0.01 per share in (586,664) (32,040)
1997)
-------------- -------------
Total distributions to shareholders......... (586,664) (32,040)
-------------- -------------
From capital share transactions:
Number of Shares
1998 1997
-----------------------
Proceeds from sale of
shares.................. -- -- -- --
Shares issued to share-
holders in distributions
reinvested.............. 132,619 6,998 555,675 31,982
Cost of shares redeemed.. (15,497) (775,836) (71,169) (3,753,107)
--------- --------- ----------- ------------
Increase (decrease) in net
assets resulting from
capital
share transactions...... 117,122 (768,838) 484,506 (3,721,125)
======== ========== ----------- ------------
Net decrease in net assets....................... (683,453) (9,667,672)
Net assets:
Beginning of period............................ 13,417,657 23,085,329
============ ============
End of period (including undistributed
net investment income of ($851,097)
and ($852,234), respectively).............. $12,734,204 13,417,657
============ ============
5
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ANCHOR GOLD AND CURRENCY TRUST
================================================================================
CONSOLIDATED SELECTED PER SHARE DATA AND RATIOS
(for a share outstanding throughout each period)
Year Ended December 31,
1998 1997 1996 1995 1994
-----------------------------------------------------
Investment income........ $(0.19) $0.08 $0.03 $0.04 $0.03
Expenses, net............ (0.09) 0.05 0.07 0.06 0.09
-----------------------------------------------------
Net investment income (0.10) 0.03 (0.04) (0.02) (0.06)
(loss)...................
Net realized and
unrealized
gain (loss) on
investments.............. (0.11) (1.68) 0.61 0.11 (0.90)
Distributions to
shareholders:
From net investment
income................ (0.20) (0.01) -- -- --
From net realized gain
on investments...... -- -- -- -- --
-----------------------------------------------------
Net (decrease) increase
in net asset value...... (0.41) (1.66) 0.57 0.09 (0.96)
Net asset value:
Beginning of period..... 4.60 6.26 5.69 5.60 6.56
=====================================================
End of period........... $4.19 $4.60 $6.26 $5.69 $5.60
=====================================================
Ratio of expenses to
average net assets...... 1.27% 1.12% 1.10% 1.10% 1.12%
Ratio of net investment
income
(loss) to average net
assets................... 1.20% 0.78% (0.60%) (0.47%) (0.68%)
Portfolio turnover....... 0.53 0.24 0.18 0.17 0.32
Average commission rate
paid..................... 0.0403 0.0454 0.0389 0.0441 0.0475
Number of shares
outstanding at end of
period.................. 3,036,896 2,919,774 3,688,612 3,688,612 3,688,612
6
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ANCHOR GOLD AND CURRENCY TRUST
================================================================================
CONSOLIDATED SCHEDULE OF INVESTMENTS
DECEMBER 31, 1998
Value
Quantity (Note 1)
COMMON STOCKS -- 21.03%
Gold/Silver Mining Stocks
140,000 Aquiline Resources Incorporated..........................$ 5,600
10,000 Canabrava Diamond Corporation............................ 4,800
45,000 Euro Nevada Mining Corporation Limited................... 731,250
30,000 Franco Nevada Mining Corporation......................... 576,600
40,000 Golden Star Resources Limited............................ 40,000
210,000 Guyanor Resources SA*.................................... 75,600
300,000 Miramar Mining Corporation............................... 276,000
30,000 Normandy Mining Ltd. ADR................................. 279,600
247,200 Northern Orion Exploration Limited*...................... 42,024
10,000 Southwestern Gold Corporation............................ 39,200
159,900 Universal Gold Limited*.................................. 578,838
350,000 War Eagle Mining Company Incorporated.................... 28,000
-----------
Total common stocks (cost $5,506,020).................... 2,677,512
-----------
FOREIGN TIME DEPOSITS -- 74.83%
34,073,332 French Franc, maturing 01/04/99, at 2.875%
(cost $6,095,719)....................................... 6,092,312
19,220,114 French Franc, maturing 01/15/99, at 3.150%
(cost $3,428,868)...................................... 3,436,556
-----------
Total foreign time deposits (cost $9,524,587)............ 9,528,868
-----------
GOLD OPTIONS -- 0.56%
15,000 Gold Bullion March 1999 300 Call......................... 45,000
15,000 Gold Bullion April 1999 310 Call....................... 26,250
-----------
Total gold options (cost $261,107)....................... 71,250
-----------
Total investments (cost $15,291,714)..................... 12,277,630
-----------
CASH & OTHER ASSETS, LESS LIABILITIES -- 3.58%..................... 456,574
===========
Total Net Assets........................................$12,734,204
===========
* Non income producing security
7
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ANCHOR GOLD AND CURRENCY TRUST
================================================================================
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998
15
1. Significant accounting policies:
Anchor Gold and Currency Trust, a Massachusetts business trust (the "Trust"),
is registered under the Investment Company Act of 1940, as amended, as a
non-diversified, closed-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.
Foreign currencies and foreign denominated securities are translated at
current market exchange rates as of noon. Gold bullion is valued each day
at noon based on the New York spot gold price. Gold coins are valued based
on valuations published in the Wall Street Journal. 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 foreign currency gains increasing net
investment income, resulted in a net increase in undistributed net
investment income and a increase in accumulated realized loss from security
transactions. This reclassification had no affect on net assets.
C. Capital Stock-- The Trust records the sales and redemptions of its
capital stock on trade date.
8
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ANCHOR GOLD AND CURRENCY TRUST
================================================================================
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998
(Continued)
D.Principles of Consolidation-- The consolidated statements include the
consolidated operations of Anchor Gold & Currency Limited of which the
Trust owns all outstanding shares. Intercompany receivables, payables and
transactions have been eliminated.
E.Foreign Currency-- Amounts denominated in or expected to settle in foreign
currencies are translated into United States dollars at rates reported by a
major Boston bank on the following basis:
A. Market value of investment securities, other assets and liabilities
at the 12:00 noon Eastern Time rate of exchange at the balance sheet date.
B. Purchases and sales of investment securities, income and expenses at
the rate of exchange prevailing on the respective dates of such
transactions (or at an average rate if significant rate fluctuations have
not occurred). The Trust does not isolate that portion of the results of
operations resulting from changes in foreign exchange rates on investments
from the fluctuations arising from changes in market prices of securities
held. Such fluctuations are included with the net realized and unrealized
gain or loss from investments. Reported net realized foreign exchange gains
or losses arise from sales and maturities of short term securities, sales
of foreign currencies, currency gains or losses realized between the trade
and settlement dates on securities transactions, the difference between the
amounts of dividends, interest, and foreign withholding taxes recorded on
the Trust's books, and the United States dollar equivalent of the amounts
actually received or paid. Net unrealized foreign exchange gains and losses
arise from changes in the value of assets and liabilities other than
investments in securities at fiscal year end, resulting from changes in the
exchange rate.
2. Tax basis of investments:
At December 31, 1998, 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 $810,860. Aggregate gross unrealized
depreciation in investments in which there was an excess of tax cost over
market value was $3,824,944. Net unrealized depreciation in investments at
December 31, 1998 was $3,014,084.
3. Investment advisory service agreements:
The investment advisory contract with Anchor 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, 1998, investment advisory fees of $7,535
were due and were included in "Accrued expenses and other liabilities" in the
accompanying Consolidated Statement of Assets and Liabilities. David Y.
Williams, a Trustee of the Trust, is President and a Director of the
Investment Adviser.
9
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ANCHOR GOLD AND CURRENCY TRUST
================================================================================
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998
(Continued)
4. Certain transactions:
Anchor Investment Management Corporation provides transfer agent services for
the Trust. Fees earned by Anchor Investment Management Corporation for
transfer agent services for the year ended December 31, 1998 were $6,500.
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 $32,480 in brokerage commissions during the year ended
December 31, 1998. Fees earned by Anchor Investment Management Corporation
for expenses related to daily pricing of the Trust shares and for bookkeeping
services for the year ended December 31, 1998 were $16,000.
5. Purchases and sales:
Aggregate cost of purchases and the proceeds from sales and maturities on
investments for the year ended December 31, 1998 were:
Cost of securities acquired:
U.S. Government and investments backed by such
securities....................................... $ 14,653,982
Other investments................................ 102,550,784
===============
$ 117,204,766
===============
Proceeds from sales and maturities:
U.S. Government and investments backed by such
securities....................................... $ 17,519,297
Other investments................................ 99,945,876
===============
$ 117,465,173
===============
10
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ANCHOR GOLD AND CURRENCY TRUST
================================================================================
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Trustees of Anchor Gold & Currency Trust:
We have audited the accompanying statement of assets and liabilities of Anchor
Gold & Currency Trust (a Massachusetts business trust), including the schedule
of investments, as of December 31, 1998, 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, 1998 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 Anchor Gold & Currency Trust as of December 31, 1998, 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 19, 1999.
11
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ANCHOR GOLD AND CURRENCY TRUST
================================================================================
OFFICERS AND TRUSTEES
MAURICE A. DONAHUE Trustee
Director and Professor, Institute for Governmental
Services and Walsh-Saltonstall Professor of
Practical Politics, University of Massachusetts
SPENCER H. LE MENAGER Trustee
President, Equity Inc.
ERNIE BUTLER Trustee
President, I.E. Butler Securities
MAURICE A. DONAHUE Trustee
Director and Professor, Institute for Governmental
Services and Walsh-Saltonstall Professor of
Practical Politics, University of Massachusetts
DAVID W.C. PUTNAM Chairman
Chairman, Board of Directors, F.L. Putnam and Trustee
Investment Management Corporation
President and Director, F.L. Putnam Securities
Company Incorporated
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
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================================================================================
ANCHOR GOLD AND CURRENCY TRUST
================================================================================
INVESTMENT ADVISER, ADMINISTRATOR AND TRANSFER AGENT
Anchor Investment Management Corporation
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
89 South Street, Boston, Massachusetts 02111
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.
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POWER OF ATTORNEY
We, the undersigned officers and Trustees of Anchor Gold and
Currency 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 September 13, 1999
/s/J. STEPHEN PUTNAM
J. Stephen Putnam Treasurer (Principle September 13, 1999
Financial Officer)
/s/SPENCER H. LEMENAGER
Spencer H. LeMenager Trustee September 13, 1999
/s/ERNIE BUTLER
I. Ernie Butler Trustee September 13, 1999
/s/DAVID Y. WILLIAMS
David Y. Williams President, Secretary September 13, 1999
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.
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CERTIFIED RESOLUTIONS
The undersigned, Christopher Y. Williams, Assistant Secretary of
Anchor Gold and Currency 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 October 18,1999.
/s/CHRISTOPHER Y. WILLIAMS
Christopher Y. Williams
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
ANCHOR GOLD AND CURRENCY TRUST DECEMBER 31, 1998 ANNUAL REPORT AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE ANNUAL REPORT.
Item Item Description
Number
1998
3(a) Net asset value:
Beginning of year $4.60
3(a) Net investment income
(loss)........... (0.10)
3(a) Net realized and
unrealized gain
(loss) on investments... (0.11)
3(a) Distributions to
shareholders:
3(a) From net
investment income
(loss)........... (0.20)
3(a) From net realized
gains on investments .... --
------
3(a) Net asset value:
End of year.... $4.19
======
3(a) Ratio of expenses to
average net
assets........... 1.27%
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