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. 2
and
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 /X/
Amendment No. 3
(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
It is proposed that this filing will become effective:
(Check appropriate box)
___ immediately upon filing pursuant to paragraph (b) of Rule 485
X on May 1, 2000 pursuant to paragraph (b)
___ 60 days after filing pursuant to paragraph (a)(1)
___ 75 days after filing pursuant to paragraph (a)(2)
___ on ____________ pursuant to paragraph (a)(1) of Rule 485
Peter K. Blume, Esq.
Thorp Reed & Armstrong
One Riverfront Center
Pittsburgh, PA 15222
(Name and Address of Agent for Service)
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PROSPECTUS
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:
- -gold bullion, gold certificates, and silver bullion;
- -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;
- -equity or convertible securities of U.S. or foreign companies primarily
engaged in business related to precious metals;
- -options on securities, securities indices and currencies;
- -precious metal and financial futures contracts and related options; and
- -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 is 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.....................................7
What are the Trust's Investment Strategies?........................8
What are the Principal Securities in Which the Trust Invests?......9
What are the Specific Risks of Investing in the Trust?.............12
Management and Organization........................................16
Shareholder Information............................................17
Other Information..................................................21
Financial Information..............................................23
Application and Registration Form..................................24
PROSPECTUS DATED MAY 1, 2000
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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
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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 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.
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.
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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.
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, 1999
1 Year 5 Year 10 Year
-----------
- -------------------------------------------
The Trust (14.08%) (7.56%) (3.80%)
XAU Index 4.62% (9.07%) (5.52%)
Gold Bullion 0.14% (5.48%) (3.28%)
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 None
offering price)
Maximum deferred sales charge (load)
(as a percentage of offering price) None
Redemption fee (as a percentage
of amount redeemed) None
Exchange fee None
Annual Fund Operating Expenses
(expenses that are deducted from fund
assets)
Management fees 0.75%
Other expenses 1.78%
Total annual Fund operating expenses 2.53%
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 $256
Three Years: $788
Five Years $1,345
Ten Years $2,866
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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:
othe prices of gold and silver and other precious metals have tended to increase
as rapidly or more rapidly than the rate of inflation; ocurrencies of countries
not involved in inflationary circumstances may increase in value relative to the
U.S. dollar; and ointerest rates have tended to increase, causing the market
value of debt instruments to decline.
Conversely, during periods of deflation (when inflationary forces are reversed):
othe price of high grade debt instruments has tended to increase while the value
of precious metals has tended to decline; and oforeign 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:
- -gold bullion, gold certificates, and silver bullion;
- -any other precious metals such as platinum and palladium;
- -indexed 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;
- -equity or convertible securities of U.S. or foreign companies primarily
engaged in the exploration, mining or processing of gold and other precious
metals;
- -options on securities, securities indices and currencies;
- -precious metals and financial futures contracts and
related options; and
- -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.
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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
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:
oactual and anticipated rates of change in the CPI over specified periods
of time; oactual 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; 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.
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.
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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.
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.
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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.
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.
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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.
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.
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Investment Strategy
The success of the Trust's investment program will be dependent to a high degree
on:
othe 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.
othe 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.
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.
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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
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.
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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 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.
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Derivatives
The Trust may engage in transactions using derivatives, including options and
futures. Derivatives allow the Trust to increase or decrease the level of risk
to which the Trust is exposed more quickly and efficiently than transactions in
other types of instruments. Derivatives, however, are volatile and involve
significant risks, including the following:
Credit Risk. There is the risk that the other party on a derivative
transaction will be unable to honor its financial obligation to the
Trust.
Currency Risk. There is the risk that changes in the exchange rate
between two currencies will adversely affect the value (in U.S. dollar
terms) of the investment.
Leverage Risk. 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.
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.
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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 the Trust's portfolio with his father,
Paul Jaspard, until his father's death in October, 1999, when he became sole
day-to-day manager of the Trust's portfolio. Alain Jaspard is President of
Linden Investment Advisors, S.A., an investment advisory firm headquartered in
Belgium. He has managed other portfolios for the Meeschaert organization
(described below) for more than two years. Mr. Jaspard has been engaged
continuously in the investment management business, including the management of
investment company assets, since September, 1997. From September, 1996 to
September, 1997, he was an investment analyst with Global Equity Managers, an
investment advisory firm based in Luxenbourg. From September, 1993, to
September, 1996, he was employed as the head of personnel recruitment and
training for a large Belgian transportation firm.
For its service under its Investment Advisory Contract with the Trust, the
Investment Adviser receives a fee, payable monthly, calculated at 0.75% per
annum of the average daily net assets of the Trust. This fee is higher than that
of most other investment companies. For the fiscal year ended December 31, 1999,
the Investment Adviser received investment advisory fees of $78,637 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
o To establish a new account, the minimum investment is $500. There is no
minimum for shareholders who make additional investments to existing
accounts.
o To exchange other securities for Trust shares, the minimum investment is
$5,000. See "EXCHANGES" below.
Share Price
The Trust's share price is its net asset value next determined after the
Distributor receives and accepts your order. The Trust calculates its net asset
value as of 12:00 noon Eastern Time on each day on which the New York Stock
Exchange is open for trading. 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, 18th Floor
Boston, Massachusetts 02116
Exchanges of shares must be done as follows:
1. You must forward all securities under a single Letter of Transmittal. In
certain instances indicated in the instructions to the Letter of
Transmittal, multiple Letters of Transmittal must be attached and
transmitted as a single exchange. The Trust may reject securities
presented for exchange for any reason, and will only accept securities
which are delivered in proper form.
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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 0.50%, payable to the Trust,
on cash redemptions and exchanges of all Trust shares occurring during the
one year period ending November 19, 2000. 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.
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.
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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.
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."
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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
Custodian, Transfer Agent and Paying Agent
Investors Bank & Trust Company, Financial Product Services, 200 Clarendon
Street, 18th Floor, Boston, Massachusetts 02116 is the Trust's custodian bank.
The custodian bank receives and holds securities, cash and other assets of the
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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,
---------------------------------------------
1999 1998 1997 1996 1995
---------------------------------------------
Net Asset Value,
Beginning of Year $4.19 $4.60 $6.26 $5.69 $5.60
- ------------------------------------------------------------------------
Income From Investment
Operations:
Net Investment Income (33.71) (0.10) 0.03 (0.04) (0.02)
Net realized and
unrealized 33.12 (0.11) (1.68) 0.61 0.11
gain (loss) on investments
- ------------------------------------------------------------------------
Total income from
investment (0.59) (0.21) (1.65) 0.57 0.09
Operations
- ------------------------------------------------------------------------
Less Distributions::
Dividends from net
investment -- (0.20) (0.01) -- --
Income
Distributions from -- -- -- -- --
capital gains
- ------------------------------------------------------------------------
Total distributions -- (0.20) (0.01) -- --
Net Asset Value, End $3.60 $4.19 $4.60 $6.26 $5.69
of Year
- ------------------------------------------------------------------------
Total Return (14.08%) (4.57%) (26.36%) (10.02%) 1.61%
- ------------------------------------------------------------------------
Ratios/Supplemental Data:
Net assets, end of year $0.176 $12.7 $13.4 $23.1 $20.9
(in millions)
Ratio of expenses to
average net assets 2.53% 1.27% 1.12% 1.10% 1.10%
Ratio of net income
to average net assets (0.31%) 1.20% 0.78% (0.60%) (0.47%)
Portfolio turnover rate 100.7% 53% 24% 18% 17%
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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.
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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
25
<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 May 1, 2000
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 May 1, 2000, and the financial statements contained in
the Trust's Annual Report for the year ended December 31, 1999. The Trust's
Annual Report is incorporated by reference in this SAI. You may obtain the
Trust's Prospectus and Annual Report without charge by writing or calling the
Trust collect at 508-831-1171.
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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.
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<PAGE>
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.
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.
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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.
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.
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The Trust receives a premium on the sale of an option, but gives up the
opportunity to profit from any increase in the price of the security or
representative securities in the case of an index option above the exercise
price of the option. The Trust pays a premium upon the purchase of an option,
which may be lost if the option proves to be of no ultimate value.
There can be no assurance that the Trust will always be able to close out
options positions at acceptable prices. The Trust will write or purchase such
options only where economically appropriate as a hedging technique to reduce the
risks in management of its portfolio, and to preserve the Trust's net asset
value, and not for speculative purposes (i.e., not for profit). In no event will
the Trust purchase such options where the value of the options, either singly or
in the aggregate, would exceed 50% of the value of the Trust's assets at the
time of purchase.
The Trust may also purchase put and call options for a premium. The Trust may
sell a put or call option which it has previously purchased prior to the sale of
the underlying security. Such a sale would result in a net gain or loss
depending on whether the amount received on the sale is more or less than the
premium and other transaction costs paid.
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.
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To secure the obligation to deliver the underlying securities in the case of an
index call option written by the Trust, the Trust will be required to deposit
qualified securities. A "qualified security" is a security against which the
Trust has not written a call option and which has not been hedged by the Trust
by the sale of a financial futures contract.
If at the close of business on any day the market value of the qualified
securities falls below 100% of the current index value times the multiplier
times the number of contracts, the Trust will deposit an amount of cash or
liquid assets equal in value to the amount by which the call is "in-the-money"
(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.
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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
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.
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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
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
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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.
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.
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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
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.
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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.
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.
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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
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.
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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.
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.
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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).
oInvestment 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.
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:
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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
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.
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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
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).
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If the Trust has a high rate of portfolio turnover, it will pay greater
brokerage commissions and other costs. The Trust must bear these increased costs
directly and thus its shareholders will bear them indirectly. There may also be
the realization of larger amounts of short-term capital gains which are taxable
to shareholders as ordinary income.
The portfolio turnover rates for the years 1999 and 1998 were 100.7% and 53%,
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.
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.
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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
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 date the Trust During the Past 5
- ---------------------------- --------- -----------------
Years
-----
ERNEST BUTLER, Trustee President, I.E.
Born June 17, 1928 Butler Securities
11809 Hinson Road, Suite 400 (securities dealer);
Little Rock, AR 72212 formerly Senior
Executive Vice
President Stephens,
Inc. (securities
dealer)
(1982-February 1998).
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SPENCER H. LEMENAGER, Trustee President, Equity,
Born January 25, 1938 Inc. (private
222 Wisconsin Avenue investment company)
P.O. Box 390
Lake Forest, IL 60045
DAVID W. C. Chairman Chairman and Trustee,
PUTNAM, and Trustee Progressive Capital
Born October 8, 1939 Accumulation Trust
10 Langley Road (formerly Anchor
Newton Centre, MA 02159 Capital Accumulation
Trust), Anchor International Bond
Trust, Anchor 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. WILLIAMS2*, Trustee, President and
Born November 24, 1930 President & Director, Anchor
579 Pleasant St., Suite 4 Secretary Investment Management
Paxton, MA 01612 Corporation
(investment adviser);
President and
Director, Meeschaert
& Co., Inc.
(securities dealer);
Vice President,
Secretary and
Treasurer,
Progressive
Investment
Management,
Inc.(investment
adviser)
CHRISTOPHER Y. WILLIAMS2, Vice President Vice President and
Born December 12, 1964 and Asst. Asst. Secretary,
579 Pleasant St., Suite 4 Secretary Progressive
Paxton, MA 01612 Investment Management
Inc. (investment
adviser),; Vice
President and
Secretary, Anchor
Investment Management
Corporation
(investment adviser);
Vice President and
Secretary, Meeschaert
& Co. Inc.
(securities dealer);
President and
Secretary, Cardinal
Investment Services,
Inc. (financial
administrative
services)
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<PAGE>
JOSEPH C. Vice President Vice President and
WILLIAMS2, and Asst. Asst. Treasurer,
Born January 13, 1971 Treasurer Progressive
579 Pleasant St., Suite 4 Investment Management
Paxton, MA 01612 Inc. (investment
adviser); Vice
President and
Treasurer, Anchor
Investment Management
Corporation; Vice
President and
Treasurer, Meeschaert
& Co. Inc.
(securities dealer);
Vice President and
Treasurer, Cardinal
Investment Services,
Inc. (financial
administrative
services)
1. David W.C. Putnam and J. Stephen Putnam are brothers.
2. David Y. Williams is the father of Christopher Y. Williams and Joseph C.
Williams. Christopher Y. Williams and Joseph C. Williams are brothers.
The Officers and Trustees of the Trust as group owned less than one percent (1%)
of the Trust's shares outstanding on December 31, 1999.
Messrs. David Putnam, Ernest Butler and Spencer LeMenager are the Trustees
who are not interested persons (as defined in the Investment Company Act of
1940) of the Trust.
The standing audit committee is composed of Messrs. LeMenager and Butler. The
Trust does not have a nominating or compensation committee.
Compensation of Officers and Trustees
The Trust does not and will not pay any compensation to any of its officers or
Trustees who are interested persons (as defined in the Investment Company Act of
1940) of the Trust or of any investment adviser or distributor of the Trust. The
Trust pays an annual fee of up to $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, Pitt & Co., c/o
Deutsche Bank, P.O. Box 2444, Church Street Station, New York, NY 10008, as
indirect nominees of Mercy Hospital, held of record 33.54% of the outstanding
shares of the trust. Anchor Investment Management Corporation, the Trust's
Investment Advisor, held of record 29.75% 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.
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.
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<PAGE>
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 Assistant Secretary - Mr. Williams
is also the Vice President and Assistant Secretary of the Trust and Vice
President and Secretary of the Distributor.
Joseph C. Williams, Vice President and Assistant Treasurer - Mr. Williams is
also the Vice President and Assistant Treasurer of the Trust and Vice President
and Treasurer of the Distributor.
Investment Advisory Contract
The Trust and the Investment Adviser entered into an Investment Advisory
Contract dated 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.
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<PAGE>
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, 1999, the Trust
paid expenses of $266,240, which represented 2.53% 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 $149,063 in 1997, $98,895 in
1998 and $78,637 in 1999. 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
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 Cardinal Investment Services, Inc., (the Administrator), 579
Pleasant Street, Paxton, Massachusetts 01612. Under the Administration
Agreement, the Administrator is required generally to administer the Trust's
business. The Administrator's duties, which may be assigned to a
sub-administrator, 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 $28,000. The Trust paid the previous
administrator, Anchor Investment Management Corporation, fees of $17,500,
$16,000, and $21,722 in 1997, 1998 and 1999, 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
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.
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<PAGE>
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.
During the years ended December 31, 1999, December 31,1998 and December 31,
1997, the Distributor received no sales commission from the Trust.
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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.
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.
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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.
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;
52
<PAGE>
(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
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.
53
<PAGE>
"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.
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
54
<PAGE>
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.
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).
55
<PAGE>
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 1999, 1998 and 1997, the Trust paid commissions paid to broker-dealers of
$57,114, $57,227, and $63,941. During 1999, 1998 and 1997 the Trust paid
brokerage commissions of $55,044, $32,480, and $28,106 to the Distributor. For
the year ended December 31, 1999, the percentage of total commissions paid to
the Distributor was 96.38%. During 1999, the Trust's purchases and sales of
securities, exclusive of United States government securities and short term
notes amounted to $2,797,430and $7,994,964, respectively. Of these transactions
$2,523,942 in purchases and $4,032,951 in sales were effected through the
Distributor.
The Trust's portfolio turnover rates were 100.7% for 1999 and 53% for 1998.
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, 18th 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, 1999, the Trust employed Livingston &
Haynes, P.C., 40 Grove Street, Wellesley, Massachusetts 02482, to certify its
financial statements and to prepare its federal and state income tax returns.
Registration Statement
This Statement of Additional Information does not contain all the information
set forth in the Registration Statement and the exhibits and schedules relating
thereto, which the Trust has filed with, and which are available at the
Securities and Exchange Commission, Washington, D.C., under the Securities Act
of 1933, as amended, and the Investment Company Act of 1940, as amended, to
which reference is hereby made.
56
<PAGE>
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, 1999, 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.
57
<PAGE>
PART C. OTHER INFORMATION
Item 23. Exhibits
Exhibit Number Description of Exhibit
(1) Restated Declaration of Trust, as amended.
(Previously filed as Exhibit 1 to Amendment
No. 1)
(2) By-Laws of the Registrant, as amended.
(Previously filed as Exhibit 2 to Amendment
No. 1)
(3) Not applicable
(4) Specimen Certificates representing Common
Shares of Beneficial Interest of the
Registrant.
(5) Investment Advisory Agreement between the
Registrant and Anchor Investment Management
Corporation. (Previously filed as Exhibit 5
to Amendment No. 1)
(6) Distributor's Contract between the
Registrant and Meeschaert & Co., Inc.
(Previously filed as Exhibit 6 to Amendment
No. 1)
(7) Not applicable.
(8) Custodian Agreement between the Registrant
and Investors Bank & Trust Company.
(Previously filed as Exhibit 8 to Amendment
No. 1)
(9) Transfer Agency and Service Agreement
between the Registrant and Anchor Investment
Management Corporation. (Previously filed as
Exhibit 9 to Amendment No. 1)
(10) Opinion and Consent of Counsel. (Previously
filed as Exhibit 10 to Amendment No. 1)
(11) p. 65 Consent of Independent Public Accountants.
(12) p. 66 Trust's Annual Report to Shareholders,
December 31, 1999.
(13) Not applicable.
(14) Not applicable
(15) Not applicable
(16) Not applicable
(17) p. 82 Power of Attorney, dated March 8, 2000 and
Certified Resolution.
(27) p. 84 Financial Data Schedule
58
<PAGE>
Item 24....Persons Controlled by or Under Common Control with the Trust.
.....Not applicable.
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 Officers Positions and
Business Address with Underwriter the Trust Offices
----------------------------------------------------------
----------------------------------------------------------
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.
59
<PAGE>
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.
Item 30. Undertakings.
Not applicable.
60
<PAGE>
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
8th day of March, 2000.
ANCHOR GOLD AND CURRENCY TRUST
By: /s/ DAVID Y. WILLIAMS
David Y. Williams, President
/s/DAVID W.C. PUTNAM* Chairman and Trustee March 8, 2000
David W. C. Putnam
/s/J. STEPHEN PUTNAM* Treasurer (Principal March 8, 2000
J. Stephen Putnam Financial Officer)
/s/SPENCER H. LEMENAGER* Trustee March 8, 2000
Spencer H. LeMenager
/s/DAVID Y. WILLIAMS President, Secretary March 8, 2000
David Y. Williams and Trustee
/s/ERNIE BUTLER Trustee March 8, 2000
Ernie Butler
*By: PETER K. BLUME April 14, 2000
Peter K. Blume
Attorney-in-Fact
61
<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. 2 /x/
-
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT
OF 1940 /x/
Amendment No. 3 / /
-
===============================================================================
ANCHOR GOLD AND CURRENCY TRUST
===============================================================================
62
<PAGE>
EXHIBITS
INDEX TO EXHIBITS
Exhibit Number Description of Exhibit
(1) Restated Declaration of Trust, as amended.
(Previously filed as Exhibit 1 to Amendment
No. 1)
(2) By-Laws of the Registrant, as amended.
(Previously filed as Exhibit 2 to Amendment
No. 1)
(3) Not applicable
(4) Specimen Certificates representing Common
Shares of Beneficial Interest of the
Registrant.
(5) Investment Advisory Agreement between the
Registrant and Anchor Investment Management
Corporation. (Previously filed as Exhibit 5
to Amendment No. 1)
(6) Distributor's Contract between the
Registrant and Meeschaert & Co., Inc.
(Previously filed as Exhibit 6 to Amendment
No. 1)
(7) Not applicable.
(8) Custodian Agreement between the Registrant
and Investors Bank & Trust Company.
(Previously filed as Exhibit 8 to Amendment
No. 1)
(9) Transfer Agency and Service Agreement
between the Registrant and Anchor Investment
Management Corporation. (Previously filed as
Exhibit 9 to Amendment No. 1)
(10) Opinion and Consent of Counsel. (Previously
filed as Exhibit 10 to Amendment No. 1)
(11) p. 65 Consent of Independent Public Accountants.
(12) p. 66 Trust's Annual Report to Shareholders,
December 31, 1999.
(13) Not applicable.
(14) Not applicable
(15) Not applicable
(16) Not applicable
(17) p. 82 Power of Attorney, dated March 8, 2000 and
Certified Resolution.
(27) p. 84 Financial Data Schedule
63
<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 7, 2000,
appearing in the prospectus, which is part of such Registration Statement, and
to the reference to us under the captions, "Condensed Financial Information
and Selected Per Share Data and Ratios".
/S/LIVINGSTON & HAYNES
Wellesley, Massachusetts
April 25, 2000
<PAGE>
ANCHOR
GOLD AND
CURRENCY
TRUST
ANNUAL REPORT
DECEMBER 31, 1999
<PAGE>
ANCHOR GOLD & CURENCY TRUST
Comparison of the Change in Value of a $10,000 Investment
in the Anchor Gold & Currency Trust, Gold Bullion and the XAU Index
[GRAPHIC OMITTED]
===============================================================================
Anchor Gold & Currency Trust
Average Annual Total Return
- -------------------------------------------------------------------------------
1 Year 5 Year 10 Year
(14.08)% (7.56)% (3.80)%
===============================================================================
<PAGE>
ANCHOR GOLD AND CURRENCY TRUST
CONSOLIDATED STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1999
Assets:
Investments at quoted market value (cost $227,137;
see Schedule of Investments, Notes 1, 2, & 5)................. $ 227,137
Cash ......................................................... 59,237
Dividends and interest receivable.............................. 1,657
Other assets................................................... 1,809
------------
Total assets.............................................. 289,840
------------
Liabilities:
Accrued expenses and other liabilities (Note 3)................ 113,552
------------
Total liabilities......................................... 113,552
------------
Net Assets:
Capital stock (unlimited shares authorized at $1.00 par value,
amount paid in on 48,912 shares outstanding) (Note 1)......... 8,962,216
Accumulated undistributed net investment income (Note 1)....... (1,662,529)
Accumulated realized loss from security transactions,
net (Note 1).................................................. (7,123,398)
Net unrealized depreciation in value of investments (Note 2).. 0
------------
Net assets (equivalent to $3.60 per share, based on
48,912 capital shares outstanding)....................... $ 176,289
============
The accompanying notes are an integral part of these financial statements.
3.
<PAGE>
ANCHOR GOLD AND CURRENCY TRUST
CONSOLIDATED STATEMENT OF OPERATIONS
DECEMBER 31, 1999
Income:
Interest...................................................... $ 214,767
Dividends..................................................... 18,730
------------
Total income.............................................. 233,497
------------
Expenses:
Management fees (Note 3)...................................... 78,637
Legal fees.................................................... 34,802
Pricing and bookkeeping fees (Note 4)......................... 21,722
Transfer fees (Note 4)........................................ 13,000
Custodian fees................................................ 12,587
Audit and accounting fees..................................... 9,500
Trustees fees and expenses.................................... 2,500
Reserve for liquidation (Note 4).............................. 88,450
Other expenses................................................ 5,042
------------
Total expenses............................................ 266,240
------------
Net investment loss............................................ (32,743)
------------
Realized and unrealized loss on investments:
Realized loss on investments-net............................. (4,868,527)
Increase in net unrealized appreciation in investments....... 3,014,084
------------
Net loss on investments................................... (1,854,443)
------------
Net decrease in net assets resulting from operations........... $(1,887,186)
============
The accompanying notes are an integral part of these financial statements.
4.
<PAGE>
ANCHOR GOLD AND CURRENCY TRUST
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASETS
Year Ended Year Ended
December 31, December 31,
1999 1998
-------------------------------
From operations:
Net investment (loss) income.................... $ (32,743) $ 159,000
Realized loss on investments, net............... (4,868,526) (654,950)
Increase (decrease) in net unrealized
appreciation in investments.................... 3,014,084 (85,345)
-------------- -------------
Net decrease in net assets resulting
from operations................................ (1,887,185) (581,295)
-------------- -------------
Distributions to shareholders:
From net investment income ($0.20 per share in
1998)......................................... -- (586,664)
-------------- -------------
Total distributions to shareholders......... -- (586,664)
-------------- -------------
From capital share transactions:
Number of Shares
1999 1998
-----------------------
Proceeds from sale of
shares.................. 13,889 -- 50,000 --
Shares issued to share-
holders in distributions
reinvested.............. -- 132,619 -- 555,675
Cost of shares redeemed.. (3,001,873) (15,497) (10,720,730) (71,169)
---------- --------- ----------- ------------
(Decrease) increase in net
assets resulting from
capital
share transactions...... (2,987,984) 117,122 (10,670,730) 484,506
=========== ========= ------------- -----------
Net decrease in net assets....................... (12,557,915) (683,453)
Net assets:
Beginning of period............................ 12,734,204 13,417,657
-------------- -------------
End of period (including undistributed
net investment income of $(883,840)
and $(851,097), respectively).............. $ 176,289 $ 12,734,204
============== =============
The accompanying notes are an integral part of these financial statements.
5.
<PAGE>
ANCHOR GOLD AND CURRENCY TRUST
CONSOLIDATED AND SELECTED PER SHARE DATA AND RATIOS
(for a share outstanding throughout each period)
Year Ended December 31,
1999 1998 1997 1996 1995
------------------------------------------------------
Investment income........ $ 240.39 $(0.19) $0.08 $0.03 $0.04
Expenses, net............ 274.10 (0.09) 0.05 0.07 0.06
------------------------------------------------------
Net investment (loss)
income.................. (33.71) (0.10) 0.03 (0.04) (0.02)
Net realized and
unrealized gain (loss)
on investments.......... 33.12 (0.11) (1.68) 0.61 0.11
Distributions to
shareholders:
From net investment
income................ -- (0.20) (0.01) -- --
From net realized gain
on investments........ -- -- -- -- --
---------- --------- -------- -------- --------
Net (decrease) increase
in net asset value...... (0.59) (0.41) (1.66) 0.57 0.09
Net asset value:
Beginning of period..... 4.19 4.60 6.26 5.69 5.60
---------- --------- -------- -------- --------
End of period........... $3.60 $4.19 $4.60 $6.26 $5.69
========== ========= ======== ======== ========
Total Return............. (14.08%) (4.57%) (26.36%) (10.02%) 1.61%
Ratio of expenses to
average net assets...... 2.53% 1.27% 1.12% 1.10% 1.10%
Ratio of net investment
(loss)income to average
net assets.............. (0.31)% 1.20% 0.78% (0.60%) (0.47%)
Portfolio turnover....... 1.07 0.53 0.24 0.18 0.17
Average commission rate 0.0254 0.0403 0.0454 0.0389 0.0441
paid.....................
Number of shares out-
standing at end of period 48,912 3,036,896 2,919,774 3,688,612 3,688,612
The accompanying notes are an integral part of these financial statements.
6.
<PAGE>
ANCHOR GOLD AND CURRENCY
CONSOLIDATED SCHEDULE OF INVESTMENTS
DECEMBER 31, 1999
Value
Quantity (Note 1)
-------- --------
UNITED STATES TREASURY BILLS - 128.84%
$230,000 Treasury Bill, 5.21% yield, maturing 03/09/00 (at cost)..$ 227,137
-----------
Total investments (cost $227,137)........................ 227,137
-----------
CASH & OTHER ASSETS, LESS LIABILITIES - (28.84)%................... (50,848)
-----------
Total Net Assets.........................................$ 176,289
===========
The accompanying notes are an integral part of these financial statements.
7.
<PAGE>
ANCHOR GOLD AND CURRENCY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
1. Significant accounting policies:
On October 18, 1999, the shareholders of the Anchor Gold and Currency Trust
(the "Trust") voted to convert the Trust from a closed-end investment company
to an open-end investment company.
Anchor Gold and Currency Trust, a Massachusetts business trust, is registered
under the Investment Company Act of 1940, as amended, as a non-diversified,
open-end investment management company. The following is a summary of
significant accounting policies followed by the Trust which are in conformity
with those generally accepted in the investment company industry. The
preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
A. Investment securities-- Security transactions are recorded on the date the
investments are purchased or sold. Each day, at noon, securities traded on
national security exchanges are valued at the last sale price on the primary
exchange on which they are listed, or if there has been no sale by noon, at
the current bid price. Other securities for which market quotations are
readily available are valued at the last known sales price, or, if
unavailable, the known current bid price which most nearly represents
current market value. Options are valued in the same manner. 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.
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 losses increasing net
investment loss, resulted in a net decrease in undistributed net investment
income and a decrease 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.
<PAGE>
ANCHOR GOLD AND CURRENCY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
(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:
1. Market value of investment securities, other assets and liabilities at
the 12:00 noon Eastern Time rate of exchange at the balance sheet date.
2. 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, 1999, the total cost of investments for federal income tax
purposes was identical to the total cost on a financial reporting basis.
Aggregate gross unrealized appreciation in investments in which there was an
excess of market value over tax cost was $0. Aggregate gross unrealized
depreciation in investments in which there was an excess of tax cost over
market value was $0. At December 31, 1999, there was no net unrealized
depreciation or appreciation in investments.
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, 1999, investment advisory fees of $380 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.
<PAGE>
ANCHOR GOLD AND CURRENCY TRUST
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1999
(Continued)
4. Certain transactions:
The Trust has entered into an agreement with Cardinal Investment Services,
Inc. for transfer agent and dividend disbursing agent services. Annual fees
for these services are $13,000.
Certain officers and trustees of the Trust are directors and/or officers of
the investment adviser and distributor. Meeschaert & Co., Inc., the Trust's
distributor, received $55,044 in brokerage commissions during the year
ended December 31, 1999.
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, 1999 were $21,722.
At a meeting of the Board of Trustees on December 3, 1999, the board approved
in form a Plan of Liquidation and Dissolution of the Trust. In approving the
Plan of Liquidation and Dissolution, the Board considered the impact of the
withdrawal of the Trust's largest shareholder on the asset base of the Trust
and the subsequent impact on the Trust's expense ratio. The Trustees approved
and ratified the creation of a reserve fund in the amount of $88,450 for the
purpose of satisfying any and all reasonable costs and expenses which may be
incurred by the Trust in liquidating its assets.
5. Purchases and sales:
Aggregate cost of purchases and the proceeds from sales and maturities on
investments for the year ended December 31, 1999 were:
Cost of securities acquired:
U.S. Government and investments backed by
such securities......................... $ 227,137
Other investments....................... 157,006,087
-------------
$ 157,233,224
=============
Proceeds from sales and maturities:
U.S. Government and investments backed by
such securities......................... $ --
Other investments....................... 167,623,889
-------------
$ 167,623,889
=============
10.
<PAGE>
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, 1999, the related statement of operations for
the year then ended, the statements of changes in net assets for each of the two
years in the period then ended, and the selected per share data and ratios for
each of the five years in the period then ended. These financial statements and
per share data and ratios are the responsibility of the Trust's management. Our
responsibility is to express an opinion on these financial statements and per
share data and ratios based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and per share data
and ratios are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1999 by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and selected per share data and ratios
referred to above present fairly, in all material respects, the financial
position of Anchor Gold & Currency Trust as of December 31, 1999, the results of
its operations for the year then ended, the changes in its net assets for each
of the two years in the period then ended, and the selected per share data and
ratios for each of the five years in the period then ended, in conformity with
generally accepted accounting principles.
LIVINGSTON & HAYNES, P.C.
Wellesley, Massachusetts,
January 7, 2000
11.
<PAGE>
ANCHOR GOLD AND CURRENCY TRUST
OFFICERS AND TRUSTEES
ERNIE BUTLER Trustee
President, I.E. Butler Securities
SPENCER H. LEMENAGER Trustee
President, Equity Inc.
DAVID W.C. PUTNAM Chairman
President, F.L. Putnam and Trustee
Investment Management Company
J. STEPHEN PUTNAM Vice President and
President, Robert Thomas Securities Treasurer
DAVID Y. WILLIAMS President, Secretary
President and Director, Meeschaert & Co., Inc., and Trustee
President and Director, Anchor Investment
Management Corporation
12.
<PAGE>
ANCHOR GOLD AND CURRENCY TRUST
INVESTMENT ADVISER AND ADMINISTRATOR
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
TRANSFER AGENT
Cardinal Investment Services Inc.
579 Pleasant St., Suite 4, Paxton, Massachusetts 01612
(508) 831-1171
CUSTODIAN
Investors Bank & Trust Company
200 Clarendon Street, Boston, Massachusetts 02116
INDEPENDENT PUBLIC ACCOUNTANT
Livingston & Haynes, P.C.
40 Grove St., Wellesley, Massachusetts 02482
LEGAL COUNSEL
Thorp Reed & Armstrong
One Riverfront Center, Pittsburgh, Pennsylvania 15222
This report is not authorized for distribution to prospective investors in the
Trust unless preceded or accompanied by an effective prospectus which includes
information concerning the Trust's record or other pertinent information.
13.
<PAGE>
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 March 8, 2000
/s/J. STEPHEN PUTNAM
J. Stephen Putnam Treasurer (Principle March 8, 2000
Financial Officer)
/s/SPENCER H. LEMENAGER
Spencer H. LeMenager Trustee March 8, 2000
/s/ERNIE BUTLER
I. Ernie Butler Trustee March 8, 2000
/s/DAVID Y. WILLIAMS
David Y. Williams President, Secretary March 8, 2000
and Trustee
* This Power of Attorney may be executed in several counterparts, each of which
shall be regarded as an original and all of which taken together shall
constitute one and the same Power of Attorney, and any of the parties hereto
may execute this Power of Attorney by signing any such counterpart.
<PAGE>
CERTIFIED RESOLUTIONS
The undersigned, Christopher Y. Williams, Assistant Secretary of
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 April 14, 2000.
/s/CHRISTOPHER Y. WILLIAMS
Christopher Y. Williams
<PAGE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
ANCHOR GOLD AND CURRENCY TRUST DECEMBER 31, 1999 ANNUAL REPORT AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE ANNUAL REPORT.
Item Item Description
Number
1999
3(a) Net asset value:
Beginning of year $4.19
3(a) Net investment income
(loss)........... (33.71)
3(a) Net realized and
unrealized gain
(loss) on investments... 33.12
3(a) Distributions to
shareholders:
3(a) From net
investment income
(loss)........... --
3(a) From net realized
gains on investments .... --
------
3(a) Net asset value:
End of year.... $3.60
======
3(a) Ratio of expenses to
average net
assets........... 2.53%
<PAGE>
</TABLE>
