Registration Nos. 33-32262; 811-
5963
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. 4 \R
x
and
REGISTRATION STATEMENT UNDER THE
x INVESTMENT COMPANY ACT OF 1940
Amendment No. 5 \R
x
(Check appropriate box or boxes)
ANCHOR STRATEGIC ASSETS TRUST
(Exact Name of Registrant as Specified in
Charter)
7022 BENNINGTON WOODS DRIVE
PITTSBURGH, PENNSYLVANIA 15237
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (412) 635-
76 10
It is proposed that this filing will become effective
(Check appropriate box)
x immediately upon filing pursuant to Paragraph (b) of Rule
485 " on ___________________ pursuant to Paragraph
(b)
" 60 days after filing pursuant to Paragraph (a)
" on (date) pursuant to Paragraph (a) of Rule (485 or
486)
Peter K. Blume, Esquire
Yukevich, Blume, Marchetti & Zangrilli,
P.C. One Gateway Center, Sixth Floor
Pittsburgh, PA 15222
(Name and Address of Agent for
Service)
The Registrant has
previously filed a
declaration of indefinite
registration of its shares
pursuant to Rule 24f-2 under the
Investment
Company Act of 1940.
The Registrant's Notice under Rule
24f2 for the fiscal
year ended
December 31, 1995 will be filed
on or before June 30, 1996
ANCHOR STRATEGIC ASSETS TRUST
Cross Reference sheet Pursuant to Rule 495(a)
Part A
Form Item Cross Reference
Item 1. Cover Page. Cover Page
Item 2. Synopsis. Shareholder Transaction
Expenses; Annual Trust
Operating Expenses
Item 3. Condensed Financial Information.
Statement
of Selected Per Share
Data.
Item 4. General Description of Registrant.Cover
Page; About the Trust;
Investment Objective
and Policies;
Specialized Investment
Techniques and Related
Risks
Item 5. Management of the Trust.
(a)
Management
-- Trustees
(b) Manager
- --
Investment Adviser
(c) Not
Applicable
(d)
Miscellaneous
Information --
Custodian, Transfer
Agent and Dividend
Paying Agent
(e)
Management
-- Expenses
(f)
Management
-- Brokerage
Item 6. Capital Stock and Other Securities.
(a) About
the
Trust; Miscellaneous
Information
(b) Not
Applicable
(c) Not
Applicable
(d) Not
Applicable
(e) How to
Purchase Shares; Other
Information
-
Shareholder Inquiries
(f) About
the
Trust; Services for
Shareholders --
Dividends and
Distributions; Taxes
Item 7. Purchase of Securities Being Offered.
(a) How to
Purchase Shares
(b)
Determination of Net
Asset Value
(c) How to
Purchase Shares
(d) How to
Purchase Shares
(e)
Distribution of Shares
Item 8. Redemption or Repurchase.
Redemption
and Repurchase of
Shares
Item 9. Pending Legal Proceedings. Not
Applicable
Statement of Additional
Part B Information Cross
Reference
Form Item
Item 10. Cover Page. Cover Page
Item 11. Table of Contents. Table of Contents
Item 12. General Information and History. Not
Applicable
Item 13. Investment Objectives and Policies.
Investment Objectives
and Policies;
Specialized Investment
Techniques and Related
Risks
Item 14. Management of the Fund. Management --
Officers and Trustees
Item 15. Control Persons and Principal Holders
of Securities.
(a)
Management
(b)
Management
(c)
Management
-- Officers and
Trustees
Item 16. Investment Advisory and Other Services.
(a), (b) Management --
Investment Advisory
Contract
(c),(d),(e) Not Applicable
(f)
Distribution of Shares
(g) Not
Applicable
(h)
Miscellaneous
Information
(i) Not
Applicable
Item 17. Brokerage Allocation. Portfolio
Security Transactions
Item 18. Capital Stock and Other Securities.
About
the Trust
Item 19. Purchase Redemption and Pricing
of Securities Being Offered.
(a),(b) How to
Purchase
Shares; Determination
of Net Asset Value
(c) Not
Applicable
Item 20. Tax Status. Taxes
Item 21. Underwriters. Distribution of
Shares; How to Purchase
Shares; Management
Item 22. Calculation of Performance Data. Not
Applicable
Item 23. Financial Statements. Financial
Statements
Part C Other Information
Information required to be included in Part C is set forth
under the appropriate Item, so numbered, in Part C of the
Registration Statement.
ANCHOR STRATEGIC ASSETS TRUST
PROSPECTUS
DATED MAY
1, 1996 \R
ANCHOR INVESTMENT MANAGEMENT
CORPORATION INVESTMENT
ADVISER
7022 BENNINGTON WOODS DRIVE
PITTSBURGH, PENNSYLVANIA 15237
Anchor Strategic Assets Trust (the "Trust") originally known
as Meeschaert Strategic Assets Trust, is a non-diversified
open-end management investment company. While originally
organized as an
unincorporated business trust in September, 1989, the Trust did
not commence operations until January 5, 1995. Its investments and
affairs are managed, subject to the supervision of its Trustees,
by Anchor Investment Management Corporation, a Massachusetts
corporation (the "Investment Adviser"), formerly known as
Meeschaert Investment
Management Corporation. The address of the Trust is 7022
Bennington Woods Drive, Pittsburgh, Pennsylvania 15237, and its
telephone number is (412) 635-7610.
The primary investment objective of the Trust is long-term
capital appreciation and preservation of the purchasing power of
shareholders' capital. As a secondary investment objective, the
Trust will seek to generate current income consistent with
the preservation of
shareholders' purchasing power. The investment strategy which the
Trust will employ is seeking to achieve its investment objectives is
two-fold. When, based on an analysis of numerous economic and
monetary factors, the Investment Adviser expects an inflationary
cycle, the Trust will invest, directly and through one or more
wholly-owned subsidiaries, at least 65% of the value of its total
assets in gold bullion, gold certificates, and silver bullion; in
any other precious metals and in any precious metals-backed or
indexed securities, which may be issued by either U.S. or foreign
private or governmental issuers, including, without limitation, the
government of South Africa and South African companies; in the
equity or convertible securities of U.S. or foreign companies
primarily engaged in businesses related to precious metals; in options
on securities, securities indices and currencies; in precious metals
and financial futures contracts and related options; and in
repurchase agreements. A company which is "primarily engaged" in
an activity is one in which at least 50% of its assets are devoted
to, or 50% of its revenue is derived from, such activity. The terms
"precious metals-backed securities," "indexed securities," "equity
securities" and "convertible securities" are defined herein under
"Investment Strategy."
As an integral part of its investment strategy, the Trust
may
invest up to 50% of its assets in the equity securities of
companies (both foreign and domestic) primarily engaged in gold
exploration, mining or processing. During such periods of actual
or anticipated inflation the Trust may also hold up to 35% of its
total assets in bank deposits, bank currency forward contracts and
certificates of deposit.
When, based on an analysis of numerous economic and
monetary
factors, the Investment Adviser expects a deflationary cycle, the
Trust will invest up to 90% of its total assets in U.S. or foreign
government and government agency fixed-income securities of
sufficient maturities to realize its objective of long-term capital
appreciation. During such periods, the Trust will hold the balance
of its assets in short-term U.S. or foreign denominated securities.
Investment in precious metals and related securities
in
anticipation of inflationary periods is intended not only to
preserve capital in the projected ensuing inflationary period,
but also to provide opportunity for capital appreciation of the
precious metals and related investments during such inflationary
period.
Investment in U.S. and other government securities in
anticipation of deflationary periods is intended to preserve capital,
while providing a relatively secure income, and to provide an
opportunity for capital appreciation if interest rates decline in
such deflationary period.
To the extent permitted by relevant provisions of the
Commodity Exchange Act, the Trust may also engage in option
transactions and futures transactions (as described more fully
herein).
No assurance can be given that the Trust's investment
objectives will be achieved.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY
THE SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
This Prospectus sets forth certain information about the
Trust which investors should know before investing, and it should be
retained for future reference. Additional facts about the Trust are
contained in a Statement of Additional Information dated May 1, 1996,
which has been
filed with the Securities and Exchange Commission. The Statement
and the Trust's Annual Report for 1995 are available without
charge by calling or by writing the Trust at the above
telephone number or address. The Statement of Additional
Information is incorporated by
reference in this Prospectus. \R
TABLE OF TRUST FEES AND EXPENSES
SHAREHOLDER TRANSACTION EXPENSES: Maximum Sales
Load Imposed on Purchase None
Maximum Sales Load Imposed on Reinvested Dividends
None
Deferred Sales Load (as a percentage of original
purchase price) (Note 1)
Year of Purchase 4.00%
Second Year
3.00%
Third Year
2.00%
Fourth Year
1.00%
Redemption Fees
None
Exchange Fees
None
ANNUAL TRUST OPERATING EXPENSES:
(AS A PERCENTAGE OF AVERAGE NET ASSETS) (NOTE
2)
Management Fees
1.50%
12b-1 Fees
None
Other Expenses 0.49% \R
Total Trust Operating Expenses 1.99% \R
EXAMPLE:
1 Year 3 5 10
Years Years
Years
You would pay the following expenses
$232
on a $1,000 investment assuming (1)
$60 $82 \R $107 \R
5% annual return and (2) redemption \R \R
at the end of each time period:
You would pay the following
expenses on the same investment, $20 \R $62 \R $107 $232
assuming no redemption: \R \R
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST
OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESSER THAN
THOSE
SHOWN.
The purpose of this table is to assist the investor in understanding
the various costs and expenses that an investor in the Trust will
bear, directly or indirectly. This information should be read in
conjunction with the Trust's Annual Report, which contains a more
complete description of the various costs and expenses and is
incorporated by reference in this Prospectus.
Note 1. A contingent deferred sales charge may be imposed upon certain
redemptions of shares purchased after inception of the Trust's
Distribution Plan. See "Contingent Deferred Sales Charge" herein.
The Trustees do not currently impose the charge.
Note 2. The Trustees have set an aggregate limit on the amount of 12b-
1 payments equal to .75 of 1% of the Trust's average daily assets for
any
fiscal year. The Trustees do not currently impose the charge.
TABLE OF CONTENTS
TABLE OF TRUST FEES AND EXPENSES 2
ANNUAL TRUST OPERATING EXPENSES 2
SELECTED PER SHARE DATA AND RATIOS 4
ABOUT THE TRUST 5
INVESTMENT OBJECTIVES AND POLICIES 5
Investment Strategy 5
Specialized Investment Techniques and Related Risks 7
Option Transactions Involving Portfolio Securities and
Securities Indices
7
Options on Foreign Currencies 7
Financial and Precious Metals Futures and Related Options
8
Limitations on futures Contracts and Related Options 8
Lending of Portfolio Securities 8
Repurchase Agreements 8
Portfolio Turnover 9
Investment Restrictions 9
INVESTOR CONSIDERATIONS 9
MANAGEMENT
10
Trustees
10
Investment Adviser
10
Expenses
11
Brokerage
11
Management Discussion of Fund Performance
11
HOW TO PURCHASE SHARES
12
DISTRIBUTION OF SHARES
12
Contingent Deferred Sales Charge
13
HOW TO EXCHANGE SECURITIES FOR TRUST SHARES
13
REDEMPTION AND REPURCHASE OF SHARES
14
DETERMINATION OF NET ASSET VALUE
15
SERVICES FOR SHAREHOLDERS
15
Open Accounts
15
Invest-By-Mail
16
DIVIDENDS AND DISTRIBUTIONS
16
TAXES
17
MISCELLANEOUS INFORMATION
17
Custodian, Transfer Agent and Dividend-Paying Agent
17
Shareholder Inquiries
17
APPLICATION FORM
18
SELECTED PER SHARE DATA AND RATIOS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD ENDED DECEMBER 31,)
The following information for the three years ended December
31, 1995 has been examined by Livingston & Haynes, P.C.,
independent accountants, and should be read in conjunction with their
report and the financial statements and notes appearing in the
Trust's Annual Report which are incorporated by reference in this
Prospectus. \R
Year Ended December 31,
1995 1994 1993
Investment income $ 0.03 $ (3.40) $ 0.19
Expenses, net 0.06 (7.86) 2.19
Net investment loss (0.03) 4.46
(2.00)
Net realized and unrealized gain 0.12 (5.41) --
(loss) on investments
Distributions to shareholders:
From net investment income -- -- --
From net realized gain on -- -- --
investments
Net decrease in net asset value 0.09 (0.95)
(2.00)
Net asset value:
Beginning of period 4.48 5.43 7.43
End of period $4.57 $4.48
$5.43
Total Return
(26.92%)
2.01% (17.5%)
Ratio of expenses to average net 1.99% 2.19% 30.85%
assets
Ratio of net investment income to (1.10)% (1.24)%
(28.14)%
average net assets
Portfolio turnover 0.12 0.42 --
Number of shares outstanding at end 1,184,7 1,044,2 12,000
of period 52 87
Per share data and ratios assuming
no waiver of advisory fees:
Expenses -- -- $ 2.30
Net investment loss -- -- $ (2.11)
Ratio of expenses to average net -- -- 32.35%
assets
Ratio of net investment loss to -- -- (29.64)%
average net assets
* Includes balancing effect of calculating per share amounts.
Note 1. All per share numbers give retroactive effect to stock
dividends.
Note 2. Investment income, operating expenses and net income (loss)
per share are computed based on
the weighted average shares outstanding throughout the fiscal periods.
ABOUT THE TRUST
The Trust is a non-diversified open-end management
investment company established as an unincorporated business
trust under the laws of Massachusetts by a Declaration of Trust
dated September 22, 1989. The Trustees amended the Declaration
of Trust in 1990 to change the name of the Trust from
Meeschaert
Strategic Assets Trust to Anchor Strategic Assets Trust. 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
nonassessable and transferable on the books of the Trust. The
shares have no preemptive rights. The shares each have one vote
and proportionate liquidation rights.
The Trust normally will not hold annual meetings of
shareholders to elect Trustees. If less than a majority of the
Trustees holding office have been elected by shareholders, a
meeting of shareholders will be called to elect Trustees. Under
the Declaration of Trust and the Investment Company Act of 1940,
the record holders of not less than two-thirds of the
outstanding shares of the Trust may remove a Trustee by votes
cast in person or by proxy at a meeting called for the purpose
or by a written declaration filed with the Trust's custodian
bank. In connection with shareholder rights to remove Trustees,
the Trust will provide shareholders with certain assistance in
communicating with other shareholders. Except as described
above, the Trustees will continue to hold office and may appoint
successor Trustees.
Under Massachusetts law, shareholders could, under certain
circumstances, be held personally liable for the obligations of
the Trust. However, the Declaration of Trust disclaims
shareholder liability for acts or obligations of the Trust and
requires that notice of this disclaimer be given in each
agreement, obligation or instrument entered into or executed by
the Trust or a Trustee. The Declaration of Trust provides for
indemnification from the assets of the Trust for all losses and
expenses of any shareholder held personally liable for the
obligations of the Trust. Thus, the risk of a shareholder
incurring a financial loss on account of his or her liability as
a shareholder of the Trust is limited to circumstances in which
the Trust itself would be unable to meet its obligations. The
possibility that these circumstances would occur is remote.
Upon payment of any liability incurred by the Trust, the
shareholder paying the liability will be entitled to
reimbursement from the general assets of the Trust. The
Trustees intend to conduct the operations of the Trust to avoid,
to the extent possible, ultimate liability of shareholders for
liabilities of the Trust.
INVESTMENT OBJECTIVES AND POLICIES
The primary investment objective of the Trust is long-term
capital appreciation and preservation of the purchasing power
of shareholders' capital. As a secondary investment objective,
the Trust will seek to generate current income consistent with
the preservation of shareholders' purchasing power. The Trust
will endeavor to achieve its objectives by anticipating
inflationary and deflationary economic cycles and investing the
Trust's assets as set forth under "Investment Strategy" below.
There can, of course, be no guarantee that the Trust's
investment objectives will be achieved, due to the uncertainty
inherent in all investments.
INVESTMENT STRATEGY
Historically, during periods of increasing inflation and
during periods of economic or monetary instability, the prices
of gold and silver and other precious metals have tended to
increase as rapidly or more rapidly than the rate of inflation.
Also, currencies of countries not involved in inflationary
circumstances may increase in value relative to the U.S.
dollar. During these same periods, interest rates have tended
to increase, causing the market value of debt instruments to
decline. Conversely, during periods of deflation (when
inflationary forces are being reversed), the price of high
grade debt instruments has tended to increase while the value
of precious metals has tended to decline. Foreign currencies
(relative to the U.S. dollar) may also decline in value at such
times.
Accordingly, the Investment Adviser will seek to
anticipate oncoming inflationary and deflationary economic
cycles and will attempt to achieve the Trust's investment
objectives by following two distinct investment approaches
depending upon whether it perceives the economy as being in an
inflationary or deflationary environment, as follows:
1. 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 gold bullion, gold certificates, and silver bullion;
in any other precious metals and in any precious metals-backed
or indexed securities, which may be issued by either U.S. or
foreign private or governmental issuers, including, without
limitation the government of South Africa and South African
companies, and in the equity or convertible securities of U.S.
or foreign companies primarily engaged in business related to
precious metals; in options on securities, securities indices
and currencies; in precious metals and financial futures
contracts and related options; and in repurchase agreements.
As an integral part of this strategy, the Trust may invest up
to 50% of its assets in the equity securities of companies
(both foreign and domestic) primarily engaged in gold
exploration, mining or processing. During such periods, the
Trust may also hold up to 35% of its total assets in bank
deposits, bank currency forward contracts and certificates of
deposits. As used herein, the following terms have the
indicated definitions: "precious metalsbacked securities" means
securities which are redeemable at a specified conversion rate
for precious metals or which are guaranteed by precious metals;
"indexed securities" means securities comprising one of the
exchange listed stock indices on which future contracts and
options can be purchased and sold, e.g., Gold/Silver Index
listed on the Philadelphia Stock Exchange; "equity securities"
means common or preferred shares in a corporation, whether or
not transferable or denominated 'stock,' or similar security,
interests of a limited partner in a limited partnership, or
warrants or rights other than rights to convert, purchase,
sell, or subscribe to a share, security, or interest of a kind
previously specified; and "convertible securities" means
debentures or preferred stock that may be exchanged by the
owner for common or preferred stock, usually of the same
company, or precious metals bullion, in accordance with the
terms of the issue.
2. When, based on an analysis of numerous economic and
monetary
factors, the Investment Adviser expects a deflationary cycle,
the Trust will invest up to 90% of its total assets in U.S. or
foreign government and government agency fixed-income
securities of sufficient maturities to realize its objective of
long-term capital appreciation. During such periods, the Trust
will hold the balance of its assets in short-term U.S. or
foreign denominated securities.
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 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 up to
100% of its assets in cash or cash equivalents.
Investment in precious metals and related securities in
anticipation of inflationary periods is intended not only to
preserve capital in the projected ensuing inflationary period,
but also to provide opportunity for capital appreciation of the
precious metals and related investments during such
inflationary period. The broad range of precious metals and
currency related investment vehicles that may be utilized by
the Trust during such inflationary periods is intended to allow
the Trust the widest
possible latitude in attempting to determine the most
attractive investment posture for the current period. There
can be no assurance that the Trust will attain its investment
objectives.
Investment in U.S. and other government securities in
anticipation of deflationary periods is intended to preserve
capital, while providing a relatively secure income, and to
provide an opportunity for capital appreciation if interest
rates decline in such deflationary periods.
The policies set forth above are fundamental policies and
may not be changed without shareholder approval.
To the extent permitted by relevant provisions of the
Commodity Exchange Act, the Trust may also engage in option
transactions and futures transactions (as described more fully
herein and in the Trust's Statement of Additional Information).
It should be emphasized that the Investment Adviser will
not
apply a rigid, mechanical determination in assessing whether
the economy is in an inflationary or disinflationary
environment. Rather, its determination will be the result of
its subjective judgment of all factors it considers to be
relevant.
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.
SPECIALIZED INVESTMENT TECHNIQUES AND RELATED RISKS
The Trust may use certain specialized investment
techniques, including transactions in options on securities,
securities indices and currencies, transactions in precious
metals and financial futures contracts and related options,
loans of portfolio securities and transactions in repurchase
agreements. While in general such transactions are not limited,
reference is made to "Limitations on Futures Contracts and
Related Options," "Lending of Portfolio Securities" and
"Repurchase Agreements" herein for limitations applicable to
those activities. These techniques involve certain risks,
which are summarized below and discussed in the Statement of
Additional Information. There can be no assurance that the
Trust will attain its investment objectives.
OPTION TRANSACTIONS INVOLVING PORTFOLIO SECURITIES AND
SECURITIES INDICES
The Trust may write call option contracts or purchase put
or call options with respect to portfolio securities and with
respect to securities indices at such times as the Investment
Adviser determines to be appropriate. Call options are written
and put options are purchased solely as covered options--and
such options (which will generally correspond to the securities
represented by the index in the case of index options) on
domestic securities are generally listed on a national
securities exchange. The Trust will write or purchase such
options only where economically appropriate as a hedging
technique to reduce the risks in management of its portfolio,
and to preserve the Trust's net asset value, and not for
speculative purposes (i.e., not for profit). In no event will
the Trust purchase such options where the value of the options,
either singly or in the aggregate, would exceed 50% of the
value of the Trust's assets at the time of purchase. Exchanges
on which such options currently are traded are the Chicago
Board of Options Exchange and the American, Pacific and
Philadelphia Stock Exchanges (the "Exchanges"). Options on
foreign securities and on some domestic securities may not be
listed on any domestic or foreign exchange. The Trust receives
a premium on the sale of an option, but gives up the
opportunity to profit from any increase in the price of
the security or representative securities in the case of an
index option above the exercise price of the option. There can
be no assurance that the Trust will always be able to close out
options positions at acceptable prices. The Trust pays a
premium upon the purchase of an option, which may be lost if
the option proves to be of no ultimate value.
OPTIONS ON FOREIGN CURRENCIES
The Trust may purchase put and call options on foreign
currencies. The Trust may purchase such options where
economically appropriate as a hedging technique to reduce the
risks in management of its portfolio, and to preserve the
Trust's net asset value, and not for speculative purposes
(i.e., not for profit). In no event will the Trust purchase
such options where the value of the options, either singly or
in the aggregate, would exceed 50% of the value of the Trust's
assets at the time of purchase.
The Trust's success in using such options depends, among
other things, on the Investment Adviser's ability to predict
the direction and volatility of price movements in the options
markets as well as the securities markets and on the Investment
Adviser's ability to select the proper type, time and duration
of options. although the Investment Adviser has prior
experience in utilizing currency options, there can be no
assurance that this technique will produce its intended
results. It should be recognized that the price movements of
options in relation to currencies purchased by the Trust may
not correspond to the price movements of the Trust's portfolio
securities and may therefore cause the options transactions to
result in losses to the Trust.
FINANCIAL AND PRECIOUS METALS FUTURES AND RELATED OPTIONS
Financial futures contracts consist of interest rate
futures
contracts, securities index futures contracts and currency
futures contracts. Precious metals futures contracts consist
of futures contracts for the purchase or sale of gold, silver
and other precious metals. A futures contract obligates the
seller of the contract to deliver, and the purchaser to take
delivery of, the subject assets called for in the contract at a
specified future time and at a specified price. An option on
the futures contract gives the purchaser the right to assume a
position in the contract (a long position if the option is a
call and a short position if the option is a put) at a
specified exercise price at any time during the period of the
option.
The Trust may purchase or sell any financial or precious
metals futures contracts which are traded on an exchange or
board of trade or other market. A U.S. public market
presently exists in interest rate futures contracts on long-
term U.S. Treasury bonds, U.S. Treasury notes and three-month
U.S. Treasury bills. Securities index futures contracts are
currently traded with respect to the Standard & Poor's 500
Composite Stock Price Index and such other broad based stock
market indices as the New York Stock Exchange Composite Stock
Index and the Value Line composite Stock Price Index. A
clearing corporation associated with the exchange or board of
trade on which a financial futures contract trades assumes
responsibility for the completion of transactions and also
guarantees that open futures contracts will be performed.
Currency and precious metals futures contracts are also traded
on various U.S. exchanges or boards of trade. Options relating
to U.S. Futures contracts are generally also traded on the same
exchanges or boards of trade.
The Trust may, following written notice thereof to its
shareholders, take advantage of opportunities in the area of
precious metals related index options and futures contracts and
options on futures contracts which are not currently available
but which may be developed, to the extent such opportunities
are consistent with the Trust's investment objectives and
legally permissible for the Trust.
LIMITATIONS ON FUTURES CONTRACTS AND RELATED OPTIONS
The Trust may not currently engage in transactions in
futures contracts or related options for speculative purposes,
but only as a hedge against anticipated changes in exchange
rates or the market value of its portfolio securities or other
assets or securities or other assets which it intends to
purchase. Also, the Trust may not currently purchase or sell
precious metals or financial futures contracts or related
options if, immediately thereafter, the sum of the amount of
initial margin deposits on the Trust's existing futures and
related options positions and the premiums paid for related
options would exceed 5% of the market value of the Trust's
total assets after taking into account unrealized profits and
losses on any such contracts. At the time of purchase of a
futures contract or an option on a futures contract, an amount
of cash, U.S. Government securities or other appropriate high-
grade debt obligations equal to the market value of the futures
contract minus the Trust's initial margin deposit with respect
thereto will be deposited in a segregated account with the
Trust's custodian bank to collateralize fully the Trust's
position and thereby ensure that it is not leveraged.
To the extent to which the Trust may enter into futures
contracts and related options also may be limited by the
requirements of the Internal Revenue Code of 1986, as amended,
for qualification as a regulated investment company. See
"Taxes" herein.
LENDING OF PORTFOLIO SECURITIES
The Trust may seek to increase its income by lending
portfolio securities. Any such loan will be continuously
secured by collateral at least equal to the market value of the
security loaned. The Trust would have the right to call a loan
and obtain the securities loaned at any time upon five days'
notice. During the existence of a loan, the Trust would
continue to receive the equivalent of the interest or dividends
paid by the issuer on the securities loaned and would also
receive a fee, or the interest on investment of the collateral,
if any. The total value of the securities loaned at any time
will not be permitted to exceed 30% of the Trust's total
assets. As with other extensions of credit, there are risks of
delay in recovery or even loss of rights in the collateral
should the borrower of the securities fail financially.
However, the loans would be made only to U.S. domestic
organizations deemed by the Trust's management to be of good
standing and when, in the judgment of the Trust's management,
the consideration to be earned justified the attendant risk.
REPURCHASE AGREEMENTS
A repurchase agreement is an agreement under which the
Trust acquires a money market instrument (a security issued by
the U.S. government or any agency thereof, a bankers'
acceptance or a certificate of deposit) from a commercial bank,
subject to resale to the seller at an agreed upon price and
date (normally the next business day). The resale price
reflects an agreed upon interest rate effective for the period
the instrument is held by the Trust and is unrelated to the
interest rate on the underlying instrument. The Trust will
effect repurchasing agreements only with large well-capitalized
banks whose deposits are insured by the Federal Deposit
Insurance Corporation and which have the capital and undivided
surplus of at least $200,000,000. The instrument acquired by
the Trust in these transactions (including accrued interest)
must have a total value in excess of the value of the
repurchase agreement and will be held by the Trust's custodian
bank until repurchased. The Trustees of the Trust will monitor
the Trust's repurchase agreement transactions on a continuous
basis and will require that the applicable collateral will be
retained by the Trust's custodian bank. No more than an
aggregate of 10% of the Trust's total assets, at the time of
investment, will be invested in repurchase agreements having
maturities longer than seven days and other investments subject
to legal or contractual restrictions on resale, or which are
not readily marketable. There is no limitation on the Trust's
assets with respect to investments in repurchase agreements
having maturities of less than seven days.
The use of repurchase agreements involves certain risks.
For example, if the seller under a repurchase agreement
defaults on its obligation to repurchase the underlying
instrument at a
time when the value of the instrument has declined, the Trust
may incur a loss upon its disposition. If the seller becomes
insolvent and subject to liquidation or reorganization under
bankruptcy or other laws, a bankruptcy court may determine that
the underlying instrument is collateral for a loan by the Trust
and therefore is subject to sale by the trustee in bankruptcy.
Finally, it is possible that the Trust may not be able to
substantiate its interest in the underlying instrument. While
the Trust's Trustees acknowledge these risks, it is expected
that they can be controlled through careful monitoring
procedures.
PORTFOLIO TURNOVER
Securities will generally be purchased for possible long
term appreciation and not for short-term trading profits;
however, the rate of portfolio turnover is not a limiting
factor when the Investment Adviser deems changes appropriate.
It is anticipated that the Trust's annual portfolio turnover
rate will normally not exceed 50%. A rate of turnover of 100%
could occur, for example, if the value of the lesser of
purchases and sales of portfolio securities for a particular
year equaled the average monthly value of portfolio securities
owned during the year (excluding short-term securities).
A high rate of portfolio turnover involves a
correspondingly greater amount of brokerage commissions and
other costs which must be borne directly by the Trust and thus
indirectly by its shareholders. It may also result in the
realization of larger amounts of short-term capital gains which
are taxable to shareholders as ordinary income.
INVESTMENT RESTRICTIONS
The practices described above with respect to options and
futures transactions and the lending of portfolio securities
are fundamental policies which may not be changed without
approval of the shareholders. these policies also provide,
among other things, that the Trust may not purchase any
securities if as a result such purchase would cause more than
10% of the total outstanding voting securities of the issuer to
be held by the Trust. Also, these policies provide that no
more than an aggregate of 10% of the Trust's total assets, at
the time of investment, will be invested in repurchase
agreements having maturities longer than seven days and other
investment subject to legal or contractual restrictions on
resale, or which are not readily marketable.
Further information on the Trust's investment restrictions
may be found in the Trust's Statement of Additional
Information.
INVESTOR CONSIDERATIONS
The Trust's investments in foreign securities involve
special risks for the following reasons: (1) there may be less
public information available about foreign companies than is
available about United States companies; (2) foreign companies
are not generally subject to the uniform accounting, auditing
and financial reporting standards and practices applicable to
United States companies; (3) foreign stock markets have less
volume than the United States markets, and the securities of
some foreign companies are less liquid and more volatile than
the securities of comparable United States companies; (4) there
may be less governmental regulation of stock exchanges,
brokers, listed companies and banks in foreign countries than
in the United States; (5) the Trust may incur fees on currency
exchanges when it changes investments from one country to
another; (6) the
Trust's foreign investments could be affected by expropriation,
confiscatory taxation, nationalization of bank deposits,
establishment of exchanges controls, political or social
instability, diplomatic developments or currency blockage; (7)
fluctuations in foreign exchange rates will affect the value of
the Trust's portfolio securities, the value of dividends and
interest earned, gains and losses realized on the sale of
securities, net investment income and unrealized appreciation
or depreciation of investments; (8) payments may be withheld at
the source; and (9) it may be more difficult to obtain legal
judgments abroad.
Furthermore, the profits of the companies in which the
Trust invests, and thus the value of the Trust's securities,
are directly affected by the price of gold. The price of gold,
in turn, is subject to dramatic upward and downward movements,
often over short periods of time, and is affected by, among
other things, industrial and commercial demand, investment and
speculation, the monetary and fiscal policies of central banks,
governments and their agencies, including gold auctions
conducted by the U.S. Treasury Department and the International
Monetary Fund, and changes in international balances of
payments and governmental responses to them, including currency
devaluation's and exchange controls.
The Trust's purchase of securities of other investment
companies results in the layering of expenses such that
investors indirectly bear a proportionate share of the expenses
of such investment companies including operating costs and
advisory and administrative fees.
There is no limitation on the Trust's investment in
foreign securities. Under the investment strategies outlined
above, it is possible that during certain periods, up to 100%
of the Trust's assets may be invested in foreign securities.
There can, of course, be no assurance that the Trust will
achieve its investment objectives since there is uncertainty in
every investment.
MANAGEMENT
TRUSTEES
Under the terms of the Declaration of Trust establishing
the Trust, which is governed by the laws of the Commonwealth of
Massachusetts, the Trustees of the Trust are ultimately
responsible for the management of its business and affairs. The
Statement of Additional Information contains background
information regarding each Trustee and executive officer of the
Trust.
INVESTMENT ADVISER
The Investment Adviser, Anchor Investment Management
Corporation, manages the Trust's investments and affairs,
subject to the supervision of the Trust's Trustees. The
principal offices of both the Trust and the Investment Adviser
are located at 7022 Bennington Woods Drive, Pittsburgh,
Pennsylvania 15237.
For its services under its Investment Advisory
Contract
with the Trust (the "Investment Advisory Contract"), the
Investment Adviser receives a fee, payable monthly, calculated
at the rate of 1 1/2% per annum of the average daily net assets
of the Trust. This fee is higher than that charged to most
other investment companies. For the fiscal year ended December
31, 1995, the Investment Adviser received investment advisory
fees of $74,697 for its services to the Trust, which
represented 1 1/2% of the Trust's average net assets. \R
The Investment Adviser and Meeschaert & Co., Inc., the
Trust's underwriter (the "distributor"), are affiliated through
common control with Societe D'Etudes et de Gestion Financieres
Meeschaert, S.A., one of France's largest privately owned
investment management firms, which together are referred to as
the "Meeschaert Organization." The Meeschaert Organization was
established in Roubaix, France in 1935 by Emile C. Meeschaert,
and presently manages, with full discretion, an aggregate
amount of approximately $1.5 billion for approximately 8,000
individual (and institutional) customers, including $250
million in French mutual funds. The person who is primarily
responsible for the day-to-day management of the Trust's
portfolio is Paul Jaspard, who is a Vice President of the
Investment Adviser. Mr. Jaspard is President of Global Equity
Managers, S.A., an investment advisory firm headquartered in
Luxembourg. He has managed other portfolios for the Meeschaert
Organization for more than eighteen years.
EXPENSES
The Trust is responsible for all its expenses that are
not assumed by the Investment Adviser under the Investment
Advisory Contract, including without limitation, the fees and
expenses of the custodian and transfer agent; costs incurred in
determining the Trust's net asset value and keeping its books;
the cost of share certificates; membership dues in investment
company organizations; distribution and brokerage commissions
and fees; fees and expenses of registering its shares; expenses
of reports to shareholders, proxy statements and other expenses
of shareholders' meetings; insurance premiums; printing and
mailing expenses; interest, taxes and corporate fees; legal and
accounting expenses; and fees and expenses of Trustees not
affiliated with the Investment Adviser. The Trust will also
bear expenses incurred in connection with litigation in which
the Trust is a party and the legal obligation the Trust may
have to indemnify its officers and Trustees with respect
thereto. For the fiscal year ended December 31, 1995, expenses
borne by the Trust amounted to $99,508 which represented 1.99%
of the Trust's average net assets. \R
BROKERAGE
Decisions to buy and sell portfolio securities for the
Trust are made pursuant to recommendations by the Investment
Adviser. The Trust, through the Investment Adviser, seeks to
execute its portfolio security transactions on the most
favorable terms and in the most effective manner possible. To
the extent consistent with the policy of seeking best price and
execution, a portion of the Trust's portfolio transactions may
be executed through the Distributor, which is an affiliate of
the Investment Adviser. In the event that this occurs, it will
be on the basis of what management believes to be current
information as to rates which are generally competitive with
the rates available from other responsible brokers and the
lowest rates, if any, currently offered by the Distributor. In
selecting among broker-dealer firms to execute its portfolio
transactions, the Trust, through the Investment Adviser, may
give consideration to those firms which have sold or are
selling shares of the Trust, and who furnish other services to
the Trust or the Investment Adviser.
MANAGEMENT DISCUSSION OF FUND PERFORMANCE
For most of the Trust's recent fiscal year, the investment
advisor determined that a relatively equal balance between gold
bullion and shares of gold mines was an appropriate asset
allocation to meet the Trust's objectives in the context of
relatively flat bullion prices. Despite continued stability in
the price of the bullion for much of the year, the Trust
returned a small positive performance for the year. \R
The average annual total return for a share of the Trust was as
follows for the period indicated:
2.01% for the one year period beginning on January
1,
1995 through December 31, 1995; \R
(8.26%) for the two year period beginning on January
1,
1994 through December 31, 1995; \R
HOW TO PURCHASE SHARES
Shares of the Trust may be purchased from the Distributor,
7022 Bennington Woods Drive, Pittsburgh, Pennsylvania 15237.
There is no sales charge or commission payable by the investor
with respect to purchases of shares. For new shareholders
initiating accounts, the minimum investment is $500, except
for exchanges of securities for Trust shares, where the
minimum is $5,000 (see "How to Exchange Securities for Trust
Shares" below). There is no minimum for shareholders
purchasing additional shares for deposit to existing accounts.
An application for use in making an initial investment in
the Trust is included in the back of this Prospectus. The
applicable price will be the net asset value next determined
after the order is received by the Distributor. (See
"Determination of Net Asset Value.")
DISTRIBUTION OF SHARES
In addition to advisory fees and other expenses, the
Trust may pay for certain expenses pursuant to a distribution
plan (the "Plan") designed to meet the requirements of Rule
12b-1 ("Rule 12b-1") under the Investment Company Act of 1940.
The Plan is of the type sometimes called a compensation plan.
The Plan provides that the Trust will pay the Distributor a
commission equal to up to 5% of the price paid to the Trust
for each sale, all or any part of which may be re-allowed by
the Distributor to others (dealers) making such sales. To the
extent that the distribution fee is not paid to such dealers,
the Distributor may use such fee for its expenses of
distribution of Trust shares. If such fee exceeds its
expenses, the Distributor may realize a profit from these
arrangements. An aggregate limit is currently in effect on
the amount of all payments pursuant to the Plan equal to .75
of 1% of the Trust's average daily net assets for any fiscal
year. If, so long as the Plan is in effect, the Distributor's
reallowances to dealers and other expenses exceed the limit
(currently .75 of 1%) for any particular year, it could
collect in any future year such amounts (which do not include
interest or other carrying charges) up to any amount by which
amounts paid to it under the Plan in that year are less than
the earlier year's limit. In such a case it might receive
amounts in excess of its then current expenses. The
Distributor's expenses are likely to be higher in the early
years of the Trust and accordingly, the annual fees received
by the Distributor in the early years are not likely to
reimburse the Distributor for the total distribution expenses
that it will incur in those years. The following numerical
example demonstrates this principle: If, in each of the first
three years of sales of the Trust's shares, sales by the
Distributor equaled $1,000,000, and the Distributor's total
expenses for such years were $60,000, $55,000 and $45,000,
respectively, the Distributor's expenses would exceed the
Distributor's expected commissions of $50,000 for the first
two years. (Note: this example does not take into account the
.75 of 1% aggregate limit discussed above.)
In 1992, the Securities and Exchange Commission approved
amendments to the National Association of Securities' Dealers
("NASD's") Rules of Fair Practice that impose limits on mutual
fund sales charges, including asset-based sales charges and
contingent deferred sales charges. These amendments became
effective on July 1, 1993, and could significantly affect the
trust's implementation of the Plan, which currently is not in
effect.
Meeschaert & Co., Inc. serves as the Trust's principal
underwriter under a Distributor's Contract dated July 21,
1993.
CONTINGENT DEFERRED SALES CHARGE
In conjunction with, but not as part of, the Plan, a
contingent deferred sales charge may be imposed upon certain
redemptions of shares purchased after inception of the Plan.
The charge in respect of such redemptions made during the
first four calendar years following purchase of the shares is
as follows: 4% in the year of purchase; 3% in the second year;
2% in the third year; and 1% in the fourth year. These charges
are not received by the Distributor and will not reduce
amounts paid to the Distributor under the Plan.
HOW TO EXCHANGE SECURITIES FOR TRUST SHARES
When shares of the Trust are being offered, the Trust may
accept U.S. Government securities and U.S. Government agency
fixed-income securities acceptable to the Investment Adviser
in exchange for shares of the Trust at net asset value. The
minimum value of securities accepted for deposit in any single
transaction is $5,000. The Trust will value accepted
securities in the manner provided for valuing its portfolio
securities (see "Determination of Net Asset Value").
Securities determined to be acceptable for the Trust, in
proper form for transfer to the Trust, together with a
completed and signed letter of transmittal in approved form
(available from the Distributor) ("Letter of Transmittal"),
should be forwarded to the Trust as follows:
Investors Bank & Trust Company
Financial Product Services Group
Attn: Anchor Strategic Assets Trust
1 Lincoln Plaza
Boston, Massachusetts 02205
An investor must forward all securities pursuant to a
single Letter of Transmittal or, in certain instances as
indicated in the Instructions to the Letter of Transmittal,
multiple Letters of Transmittal attached and transmitted as a
single exchange. The Trust will only accept securities which
are delivered in proper form.
An investor will be required to represent, among other
things, that the securities forwarded are not subject to any
restrictions upon their sale by the Trust by reason of any
agreement or representation that the investor has made in
respect thereof, or of his being in control of, controlled by,
or under common control with, the issuer thereof within the
meaning of Section 2(11) of the Securities Act of 1933, or for
any other reason. The Trust will not accept securities for
exchange if, in the opinion of its counsel, acceptance would
violate any federal or other law to which the Trust is
subject.
Investors who are contemplating an exchange of securities
for shares of the Trust, or their representatives, are advised
to contact the Distributor to determine whether the securities
are acceptable to the Trust before forwarding such securities.
The Trust reserves the right to reject any securities when it
determines in its sole discretion that it is in the best
interests of the Trust to do so.
If securities presented for exchange are found to be in
good order only in part, the Trust may issue the appropriate
number of shares in accordance with the procedure described
below for such part and return the balance to the investor or,
at its option, may waive any or all irregularities to the
extent permissible under applicable law and issue shares for
all or a portion of such defective presentation. A
confirmation for shares of the Trust will be issued to an
investor after accepted securities presented by him have
cleared for transfer to the Trust. No certificates will be
issued unless requested by the investor.
By tendering securities, an investor agrees to accept the
determination of market value by the Trustees concurrently
with
the determination of the Trust's net asset value per share.
The number of shares of the Trust to be issued to an investor
in
exchange for securities shall be the value of such accepted
securities determined in the manner described above, divided by
the net asset value per Trust share next determined after the
Trust's acceptance of such securities.
A gain or loss for federal tax purposes may be realized by
an investor in connection with the exchange of securities for
shares of the Trust, depending upon his tax cost basis for the
securities tendered for exchange. Each investor should consult
his tax advisor with respect to the particular federal income
tax consequences, as well as any state and local tax
consequences, of exchanging his securities for Trust shares.
REDEMPTION AND REPURCHASE OF SHARES
Any shareholder may require the Trust to redeem his
shares. In addition, the Trust maintains a continuous offer to
repurchase its shares. If a shareholder used the services of a
broker in selling his shares in the over-the-counter market,
the broker may charge a reasonable fee for his services.
Redemptions and repurchases will be made in the following
manner.
1. Certificates for shares of the Trust may be mailed or
presented, duly endorsed, with signatures guaranteed in the
manner described below, with a written request that the Trust
redeem the shares, to the Trust's transfer agent, Anchor
Investment Management Corporation, at 7022 Bennington Woods
Drive, Pittsburgh, Pennsylvania 15237. If no certificate has
been issued and shares are held in an Open Account, a written
request that the Trust redeem such shares, with signatures
guaranteed in the manner described below, may be mailed or
presented as described above. The redemption price will be the
net asset value next determined after the request and/or
certificates are received.
2. A request for repurchase may be communicated to the
Trust by a shareholder through a broker. The repurchase price
will be the net asset value next determined after the request
is received by the Trust, provided that, if the broker receives
the request before noon and transmits it to the Trust before
1:00 p.m. Eastern Time the same day, the repurchase price will
be the net asset value determined as of 12:00 noon Eastern Time
that day. If the broker receives the request after noon, the
repurchase price will be the next asset value determined as of
12:00 noon Eastern Time the following day. If an investor uses
the services of a broker in having his shares repurchased, the
broker may charge a reasonable fee for his services.
Payment for shares redeemed or repurchased will be
delivered within seven days after receipt of the shares, and/or
required documents, duly endorsed. The signature(s) on an
issued certificate must be guaranteed by a commercial bank or
trust company or by a member of the New York, American, Pacific
Coast, Boston or Chicago Stock Exchange. A signature guarantee
by a savings bank or savings and loan association or
notarization by a notary public is not acceptable.
In order to ensure proper authorization the transfer agent may
request additional documents such as, but not restricted to,
stock powers, trust instruments, certificates of corporate
authority and waiver of tax required in some states from
selling estates before repurchasing shares.
The right of redemption may be suspended or the payment
date postponed when the New York Stock Exchange is closed for
other than customary weekend or holiday closings, or when
trading on the New York Stock Exchange is restricted, as
determined by the Securities and Exchange Commission; for any
period when an emergency as defined by the rules of the
Commission exists; or during any period when the Commission
has, by order, permitted such suspension. In case of a
suspension of the right of redemption, a shareholder who has
tendered a certificate for redemption or made a request for
repurchase through a broker may withdraw his request or
certificate or, absent such withdrawal,
he will receive payment of the net asset value determined nest
after the suspension has been terminated.
A Shareholder may receive more or less than he paid for
his shares, depending on the net asset value of the shares at
the time of redemption or repurchase.
DETERMINATION OF NET ASSET VALUE
The net asset value is determined by the Trust as of 12:00
noon Eastern Time on each business day on which the New York
Stock Exchange is open for trading or on any day that the Trust
is open for business, but the New York Stock Exchange is not
open for business, if there occurs an event which might
materially affect the net asset value of the Trust's redeemable
shares.
The manner of determination of the net asset value is
briefly as follows: Securities traded on a U.S. national or
other foreign securities exchange are valued at the last sale
price on the primary exchange on which they are listed, or if
there has been no sale that day, at the current bid price.
Other U.S. and foreign securities and foreign currencies for
which market quotations are readily available are valued at the
known current bid price believed most nearly to represent
current market value. Other securities (including limited
traded securities) and all other assets of the Trust are valued
at fair value as determined in good faith by the Trustees of
the Trust. Liabilities are deducted from the total, and the
resulting amount is divided by the number of shares
outstanding.
Each day investment securities traded on a national
securities exchange are valued at the noon sales price;
securities traded in the over-the-counter market are valued at
the last sale price as of 12:00 noon. Gold bullion is valued
each day at noon based on the New York spot gold price. Gold
coins, foreign currencies, and foreign denominated securities
for which market quotations are readily available are valued at
the known bid prices as of 12:00 noon. Temporary cash
investments are stated at cost. In the absence of a reliable
market for a particular metal, security or currency, an
investment therein will be valued at fair value as determined
in good faith by the Trustees.
SERVICES FOR SHAREHOLDERS
OPEN ACCOUNTS
As a convenience to the shareholder, all shares of the
Trust registered in his name are automatically credited to an
Open Account maintained for him on the books of the Trust. All
shares acquired by the shareholder will be credited to his Open
Account and share certificates will not be issued unless
requested. Certificates representing fractional shares will not
be issued in any case. Certificates previously acquired may be
surrendered to the Trust's transfer agent, such certificates
will be canceled and the share represented thereby will
continue to be credited to the Open Account of the shareholder.
Each time shares are credited to his Open Account, the
shareholder will receive a statement showing the details of the
transaction and the then current balance of shares owned by
him. Shortly after the end of each calendar year he will also
receive a complete annual statement of his Open Account as well
as information as to the federal tax status of dividends and
capital gain distributions, if any, paid by the Trust during
the year.
Shares credited to an Open Account are transferable upon
written instructions to the Trust's transfer agent.
INVEST-BY-MAIL
An Open Account provides a single and convenient way of
setting up a flexible investment program for the accumulation
of shares of the Trust. At any time when the Trust is offering
its shares the shareholder may send a check (payable to the
order of the Trust) to Investors Bank & Trust Company--
Shareholders Services, Attn: Anchor Strategic Assets Trust, 24
Federal Street, Boston, Massachusetts 02110 (giving the full
name or names of his
account). The check will be used to purchase additional shares
for his Open Account at the net asset value next determined
after the check is received. Any check not payable to the
order of the Trust will be returned.
The cost of administering Open Accounts for the benefit of
shareholders who participate in them will be borne by the Trust
as an expense of all its shareholders.
DIVIDENDS AND DISTRIBUTIONS
The Trust currently intends to distribute any dividends
and distributions in additional shares, or, at the option of
the shareholder, in cash. In accordance with his distribution
option, a shareholder may elect (1) to receive both dividends
and capital gain distributions in additional shares, or (2) to
receive dividends in cash and capital gain distributions in
additional shares, or (3) to receive both dividends and capital
gain distributions in cash. A shareholder may change his
distribution option at any time by notifying the Trust's
transfer agent in writing. To be effective with respect to a
particular dividend or distribution, the new distribution
option must be received by the transfer agent at least 30 days
prior to the close of the fiscal year. All accounts with a
cash dividend option will be changed to reinvest both dividends
and capital gains automatically upon determination by the
Trust's transfer agent that the address of record is not
current.
Dividends and capital gain distributions received in
shares will be received by the Trust's transfer agent, as agent
for the shareholder, and credited to his Open Account in full
and fractional shares computed at the record date closing net
asset value.
TAXES
The Trust intends to qualify under Subchapter M of the
Internal Revenue Code as a regulated investment company and to
distribute substantially all investment income and capital
gains, if any, at least once every year so that, to the extent
of such distributions, the Trust will not be subject to federal
income taxes.
Shareholders will be subject to federal income taxes on
distributions made by the Trust whether they are received in
cash or additional Trust shares. Distributions of net
investment income and short-term capital gains, if any, will be
taxable to shareholders as ordinary income. Distributions of
long-term capital gains, if any, will be taxable to
shareholders as longterm capital gains, without regard to how
long a shareholder has held shares of the Trust. Dividends
paid by the Trust will generally not qualify for the dividends
received deductions for corporations. The Trust will notify
shareholders each year of the amount of dividends and
distributions, including the amount of any distribution of long-
term capital gains.
The Trust's foreign investments may be subject to foreign
withholding taxes. The Trust will be entitled to claim a
deduction for such foreign withholding taxes for federal income
tax purposes. However, any such taxes will reduce the income
available for distribution to shareholders.
The Trust is required to withhold 20% of the dividends
paid with respect to any shareholder who fails to furnish the
Trust with a correct taxpayer identification number, who under-
reported dividend or interest income, or who fails to certify
to the Trust that he or she is not subject to such withholding.
An individual's tax identification is his or her social
security number.
The foregoing is a general and abbreviated summary of the
applicable provisions of the Internal Revenue code and Treasury
regulations currently in effect. For the complete provisions,
reference should be made to the pertinent Code sections and
regulations. The Code and regulations are subject to change by
legislative or administrative actions.
MISCELLANEOUS INFORMATION
CUSTODIAN, TRANSFER AGENT AND DIVIDEND-PAYING AGENT
All securities, cash and other assets of the Trust are
received, held in custody and delivered or distributed by
Investors Bank & Trust Company, Custodian, 24 Federal Street,
Boston, Massachusetts 02110, provided that in cases where
foreign securities must, as a practical matter, be held abroad,
the Trust's custodian bank and the Trust will make appropriate
arrangements so that such securities may legally be so held
abroad. The Trust's custodian bank does not decide on
purchases or sales of portfolio securities or the making of
distributions. Anchor Investment Management Corporation, 7022
Bennington Woods Drive, Pittsburgh, Pennsylvania 15237, serves
as transfer agent and dividend-paying agent for the Trust.
SHAREHOLDER INQUIRIES
For further information about the Trust, investors should
call (412) 635-7610. Written inquiries should be addressed to
Anchor Strategic Assets Trust, 7022 Bennington Woods Drive,
Pittsburgh, Pennsylvania 15237.
ANCHOR STRATEGIC ASSETS TRUST
(THE "TRUST")
MEESCHAERT & CO., INC.
("DISTRIBUTOR")
APPLICATION AND REGISTRATION
FORM1 SEND APPLICATION
TO
MEESCHAERT & CO., INC., 7022 BENNINGTON WOODS DRIVE,
PITTSBURGH, PENNSYLVANIA 15237
Date:
__________________
_
I. ACCOUNT REGISTRATION:
New: Social Security or Tax
Number___________________________________________________
(if two names below, circle which one has this
number.)
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:
A check for $_______________ payable to the Trust
attached. or
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.
A. Dividends and capital gains in additional full and
fractional shares credited to shareholder's account, no
certificates issued.
OR
B. Dividends in cash; capital gains in additional full
and fractional shares credited to shareholder's account; no
certificates issued.
OR
C. Dividends in cash; capital gains in cash.
(Certificates will be issued to shareholders requesting such in
writing from the Transfer Agent.)
III. INVEST-BY-MAIL SERVICE: FOR PERIODIC SHARE ACCUMULATION
(WHETHER OR NOT DIVIDENDS ARE RECEIVED IN SHARES)
Please check if you wish to utilize the Trust's Invest-By
Mail Service. This is a voluntary service involving no extra
charge to the shareholder, and it may be changed or
discontinued at any time.
IV. SHAREHOLDER'S SIGNATURE: Should be the same as name in
Account Registration.
__________________________________
_____________________________________
Signature Signature of Co-
Owner (if any)
(I have received a current prospectus of the Trust and I
understand that my account will be covered by the provisions
on
the reverse side of this Application. I also understand that I
may terminate any of these services at any time.)
DEALER AUTHORIZATION:
(please print)
Representative
_________________________________
_____________________________________
Dealer's Name (Representative's
Name)
_________________________________
_____________________________________
Home Office Address Telephone
Number(Representative's Number)
Branch Office:
_________________________________
_____________________________________
City State Zip Address
_________________________________
_____________________________________
Telephone Number Authorized Signature of Dealer
City State Zip
ANCHOR STRATEGIC ASSETS TRUST
7022 BENNINGTON WOODS DRIVE
PITTSBURGH, PENNSYLVANIA
15237
(412) 635-7610
STATEMENT OF ADDITIONAL
INFORMATION
MAY 1, 1996 \R
This Statement of Additional Information supplements the
information contained in the current Prospectus of Anchor
Strategic Assets Trust (the "Trust"), dated May 1, 1996, and
should be read in conjunction with the Trust's Prospectus and
the financial statements contained in the Trust's Annual Report
for the year ended December 31, 1995. The Trust's Prospectus
and Annual Report may be obtained without charge by writing or
calling the Trust. The Trust's Annual Report is incorporated
by reference in this Statement of Additional Information.\R
TABLE OF CONTENTS
ABOUT THE TRUST 3
INVESTMENT STRATEGY 3
GENERAL RISK CONSIDERATIONS 5
Precious Metals 5
SPECIALIZED INVESTMENT TECHNIQUES AND RELATED RISKS 6
Option Transactions Involving Portfolio Securities and
Securities Indices 6
Securities Options 7
Index Options 8
Risk of Options and Indices 8
Options on Foreign Currencies 9
Risks of Foreign Currency Option Activities 10
Special Risks of Foreign Currency Options 10
Financial and Precious Metals Futures and Related
Options 11
Limitations on Futures Contracts and Related Options 13
Risks Relating to Futures Contracts and Related
Options 13
Lending of Portfolio Securities 14
Repurchase Agreements 14
PORTFOLIO TURNOVER 14
INVESTMENT RESTRICTIONS 15
MANAGEMENT 16
Officers and Trustees 16
Remuneration of Officers and Trustees 17
Investment Advisory Contract 17
Investment Adviser 18
PRINCIPAL HOLDERS OF SECURITIES 18
DETERMINATION OF NET ASSET VALUE 18
DISTRIBUTION OF SHARES 19
Contingent Deferred Sales Charge 19
HOW TO PURCHASE SHARES 20
REDEMPTION, EXCHANGE AND REPURCHASE OF SHARES 20
DISTRIBUTIONS 21
TAXES 21
Tax Treatment of Options and Futures Transactions 22
PORTFOLIO SECURITY TRANSACTIONS 23
MISCELLANEOUS INFORMATION 24
Custodian, Transfer Agent and Dividend-Paying Agent 24
Independent Public Accountants 25
Registration Statement 25
FINANCIAL STATEMENTS 25
ABOUT THE TRUST
The Trust was established as an unincorporated business
trust under the laws of Massachusetts by a Declaration of Trust dated
September 22, 1989. The Trustees amended the Declaration of
Trust in 1990 to change the name of the Trust from Meeschaert
Strategic Assets Trust to Anchor Strategic Assets Trust.
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
nonassessable and transferable on the books of the Trust. The
shares have no preemptive rights. The shares each have one vote
and proportionate liquidation rights.
The Trust normally will not hold meetings of shareholders
to elect Trustees. If less than a majority of the Trustees
holding office have been elected by shareholders, a meeting of
shareholders will be called to elect Trustees. Under the
Declaration of Trust and the Investment Company Act of 1940,
the record holders of not less than two-thirds of the
outstanding shares of the Trust may remove a Trustee by votes
cast in person or by proxy at a meeting called for the purpose
or by a written declaration filed with the Trust's custodian
bank. In connection with shareholder rights to remove
Trustees, the Trust will provide shareholders with certain
assistance in communicating with other shareholders. Except as
described above, the Trustees will continue to hold office and
may appoint successor Trustees.
Under Massachusetts law, shareholders could under certain
circumstances, be held personally liable for the obligations of
the Trust. However, the Declaration of Trust disclaims
shareholder liability for acts or obligations of the Trust and
requires that notice of this disclaimer be given in each
agreement, obligation or instrument entered into or executed by
the Trust or a Trustee. The Declaration of Trust provides for
indemnification from the assets of the Trust for all losses and
expenses of any shareholder held personally liable for the
obligations of the Trust. Thus, the risk of a shareholder
incurring a financial loss on account of his or her liability
as a shareholder of the Trust is limited to circumstances in
which the Trust itself would be unable to meet its obligations.
The possibility that these circumstances would occur is remote.
Upon payment of any liability incurred by the Trust, the
shareholder paying the liability will be entitled to
reimbursement from the general assets of the Trust. The
Trustees intend to conduct the operations of the Trust to
avoid, to the extent possible, ultimate liability of
shareholders for liabilities of the Trust.
INVESTMENT STRATEGY
The Trust's Prospectus contains a description of the
investment objectives and policies of the Trust, including a
discussion of specialized techniques that the Trust may use in
order to achieve its investment objectives and certain risks
related thereto. The following discussion is intended to
provide further information concerning investment strategy,
techniques, and risk considerations which the Investment
Adviser believes to be of interest to investors.
Historically, during periods of increasing inflation and
during periods of economic or monetary instability, the prices
of gold and silver and other precious metals have tended to
increase as rapidly or more rapidly than the rate of inflation.
Also, currencies of countries not involved in inflationary
circumstances may increase in value relative to the U.S.
dollar. During these same periods, interest rates have tended
to increase, causing the market value of debt instruments to
decline. Conversely, during periods of deflation (when
inflationary forces are being reversed) the price of high grade
debt instruments has tended to increase while the value of
precious metals has tended to decline. Foreign currencies
(relative to the U.S. dollar) may also decline in value at such
times.
Accordingly, the Investment Adviser will seek to
anticipate oncoming inflationary and deflationary economic
cycles.
The Investment Adviser's determination as to whether the
economy is inflationary or deflationary will be made based upon
constant study of numerous economic and monetary factors.
These factors will include, but not necessarily be limited to:
actual and anticipated rates of change in the Consumer Price
Index ("CPI") over specified periods of time; actual and
anticipated changes and rates of changes in the U.S. dollar in
relation to other key currencies, e.g., the German mark, the
British pound and the Japanese yen; actual and anticipated
changes, and rates
of change, in short and long term interest rates and real
interest rates, i.e., inflation adjusted interest rates; actual
and anticipated changes in the money supply; and actual and
anticipated governmental fiscal and monetary policy. It should
be emphasized that the Investment Adviser will not apply a
rigid, mechanical determination in assessing whether the
economy is an inflationary or disinflationary environment.
Rather, its determination will be the result of its subjective
judgment of all factors it considers relevant.
When, by reason of a rising rate of change in the CPI,
rising interest rates, and/or a decline in the value of the
U.S. dollar, an inflationary cycle is expected, the Trust will
invest at least 65% of the value of its total assets in gold
bullion, gold certificates, and silver bullion; in any other
precious metals and related securities which may be issued by
either U.S. or foreign private or governmental issuers,
including without limitation the government of South Africa and
South African companies; in options on securities, securities
indices and currencies; in precious metals and financial
futures contracts and related options; and in repurchase
agreements. As an integral part of this strategy the Trust may
invest up to 50% of its assets in the equity securities of
companies (both foreign and domestic) primarily engaged in gold
exploration, mining or processing. A company which is
"primarily engaged" in an activity is one in which at least 50%
of its assets are devoted to or 50% of its revenue is derived
from such activity. Assets of the Trust not invested as
described above will largely be invested in debt instruments of
the U.S. Government and its agencies having varied maturities
or in repurchase agreements or loans of securities as described
below. As used herein, the following terms have the indicated
definitions: "equity securities" means shares in a corporation,
whether or not transferable or denominated 'stock', or similar
security, interest of a limited partner in a limited
partnership, or warrants or rights other than rights to
convert, to purchase, sell, or subscribe to a share, security,
or interest of a kind previously specified; and "convertible
securities" means debentures or preferred stock that may be
exchanged by the owner for common stock or another security,
usually of the same company, in accordance with the terms of
the issue.
When, by reason of a declining rate of change in the CPI,
declining interest rates, and/or an increase in the value of
the U.S. dollar, a deflationary cycles is anticipated, the
Trust will invest up to 90% of its total assets in debt
instruments of U.S. or foreign government and government agency
fixed-income securities of sufficient maturities to realize its
objective of long-term capital appreciation. During such
periods, the Trust will hold the balance of its assets in short-
term U.S. or foreign denominated securities.
U.S. Government securities include U.S. Treasury bills,
notes and bonds, which differ in their interest rates,
maturities and times of issuance. Treasury bills have
maturities of one year or less. Treasury notes have maturities
of one to ten years and Treasury bonds have maturities of
greater than ten years at the date of issuance. U.S.
Government securities also include obligations of agencies and
instrumentalities of the U.S. Government. Agencies and
instrumentalities of the U.S. Government include, but are not
limited to: Federal Land Banks; Farmers Home Administration;
Central Bank of Cooperatives; Federal Intermediate Credit
Banks; Federal Home Loan Banks; and Federal National Mortgage
Association. Some obligations of the U.S. Government agencies
and instrumentalities, such as Treasury bills and Government
National Mortgage Association (GNMA) certificates, are
supported by the full faith and credit of the United States;
others, such as securities of Federal Home Loan Banks, are
supported by the right of the issuer to borrow from
the U.S. Treasury; still others, such as bonds issued by the
Federal National Mortgage Association, a private corporation,
are supported only by the credit of the instrumentality. These
securities are not insured by the U.S. Government and there can
be no assurance that the U.S. Government will support an
instrumentality it sponsors. The Trust will invest in the
securities issued by such an instrumentality only when its
Investment Adviser determines that the credit risk with respect
to the instrumentality does not make its securities unsuitable
investments.
GNMA certificates have yield and maturity characteristics
corresponding to the underlying mortgage loans. Thus, unlike
U.S. Treasury bonds, which pay a fixed rate of interest until
maturity when the entire principal amount comes due, payments
on GNMA certificates include both interest and a partial
prepayment of principal. Additional prepayments of principal
may result from the prepayment, refinancing or foreclosure of
the underlying mortgage loans. Although maturities of the
underlying mortgage loans range up to 30 years, such
prepayments shorten the effective maturities to approximately
12 years (based upon current government statistics). GNMA
certificates currently offer yields higher than those available
from other types of U.S. Government securities, but because of
the prepayment feature may be less effective than other types
of securities as a means of "locking in" attractive long-term
interest rates. This is caused by the need to reinvest
prepayments of principal generally and the possibility of
significant unscheduled prepayments resulting from declines in
mortgage interest rates. As a result, GNMA certificates may
have less potential for capital appreciation during periods of
declining interest rates than other investments of comparable
maturities, while having a comparable risk of decline during
periods of rising interest rates.
There are certain other risks associated with GNMA
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.
U.S. Government debt securities of the sort owned by the
Trust fluctuate in market price (but not in ultimate repayment
amount) primarily with interest rate levels and trends, rising
when interest rates decline and declining when interest rates
rise; they generally possess a high degree of dependability
with respect to timely payment of principal or interest.
If, in the opinion of the Investment Adviser, there are
periods 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 shortterm U.S. Government securities and other money
market instruments, cash or cash equivalents. Money market
instruments include high-grade commercial paper (promissory
notes issued by corporations to finance their short-term credit
needs), negotiable certificates of deposit, non-negotiable
fixed time deposits, bankers' acceptances and repurchase
agreements. Investments in commercial paper will be rated Prime-
1 by Moody's Investors Services, Inc. or A-1 by Standard &
Poor's corporation
or F-1 by Fitch Investors Service, Inc., which are the highest
ratings assigned by these agencies. Money market instruments
will be limited to U.S. dollar denominated instruments which
are rated in the top two categories by an independent
nationally recognized rating organization or, if not rated, are
of comparable quality as determined by the Trustees.
Investments in bank instruments will be in instruments which
are issued by U.S. or foreign banks having capital and
undivided surplus at the time of investment of $200,000,000 or
more and which mature in one year or less from the date of
acquisition.
GENERAL RISK CONSIDERATIONS
Because of the following considerations, an investment in
the Trust should not be considered a complete investment
program (additional risk considerations are discussed below).
The success of the Trust's investment program will be
dependent to a high degree on the Investment Adviser's ability
to anticipate the onset and termination of inflationary and
deflationary cycles. A failure to anticipate a deflationary
cycle could result in the Trust's assets being
disproportionately invested in precious metals. Conversely, a
failure to predict an inflationary cycle could result in the
Trust's assets being disproportionately invested in U.S.
Government securities. The success of the Trust's investment
program will also be dependent to a high degree on the validity
of the premise that the values of gold and other precious
metals will move in a different direction than the values of
U.S. Government securities during periods of inflation or
deflation. If values of both precious metals and U.S.
Government securities move down during the same period of time,
the value of the shareholder's investment will decline rather
than stabilize or increase, as anticipated, regardless of
whether the Trust is primarily invested in precious metals or
U.S. Government securities.
Investment on an international basis involves certain
risks not involved in domestic investments, including
fluctuations in foreign exchange rates, higher foreign
brokerage costs, costs of currency conversion, currency
blockage, different accounting standards, difficulty in
obtaining foreign court judgments, future political and
economic developments, and the possible imposition of exchange
controls or other foreign governmental laws or restrictions.
Since the Trust may invest in securities denominated or quoted
in currencies other than the U.S. dollar, changes in foreign
currency exchange rates will affect the value of securities in
the portfolio and the unrealized appreciation or depreciation
of investments. In addition, with respect to certain foreign
countries there is the possibility of expropriation and
nationalization of assets, confiscatory taxation, political or
social instability or diplomatic developments which could
affect investments in those countries. Interest and dividends,
and possibly other amounts received by the Trust in respect of
foreign investments, may be subject to withholding and other
taxes at the source, depending upon the laws of the county in
which the investment is made.
PRECIOUS METALS
It should be recognized that any investment in gold and
silver bullion and other precious metals is subject to certain
risks. For example, dramatic upward or downward price
movements may occur in gold or silver over short periods of
time, influenced by many factors such as international
tensions, oil price changes, interest rate policies, political
uncertainties, rumors, supply and demand factors and lack of
regulation. Also, since investments in precious metals do not
generate any interest income or dividends, the only source of
return from these investments would be from any gains realized
upon their sale. Furthermore, the value of these investments
may be affected by such factors as the following:
1. Price Fluctuations: The price of gold has recently
been
subject to dramatic upward and downward price movements over
short periods of time. Such prices have ranged from a low
$37.39 per troy ounce on January 7, 1971 to a high of over $800
per troy ounce in 1980. Such prices have been influenced by,
among other things, industrial and commercial demand,
investment and speculation, and monetary and fiscal policies of
central banks and governments and their agencies, including
gold auctions conducted by the U.S. Treasury Department and the
International Monetary Fund.
2. Concentration of Source of Supply and Control of
Sales: At the current time there are only four major sources of
supply of primary gold production, and their market shares
cannot be readily ascertained. The Republic of South Africa and
the former Union of Soviet Socialist Republics are the two
largest producers. Political and economic conditions affecting
either country may have a direct impact on that country's sales
of gold. The only legally authorized sales agent for gold
produced in South Africa is the Reserve Bank of South Africa,
which controls the time and place of any sale of South African
bullion in accordance with its retention policies. The South
African Ministry of Mines determines gold mining policy and has
required mining companies to produce lower grades of ore when
gold prices are rising. South Africa depends predominantly on
gold sales for the foreign exchange necessary to finance its
imports, so that its sales policy is necessarily subject to
national economic and political developments.
3. Tax and Currency Laws: Changes in the tax or currency
laws of the U.S. or of foreign countries may inhibit the
Trust's ability to pursue, or may increase the cost of pursing,
its precious metals investment program.
4. Unpredictable Monetary Policies, Economic and
Political Conditions: The Trust's precious metals assets may
be less liquid or the change in the value of such assets may be
more volatile (and less related to general price movements in
the U.S. securities markets) than would be the case with
investments in the securities of larger U.S. companies,
particularly because the price of gold and other precious
metals may be affected by unpredictable international monetary
policies, conditions of scarcity and surplus and speculation.
For instance, major civil strife in South Africa could
seriously influence the price of gold. In addition, the use of
gold or Special Drawing Rights (which are also used by members
of the International Monetary Fund for international
settlements) to settle net deficits and surpluses in trade and
capital movements between nations subjects the supply and
demand of gold and therefore its price, to a variety of
economic factors which normally would not affect other types of
commodities.
5. New and Developing Market: Between 1933 and December
31, 1974, a gold market did not exist in the United States for
individual investment purposes. Since the latter date, markets
have been developing. Certain entities, including the U.S.
Treasury and the International Monetary Fund, have from time to
time conducted sales of relatively large amounts of gold
bullion and may continue to do so from time to time in the
future. Large purchases or sales of gold bullion, including
sales by such banks and agencies or by the U.S. Government, are
likely to affect the price of gold bullion.
6. Lack of Regulation: The trading of gold bullion in
the United States is not currently subject to existing rules
which govern the trading of agricultural and certain other
commodities and commodity futures. The absence of such
regulation may adversely affect the continued development of an
orderly market in gold bullion. The development of a regulated
futures market in gold bullion might also affect the
development of the market in and the price of gold bullion in
the United States.
In addition to being affected by many of the same factors
influencing the pricing of gold, silver prices may also be
affected by labor relations in the silver and copper mining
industries (a significant portion of U.S. silver ore production
is a by-product of copper). Prices of other precious metals
may be similarly and otherwise affected.
Since investments in precious metals do not generate any
interest or dividends, the only source of return from such
investments will be from any gains (less any losses) realized
from sales of such metals. It is expected that any such income
will be taxable as capital gain in the manner applicable to
ordinary business corporations.
Prices at which gold and silver bullion and other precious
metals are purchased or sold normally include dealer markups or
markdowns, insurance expenses, assay charges and shipping
costs. For example, all such charges under current market
conditions for 400 troy ounces of gold bullion of at least
995/1000 purity do not generally in the aggregate exceed 2% of
the price. Such costs and expenses may be a grater or lesser
percentage of the price from time to time, depending on whether
the price of gold bullion decreases or increases. Such charges
will vary in respect of other precious metals. In addition,
the Trust will incur ongoing storage costs for its precious
metals.
SPECIALIZED INVESTMENT TECHNIQUES AND RELATED RISKS
The Trust may use certain specialized investment
techniques, including transactions in options on securities,
securities indices and currencies, transactions in precious
metals and financial futures contracts and related options,
loans of portfolio securities and transactions in repurchase
agreements.
OPTION TRANSACTIONS INVOLVING PORTFOLIO SECURITIES AND
SECURITIES INDICES
The Investment Adviser believes that the assets of the
Trust may be increased by realizing premiums from the writing
of call options and by purchasing put options with respect to
securities held by the Trust. The Trust may write call option
contracts or purchase put or call options with respect to
portfolio securities and with respect to securities indices at
such times as its management determines to be appropriate.
Call options are written and put options are purchase solely as
covered options -options with respect to securities which the
Trust owns (which will generally correspond to the securities
represented by the index in the case of index options) -- and
such options on domestic securities are generally listed on a
national securities exchange. Such options are currently
traded on the Chicago Board of Options Exchange and the
American, Pacific and Philadelphia Stock Exchanges (the
"Exchanges"). Options on foreign securities and on some
domestic securities may not be listed on any domestic or
foreign exchange. The Trust receives a premium on the sale of
an option, but gives up the opportunity to profit from any
increase in the price of the security or representative
securities in the case of an index option above the exercise
price of the option. The Trust pays a premium upon the
purchase of an option, which may be lost if the option proves
to be of no ultimate value. There can be no assurance that the
Trust will always be able to close out options positions at
acceptable prices. The Trust will write or purchase such
options only where economically appropriate as a hedging
technique to reduce the risks in management of its portfolio,
and to preserve the Trust's net asset value, and not for
speculative purposes (i.e., not for profit). In no event will
the Trust purchase such options where the value of the options,
either singly or in the aggregate, would exceed 50% of the
value of the Trust's assets at the time of purchase.
The Trust may also purchase put and call options for a
premium. The trust may sell a put or call option which it has
previously purchased prior to the sale of the underlying
security. Such a sale would result in a net gain or loss
depending on whether the amount received on the sale is more or
less than the premium and other transaction costs paid.
It should be recognized that the Trust pays brokerage
commissions in connection with the writing and purchasing of
options and efficient closing transactions, as well as for
purchases and sales of underlying securities. The writing of
options could result in significant increases in the Trust's
portfolio turnover rate, especially during periods when market
prices of the underlying securities appreciate.
In connection with the Trust's qualifying as a regulated
investment company under the Internal Revenue Code of 1986,
other restrictions on the Trust's ability to enter into option
transactions may apply from time to time. See "Taxes".
SECURITIES OPTIONS
A call option is a short-term contract (having a duration
of nine months or less) which gives the purchaser of the
option, in return for a premium paid, the right to buy, and the
writer the obligation to sell, the underlying security at the
exercise price at any time prior to the expiration of the
option, regardless of the market price of the security during
the option period. The premium paid to the writer is the
consideration for undertaking the obligations of the option
contract. The writer forgoes the opportunity to profit from an
increase in the market price of the underlying security above
the exercise price except insofar as the premium represents
such a profit. Should the price of the security decline, on
the other hand, the premium represents an offset to such loss.
A call option on a securities index is similar to a call option
on an individual security, except that the value of the option
depends on the weighted value of the group of securities
comprising the index and all settlements are made in cash.
If a call option expires on its stipulated expiration date
or if the Trust enters into a closing purchase transaction, the
Trust will realize a gain (or less if the cost of a closing
purchase transaction exceeds the premium received when the
option was sold) without regard to any unrealized gain or loss
on the underlying security, and the liability related to such
option will be extinguished. If a call option is exercised,
the Trust will realize a gain or loss from the sale of the
underlying security and the proceeds of the sale will be
increased by the premium originally received.
A put option gives the purchaser of the option the right
to sell, and the writer the obligation to buy, the underlying
security at the exercise price during the option period. Thus
the Trust may purchase a put option on an underlying security
owned by the Trust as a defensive technique in order to protect
against an anticipated decline in the value of the security.
For example, a put option may be purchased in order to protect
unrealized appreciation of a security where the Investment
Adviser deems it desirable to continue to hold the security
because of tax considerations. The premium paid for the put
option would reduce any capital gain when the security is
eventually sold.
As the foregoing suggests, the writing of call option
contracts and the purchasing of put options is a highly
specialized activity which involves investment techniques and
risks different from those ordinarily associated with
investment companies, but the limitations described below tend
to reduce such risks.
When a security is sold from the Trust's portfolio, the
Trust effects a closing call purchase or put sale transaction
so as to close out any existing option on the security. A
closing transaction may be made only on an Exchange or other
market which provides a secondary market for an option with the
main exercise price and expiration date. There is no assurance
that a liquid secondary market on an Exchange or otherwise will
exist for any
particular option or at any particular time, and for some
options no secondary market on an Exchange or otherwise may
exist. If the Trust is unable to effect a closing transaction,
in the case of a call option, the Trust will not be able to
sell the underlying security until the option expires or the
Trust delivers the underlying security upon exercise.
INDEX OPTIONS
A multiplier for an index option performs a function
similar to the unit of trading for an option on an individual
security. It determines the total dollar value per contract of
each point between the exercise price of the option and the
current level of the underlying index. A multiplier of 100
means that a one-point difference will yield $100. Options on
different indices may have different multipliers.
Securities indices for which options are currently traded
include the Standard & Poor's 100 and 500 Composite Stock Price
Indices, Computer/Business Equipment Index, Major Market Index,
Amex Market Value Index, Computer Technology Index, Oil and Gas
Index, NYSE Options Index, Gaming/Hotel Index, Telephone Index,
Transportation Index, Technology Index, and Gold/Silver Index.
The Trust may write call options and purchase put and call
options on any other traded indices. Call options on
securities indices written by the Trust will be "covered' by
identifying the specific portfolio securities being utilized.
To secure the obligation to deliver the underlying
securities in the case of an index call option written by the
Trust, the Trust will be required to deposit qualified
securities. A "qualified security" is a security against which
the Trust has not written a call option and which has not been
hedged by the Trust by the sale of a financial futures
contract. If at the close of business on any day the market
value of the qualified securities falls below 100% of the
current index value times the multiplier times the number of
contracts, the Trust will deposit an amount of cash or liquid
assets equal in value to the amount by which the call is "in-
the-money" times the multiplier times the number of contracts.
Any amount segregated may be applied to the Trust's obligation
to segregate additional amounts in the event that the market
value of the qualified securities falls below 100% of the
contract index value times the multiplier times the number of
contracts.
RISKS OF OPTIONS ON INDICES
Because the value of an index option depends upon
movements in the level of the index rather than the price of a
particular security, whether the Trust will realize a gain or
loss on the purchase or sale of an option on an index depends
upon movements in the level of prices in the market generally
or in an industry or market segment, rather than movements in
the price of an individual security. Accordingly, successful
use by the Trust of options on indices will be subject to the
Investment Adviser's ability to predict correctly movements in
the direction of the market generally or of a particular
industry. This requires different skills and techniques than
predicting changes in the price of individual securities.
Index prices may be distorted if trading of certain
securities included in the index is interrupted. Trading in
index options also may be interrupted in certain circumstances,
such as if trading were halted in a substantial number of
securities included in the index. If this occurred, the Trust
would not be able to close out options which it has purchased
or written and, if restriction on exercise were imposed, might
be unable to exercise an option it purchased, which could
result in substantial losses to the Trust. However, it is the
Trust's policy to purchase or write options only on indices
which include a sufficient number of securities so that the
likelihood of a trading halt in the index is minimized.
Because the exercise of an index option is settled in
cash,
an index call writer cannot determine the amount of its
settlement obligation in advance and, unlike call writing on
portfolio securities, cannot provide in advance for its
potential settlement obligation by holding the underlying
securities.
Price movements in securities in the Trust's portfolio
will
not correlate perfectly with movements in the level of the
index and, therefore, the Trust bears the risk that the price
of the securities held by the Trust may not increase as much as
the index. In this event, the Trust would bear a loss on the
call which would not be completely offset by movements in the
prices of the Trust's portfolio securities. It is also possible
that the index may rise when the Trust's portfolio securities
do not. If this occurred, the Trust would experience a loss on
the call which would not be offset by an increase in the value
of its portfolio and also might experience a loss in its
portfolio.
Unless the Trust has other liquid assets which are
sufficient to satisfy the exercise of a call on an index, the
Trust will be required to liquidate portfolio securities in
order to satisfy the exercise. Because an exercise must be
settled within hours after receiving the notice of exercise, if
the Trust fails to anticipate an exercise, it may have to
borrow from a bank (in amounts not exceeding 5% of the Trust's
total assets) pending settlement of the sale of securities in
its portfolio and would incur interest charges thereon.
When the Trust has written a call on an index, there is
also a risk that the market may decline between the time the
Trust has the call exercised against it, at a price which is
fixed as of the closing level of the index on the date of
exercise, and the time the Trust is able to sell securities in
its portfolio. As with options on portfolio securities, the
Trust will not learn that a call has been exercised until the
day following the exercise date but, unlike a call on a
portfolio security in settlement, the Trust may have to sell
part of its portfolio securities in order to make settlement in
cash, and the price of such securities might decline before
they could be sold.
If the Trust exercises a put option on an index which it
has purchased before final determination of the closing index
value for that day, it runs the risk that the level of the
underlying index may change before closing. If this change
causes the exercised option to fall "out-of-the-money," the
Trust will be required to pay the difference between the
closing index value and the exercise price of the option
(multiplied by the applicable multiplier) to the assigned
writer. Although the Trust may be able to minimize the risk by
withholding exercise instructions until just before the daily
cutoff time or by selling rather than exercising an option when
the index level is close to the exercise price, it may not be
possible to eliminate this risk entirely because the cutoff
times for index options may be earlier than those fixed for
other types of options and may occur before definitive closing
index values are announced.
OPTIONS ON FOREIGN CURRENCIES
The Trust may purchase put and call options on foreign
currencies. The Trust may purchase such options where
economically appropriate as a hedging technique to reduce the
risks in management of its portfolio, and to preserve the
Trust's net asset value, and not for speculative purposes
(i.e., not for profit). In no event will the Trust purchase
such options where the value of the options, either singly or
in the aggregate, would exceed 50% of the value of the Trust's
assets at the time of purchase.
The Trust's success in using such options depends, among
other things, on the Investment Adviser's ability to predict
the direction and volatility of price movements in the options
markets as well as securities markets and on the Investment
Adviser's ability to select the proper type, time and duration
of
options. Although the Investment Adviser has prior experience
in utilizing currency options, there can be no assurance that
this technique will produce its intended results. It should be
recognized that the price movements of options relating to
currencies purchased by the Trust may not correspond to the
price movements of the Trust's portfolio securities and may
therefore cause the options transactions to result in losses to
the Trust.
A put option on a foreign currency is a short-term
contract
(generally having a duration of nine months or less) which
gives the purchaser of the put option, in return for a premium,
the right to sell the underlying currency at a specified price
during the term of the option. A call option on a foreign
currency is a short-term contract which gives the purchaser of
the call option, in return for a premium, the right to buy the
underlying currency at a specified price during the term of the
option. The purchase of put and call options on foreign
currencies is analogous to the purchase of puts and calls on
stocks.
Options on foreign currencies are currently traded in the
United States on the Philadelphia Stock Exchange and the
Chicago Board Options Exchange. Such options are currently
traded on British pounds, Swiss francs, Japanese yen, Deutsche
marks and Canadian dollars. The Trust could use foreign
currency options to protect against the decline in value of
portfolio securities resulting from changes in foreign exchange
rates, as the following examples illustrate:
1. In connection with the Trust's payment for securities
of a foreign issuer at some future date in a foreign currency,
the Trust may purchase call options on such foreign currency in
order to hedge against the risk that the value of the foreign
currency might rise against the U.S. dollar, thereby increasing
the cost of the currency and the transaction.
EXAMPLE: The Trust must pay for the purchase of
securities of a Swiss issuer in Swiss francs. If the Trust is
concerned that the price of Swiss francs might rise in price in
terms of the U.S. dollar from, for example, $.4780, it might
purchase Swiss franc June 48 call options for a premium of, for
example, .50 (i.e. $.050 per Swiss franc times 62,500 Swiss
francs per contract, for a total premium of $312.50--plus
transaction costs). This would establish a maximum cost for
Swiss francs and, hence, the maximum cost in U.S. dollars for
the Swiss securities. Thus, if Swiss francs subsequently
appreciated to $.4950 and the premium on Swiss franc June 48
call options increased to, for example, 1.95 (for a total
premium of $1,218.75), the Trust could sell the option at a
profit ($1,218.75 less the original premium paid of $312.50 and
transaction costs) to offset the increased cost of acquiring
Swiss francs. Alternatively, the Trust could exercise the
option contract. If the Swiss franc remained below $.48, the
Trust could let its calls expire (losing its premium) and
purchase the Swiss francs at a lower price.
2. The Trust may purchase foreign currency options to
protect against a decline in the Trust's cash and short-term
U.S. Government securities.
EXAMPLE: The Trust may have investments in cash and in
short-term U.S. Government securities, e.g., U.S. Treasury
bills having maturities of less than one year. In order to
hedge against a possible decline in the value of the U.S.
dollar, the Trust might purchase Deutsche mark 40 calls. If
the Deutsche mark appreciates above $.40, then the Trust could
exercise its option contract and stabilize the value of its
cash holdings and the underlying value of the U.S. Treasury
bills in its portfolio as a result of the improved exchange
rate between the Deutsche mark and the U.S. dollar.
As is the case with other listed options, the
effectiveness of foreign currency options in carrying out the
Trust's objectives will depend on the exercise price of the
option held
and the extent to which the value of such option will be
affected by changes in the exchange rates of the underlying
currency. To terminate its rights in options which it has
purchased, the Trust would sell an option of the same series in
a closing sale transaction. A gain or loss, which will be
offset by a loss or gain on the U.S. dollar, will be realized
depending on whether the sale price of the option is more or
less than the cost to the Trust of establishing the position.
If the contemplated transaction is not completed, the option
may be allowed to expire, (resulting, however, in the loss of
the option premium amount), or liquidated for any remaining
value.
Foreign currency options purchased for the Trust shall be
valued at the last sale price on the principal Exchange on
which such option is traded, or in the absence of a sale, the
mean between the last bid and offering prices. Options which
are not actively traded will be valued at the difference
between the option price and the current market price of the
underlying security, provided that the put price is higher than
such market price or the call price is lower than such market
price. In the event that a put price is lower than the current
market value of the underlying security, or a call price is
higher than the current market value of the underlying
security, then the option will be assigned no value. The Trust
will write or purchase such options only where economically
appropriate as a hedging technique to reduce the risks in
management of its portfolio, and to preserve the Trust's net
asset value, and not for speculative purposes (i.e., not for
profit).
RISKS OF FOREIGN CURRENCY OPTION ACTIVITIES
Assuming that any decline in the value of the Trust's
portfolio is accompanied by a rise in the value of a foreign
currency in relation to the U.S. dollar, the purchase of
options on the foreign currency may generate gains which would
partially offset such decline. However, if after the Trust
purchases an option, the value of the Trust's portfolio moves
in the opposite direction from that contemplated, the Trust may
experience losses to the extent of premiums it paid in
purchasing such options, and this will reduce any gains the
Trust would otherwise have. For this reason as well as supply
and demand imbalances and other market factors, the price
movements of options on foreign currencies purchased by the
Trust may not correspond to the price movements of the Trust's
portfolio securities and may cause the options transactions to
result in losses to the Trust.
Option positions on foreign currencies may be closed out
only on an Exchange or other market which provides a secondary
market for options of the same series. United States options
on foreign currencies are currently traded only on the
Philadelphia Stock Exchange and the Chicago Board Options
Exchange. Trading in options on foreign currencies may be
interrupted, for example, because of supply and demand
imbalances arising from a lack of either buyers or sellers. In
addition, trading may be suspended after the price of an option
has risen or fallen more than a specified maximum amount.
Exercise of foreign currency options also could be restricted
or delayed because of regulatory restrictions or other factors.
Trading on options on foreign currencies commenced in December,
1982. The ability to establish and close out positions in such
options will be subject to the development and maintenance of a
liquid secondary market. It is not certain that this market
will continue. The Trust will not purchase foreign currency
options on any Exchange or other market unless and until, in
the Investment Adviser's opinion, the market for such options
has developed sufficiently. Although it is intended that the
Trust purchase options only when there appears to be an active
market in such instruments, there can be no assurance that a
liquid market will exist at a time when the Trust seeks to
close a particular option position. Accordingly, the Trust may
experience losses as a result of its inability to
close out an options position.
SPECIAL RISKS OF FOREIGN CURRENCY OPTIONS
In addition to the risks described above, there are
special risks associated with foreign currency options,
including the following:
1. The value of foreign currency options is dependent
upon the value of foreign currencies relative to the U.S.
dollar. As a result, the prices of foreign currency options
may vary with changes in the value of either or both
currencies. Thus, fluctuations in the value of the U.S. dollar
will affect exchange rates and the value of foreign currency
options, even in the case of an otherwise stable foreign
currency. Conversely, fluctuations in the value of a foreign
currency will affect exchange rates and the value of foreign
currency options even if the value of the U.S. dollar remains
relatively constant. Thus, careful consideration must be given
to factors affecting both the U.S. economy and the economy of
the foreign country issuing the foreign currency underlying the
option.
2. The value of any currency, including U.S. dollars and
foreign currencies, may be affected by a number of complex
factors applicable to the issuing country, such as the
prevailing monetary policy of that country, its money supply,
its trade deficit or surplus, its balance of payments, interest
rates, inflation rates and the extent or trend of its economic
growth. In addition, foreign countries may take a variety of
actions, such as increasing or decreasing the money supply or
purchasing or selling government obligations, which may have an
indirect but immediate effect on exchange rates.
3. The exchange rates of foreign currencies (and
therefore the value of foreign currency options) could be
significantly affected, fixed or supported directly or
indirectly by government actions. Such government intervention
may increase risks to investors since exchange rates may not be
free to fluctuate in response to other market forces.
4. Because foreign currency transactions occurring in the
interbank market involve substantially larger amounts than
those likely to be involved in the exercise of individual
foreign currency option contracts, investors who buy or write
foreign currency options may be disadvantaged by having to deal
in an odd lot market for the underlying foreign currencies at
prices that are less favorable than for round lots. Because
this price differential may be considerable, it must be taken
into account when assessing the profitability of a transaction
in foreign currency options.
5. There is no systematic reporting of last sale
information for foreign currencies. There is reasonably
current, representative bid and offer information available on
the floor of the exchange on which foreign currency options are
traded, in certain brokers' offices, in bank foreign trading
offices, and to others who wish to subscribe for their
information. There is, however, no regulatory requirement that
those quotations be firm or revised on a timely basis. The
absence of last sale information and the limited availability
of quotations to individual investors may make it difficult for
many investors to obtain timely, accurate data about the state
of the underlying market. In addition, the quotation
information that is available is representative of very large
transactions in the interbank market and does not reflect
exchange rates for smaller transactions. Since the relatively
small amount of currency underlying a single foreign currency
option would be treated as an odd lot in the interbank market
(i.e., less than between $1 and $5 million), available pricing
information from that market may not necessarily reflect prices
pertinent to a single foreign currency option contract and
investors who buy or sell foreign currency options covering
amounts of less than $1 to $5 million can expect to deal in the
underlying market at prices that are
less favorable than for round lots.
6. Foreign governmental restrictions or taxes could
result in adverse changes in the cost of acquiring or disposing
of foreign currencies. If the Options Clearing Corporation
("OCC") determines that such restrictions or taxes would
prevent the orderly settlement of foreign currency option
exercises or impose undue burdens on parties to exercise
settlements, it has the authority to impose special exercise
settlement procedures, which could adversely affect the Trust.
7. The interbank market in foreign currencies is a
global, around-the-clock market. Therefore, in contrast with
the exchange markets for stock options, the hours of trading
for foreign currency options do not conform to the hours during
which the underlying currencies are traded. (Trading hours for
foreign currency options can be obtained from a broker.) To
the extent that the options markets are closed while the market
for the underlying currencies remain open, significant price
and rate movements may take place in the underlying markets
that cannot be reflected in the options markets. The
possibility of such movements should be taken into account in
(a) relating closing prices in the options and underlying
markets, and (b) determining whether to close out a short
options position that might be assigned in an exercise that
takes place after the options market is closed on the basis of
underlying currency price movements at a later hour.
8. Since settlement of foreign currency options must
occur within the country issuing that currency, investors
through their brokers, must accept or make delivery of the
underlying foreign currency in conformity with any U.S. or
foreign restrictions or regulations regarding the maintenance
of foreign banking arrangements by U.S. residents and may be
required to pay any fees, taxes or charges associated with such
delivery which are assessed in the issuing country. Prior to
the placing of any assets with a foreign custodian in
connection with the settlement of foreign currency options, the
Trustees of the Trust shall have determined that maintaining
such assets in a particular country or countries is consistent
with the best interests of the Trust and its shareholders, and
that maintaining such assets with a particular foreign
custodian is consistent with the best interests of the Trust
and its shareholders. The Trust shall also have approved, as
consistent with the best interests of the Trust and its
shareholders, a written contract between the Trust and such
foreign custodian that will maintain the Trust's assets. The
Trustees shall also establish a system to monitor such foreign
custody arrangements and a majority of the Trustees, at least
annually, shall review and approve the continuance of such
arrangements as consistent with the best interests of the Trust
and its shareholders.
FINANCIAL AND PRECIOUS METALS FUTURES AND RELATED OPTIONS
Financial futures contracts consist of interest rate
futures
contracts, securities index futures contracts and currency
futures contracts. Precious metals futures contracts consist
of futures contracts for the purchase or sale of gold, silver
and other precious metals. A futures contract obligates the
seller of the contract to deliver, and the purchaser to take
delivery of, the subject assets called for in the contract at a
specified future time and at a specified price. An option on
the futures contract gives the purchaser the right to assume a
position in the contract (a long position if the option is a
call and a short position if the option is a put) at a
specified exercise price at any time during the period of the
option.
While the Trust's fundamental policies permit the Trust to
engage in financial and precious metals futures transactions,
including the writing of covered call options and the purchase
and sale of put and call options in connection therewith, the
Trust may initially engage in such futures and related option
transactions only for hedging purposes, and its investment in
such transactions will be limited to commitments totaling no
more than 5% of the Trust's total assets. In order to engage
in transactions not so limited, the Trust may seek registration
as a commodity pool operator with the federal Commodity Futures
Trading Commission. If such registration is effected, the
Trust would be able to enter into such futures and related
option transactions directly for profit purposes and not only
for hedging, and would also be able to effect such futures and
related option transactions without limit as to the amount of
the Trust's assets involved. The discussion below as to these
transactions relates primarily to the use of such transactions
within the currently applicable restrictions and limits.
The Trust may use financial and precious metals futures
contracts and related options to hedge against changes in
currency exchange rates or in the market value of its portfolio
assets or assets which it intends to purchase. Hedging is
accomplished when an investor takes a position in the futures
market opposite to his cash market position. There are two
types of hedges--long (or buying) and short (or selling)
hedges. Historically, prices in the futures market have tended
to move in concert with cash market prices and prices in the
futures market have maintained a fairly predictable
relationship to prices in the cash market. Thus, a decline in
the market value of securities in the Trust's portfolio may be
protected against to a considerable extent by gains realized on
futures contracts sales. Similarly, it is possible to protect
against an increase in the market price of assets which the
Trust may wish to purchase in the future by purchasing futures
contracts.
The Trust may purchase or sell any financial or precious
metals futures contracts which are traded on an exchange or
board of trade or other market. A U.S. public market presently
exists in interest rate futures contracts on long-term U.S.
Treasury bonds, U.S. Treasury notes and three-month U.S.
Treasury bills. Securities index futures contracts are
currently traded with respect to the Standard & Poor's 500
composite Stock Price Index and such other broad-based stock
market indices as the New York Stock Exchange Composite Stock
Index and the Value Line Composite Stock Price Index. A
clearing corporation associated with the exchange or board of
trade on which a financial futures contact trades assumes
responsibility for the completion of transactions and also
guarantees that open futures contracts will be performed.
Currency and precious metals futures contracts are also traded
on various U.S. Exchanges or boards of trade. Options relating
to U.S. futures contracts are generally also traded on the same
exchanges or boards of trade.
In contrast to the situation where the Trust purchases or
sells a security, no security or other asset is delivered or
received by the Trust upon the purchase or sale of a futures
contract. Initially, the Trust will be required to deposit in
a segregated account with its custodian bank an amount of cash
or U.S. Treasury bills. This amount is known as initial margin
and is in the nature of a performance bond or good faith
deposit on the contract. The current initial margin deposit on
the contract is approximately 5% of the contract amount.
Brokers may establish deposit requirements higher than this
minimum. Subsequent payments, called variation margin, will be
made to and from the account on a daily basis as the price of
the futures contract fluctuates. This process is known as
marking to market.
The writer of an option on a futures contract is required
to
deposit margin pursuant to requirements similar to those
applicable to futures contracts. Upon exercise of an option on
a futures contract, the delivery of the futures position by the
writer of the option to the holder of the option will be
accompanied by delivery of the accumulated balance in the
writer's margin account. This amount will be equal to the
amount
by which the market price of the futures contract at the time
of exercise exceeds, in the case of a call, or is less than, in
the case of a put, the exercise price of the option on the
futures contract.
Although futures contracts by their terms call for actual
delivery or acceptance of currencies or securities or other
assets, in most cases the contracts are closed out before the
settlement date without the making or taking of delivery.
Closing out is accomplished by effecting an offsetting
transaction. A futures contract sale is closed out by
effecting a futures contract purchase for the same aggregate
amount of
securities and the same delivery date. If the sale price
exceeds the offsetting purchase price, the seller immediately
would be paid the difference and would realize a gain. If the
offsetting purchase price exceeds the sale price, the seller
immediately would pay the difference and would realize a loss.
Similarly, a futures contract purchase is closed out by
effecting a futures contract sale for the same securities and
the same delivery date. If the offsetting sale price exceeds
the purchase price, the purchaser would realize a gain, whereas
if the purchase price exceeds the offsetting sale price, the
purchaser would realize a loss.
The Trust will pay commissions on futures contracts and
related options transactions. These commissions may be higher
than those which would apply to purchases and sales of
securities directly.
The Trust may, following written notice thereof to its
shareholders, take advantage of opportunities in the area of
precious metals related index options and futures contracts and
options on futures contracts which are not currently available
but which may be developed, to the extent such opportunities
are consistent with the Trust's investment objectives and
legally permissible for the Trust.
LIMITATIONS ON FUTURES CONTRACTS AND RELATED OPTIONS
The Trust may not currently engage in transactions in
futures contracts or related options for speculative purposes,
but only as a hedge against anticipated changes in exchange
rates or the market value of its portfolio securities or other
assets or securities or other assets which it intends to
purchase. Also, the Trust may not currently purchase or sell
precious metals or financial futures contracts or related
options if, immediately thereafter, the sum of the amount of
initial margin deposits on the Trust's existing futures and
related options positions and the premiums paid for related
options would exceed 5% of the market value of the Trust's
total assets after taking into account unrealized profits and
losses on any such contracts. At the time of purchase of a
futures contract or an option on a futures contract, an amount
of cash, U.S. government securities or other appropriate high-
grade debt obligations equal to the market value of the futures
contract, minus the Trust's initial margin deposit with respect
thereto, will be deposited in a segregated account with the
Trust's custodian bank to collateralize fully the position and
thereby ensure that it is not leveraged.
The extent to which the Trust may enter into futures
contracts and related options also may be limited by the
requirements of the Internal Revenue Code of 1986 for
qualification as a regulated investment company. See "Taxes"
herein.
RISKS RELATING TO FUTURES CONTRACTS AND RELATED OPTIONS
Positions in futures contracts and related options may be
closed out only on an exchange or other market which provides a
secondary market for such contracts or options. The Trust will
enter into futures or related options positions only if there
appears to be a liquid secondary market. However, there can be
no assurance that a liquid secondary market will exist for any
particular futures or related option contract at any specific
time. Thus, it may not be possible to close out a futures or
related option position. In the case of a futures position, in
the event of adverse price movements, the Trust would continue
to be required to make daily margin payments. In this
situation, if the Trust has insufficient cash to meet daily
margin requirements it may have to sell portfolio assets at a
time when it may be disadvantageous to do so. In addition, the
Trust may be required to take or make delivery of the
securities underlying the futures contracts it holds. The
inability to close out futures positions also could have an
adverse impact on the Trust's ability to hedge its portfolio
effectively.
There are several risks in connection with the use of
futures contracts as a hedging device. While hedging can
provide protection against an adverse movement in the market
prices, it can also preclude a hedger's opportunity to benefit
from a favorable market movement. In addition, investing in
futures contracts and options on futures contracts will cause
the Trust to incur additional brokerage commissions and may
cause an increase in the Trust's portfolio turnover rate.
The successful use of futures contracts and related
options also depends on the ability of the Trust's Investment
Adviser to forecast correctly the direction and extent f
currency exchange rate and market movements within a given time
frame. To the extent exchange rate and market prices remain
stable during the period a futures contract or option is held
by the Trust or such prices move in a direction opposite to
that anticipated, the Trust may realize a loss on the hedging
transaction which is not offset by an increase in the value of
its portfolio securities. As a result, the Trust's total return
for the period may be less than if it had not engaged in the
hedging transaction.
Utilization of futures contracts by the Trust involves the
risk of imperfect correlation in movements in the price of
futures contracts and movements in the price of the currencies
or securities or other assets which are being hedged. If the
price of the futures contract moves more or less than the price
of the currencies or securities or other assets being hedged,
the Trust will experience a gain or loss which will not be
completely offset by movements in the price of the currencies
or securities or other assets. It is possible that, where the
Trust has sold futures contracts to hedge its portfolio
securities and other assets against decline in the market, the
market may advance and the value of securities held in the
trust's portfolio (or related currencies) may decline. If this
occurred, the Trust would lose money on the futures contract
and would also experience a decline in value in its portfolio
securities and other assets. Where futures are purchased to
hedge against a possible increase in the prices of securities
or other assets before the Trust is able to invest its cash (or
cash equivalents) in securities (or options) in an orderly
fashion, it is possible that the market may decline; if the
Trust then determines not to invest in securities (or options)
at that time because of concern as to possible further market
decline or for other reasons, the Trust will realize a loss on
the futures that would not be offset by a reduction in the
price of securities purchased.
The market prices of futures contracts may be affected if
participants in the futures market elect to close out their
contract through offsetting transactions rather than to meet
margin deposit requirements. In such case, distortions in the
normal relationship between the cash and futures markets could
result. Price distortions could also result if investors in
futures contracts opt to make or take delivery of the
underlying securities rather than to engage in closing
transactions due to the resultant reduction in the liquidity of
the futures market. In addition, due to the fact that, from the
point of view of speculators, the deposit requirements in the
futures markets are
less onerous than margin requirements in the cash market,
increased participation by speculators in the futures market
could cause temporary price distortions. Due to the
possibility of price distortions in the futures market and
because of the imperfect correlation between movements in the
prices of currencies and securities and other assets and
movements in the prices of futures contracts, a correct
forecast of market trends may still not result in a successful
hedging transaction.
Compared to the purchase or sale of futures contracts, the
purchase of put or call options on futures contracts involves
less potential risk for the Trust because the maximum amount at
risk is the premium paid for the options plus transaction
costs. However, there may be circumstances when the purchase of
an option on a futures contract would result in a loss to the
Trust while the purchase or sale of the futures contract would
not have resulted in a loss, such as when there is no movement
in the price of the underlying securities.
LENDING OF PORTFOLIO SECURITIES
The Trust may seek to increase its income by lending
portfolio securities . Any such loan will be continuously
secured by collateral at least equal to the market value of
the security loaned. The Trust would have the right to call a
loan and obtain the securities loaned at any time on five
days' notice. During existence of a loan, the Trust would
continue to receive the equivalent of the interest or
dividends paid by the issuer on the securities loaned and
would also receive a fee, or the interest on investment of the
collateral, if any. The total value of the securities loaned
at any time will not be permitted to exceed 30% of the Trust's
total assets. As with other extensions of credit, there are
risks of delay in recovery or even loss of rights in the
collateral should the borrower of the securities fail
financially. However, the loans would be made only to U.S.
domestic organizations deemed by the Trust's management to be
earned justifies the attendant risk.
REPURCHASE AGREEMENTS
A repurchase agreement is an agreement under which the
Trust acquires a money market instrument (a security issued by
the U.S. Government or any agency thereof, a banker's
acceptance or a certificate of deposit) from a commercial bank,
subject to resale to the seller at an agreed upon price and
date (normally the next business day). The resale price
reflects an agreed upon interest rate effective for the period
the instrument is held by the Trust and is unrelated to the
interest rate on the underlying instrument. The Trust will
effect repurchase agreements only with large well-capitalized
banks whose deposits are insured by the Federal Deposit
Insurance Corporation and which have capital and undivided
surplus of at least $200,000,000. The instrument acquired by
the Trust in these transactions (including accrued interest)
must have a total value in excess of the value of the
repurchase agreement and will be held by the Trust's custodian
bank until repurchased. The Trustees of the Trust will monitor
the Trust's repurchase agreement transactions on a continuous
basis and will require that the applicable collateral will be
retained by the Trust's custodian bank. No more than an
aggregate of 10% of the Trust's total assets, at the time of
investment, will be invested in repurchase agreements having
maturities longer than seven days and other investments subject
to legal or contractual restrictions on resale, or which are
not readily marketable. There is no limitation on the Trust's
assets with respect to investments in repurchase agreements
having maturities of less than seven days.
The use of repurchase agreements involves certain risks.
For example, if the seller under a repurchase agreement
defaults on its obligation to repurchase the underlying
instrument at a time when the value of the instrument has
declined, the Trust may incur a loss upon its disposition. If
the seller becomes
insolvent and subject to liquidation or reorganization under
bankruptcy or other laws, a bankruptcy court may determine that
the underlying instrument is collateral for a loan by the Trust
and therefore is subject to sale by the trustee in bankruptcy.
Finally, it is possible that the Trust may not be able to
substantiate its interest in the underlying instrument. While
the Trust's Trustees acknowledge these risks, it is expected
that they can be controlled through careful monitoring
procedures.
PORTFOLIO TURNOVER
Securities will generally be purchased for possible long
term appreciation and not for short-term trading profits;
however, the rate of portfolio turnover is not a limiting
factor when the Investment Adviser deems changes appropriate.
It is anticipated that the Trust's annual portfolio turnover
rate will normally not exceed 50%. A rate of turnover of 100%
could occur, for example, if the value of the lesser of
purchases and sales of portfolio securities for a particular
year equaled the average monthly value of portfolio securities
owned during the year (excluding short-term securities).
A high rate of portfolio turnover involves a
correspondingly greater amount of brokerage commissions and
other costs which must be borne directly by the Trust and thus
indirectly by its shareholders. It may also result in the
realization of larger amounts of short-term capital gains which
are taxable to shareholders as ordinary income.
The portfolio turnover rates for the years, 1995, 1994
and 1993 were 12%, 42%, and 0%, respectively. \R
INVESTMENT RESTRICTIONS
The Trust has adopted the following investment
restrictions which are fundamental policies and cannot be
changed without approval by the holders of a majority of the
outstanding voting securities of the Trust (which in the
Prospectus and this Statement of Additional Information means
the lesser of either (i) a majority of the outstanding shares
of the Trust or (ii) 67% or more of the shares represented at a
meeting if more than 50% of such shares are present or
represented by proxy at the meeting):
1. The Trust will not purchase any securities (other than
securities of the U.S. Government, its agencies, or
instrumentalities) if as a result more than 5% of the Trust's
total assets (taken at current value) would then be invested in
securities of a single issuer.
2. The Trust will not make loans, except that the Trust
may (a) purchase a portion of an issue or publicly distributed
bonds, debentures, or similar debt securities (including so
called "repurchase agreements" whereby the Trust's cash is, in
effect, deposited on a secured basis with a bank for a period
and yields a return; provided, however, that no more than an
aggregate of 10% of the Trust's total assets, immediately after
such investment, will be invested in repurchase agreements
having maturities longer than seven days and other investments
subject to legal or contractual restrictions on resale, or
which are not readily marketable), and (b) lend portfolio
securities upon such conditions as may be imposed from time to
time by the Securities and Exchange Commission, provided that
the value of securities loaned at any time may not exceed 30%
of the Trust's total assets.
3. The Trust will not borrow in excess of 5% of its total
assets, taken at market or other fair value, at the time such
borrowing is made, and any such borrowing may be undertaken
only as a temporary measure for extraordinary or emergency
purposes; and the Trust may not pledge, mortgage, or
hypothecate its assets taken at market to an extent greater
than 15% of the Trust's gross assets taken at cost.
4. The Trust will not purchase any securities if such
purchase would cause more than 10% of the total outstanding
voting securities of such issuer (other than any wholly-owned
subsidiary of the Trust) to be held by the Trust.
5. The purchase or retention of the securities of any
issuer is prohibited if the officers and Trustees of the Trust
or its Investment Adviser owning beneficially more than 1/2 of
1% of the securities of such issuer together own beneficially
more than 5% of the securities of such issuer.
6. The purchase of the securities of any other investment
company is prohibited, except that the Trust may make such a
purchase in the open market involving no commission or profit
to a sponsor or dealer (other than the customary broker's
commission), provided that not more than 10% of the trust's
total assets (taken at market or other fair value) would be
invested in such securities and not more than 3% of the voting
stock of another investment company would be owned by the Trust
immediately after the making of any such investment, and the
Trust may make such a purchase as part of a merger,
consolidation or acquisition of assets.
7. The purchase of securities of companies with a record
(including that of their predecessors) of less than three
years' continuous operation is prohibited if such purchase
would cause the Trust's investments in such companies taken at
cost to exceed 5% of the total assets of the Trust taken at
current values, except that this restriction shall not apply to
any of the Trust's investments in any of its wholly-owned
subsidiaries.
8. The Trust will not participate in a joint venture or
on a joint and several basis in any securities trading
account.
9. The Trust will not act as an underwriter of
securities
issued by others, except to the extent it may be deemed such
in connection with the disposition of securities owned by it.
10. The Trust will not make short sales of securities
unless at all times when a short position is open, it owns
an equal amount of such securities or owns securities
convertible into or exchangeable for, without payment of any
further consideration, securities of the same issue as, and
at least equal in amount to, the securities sold short.
11. The Trust will not purchase securities on margin, but
may obtain such short-term credits as may be necessary for the
clearance of purchases and sales of securities.
12. The Trust will not invest in a company in any single
industry, if, immediately after such investment, more than 25%
of the Trust's total assets would be invested in companies of
such industry. Eligible industry classifications are gold
mining, silver mining, companies mining other precious metals,
gold manufacturing and industrial production and silver
manufacturing and industrial production.
13. The Trust will not make investments in real estate or
indirect interests in real estate.
14. The Trust will not write, purchase or sell puts,
calls or combinations thereof or take positions in commodities
or commodity futures contracts or related options except that
the Trust may (a) write covered call options with respect to
securities, securities indices and currencies and enter into
closing purchase or sale transactions with respect to such
written options, (b) purchase put or call options with respect
to securities, securities indices and currencies, and (c)
engage in financial and precious metals futures contracts and
related options transactions, all as described in the
Prospectus and above under "Investment Policies and Risk
Considerations".
MANAGEMENT
OFFICERS AND TRUSTEES
The Trust's Officers and Trustees, their positions with
the Trust and their principal occupations are listed below.
Except as indicated, each individual has held the office shown
or other offices in the same company, other than the Trust, for
the last five years. Unless otherwise noted, the business
address of each
Officer and Trustee is 7022 Bennington Woods Drive, Pittsburgh,
Pennsylvania 15237, which is also the address of the Trust's
Investment Adviser, Meeschaert Investment Management
Corporation. Those Trustees who are "interested persons" of the
Trust or the Investment Adviser, as defined in the Investment
Company Act of 1940, by virtue of their affiliation with either
the Trust or the Investment Adviser, are indicated by an
asterisk (*).
Positions with Principal
Name and Address the Trust Occupation
DAVID W. C. PUTNAM Chairman Chairman and Trustee,
10 Langley Road and Trustee Anchor Capital Accumulation
Trust,
Newton Centre, MA 02159 Anchor International
Bond
Trust, Anchor
Strategic Assets Trust,
Anchor Resource and Commodity
Trust,and
Anchor
Gold and Currency Trust
(Investment
Companies); President and
Director, F. L. Putnam
Securities Company, Inc.; Chairman and
Director, Boston Security Counsellors, Inc.
(Investment Adviser); Chairman and
Trustee, The Advest Advantage Investment Trusts
(Investment Companies.)
SPENCER H. LE MENAGER Secretary and President,
Equity, Inc.; formerly
222 Wisconsin Avenue Trustee
P. O. Box 390 President, Howe, Barnes &
Johnson
Lake Forest, IL 60045 Inc. (securities
dealer).
^ ^ ^
MAURICE A. DONAHUE Trustee Director and
Professor, Institute for Governmental 50 Holy Family Road
Services and Walsh-Saltonstall Professor of Practical Holyoke,
MA 01040 Politics, University of
Massachusetts, Director Vanguard Savings
Bank Former Member , Massachusetts
House of Representatives, Former Member and
President, Massachusetts Senate. \R
DAVID Y. WILLIAMS* President and President and Director,
Anchor 7022 Bennington Woods Dr. Trustee Investment
Management Corporation;
Pittsburgh, PA 15237 President and Director,
Meeschaert & Co., Inc.
(securities dealer).
J. STEPHEN PUTNAM Vice President President, Robert Thomas
880 Carillon Parkway and Treasurer Securities,
Inc. (securities
P.O. Box 12749 dealer) since June 1983;
Director
St. Petersburg, FL 33733 F. L. Putnam
Securities
Company,
Incorporated. Formerly,
President and Director, EPB,
Inc.
and Vice President, Burgess
& Leith Incorporated.
CHRISTOPHER Y. WILLIAMS Vice President Vice
President
and Secretary, Anchor
485 Cherry Court and Asst. Secretary Investment Management
Corporation;
Pittsburgh, PA 15237 Vice President and
Secretary, Meeschaert
& Co., Inc. (securities
dealer)
JOSEPH C. WILLIAMS Vice President Vice President and
Treasurer, Anchor
4594 Bucktail Dr. and Asst. Treasurer
Investment
Management Corporation;
Allison Park, PA 15101 \R Vice President and
Treasurer, Meeschaert
& Co., Inc. (securities
dealer)
The Officers and Trustees of the Trust as a group owned or
had beneficial interests in less than one percent (1%) of those
shares of the Trust outstanding on December 31, 1995. \R
Messrs. Putnam, Le Menager, and Donahue, are the Trustees
who are not "interested persons" (as that term is defined in
the Investment Company Act of 1940) of the Trust. \R
Mr. David W.C. Putnam and Mr. J. Stephen Putnam are brothers.
Mr. David Y. Williams is the father of Mr. Christopher Y.
Williams and Mr. Joseph C. Williams. Mr. Christopher Y.
Williams and Mr. Joseph C. Williams are brothers.
Mr. David W.C. Putnam and Mr. J. Stephen Putnam are brothers.
Mr. David Y. Williams is the father of Mr. Christopher Y.
Williams and Mr. Joseph C. Williams. Mr. Christopher Y.
Williams and Mr. Joseph C. Williams are brothers.
The standing audit committee is composed of Messrs. Le
Menager and, Donahue. The Trust does not have a nominating or
compensation committee. \R
REMUNERATION OF OFFICERS AND TRUSTEES
The Trust will not pay any remuneration to its Officers or
Trustees as such who are "interested persons" (as that term is
defined in the Investment Company Act of 1940) of the Trust or
of any investment advisor or distributor of the Trust but will
pay an annual fee not in excess of $1,000 to each Trustee who
is not such an "interested person"
INVESTMENT ADVISORY CONTRACT
The Trust engages Anchor Investment Management
Corporation, formerly known as Meeschaert Investment Management
Corporation, as Investment Adviser pursuant to an Investment
Advisory Contract dated July 21, 1993, which was approved by
the shareholders of the Trust.
The Investment Adviser manages the investments and affairs
of the Trust, subject to the supervision of the Trust's Board
of Trustees. The Investment Adviser furnishes to the Trust
investment advice and assistance, administrative services,
office space, equipment and clerical personnel and investment
advisory, statistical and research facilities. The Trust is
responsible for all its expenses not assumed by the Investment
Adviser under the contract, including, without limitation, the
fees and expenses of the custodian and transfer agents, costs
incurred in determining the Trust's net asset value and keeping
its books; the cost of share certificates; membership dues in
investment
company organizations; distribution and brokerage commissions
and fees; fees and expenses of registering its shares; expenses
of reports to shareholders, proxy statements and other expenses
of shareholders' meetings; insurance premiums, printing and
mailing expenses; interest, taxes and corporate fees; legal and
accounting expenses; and fees and expenses of Trustees not
affiliated with the Investment Adviser. The Trust will also
bear expenses incurred in connection with litigation in which
the Trust is a party and the legal obligation the Trust may
have to indemnify its Officers and Trustees with respect
thereto.
The Trust pays the Investment Adviser, as compensation
under the Investment Advisory Contract, a monthly fee at the
rate of 1 1/2% per annum of the average daily net assets of the
Trust. This fee is higher than that paid by most other
investment companies. For each of the Trust's fiscal years
ended December 31, 1991, 1992 and 1993, the Investment Adviser
did not receive any investment advisory fees or other
compensation under the Investment Advisory Contract. The
Investment Adviser received a fee of $74,697 for services
rendered in 1995. \R
The Investment Advisory Contract will remain in effect
until July 20, 1995, but it may be extended from year to year
thereafter if approved at least annually (a) by the vote of a
majority of the outstanding shares of the Trust or by the Board
of Trustees, and in either case, (b) by a vote of a majority of
the Trustees of the Trust who are not parties to the contract
or "interested persons" (as that term is defined in the
Investment Company Act of 1940) of any such party cast in
person at a meeting called for the purpose. Amendments to the
contract require similar approval by the shareholders and the
Trustees who are not "interested persons" (the "Independent
Trustees"). The contract is terminable at any time without
penalty by the Board of Trustees of the Trust or by vote of a
majority of the Trust's shares on 60 days' written notice or by
the Investment Adviser on 90 days' written notice. The
contract terminates automatically in the event of its
assignment (which includes the transfer of a controlling block
of the stock of the Investment Adviser).
INVESTMENT ADVISER
The Investment Adviser, Anchor Investment Management
Corporation (formerly Meeschaert Investment Management
Corporation) is located at 7022 Bennington Woods Drive,
Pittsburgh, Pennsylvania 15237. The Trust's principal offices
are also located at this address.
The Investment Adviser and Meeschaert & Co., Inc., the
Trust's principal underwriter (the "Distributor"), are
affiliated through common control with Societe D'Etudes et de
Gestion Financieres Meeschaert, S.A. ("Societe D'Etudes"), one
of France's largest privately-owned investment management
firms, which together are referred to as the "Meeschaert
organization". The Meeschaert organization was established in
Roubaix, France in 1935 by Emile C. Meeschaert, and presently
manages, with full discretion, an aggregate amount of
approximately $1.5 billion for about 8,000 individual (and
institutional) customers, including $250 million in French
mutual funds.
The Investment Adviser's Directors and Officers are as follows:
Luc E. Meeschaert, Chairman; his principal occupation is
serving as Chief Executive Officer of Societe D'Etudes.
David Y. Williams, President and Director; Mr. Williams is
also a Trustee of the Trust and President and a Director of
Meeschaert & Co., Inc., the Trust's Distributor.
Paul Jaspard, Vice President; his principal occupation is
serving as President of Global Equity Managers, S.A., P.O. Box
1543 26A, rue Albert-Premier, L-1015 Luxembourg (investment
advisor). Mr. Jaspard manages portfolios for the Meeschaert
organization, and is the individual primarily responsible for
the day-to-day management of the Trust's portfolio.
PRINCIPAL HOLDERS OF SECURITIES
As of the date of this Statement of Additional
Information, Wendel & Co., as an indirect nominee of Societe
D'Etudes, 23 Rue Drouot, 75009, Paris, France, held of record
100% of the outstanding shares of the Trust. As of the date
hereof, Societe D'Etudes had sole voting and investment power
with respect to all of the outstanding shares of the Trust.
DETERMINATION OF NET ASSET VALUE
The net asset value is determined by the Trust as of 12:00
Noon Eastern Time on each business day on which the New York
Stock Exchange is open for trading or on any day that the Trust
is open, but the New York Stock Exchange is not open for
business, if there occurs an event which might materially
affect the net asset value of the Trust's redeemable shares.
The manner of determination of the net asset value is
briefly as follows: Securities traded on a U.S. national or
other foreign securities exchange are valued at the last sale
price on the primary exchange on which they are listed, of if
there has been no sale that day, at the current bid price.
Other U.S. and foreign securities for which market quotations
are readily available are valued at the known current bid price
believed most nearly to represent current market value. Other
securities (including limited traded securities) and all other
assets of the Trust are valued at fair market value as
determined in good faith by the Trustees of the Trust.
Liabilities are deducted from the total, and the resulting
amount is divided by the number of shares outstanding.
Each day investment securities traded on a national
securities exchange are valued at the noon sales price;
securities traded in the over-the-counter market are valued at
the last sale price as of 12:00 Noon. Gold bullion is valued
at noon based on the New York spot gold price. Gold coins,
foreign currencies, and foreign denominated securities for
which market quotations are readily available are valued at the
known bid price as of 12:00 Noon. Temporary cash investments
are stated at cost. In the absence of a reliable market for a
particular metal, security or currency, an investment therein
will be valued at fair value as determined in good faith by the
Trustees.
DISTRIBUTION OF SHARES
Rule 12-b-1 under the Investment Company Act of 1940
("Rule 12b-1") permits investment companies to use their assets
to bear expenses of distributing their shares if they comply
with various conditions, including adoption of a distribution
plan containing certain provisions set forth in the rule. On
November 17, 1989, such a Plan was approved by the Board of
Trustees, including a majority of the Independent Trustees who
have no direct or indirect financial interest in the Plan or
any agreement related thereto (the "Rule 12b-1 Trustees"). The
Plan is of the type sometimes called a compensation plan.
The Plan is currently not in effect, and will not be
implemented unless and until reapproved by the Trust's
shareholders and Board of Tustees. Accordingly, for the year
ended December 31, 1993, the Trust paid no fees under the Plan
to the Distributor.
In connection with the Plan, Trust shares are offered for
sale at net asset value, and the Trust may pay the Distributor
a commission equal to up to 5% of the price paid to the Trust
for each sale, all or any part of which may be re-allowed by
the Distributor to others (dealers) making such sales. To the
extent that the distribution fee is not paid to such dealers,
the Distributor may use such fee for its expenses of
Distribution of Trust shares. If such fee exceeds its
expenses, the Distributor may realize a profit from these
arrangements. The Plan provides for an aggregate limit on the
amount of all payments pursuant to the Plan equal to .75 of 1%
of the Trust's average daily net assets for any fiscal year.
If, so long as the Plan is in
effect, the Distributor's re-allowances to dealers and other
expenses exceed the .75 of 1% limit in any particular year, it
could collect in any future year such amounts (which do not
include interest or other carrying charges) up to any amount by
which amounts paid to it under the Plan in that year are less
than the applicable limit for the prior year. In such a case
it might receive amounts in excess of its then current
expenses.
Whether any expenditure under the Plan is subject to a
state
expense limit will depend upon the nature of the expenditure
and the terms of the state law, regulation or order imposing
the limit. Any expenditure subject to such a limit will be
included in the Trust's total operating expenses for purposes
of determining compliance with the expense limit.
The Plan may be terminated at any time by vote of the Rule
12b-1. Trustees, or by vote of a majority of the outstanding
voting shares of the Trust. Any change in the Plan that would
materially increase the distribution expenses of the Trust
provided for in the Plan requires shareholder approval;
otherwise, the Plan may be amended by the Trustees, including
the Rule 12b-1 Trustees.
If and when the Plan is in effect, the selection and
nomination of candidates for Independent Trustees must be
committed to the discretion of the Independent Trustees.
The total amounts paid by the Trust under the foregoing
arrangements may not currently exceed the maximum limit
specified above, and the amounts and purposes of expenditures
under the Plan must be reported to the Rule 12b-1 Trustees
quarterly. The Rule 12-b1 Trustees may require or approve
changes in the implementation or operation of the Plan, and may
also require that total expenditures by the Trust under the
Plan be kept within limits lower than the maximum amount
currently permitted under the Plan as stated above.
If the limit on expenditures is reached at any given time,
the Distributor intends, although it is not obligated to do so,
to continue to offer shares of the Trust and to continue to pay
others re-allowances and maintenance fees. In such an event,
the Distributor intends that it will seek payment from the
Trust in the amount of its commissions (including re-
allowances) and maintenance fees at such times when the
expenditures limit has not otherwise been reached. The Trust
will have no contractual obligation to pay any portion of such
amounts to the Distributor, and the amount, if any, and the
time and conditions under which the Trust might make such
payment as requested by the Distributor will be solely within
the discretion of the 12b-1 Trustees.
In 1992, the Securities and Exchange Commission approved
amendments to the National Association of Securities' Dealers
("NASD's") Rules of Fair Practice that impose limits on mutual
fund sales charges, including asset-based sales charges (i.e.
Rule 12b-1 fees) and contingent deferred sales charges. These
amendments became effective on July 7, 1993. To the extent
that such amendments to Rule 12b-1 under the Investment Company
Act of 1940 or the NASD's Rules of Fair Practice are
inconsistent with the Plan, the Trusts' Board of Trustees will
either terminate the Plan before it becomes effective or
propose changes to the Plan necessary to conform the Plan to
such amendments.
CONTINGENT DEFERRED SALES CHARGE
In conjunction with, but not as part of, the Plan, a
contingent deferred sales charge may be imposed upon certain
redemptions of shares purchased after inception of the plan.
The charge in respect of such redemptions made during the first
four calendar years following purchase of the shares is as
follows: 4% in the year of purchase; 3% in the second year; 2%
in the third year; and 1% in the fourth year. These charges
are not received by the Distributor and will not reduce amounts
paid to the Distributor under the Plan.
HOW TO PURCHASE SHARES
Shares of the Trust may be purchased from the Distributor,
7022 Bennington Woods Drive, Pittsburgh, Pennsylvania 15237.
There is no sales charge or commission payable by the investor
with respect to the purchase of shares. For new shareholders
initiating accounts, the minimum investment is $500, except for
exchanges of securities for Trust shares, where the minimum is
$5,000 (see "How to Exchange Securities for Trust Shares" in
the Prospectus). There is no minimum for shareholders making
additional investments to existing accounts.
An application for use in making an initial investment in
the Trust appears in the back of the Trust's Prospectus. The
applicable price will be the net asset value next determined
after the order is received by the Distributor. (See
"Determination of Net Asset Value".)
The Distributor sells shares to the public as agent for
the trust and is the sole principal underwriter for the Trust
under a Distributor's Contract dated July 23, 1993. The
contract automatically terminates upon assignment (which
includes the transfer of a controlling block of the stock of
the Distributor) by either party. The contract also provides
that it will continue for two years from its date and
thereafter its continuation from year to year will require
approval by a majority of the Trust's shares or by the Board of
Trustees and, in addition to such approval, the approval, by
vote cast in person, at a meeting called for the purpose, by a
majority of the Independent Trustees. Under the contract, the
Distributor pays expenses of sales literature, including copies
of any prospectus of the Trust delivered to investors, and the
Trust pays for its registration and registration of its shares
under the Federal Securities and Investment Company Acts and
state securities acts and other expenses in which it has a
direct interest.
For the years ended December 31, 1995, December 31,
1994 and December 31, 1993, the Distributor received no sales
commission from the Trust. \R
REDEMPTION, EXCHANGE AND REPURCHASE OF SHARES
Any shareholder will be able to require the Trust to
redeem his shares. In addition, the Trust will maintain a
continuous offer to repurchase its shares. If a shareholder
uses the services of a broker in selling his shares in the over-
thecounter market, the broker may charge a reasonable fee for
his services. Redemptions, exchanges and repurchases will be
made in the following manner:
1. Certificates for shares of the Trust may be mailed or
presented, duly endorsed, with signatures guaranteed in the
manner described below, with a written request that the Trust
redeem the shares, to the Trust's transfer agent, Anchor
Investment Management Corporation, 7022 Bennington Woods Drive,
Pittsburgh, Pennsylvania 15237 or to the Trust. If no
certificate has been issued and shares are held in an Open
Account with the Trust's transfer agent, a written request that
the Trust redeem such shares, accompanied by a separate
assignment form (stock power), duly endorsed, with signatures
guaranteed in the manner described below, may be mailed to
presented as described above. The redemption price will be the
net asset value next determined after the certificates and
request are received.
2. A request for repurchase may be communicated to the
Trust by a shareholder through a broker. The repurchase price
will be the net asset value next determined after the request
is received by the Trust, provided that, if the broker receives
the request before noon and transmits it to the Trust before
1:00 p.m. Eastern Time the same day, the repurchase price will
be the net asset value determined as of 12:00 Noon Eastern Time
that day. If the broker receives the request after noon, the
repurchase price will be the net asset value determined as of
12:00 Noon Eastern Time the following day. If an investor uses
the services of a broker in having his shares repurchased, the
broker may charge a reasonable fee for his services.
Payment for shares redeemed or repurchased will be
delivered within seven days after receipt of the shares, and/or
required documents, duly endorsed. The signature(s) on the
certificate or separate assignment form must be guaranteed by a
commercial bank or trust company or by a member of the New
York, American, Pacific Coast, Boston or Chicago Stock
Exchange. A signature guarantee by a savings bank and loan
association or notarization by a notary public is not
acceptable.
In order to insure proper authorization the transfer
agent may request additional documents such as, but not
restricted to, stock powers, trust instruments, certificates of
death, appointments as executor, certificates of corporate
authority and waiver of tax required in some states from
selling estates before redeeming shares.
Under unusual circumstances, when the Board of Trustees
deems it in the best interest of the Trust's shareholders, the
Trust may make payment for shares repurchased or redeemed in
whole or in part in securities or other assets of the Trust
taken at current values. Such payments are permitted pursuant
to Rule 18f-1 of the Investment Company Act of 1940, provided
that the Trust does not make an election with the Commission
that would irrevocably preclude such payments in kind. The
Trust does not presently intend to make such an election. Such
an election would require the Trust to redeem with cash at a
shareholder's election in any case where the redemption
involves less than $250,000 (or 1% of the Trust's net assets at
the beginning of each ninety day period during which such
redemptions are in effect, if that amount is less than
$250,000). Should payment be made in securities, the redeeming
shareholder may incur brokerage costs in converting such
securities to cash.
The right of redemption may be suspended or the payment
date postponed when the New York Stock Exchange is closed for
other than customary weekend or holiday closings, or when
trading on the New York Stock Exchange is restricted, as
determined by the Securities and Exchange Commission; for any
period when an emergency as defined by rules of the Commission
exists; or during any period when the Commission has, by order,
permitted such suspension. In case of a suspension of the
right of redemption, a shareholder who has tendered a
certificate for redemption or made a request for redemption
through a broker may withdraw his request or certificate or he
will receive payment of the net asset value determined next
after the suspension has been terminated.
A shareholder may receive more or less than he paid for
his shares, depending on the net asset value of the shares at
the time of redemption or repurchase.
DISTRIBUTIONS
The Trust distributes any income dividends and capital
gains distributions in additional shares, or, at the option of
the shareholder, in cash. In accordance with his distribution
option, a shareholder may elect (1) to receive both dividend
and capital gain distributions in additional shares or (2) to
receive dividends in cash and capital gain distributions in
additional shares or (3) to receive both dividends and capital
gain distributions in cash. A shareholder may change his
distribution option at any time by notifying the Transfer Agent
in writing. To be effective with respect to a particular
dividend or distribution, the new distribution option must be
received by the Transfer Agent at least 30 days prior to the
close of the fiscal year. All accounts with a cash dividend
option will be changed to reinvest both dividends and capital
gains automatically upon determination by the Trust's transfer
agent that the address of record for the account is not
current.
Dividends and capital gain distributions received in
shares
will be received by the Trust's transfer agent, as agent for
the shareholder, and credited to his Open Account in full and
fractional shares computed at the record date closing net asset
value.
Interest and dividends, and possible other amounts
received by the Trust in respect of foreign investments, may be
subject to withholding and other taxes at the source, depending
upon the laws of the country in which the investment is made.
TAXES
The Trust intends to qualify each year as a regulated
investment company under Subchapter M of the Internal Revenue
Code, as subsequently amended or re-enacted. In order to so
qualify, the Trust must, among other things, (i) derive at
least 90% of its gross income from dividends, interest,
payments with respect to certain securities, loans and gains
from the sale of securities; (ii) derive less than 30% of its
gross income from gains from the sale or other disposition of
securities held for less than three months; (iii) distribute at
least 90% of its dividend, interest and certain other taxable
income each year; (iv) maintain at least 50% of the value of
its total assets in cash, cash items, U.S. Government
securities, securities of other regulated investment companies,
and other securities to the extent that no more than 5% of its
assets are invested in the securities of one issuer and it owns
no more than 10% of the value of any issuer's voting
securities, and (v) have no more than 25% of its assets
invested in the securities (other than those of the U.S.
Government or other regulated investment companies) of any one
issuer or of two or more issuers which the Trust controls and
which are engaged in the same, similar or related trades and
businesses. To the extent the Trust qualifies for treatment as
a regulated investment company, the Trust will not be subject
to Federal income tax on income paid to its shareholders in the
form of dividends or capital gains distributions.
Dividends paid by the trust will generally not qualify for
the dividends-received deductions for corporations. The Trust
will notify shareholders each year of the amount of dividends
and distributions, including the amount of any distribution of
longterm capital gains.
The Trust will be subject to a nondeductible 4% exercise
tax to the extent that it fails to distribute, with respect to
each calendar year, at least 98% of its ordinary income for
such calendar year and 98% of its capital gain net income for
the oneyear period ending on October 31 of such calendar year.
In addition, to the extent that the Trust fails to distribute
100% of its ordinary and capital gain net income with respect
to any calendar year, the amount of such shortfall is subject
to such tax unless distributed with respect to the following
calendar year. For a distribution to qualify as such with
respect to a calendar year under the foregoing rules, it must
be declared by the Trust before December 31 of the year and
paid by the Trust before the following February 1. Such
distributions will be taxable to taxable shareholders in the
year the distributions are declared rather than the year in
which the distributions are received.
The Trust's foreign investments may be subject to foreign
withholding taxes. The Trust will be entitled to claim a
deduction for such foreign withholding taxes for federal income
tax purposes. However, any such taxes will reduce the income
available for distribution to shareholders.
Under the Interest and Dividend Compliance Act of 1983,
the Trust will be required to withhold and remit to the U.S.
Treasury 20% of the dividends and proceeds of redemptions paid
with respect to any shareholder who fails to furnish the Trust
with a correct taxpayer identification number, who under-
reported dividends or interest income, or who fails to certify
that he or
she is not subject to such withholding. An individual's
tax identification number is his or her social security
number.
TAX TREATMENT OF OPTIONS AND FUTURES TRANSACTIONS
In connection with its operations, the Trust may write and
purchase options. The tax consequences of transactions in
options will vary depending upon whether the option expires or
is exercised, sold or closed. The Trust may also affect
transactions in financial futures contracts and related
options. The tax consequences of certain of these transactions
were changes or clarified by amendments made to the Internal
Revenue Code by the Deficit Reduction Act of 1984 (the "Act").
Although no final regulations have been adopted under the Act,
the following discussion reflects the Trust's interpretation of
applicable changes made by the Act.
The Trust will seek principally to purchase or write
futures contracts and options that will be classified as
"regulated futures contracts", "equity options", or "nonequity
options", to the extent consistent with its investment
objective and opportunities which appear available. "Regulated
futures contracts" are contracts which are marked-to-market
under a daily cash flow system of the type used by United
States futures exchanges to determine the amount which must be
deposited (in the case of losses) and the amount which may be
withdrawn (in the case of gains) as a result of price changes
with respect to the contract during the day, and which are
traded on or subject to the rules of a qualified board of trade
or exchange. "Equity options" are any options to buy or sell
stock, or any option, the value of which is determined directly
or indirectly by reference to any stock (or group of stocks) or
stock index; equity options do not include any options with
respect to any group of stocks or stock index if there is in
effect a designation by the Commodity Futures Trading
Commission of a contract market for a contract based on such
group of stocks or index, or the Secretary of the Treasury
determines that such option meets the requirements of law for
such a designation. "Nonequity options" are any listed options
which are not equity options.
Regulated futures contracts and nonequity options, defined
as "Section 1256 Contracts" under the Act, are subject to a
marked-to-market rule for federal income tax purposes. Under
this rule, each such contract and option held by the Trust at
the end of each fiscal year will be treated as sold for fair
market value on the last business day of such fiscal year. As
described below, the character of gain or loss resulting from
the sale, disposition, closing out, expiration or other
termination of such contracts and options will be treated as
long-term capital gain or loss to the extent of 60% thereof,
and as short-term capital gain or loss to the extent of 40%
thereof ("60/40 gain or loss"). Equity options, on the other
hand, are not subject to the markedto-market rule. The
character of gain or loss resulting from the sale, disposition,
closing out, expiration or other termination of such equity
options is not subject to the 60/40 gain or loss rule.
The Trust will not realize gain or loss on the receipt or
payment of a premium. If a call option written by the Trust
expires without being exercised, the premium received will be
recognized by the Trust as a gain (60/40 for a nonequity call
option or short-term for an equity call option.) If a put
option purchased by the Trust expires without being exercised,
the premium paid will be recognized by the Trust as a loss
(60/40 for a nonequity put option or short long-term for an
equity put option, depending on the holding period of the put);
if, however, the Trust acquired the put option on the same day
it acquired the property identified as intended to be used in
exercising such put, the premium paid will be added to the
basis of the underlying securities. If a nonequity or equity
call option written by the Trust is exercised (or a nonequity
put option
purchased by the Trust is sold), the Trust will recognize short
or long-term capital gain or loss depending on the holding
period of the underlying securities. If a regulated futures
contract, nonequity call option written by the Trust or
nonequity put option purchased by the Trust is closed (i.e.,
the Trust's obligations are terminated other than through
exercise or lapse), the Trust will recognize 60/40 gain or
loss. If an equity call option written by the Trust is closed,
the Trust will recognize short-term capital gain or loss; if an
equity put option purchased by the Trust is closed, the Trust
will recognize long or short-term capital gain or loss,
depending on the holding period of the put option.
Section 1092 of the Internal Revenue Code, which applies
to certain straddles, may affect the taxation of the Trust's
transactions in options on portfolio securities and in
financial futures (and related options). As a result of rules
under that section, the Trust may be required to postpone
recognition of losses incurred in certain closing purchase
transactions under the year in which the other leg of the
straddle is closed. The Treasury Department has issued
temporary regulations on the holding period of straddles held
by regulated investment companies.
The Internal Revenue Service has ruled publicly that an
exchange-traded call option on a particular security is a
security for the purpose of the 50% of assets diversification
test and that its issuer is the issuer of the underlying
security, not the writer of the option, for purposes of
diversification requirements. In contrast, the Internal
Revenue Service has ruled privately that the issuer of a broad-
based financial futures option such as a stock index futures
contract (or an option on such a contract) is the writer of the
instrument and not the issuers of the group of stocks or
securities which comprise the index. Accordingly, the Trust
much treat such a futures contract (or option on it) as issued
by a single issuer for purposes of meeting the diversification
tests.
In other private rulings, the Internal Revenue Service has
addressed other tax issues arising from investments by
regulated investment companies in options and future contracts.
In particular, the Internal Revenue Service has stated in
private rulings that the gains recognized as a result of the
deemed sale or certain options under the marked-to-market rule
(which are treated as 60/40 gain) will not be treated as gains
from the sale or exchange of securities held for less than
three months, regardless of the actual holding period to year
end. The Internal Revenue Service also has stated in private
rulings that gains or losses with respect to index futures
contracts on securities (and related options) are gains and
losses from the sale or exchange of securities.
The legislative history of the Tax Reform Act of 1986
provides that income realized in connection with writing
covered and uncovered put and call options is intended by
Congress to be qualifying income for purposes of the 90%
passive income test. However, the requirement that less than
30% of the Trust's gross income be derived from gains from the
sale or other disposition of securities held for less than
three months will restrict the Trust in its ability to write
covered call options or securities that it has held less than
three months, to effect closing purchase transactions with
respect to options that have been held less than three months,
and to effect closing purchase transactions with respect to
options that have been written less than three months prior to
such transactions. Consequently, in order to avoid realizing a
gain within the three-month period, the Trust may be required
to defer the closing out of an option beyond the time when it
might otherwise be advantageous to do so.
The Tax Reform Act of 1986 revised the rules concerning
gains from sales of assets held less than three months in the
case of a "designated hedge". In the case of a "designated
hedge", recognized gains may be offset by unrecognized declines
in value of the other leg of the hedge during the period of the
hedge for purposes of determining whether gains from sales of
securities held for less than three months equal or exceed 30%
of gross income. For example, if a fund sells a one-month call
at $95 on stock it owns which is worth $100 for $4, the stock
declines in value of $94 and the option is not exercised, the
$4 of recognized gain on lapse of the option is offset by the
$6 decline in value of the stock and there is no net gain for
purposes of the three-month gains test. The $4 is recognized
under the usual rules for other purposes. The Conference
Committee Report on the 1986 Act established procedures for
identification of a "designated hedge" prior to issuance of
regulations on the topic.
There are unanswered questions in this area. In
particular, the Internal Revenue Service has declined to
determine whether any gain is derived from securities held less
than three months if a taxpayer buys a regulated futures
contract just prior to the end of its taxable year, has the
contract marked-to-market at year end, and then actually closes
the contract within three months of its initial purchase in the
following taxable year. Furthermore, since taxpayers other than
the taxpayer requesting a particular private ruling are not
entitled to rely on it, the Trust intends to keep its activity
in options at a low volume until the Service rules publicly, or
the Treasury Department issues final regulations, on open
issues.
If, in any taxable year, the Trust fails to qualify as a
regulated investment company, the Trust would be taxed in the
same manner as an ordinary corporation and the distributions to
its shareholders would not be deductible by the Trust in
computing its taxable income. In addition, in the event of
such failure to qualify, the Trust's distributions, to the
extent derived from the Trust's current or accumulated earnings
and profits, would be taxable to its shareholders as ordinary
income dividends, even if those dividends might otherwise have
been considered distributions of capital gains.
PORTFOLIO SECURITY TRANSACTIONS
Decisions to buy and sell portfolio securities for the
Trust are made pursuant to recommendations by the Investment
Adviser. The Trust, through the Investment Adviser, seeks to
execute portfolio security transactions on the most favorable
terms and in the most effective manner possible. In seeking
such execution, the Investment Adviser will use its best
judgment in evaluating the terms of a transaction and will give
consideration to various relevant factors, including without
limitation the size and type of the transaction, the nature and
character of the markets for the security, the confidentiality,
speed and certainty of effective execution required for the
transaction, the reputation, experience and financial condition
of the brokerdealer and the quality of services rendered by the
broker-dealer in other transactions, and the reasonableness of
the brokerage commission, if any.
It is expected that on frequent occasions, there will be
many broker-dealer firms which will meet the foregoing criteria
for a particular transaction. In selecting among such firms,
the Trust, through the Investment Adviser, may give
consideration to those firms which have sold, or are selling,
shares of the Trust. In addition, the Investment Adviser may
allocate Trust brokerage business on the basis of brokerage and
research services and other information provided by broker-
dealer firms, which may involve the payment of reasonable
brokerage commissions in excess of those chargeable by other
broker-dealer firms for effecting the same transactions. Such
"brokerage and research services" may be used for other of the
Investment Adviser's advisory
accounts and all such services may not be used by the
Investment Adviser in managing the Trust. The term "brokerage
and research services" includes advice as to the value of the
securities; the advisability of investing in, purchasing or
selling securities; the availability of securities, or
purchasers or sellers of securities; furnishing analyses and
reports concerning issuers, industries, securities, economic
factors and trends; portfolio strategy and the performance of
accounts; and effecting securities transactions and performing
functions incidental thereto (such as clearance and
settlement).
The policy referred to above of considering sales of
shares of the Trust as one of the factors in the selection of
brokerdealer firms to execute portfolio transactions, subject
to the requirement of seeking best execution, is specifically
permitted by a rule of the National Association of Securities
Dealers, Inc. The rule also provides, however, that no member
firm shall favor or disfavor the distribution of shares of any
particular fund or group of funds on the basis of brokerage
commissions received or expected by such firm from any source.
The Trust and one or more of the other investment
companies or accounts for which the Investment Adviser or its
affiliates render investment advisory services on occasion may
simultaneously be engaged in the purchase or sale of the same
security. In such event the transactions in such security
normally will be averaged as to price and allocated as to
amount among the several clients or accounts in a manner deemed
equitable to all. It is recognized that in some cases this
system could have a detrimental effect on the price or volume
of the security as far as the Trust is concerned. In other
cases, however, it is believed that the ability to participate
in volume transactions will produce better executions for the
Trust.
To the extent consistent with the policy of seeking best
price and execution, a portion of the Trust's portfolio
transactions may be executed through the Distributor,
Meeschaert & Co., Inc., which is an affiliate of the Investment
Adviser. In the event that this occurs, it will be on the
basis of what management believes to be current information as
to rates which are generally competitive with the rates
available from other responsible brokers and the lowest rates,
if any, currently offered by the Distributor.
During 1995, 1994, and 1993, commissions paid to
brokerdealers by the Trust were $7,779, $ 17,877, and $0,
respectively. During 1995, 1994, and 1993, brokerage
commissions
of $ 1,506, $ 2,481, and $0, respectively, were paid by the
Trust to Meeschaert & Co., Inc. For the year ended December 31,
1995, the percentage of total commissions paid to Meeschaert &
Co., Inc. was 19.4%. During 1995 the Trust's purchases and
sales of securities, exclusive of United States government
securities and short-term notes, amounted to $1,511,756 and
$571,290, respectively. 16.2% of such purchases and sales
involved the payment of commissions with respect to
transactions effected through Meeschaert & Co., Inc. Part of
the Trust's portfolio transactions in 1995 were executed on a
net basis without payment of brokerage commissions because the
Investment Adviser determined that better prices and executions
were available through this method. Meeschaert & Co., Inc.
received no compensation or other payment, either as agent or
principal, in these transactions. \R
The portfolio turnover rates for 1995, 1994, and 1993, were
12%, 42%, and 0%, respectively. \R
MISCELLANEOUS INFORMATION
CUSTODIAN, TRANSFER AGENT AND DIVIDEND-PAYING AGENT
All securities, cash and other assets of the Trust are
received, held in custody and delivered or distributed by
Investors Bank & Trust Company, Custodian, 24 Federal Street,
Boston, Massachusetts 02110, provided that in cases where
foreign
securities must, as a practical matter, be held abroad, the
Trust's custodian bank and the Trust will make appropriate
arrangements so that such securities may be legally so held
abroad. The Trust's custodian bank does not decide on
purchases or sales of portfolio securities or the making of
distributions. Anchor Investment Management Corporation, 7022
Bennington Woods Drive, Pittsburgh, Pennsylvania 15237, serves
as transfer agent and dividend-paying agent for the Trust.
INDEPENDENT PUBLIC ACCOUNTANTS
For the fiscal year endind December 31, 1993, the Trust
employed Livingston & Haynes, P.C., Two Sun Life Park,
Wellesley Hills, Massachusetts 02181, to certify its financial
statements and to prepare its federal and state income tax
returns.
REGISTRATION STATEMENT
This Statement of Additional Information does not
contain all the information set forth in the Registration
Statement and the exhibits and schedules relating thereto,
which the Trust has filed with, and which are available at the
Securities and Exchange Commission, Washington, D.C., under the
Securities Act of 1933, as amended, and the Investment Company
Act of 1940, as amended, to which reference is hereby made.
FINANCIAL STATEMENTS
The financial statements of the Trust appearing in the
Statement of Additional Information have been examined by
Livingston and Haynes, P.C., independent accountants, as set
forth in their report, and are included in reliance upon such
reports given on the authority of said firm as experts in
accounting and auditing. A copy of the Trust's Annual Report
may be obtained without charge by writing Anchor Investment
Management Corporation, 7022 Bennington Woods Drive,
Pittsburgh, Pennsylvania 15237, or by calling Anchor Investment
Management Corporation at (412) 635-7610.
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. 4 \R
/x/
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT
OF 1940
/x/
Amendment No. 5 \R
/x/
________________________________________
ANCHOR STRATEGIC ASSETS TRUST
________________________________________
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 and Class A Common Shares of
Beneficial Interest of the Registrant.
(Previously filed as Exhibit 4 to
Amendment No. 1)
(5) Investment Advisory Agreement between
the Registrant and Anchor Investment
Management Corporation. (Previously filed
as Exhibit 5 to Amendment No. 2)
(6) Distributor's Contract between the
Registrant and Meeschaert & Co., Inc.
(Previously filed as Exhibit 6 to
Amendment No. 2)
(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) Consent of Independent Public
Accountants.
(12) Trust's Annual Report to
Shareholders, December 31, 1995.
(13) Not applicable.
(14) Not applicable.
(15) Distribution Plan of the Registrant.
(Previously filed as Exhibit 15 to
Amendment No. 1)
(16) Not applicable.
(17) Power of Attorney, dated April 5,
1996.\R
Part C. Other Information.
Item 24. Financial Statements and Exhibits
(a) Financial Statements:
Included in Part A:
Selected Per Share Data
and Ratios for a share outstanding throughout
each period ended December 31, for the ten year
ended December 31, 1995 \R
Included in Part B:
Report of Independent Public Accountants*
Statement of Assets and Liabilities December
31,
1995*\R
Statement of Operations for the year
ended
December 31, 1995*\R
Statement of Changes in Net Assets for the
years
ended December 31, 1995
and December 31, 1994*\R
Schedule of Investments, December 31, 1995*
Notes to Financial Statements*\R
* Included in
Registrant's annual report to shareholders for
December 31, 1995 \R
a copy of which is included as Exhibit 12
and incorporated herein by reference thereto.
(b) Exhibits:
Exhibit 11. Consent of Independent Public Accountants.
Exhibit 12.Trust's Annual Reports to Shareholders,
December 31, 1995. \R
Exhibit 17.Power of Attorney, dated April 5, 1996. \R
Item 25. Persons controlled by or under common Control
with Registrant.
(a) No person controls the Registrant.
(b) The following table sets forth the name,
address and percentage of ownership at March 31, 1996,
of each person who then owned of record 5% or more of
any class of the Registrant's outstanding shares:
Name: Address: Percentage
Ownership:
Bank of New York PO Box 1066 71.49%
Wall Street Station
New York, NY 10268 \R
Societe Generale 1221 Ave. of the Americas 28.51%
Securities Corp. New York, NY 10020 \R
At March 31, 1996, officers and Trustees of the Registrant
as a group owned less than 1% of the outstanding Common
shares. \R
Item 26. Number of Holders of Securities.
The number of holders of record of securities of
the Registrant as of March 31, 1996 is as follows:
Title of Class:Number of Holders of Record:
Common Shares 2 \R
Class A Shares 0
Item 27. Indemnification.
No amendment. The information was filed in Item 27
of Amendment No. 1
Item 28. 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 this reference thereto.
Item 29. Principal Underwriters.
(a) The Distributor currently acts as distributor
for the following investment companies:
Anchor Capital Accumulation Trust
S.E.C. file # 811-00972
Anchor International Bond Trust
S.E.C. file # 811-4644
Anchor Resource and Commodity Trust
S.E.C. file # 811-8706
(b) See the answer to Item 21 of Part B, which is
herein
incorporated by this
reference thereto.
Item 30. Location of Accounts and Records.
Persons maintaining physical possession of
accounts, books, and other documents required to be
maintained by Section 31(a) of the Investment Company
Act of 1940 and rules promulgated thereunder
include Registrant's Secretary, David W.C. Putnam;
Registrant's Investment Advisor, Anchor Investment
Management Corporation; and Registrant's custodian,
Investors Bank & Trust company. The address of the
Secretary is 10 Langley Road, Suite
404, Newton Centre, Massachusetts 02159; the address
of the investment adviser and the transfer agent and
dividend paying agent is 7022 Bennington Woods Drive,
Pittsburgh, Pennsylvania 15237; and the address of the
custodian is Financial Product Services, 1 Lincoln
Plaza, Boston, Massachusetts 02205.
Item 31. Management Services.
Not applicable.
Item 32. Undertakings.
(a) Not applicable.
(b) Not applicable.
(c) Registrant hereby undertakes to call a meeting
of shareholders for the purpose of voting on the
question of removal of a Trustee or Trustees when
requested in writing to do so by the holders of
at least 10% of the Registrant's outstanding shares
of common stock and, in connection
with such meeting, to comply with the
provisions of Section 16(c) of the Investment Company
Act of 1940 relating to shareholder communications.
SIGNATURES
Pursuant to the requirements of the Securities Act of
1933 and the Investment Company Act of 1940, the Registrant
certifies that it meets all the requirements for
effectiveness of this Registration Statement pursuant to
Rule 485(b) and has duly caused this Amendment to the
Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of
Pittsburgh and the Commonwealth of Pennsylvania on the 29nd
day of April, 1996.
ANCHOR STRATEGIC ASSETS TRUST
By: ____________________________
__ David Y. Williams,
President
Pursuant to the Securities Act of 1933, this Amendment
to this Registration Statement has been signed below by
the following persons in the capacities and on the date
indicated.
Signature Title Date
* President, Secretary,
a
nd April 19, 1996
David W.C. Putnam Trustee (Principle Executive Officer)
* Treasurer
(Principle
April 19, 1996
J. Stephen Putnam Financial Officer)
*
Trustee
April 19, 1996
Maurice A. Donahue
*
Trustee
April 19, 1996
David Y. Williams
*By:
Peter K. Blume
Attorney-in-Fact April 29,
1996
_______________________________
1This 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.
Exhibit 11
Livingston & Haynes, P.C.
Certified Public Accountants
Two Sun Life Park
Wellesley Hills, MA 02181-5693
Tel: (617) 237-3339
Fax: (617) 237-3606
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 Strategic Assets Trust on the amended Form N-lA our
report dated January 12, 1996, appearing in the
prospectus, which is part of such Registration Statement,
and to the reference to us under the captions, "Selected
Per Share Data and Ratios".
Livingston & Haynes P.C.
Wellesley Hills, Massachusetts April 25,1996
ANCHOR
STRATEGIC
ASSETS
TRUST
ANNUAL REPORT
DECEMBER 31, 1995
ASSETS:
Investments at quoted market value (cost
$5,320,917; $4,929,9
see Schedule of Investments, Notes 1, 2, & 15
5)
Cash 526,530
Dividends and interest receivable 2,923
Total assets 5,459,36
8
LIABILITIES:
Payable for capital shares redeemed 29,264
Accrued expenses and other liabilities (Note 16,596
3)
Total liabilities 45,860
NET ASSETS:
Capital stock (unlimited shares authorized at
$1.00 par value, 6,202,30
amount paid in on 1,184,752 shares 3
outstanding) (Note 1)
Accumulated overdistributed net investment (166,941
income )
Accumulated realized loss from security (230,852
transactions, net )
Net unrealized depreciation in value of (391,002
investments (Note 2) )
Net assets (equivalent to $4.57 per share,
based on $5,413,5
08
1,184,752 capital shares outstanding)
POWER OF ATTORNEY
We, the undersigned officers and Trustees of Anchor
Strategic Assets Trust, hereby severally constitute David
W.C. Putnam, David Y. Williams, and Peter K. Blume, and each
of them singly, our true and lawful attorneys, with full
power to them and each of them singly to sign for us, and in
our names and in the capacity mentioned below, any and all
Registration Statements and/or Amendments to the
Registration Statements, filed with the Securities and
Exchange Commission, hereby ratifying and confirming our
signatures as they may be signed by our said attorneys to
any and all amendments to said Registration Statement, and
all additional Registration Statements and Amendments
thereto.
Witness our hands and common seal on the dates set
forth below*
Signature
Title Date
David W.C. Putnam
Chairman and Trustee April 19, 1995
David W.C. Putnam
J. Stephen Putnam
Treasurer (Principle April 19, 1995
J. Stephen Putnam
Financial Officer)
Spencer H. LeMenager
Secretary and Trustee April 19, 1995
Spencer H. LeMenager
Maurice A. Donahue
Trustee April 19,
1995
Maurice A. Donahue
David Y. Williams
President and Trustee April 19, 1995
David Y. Williams
* This Power of Attorney may be executed in several
counterparts, each of which shall be regarded as an original
and all of which taken together shall constitute one and the
same Power of Attorney, and any of the parties hereto may
execute this Power of Attorney by signing any such
counterpart.
