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. 6 |X|
and
REGISTRATION STATEMENT UNDER THE |X|
INVESTMENT COMPANY ACT OF 1940
Amendment No. 7 |X|
(Check appropriate box or boxes)
ANCHOR STRATEGIC ASSETS TRUST
(Exact Name of Registrant as Specified in Charter)
579 Pleasant Street, Suite 4
Paxton, Massachusetts 01612
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code:
(508) 831-1171
It is proposed that this filing will become effective
(Check appropriate box)
|X| immediately upon filing pursuant to Paragraph (b) of Rule 485
|_| on ___________________ pursuant to Paragraph (b)
|_| 60 days after filing pursuant to Paragraph (a)(1)
|_| on _______ pursuant to Paragraph (a)(1)
|_| 75 days after filing pursuant to Paragraph (a)(2)
|_| on _______ pursuant to Paragraph (a)(2) of Rule 485
Peter K. Blume, Esquire
Thorp Reed & Armstrong
One Riverfront Center
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 24f-2 for the fiscal year ended December 31, 1997 will be
filed on or before June 30, 1998
PAGE 1 OF 66. EXHIBIT INDEX ON PAGE 50.
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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 Statement
Information of Selected Per Share
Data.
Item 3A. Financial Data Schedule.
Item 4. General Description of Cover
Registrant 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 5A.............................. Management's Discussion
of Fund Performance
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
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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 Not Applicable
History
Item 13. Investment Objectives and Investment Objectives and
Policies 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
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Item 17. Brokerage Allocation. Portfolio Security
Transactions
Item 18. Capital Stock and Other About the Trust
Securities
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 Not Applicable
Data
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.
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ANCHOR STRATEGIC ASSETS TRUST
PROSPECTUS
Dated May 1, 1998
Anchor Investment Management Corporation
Investment Adviser
579 Pleasant Street, Suite 4
Paxton, Massachusetts 01612
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 579 Pleasant Street, Suite
4, Paxton, Massachusetts 01612, and its telephone number is (508) 831-1171.
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.
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This Prospectus sets forth certain information about the Trust
which investors should know before investing, and it should be retained
for future reference. Additional facts about the Trust are contained in
a Statement of Additional Information dated May 1, 1998, which has been
filed with the Securities and Exchange Commission. The Statement and the
Trust's Annual Report for 1997 are available without charge by calling or
by writing the Trust at the above telephone number or address. The
Statement of Additional Information is incorporated by reference in
this Prospectus.
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TABLE OF TRUST FEES AND EXPENSES
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SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Load Imposed on Purchase .. None
Maximum 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%
Maximum Sales Load Imposed on Reinvested
Dividends............................... None
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........................... 0.85%
Total Trust Operating Expenses........... 2.35%
EXAMPLE:
1 Year 3 Years 5 Years 10 Years
You would pay the following
expenses on a $1,000 investment
assuming (1) 5% annual return and (2)
redemption at the end of each time
period: $64 $93 $126 $269
You would pay the following
expenses on the same investment,
assuming no redemption: $24 $73 $126 $269
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, and will not do so
without shareholders' approval of the Plan.
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TABLE OF CONTENTS
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TABLE OF TRUST FEES AND EXPENSES..................................3
ANNUAL TRUST OPERATING EXPENSES...................................3
CONDENSED FINANCIAL INFORMATION & SELECTED PER SHARE
DATA AND RATIOS..................................................5
Financial Highlights...........................................5
ABOUT THE TRUST...................................................6
INVESTMENT OBJECTIVES AND POLICIES................................6
Investment Strategy............................................6
Specialized Investment Techniques and Related Risks............8
Option Transactions Involving Portfolio Securities and
Securities Indices............................................8
Options on Foreign Currencies..................................8
Financial and Precious Metals Futures and Related Options......8
Limitations on futures Contracts and Related Options...........9
Lending of Portfolio Securities................................9
Repurchase Agreements..........................................9
Portfolio Turnover............................................10
Investment Restrictions.......................................10
INVESTOR CONSIDERATIONS..........................................10
MANAGEMENT.......................................................11
Trustees......................................................11
Investment Adviser............................................11
Expenses......................................................12
Brokerage.....................................................12
Management Discussion of Fund Performance.....................12
HOW TO PURCHASE SHARES...........................................13
DISTRIBUTION OF SHARES...........................................13
Contingent Deferred Sales Charge..............................14
HOW TO EXCHANGE SECURITIES FOR TRUST SHARES......................14
REDEMPTION AND REPURCHASE OF SHARES..............................15
DETERMINATION OF NET ASSET VALUE.................................16
SERVICES FOR SHAREHOLDERS........................................16
Open Accounts.................................................16
Invest-By-Mail................................................17
DIVIDENDS AND DISTRIBUTIONS......................................17
TAXES............................................................17
MISCELLANEOUS INFORMATION........................................18
Custodian, Transfer Agent and Dividend-Paying Agent...........18
Shareholder Inquiries.........................................18
APPLICATION FORM.................................................19
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CONDENSED FINANCIAL INFORMATION AND SELECTED PER SHARE DATA AND RATIOS
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(for a share outstanding throughout each period ended December 31,)
The following information for the five years ended December 31, 1997 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.
Financial Highlights
Year Ended December 31,
1997 1996 1995 1994 1993
Net Asset Value, $ 4.86 $ 4.57 $ 4.48 $ 5.43 $ 7.43
Beginning of year.........
Investment income....... 0.40 0.01 0.03 (3.40) 0.19
Net investment income
(loss).................. (0.10) (0.02) (0.03) 4.46 (2.00)
Net realized and
unrealized gain (loss)
on investments.......... (0.86) 0.31 0.12 (5.41) --
Total From
Investment Operations... (0.96) 0.29 0.09 (0.95) (2.00)
Distributions to
shareholders:
From net investment
income (loss)........... -- -- -- -- --
From net realized
gains on investments.... -- -- -- -- --
Total Distributions..... -- -- -- -- --
Net increase (decrease)
in net asset value...... (0.96) 0.29 0.09 (0.95) (2.00)
Net Asset Value, End of
year..................... $ 3.90 $ 4.86 $ 4.57 $ 4.48 $ 5.43
Total Return.............. (19.75)% 6.35% 2.01% (17.5%) (26.92%)
Ratios/Supplemental Data
Net Assets, End of Period. $4,697,308 $8,182,245 $5,413,508 $ 65,127
Ratio of expenses to
average net assets........ 2.35% 1.98% 1.99% 2.19% 30.85%
Ratio of net investment
income to average net
assets................... (0.40)% (1.49)% (1.10)% (1.24)% (28.14)%
Portfolio turnover........ 0.21 0.37 0.12 0.42 --
Average Commission Rate
Paid..................... 0.0386 0.0568 0.0433 0.0345 --
Per share data and ratios assuming no
waiver of advisory fees:
Net investment loss....... $(2.11)
Ratio of expenses to
average net assets........ 32.35%
Ratio of net investment
incometo average
net assets................ (29.64)
* Includes balancing effect of calculating per share amounts.
Note 1. All per share numbers give retroactive effect to stock dividends.
Note 2. Investment income and net income (loss) per share are computed
based on the weighted average shares outstanding throughout the fiscal periods.
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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 non-assessable and transferable on the books of the Trust. The shares have
no preemptive rights. The shares each have one vote and proportionate
liquidation rights.
The Trust normally will not hold annual meetings of shareholders to elect
Trustees. If less than a majority of the Trustees holding office have been
elected by shareholders, a meeting of shareholders will be called to elect
Trustees. 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:
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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 metals-backed
securities" means securities which are redeemable at a specified conversion rate
for precious metals or which are guaranteed by precious metals; "indexed
securities" means securities comprising one of the exchange listed stock indices
on which future contracts and options can be purchased and sold, e.g.,
Gold/Silver Index listed on the Philadelphia Stock Exchange; "equity securities"
means common or preferred shares in a corporation, whether or not transferable
or denominated 'stock,' or similar security, interests of a limited partner in a
limited partnership, or warrants or rights other than rights to convert,
purchase, sell, or subscribe to a share, security, or interest of a kind
previously specified; and "convertible securities" means debentures or preferred
stock that may be exchanged by the owner for common or preferred stock, usually
of the same company, or precious metals bullion, in accordance with the terms of
the issue.
2. When, based on an analysis of numerous economic and monetary factors, 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.
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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
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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
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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
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<PAGE>
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 579 Pleasant Street, Suite 4, Paxton, Massachusetts 01612.
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, 1997, the
Investment Adviser received investment advisory fees of $86,010 for its services
to the Trust, which represented 1 1/2% of the Trust's average net assets.
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
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management of the Trust's portfolio is Paul Jaspard, who is a Vice President of
the Investment Adviser. Mr. Jaspard is President of Linden Investment Advisers,
S.A., an investment advisory firm headquartered in Belgium. 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, 1997, expenses borne by the Trust amounted to $134,471
which represented 2.35% of the Trust's average net assets.
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
The price of gold declined steadily from $370 to $290 an ounce during
1997. In response to this market decline, commencing in January of 1997, the
Trust continued to reduce its exposure to gold mining shares, especially in the
junior mining and exploration companies. The percentage of shares of gold mining
companies held in the Trust's portfolio declined from 40% to 25% by the middle
of 1997. At the end of 1997, the Trust purchased shares in major mining
companies such as Barrick Gold and Newmont Mining. These purchases raised the
percentage of the Trust's assets invested in shares of mining companies to
approximately one third of the total assets of the Trust.
The percentage of physical gold bullion held by the Trust was kept at
approximately 20% of total assets. This policy of investing helped the Trust to
minimize the impact of the bear market in gold bullion and gold mining
companies.
Comparison of the Change in Value of a $10,000 Investment in the Anchor
Strategic Assets Trust and the Barron's Gold Mining Index
[GRAPHIC OMITTED]
HOW TO PURCHASE SHARES
......Shares of the Trust may be purchased from the Distributor, 579 Pleasant
Street, Suite 4, Paxton, Massachusetts 01612. 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
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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
200 Clarendon Street, 16th Floor
Boston, Massachusetts 02116
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.
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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 579 Pleasant Street, Suite 4,
Paxton, Massachusetts 01612. 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
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<PAGE>
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.
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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, 200
Clarendon Street, 16th Floor, Boston, Massachusetts 02116 (giving the full name
or names of his account). The check will be used to purchase additional shares
for his Open Account at the net asset value next determined after the check is
received. Any check not payable to the order of the Trust will be returned.
The cost of administering Open Accounts for the benefit of shareholders
who participate in them will be borne by the Trust as an expense of all its
shareholders.
DIVIDENDS AND DISTRIBUTIONS
The Trust currently intends to distribute any dividends and
distributions in additional shares, or, at the option of the shareholder, in
cash. In accordance with his distribution option, a shareholder may elect (1) to
receive both dividends and capital gain distributions in additional shares, or
(2) to receive dividends in cash and capital gain distributions in additional
shares, or (3) to receive both dividends and capital gain distributions in cash.
A shareholder may change his distribution option at any time by notifying the
Trust's transfer agent in writing. To be effective with respect to a particular
dividend or distribution, the new distribution option must be received by the
transfer agent at least 30 days prior to the close of the fiscal year. All
accounts with a cash dividend option will be changed to reinvest both dividends
and capital gains automatically upon determination by the Trust's transfer agent
that the address of record is not current.
Dividends and capital gain distributions received in shares will be
received by the Trust's transfer agent, as agent for the shareholder, and
credited to his Open Account in full and fractional shares computed at the
record date closing net asset value.
TAXES
The Trust intends to qualify under Subchapter M of the Internal Revenue
Code as a regulated investment company and to distribute substantially all
investment income and capital gains, if any, at least once every year so that,
to the extent of such distributions, the Trust will not be subject to federal
income taxes.
Shareholders will be subject to federal income taxes on distributions made
by the Trust whether they are received in cash or additional Trust shares.
Distributions of net investment income and short-term capital gains, if any,
will be taxable to shareholders as ordinary income. Distributions of long-term
capital gains, if any, will be taxable to shareholders as long-term capital
gains, without regard to how long a shareholder has held shares of the Trust.
Dividends paid by the Trust will generally not qualify for the dividends
received deductions for corporations. The Trust will notify shareholders each
year of the amount of dividends and distributions, including the amount of any
distribution of long-term capital gains.
The Trust's foreign investments may be subject to foreign withholding
taxes. The Trust will be entitled to claim a deduction for such foreign
withholding taxes for federal income tax purposes. However, any such taxes will
reduce the income available for distribution to shareholders.
The Trust is required to withhold 20% of the dividends paid with respect
to any shareholder who fails to furnish the Trust with a correct taxpayer
identification number, who under-reported dividend or interest income, or who
fails to certify to the Trust that he or she is not subject to such withholding.
An individual's tax identification is his or her social security number.
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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, 200 Clarendon Street, 16th Floor, Boston, Massachusetts
02116, 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, 579 Pleasant Street, Suite 4, Paxton, Massachusetts 01612, serves
as transfer agent and dividend-paying agent for the Trust.
SHAREHOLDER INQUIRIES
For further information about the Trust, investors should call (508)
831-1171. Written inquiries should be addressed to Anchor Strategic Assets
Trust, 579 Pleasant Street, Suite 4, Paxton, Massachusetts 01612.
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ANCHOR STRATEGIC ASSETS TRUST
(the "Trust")
MEESCHAERT & CO., INC.
("Distributor")
APPLICATION AND REGISTRATION FORM1
Send Application to
Meeschaert & Co., Inc., 579 Pleasant Street, Suite 4, Paxton,
Massachusetts 01612
Date: ___________________
I. ACCOUNT REGISTRATION:
[GRAPHIC OMITTED] New: Social Security or Tax Number__________________
(if two names below, circle which one has this number.)
[GRAPHIC OMITTED] Existing: Account Number
- ----------------------------------------------------------
(from your latest statement - vital for identification.)
Name(s) ____________________________________________________________________
Type or print exactly as they are to appear on the Trust's records.)
Street _____________________________________________________________________
City __________________________________________ State________ Zip __________
If address outside the U.S.A., please circle I (am)(am not) a citizen
of the U.S.A.
If registration requested in more than one name, shares will be registered
as "Joint Tenants with Rights of Survivorship" unless otherwise instructed.
II. BASIS FOR OPENING NEW ACCOUNT:
[GRAPHIC OMITTED] A check for $_______________ payable to the Trust
attached.
or
[GRAPHIC OMITTED] Shares _______________ recently purchased on _________
(number) (date)
Distribution Option: (exercisable only by holders of Common Shares)
Check only one. If none checked, option A will be assigned.
[GRAPHIC OMITTED] A. Dividends and capital gains in additional full
and fractional shares credited to shareholder's account, no certificates
issued.
OR
[GRAPHIC OMITTED] B. Dividends in cash; capital gains in additional
full and fractional shares credited to shareholder's account; no
certificates issued.
OR
[GRAPHIC OMITTED] C. Dividends in cash; capital gains in cash.
(Certificates will be issued to shareholders requesting such in writing
from the Transfer Agent.)
- -----------------------------------------------
1 This Application and Registration Form is designed for cash purchases of
Trust shares. The procedure for exchange of securities for Trust shares
is described in the Trust Prospectus.
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<PAGE>
III. INVEST-BY-MAIL SERVICE: for periodic share accumulation (whether
or not dividends are received in shares)
[GRAPHIC OMITTED] Please check if you wish to utilize the Trust's Invest-By-Mail
Service. This is a voluntary service involving no extra charge to the
shareholder, and it may be changed or discontinued at any time.
IV. SHAREHOLDER'S SIGNATURE: Should be the same as name in Account
Registration.
- ---------------------------------- -------------------------------------
Signature Signature of Co-Owner (if any)
(I have received a current prospectus of the Trust and I understand that my
account will be covered by the provisions on the reverse side of this
Application. I also understand that I may terminate any of these services
at any time.)
DEALER AUTHORIZATION:
(please print)
Representative
- --------------------------------- -------------------------------------
Dealer's Name (Representative's Name)
- --------------------------------- -------------------------------------
Home Office Address Telephone Number(Representative's Number)
Branch Office:
- --------------------------------- -------------------------------------
City State Zip Address
- --------------------------------- -------------------------------------
Telephone Authorized Signature City State Zip
Number of Dealer
22
<PAGE>
ANCHOR STRATEGIC ASSETS TRUST
579 Pleasant Street, Suite 4
Paxton, Massachusetts 01612
(508) 831-1171
STATEMENT OF ADDITIONAL INFORMATION
May 1, 1998
This Statement of Additional Information supplements the information
contained in the current Prospectus of Anchor Strategic Assets Trust (the
"Trust"), dated May 1, 1998, 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, 1997. 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.
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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 .........................................7
Risk of Options and Indices ...........................7
Options on Foreign Currencies .........................8
Risks of Foreign Currency Option Activities ...........9
Special Risks of Foreign Currency Options ............10
Financial and Precious Metals Futures and Related
Options ..............................................11
Limitations on Futures Contracts and Related
Options...............................................12
Risks Relating to Futures Contracts and Related
Options...............................................12
Lending of Portfolio Securities ......................13
Repurchase Agreements ................................13
PORTFOLIO TURNOVER .......................................13
INVESTMENT RESTRICTIONS ..................................14
MANAGEMENT ...............................................15
Officers and Trustees ................................15
Remuneration of Officers and Trustees ................16
Investment Advisory Contract .........................16
Investment Adviser ...................................17
PRINCIPAL HOLDERS OF SECURITIES ..........................17
DETERMINATION OF NET ASSET VALUE .........................17
DISTRIBUTION OF SHARES ...................................17
Contingent Deferred Sales Charge......................18
HOW TO PURCHASE SHARES ...................................18
REDEMPTION, EXCHANGE AND REPURCHASE OF SHARES ............19
DISTRIBUTIONS ............................................20
TAXES ....................................................20
Tax Treatment of Options and Futures Transactions ....20
PORTFOLIO SECURITY TRANSACTIONS ..........................22
MISCELLANEOUS INFORMATION ................................23
Custodian, Transfer Agent and Dividend-Paying Agent ..23
Independent Public Accountants .......................23
Registration Statement ...............................23
FINANCIAL STATEMENTS......................................23
24
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ABOUT THE TRUST
......The Trust was established as an unincorporated business trust under the
laws of Massachusetts by a Declaration of Trust dated 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 non-assessable and transferable on the books of the Trust. The shares have
no preemptive rights. The shares each have one vote and proportionate
liquidation rights.
......The Trust normally will not hold meetings of shareholders to elect
Trustees. If less than a majority of the Trustees holding office have been
elected by shareholders, a meeting of shareholders will be called to elect
Trustees. 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
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<PAGE>
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
short-term U.S. Government securities and other money market instruments, cash
or cash equivalents. Money market instruments include high-grade commercial
paper (promissory notes issued by corporations to finance their short-term
credit needs), negotiable certificates of deposit, non-negotiable fixed time
deposits, bankers' acceptances and repurchase agreements. Investments in
commercial paper will be rated Prime-1 by Moody's Investors Services, Inc. or
A-1 by Standard & Poor's corporation or F-1 by Fitch Investors Service, Inc.,
which are the highest ratings assigned by these agencies. Money market
instruments will be limited to U.S. dollar denominated instruments which are
rated in the top two categories by an independent nationally recognized rating
organization or, if not rated, are of comparable quality as determined by the
Trustees. Investments in bank instruments will be in instruments which are
issued by U.S. or foreign banks having capital and undivided surplus at the time
of investment of $200,000,000 or more and which mature in one year or less from
the date of acquisition.
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<PAGE>
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
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<PAGE>
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.
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<PAGE>
......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
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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
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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,
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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.
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......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.
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......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
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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
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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 1997, 1996, and 1995 were 21%,
37%, and 12%, respectively.
INVESTMENT RESTRICTIONS
......The Trust has adopted the following investment restrictions which are
fundamental policies and cannot be changed without approval by the holders of a
majority of the outstanding voting securities of the Trust (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.
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......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 579 Pleasant Street, Suite 4, Paxton,
Massachusetts 01612, 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
Newton Centre, MA 02159 Trust, Anchor International
Bond Trust, Anchor Strategic
Assets Trust, Anchor Resource
and Commodity Trust,and Anchor
Gold and Currency Trust
(Investment Companies);
President and Director, F. L.
Putnam Securities Company,Inc.
and subsidiaries.
SPENCER H. LE MENAGER Secretary and President, Equity, Inc.;
222 Wisconsin Avenue Trustee formerly President, Howe,
P.O. Box 390 Barnes & Johnson Inc.
Lake Forest, IL 60045 (securities dealer).
MAURICE A. DONAHUE Trustee Director and Professor,
50 Holy Family Road Institute for Governmental
Holyoke, MA 01040 Services and Walsh-Saltonstall
Professor of Practical
Politics, University of
Massachusetts, Director
Vanguard Savings Bank, Former
Member, Massachusetts House of
Representatives, Former Member
and President, Massachusetts
Senate.
DAVID Y. WILLIAMS* President and President and Director,
579 Pleasant St., Ste 4 Trustee Anchor Investment Management
Paxton, MA 01612 Corporation; President and
Director, Meeschaert & Co.,
Inc. (securities dealer).
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J. STEPHEN PUTNAM Vice President President, Robert Thomas
880 Carillon Parkway and Treasurer Securities, Inc. (securities
P.O. Box 12749 Dealer; Director, F.L.Putnam
St. Petersburg, FL 33733 Securities Company, Inc.
Formerly, President and
Director, EPB, Inc. and Vice
President, Burgess & Leith
Incorporated.
CHRISTOPHER Y. WILLIAMS Vice President Vice President and Secretary,
579 Pleasant St., Ste 4 and Asst. Secretary Anchor Investment Management
Paxton, MA 01612 Corporation; Vice President
and Secretary, Meeschaert & Co.
Inc.(securities dealer);
President and Secretary,
Cardinal Investment Services,
Inc.
JOSEPH C. WILLIAMS Vice President Vice President and Treasurer,
579 Pleasant St., Ste 4 and Asst. Treasurer Anchor Investment Management
Paxton, MA 01612 Corporation; Vice President
and Treasurer, Meeschaert & Co.
Inc.(securities dealer); Vice
President and Treasurer,
Cardinal Investment Services,
Inc.
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, 1997.
Messrs. Putnam, Le Menager, and Donahue, are the Trustees who are not
"interested persons" (as that term is defined in the Investment Company Act
of 1940) of the Trust.
Mr. David W.C. Putnam and Mr. J. Stephen Putnam are brothers.
Mr. David Y. Williams is the father of Mr. Christopher Y. Williams and Mr.
Joseph C. Williams. Mr. Christopher Y. Williams and Mr. Joseph C. Williams
are brothers.
The standing audit committee is composed of Messrs. LeMenager and Donahue. The
Trust does not have a nominating or compensation committee.
Remuneration of Officers and Trustees
The Trust does not and 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 does pay an annual fee not in excess of $1,000 to
each Trustee who is not such an "interested person". The Trust did not
compensate any person, including directors, officers or employees, in excess of
$60,000.00 during its most recent fiscal year.
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 $86,010 for services rendered
in 1997.
The Investment Advisory Contract will remain in effect until July 20,
1998, but it may be extended from year to year thereafter if approved at least
annually (a) by the vote of a majority of the outstanding shares of the Trust or
by the Board of Trustees, and in either case, (b) by a vote of a majority of the
Trustees of the Trust who are not parties to the contract or "interested
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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 579 Pleasant Street,
Suite 4, Paxton, Massachusetts 01612. 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 Linden Investment Advisers, S.A., 67 Avenue Terlinden, B-1310
LaHulpe, Belgium (investment adviser). 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 59.51% 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,
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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, 1996, 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, 579 Pleasant
Street, Suite 4, Paxton, Massachusetts 01612. 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.
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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, 1997, 1996, and 1995 the Distributor
received no sales commission from the Trust.
REDEMPTION, EXCHANGE AND REPURCHASE OF SHARES
Any shareholder will be able to require the Trust to redeem his shares. In
addition, the Trust will maintain a continuous offer to repurchase its shares.
If a shareholder uses the services of a broker in selling his shares in the
over-the-counter market, the broker may charge a reasonable fee for his
services. Redemptions, exchanges and repurchases will be made in the following
manner:
1. Certificates for shares of the Trust may be mailed or presented, duly
endorsed, with signatures guaranteed in the manner described below, with a
written request that the Trust redeem the shares, to the Trust's transfer agent,
Anchor Investment Management Corporation, 579 Pleasant Street, Suite 4, Paxton,
Massachusetts 01612 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.
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A shareholder may receive more or less than he paid for his shares,
depending on the net asset value of the shares at the time of redemption or
repurchase.
DISTRIBUTIONS
The Trust distributes any income dividends and capital gains distributions
in additional shares, or, at the option of the shareholder, in cash. In
accordance with his distribution option, a shareholder may elect (1) to receive
both dividend and capital gain distributions in additional shares or (2) to
receive dividends in cash and capital gain distributions in additional shares or
(3) to receive both dividends and capital gain distributions in cash. A
shareholder may change his distribution option at any time by notifying the
Transfer Agent in writing. To be effective with respect to a particular dividend
or distribution, the new distribution option must be received by the Transfer
Agent at least 30 days prior to the close of the fiscal year. All accounts with
a cash dividend option will be changed to reinvest both dividends and capital
gains automatically upon determination by the Trust's transfer agent that the
address of record for the account is not current.
Dividends and capital gain distributions received in shares will be
received by the Trust's transfer agent, as agent for the shareholder, and
credited to his Open Account in full and fractional shares computed at the
record date closing net asset value.
Interest and dividends, and possible other amounts received by the Trust
in respect of foreign investments, may be subject to withholding and other taxes
at the source, depending upon the laws of the country in which the investment is
made.
TAXES
The Trust intends to qualify each year as a regulated investment company
under Subchapter M of the Internal Revenue Code, as subsequently amended or
re-enacted. In order to so qualify, the Trust must, among other things, (i)
derive at least 90% of its gross income from dividends, interest, payments with
respect to certain securities, loans and gains from the sale of securities; (ii)
derive less than 30% of its gross income from gains from the sale or other
disposition of securities held for less than three months; (iii) distribute at
least 90% of its dividend, interest and certain other taxable income each year;
(iv) maintain at least 50% of the value of its total assets in cash, cash items,
U.S. Government securities, securities of other regulated investment companies,
and other securities to the extent that no more than 5% of its assets are
invested in the securities of one issuer and it owns no more than 10% of the
value of any issuer's voting securities, and (v) have no more than 25% of its
assets invested in the securities (other than those of the U.S. Government or
other regulated investment companies) of any one issuer or of two or more
issuers which the Trust controls and which are engaged in the same, similar or
related trades and businesses. To the extent the Trust qualifies for treatment
as a regulated investment company, the Trust will not be subject to Federal
income tax on income paid to its shareholders in the form of dividends or
capital gains distributions.
Dividends paid by the trust will generally not qualify for the
dividends-received deductions for corporations. The Trust will notify
shareholders each year of the amount of dividends and distributions, including
the amount of any distribution of long-term capital gains.
The Trust will be subject to a nondeductible 4% exercise tax to the extent
that it fails to distribute, with respect to each calendar year, at least 98% of
its ordinary income for such calendar year and 98% of its capital gain net
income for the one-year period ending on October 31 of such calendar year. In
addition, to the extent that the Trust fails to distribute 100% of its ordinary
and capital gain net income with respect to any calendar year, the amount of
such shortfall is subject to such tax unless distributed with respect to the
following calendar year. For a distribution to qualify as such with respect to a
calendar year under the foregoing rules, it must be declared by the Trust before
December 31 of the year and paid by the Trust before the following February 1.
Such distributions will be taxable to taxable shareholders in the year the
distributions are declared rather than the year in which the distributions are
received.
The Trust's foreign investments may be subject to foreign withholding
taxes. The Trust will be entitled to claim a deduction for such foreign
withholding taxes for federal income tax purposes. However, any such taxes will
reduce the income available for distribution to shareholders.
Under the Interest and Dividend Compliance Act of 1983, the Trust will be
required to withhold and remit to the U.S. Treasury 20% of the dividends and
proceeds of redemptions paid with respect to any shareholder who fails to
furnish the Trust with a correct taxpayer identification number, who
under-reported dividends or interest income, or who fails to certify that he or
she is not subject to such withholding. An individual's tax identification
number is his or her social security number.
Tax Treatment of Options and Futures Transactions
In connection with its operations, the Trust may write and purchase
options. The tax consequences of transactions in options will vary depending
upon whether the option expires or is exercised, sold or closed. The Trust may
also affect transactions in financial futures contracts and related options. The
42
<PAGE>
tax consequences of certain of these transactions were changes or clarified by
amendments made to the Internal Revenue Code by the Deficit Reduction Act of
1984 (the "Act"). Although no final regulations have been adopted under the Act,
the following discussion reflects the Trust's interpretation of applicable
changes made by the Act.
The Trust will seek principally to purchase or write futures contracts and
options that will be classified as "regulated futures contracts", "equity
options", or "nonequity options", to the extent consistent with its investment
objective and opportunities which appear available. "Regulated futures
contracts" are contracts which are marked-to-market under a daily cash flow
system of the type used by United States futures exchanges to determine the
amount which must be deposited (in the case of losses) and the amount which may
be withdrawn (in the case of gains) as a result of price changes with respect to
the contract during the day, and which are traded on or subject to the rules of
a qualified board of trade or exchange. "Equity options" are any options to buy
or sell stock, or any option, the value of which is determined directly or
indirectly by reference to any stock (or group of stocks) or stock index; equity
options do not include any options with respect to any group of stocks or stock
index if there is in effect a designation by the Commodity Futures Trading
Commission of a contract market for a contract based on such group of stocks or
index, or the Secretary of the Treasury determines that such option meets the
requirements of law for such a designation. "Nonequity options" are any listed
options which are not equity options.
Regulated futures contracts and nonequity options, defined as "Section
1256 Contracts" under the Act, are subject to a marked-to-market rule for
federal income tax purposes. Under this rule, each such contract and option held
by the Trust at the end of each fiscal year will be treated as sold for fair
market value on the last business day of such fiscal year. As described below,
the character of gain or loss resulting from the sale, disposition, closing out,
expiration or other termination of such contracts and options will be treated as
long-term capital gain or loss to the extent of 60% thereof, and as short-term
capital gain or loss to the extent of 40% thereof ("60/40 gain or loss"). Equity
options, on the other hand, are not subject to the marked-to-market rule. The
character of gain or loss resulting from the sale, disposition, closing out,
expiration or other termination of such equity options is not subject to the
60/40 gain or loss rule.
The Trust will not realize gain or loss on the receipt or payment of a
premium. If a call option written by the Trust expires without being exercised,
the premium received will be recognized by the Trust as a gain (60/40 for a
nonequity call option or short-term for an equity call option.) If a put option
purchased by the Trust expires without being exercised, the premium paid will be
recognized by the Trust as a loss (60/40 for a nonequity put option or short
long-term for an equity put option, depending on the holding period of the put);
if, however, the Trust acquired the put option on the same day it acquired the
property identified as intended to be used in exercising such put, the premium
paid will be added to the basis of the underlying securities. If a nonequity or
equity call option written by the Trust is exercised (or a nonequity put option
purchased by the Trust is sold), the Trust will recognize short or long-term
capital gain or loss depending on the holding period of the underlying
securities. If a regulated futures contract, nonequity call option written by
the Trust or nonequity put option purchased by the Trust is closed (i.e., the
Trust's obligations are terminated other than through exercise or lapse), the
Trust will recognize 60/40 gain or loss. If an equity call option written by the
Trust is closed, the Trust will recognize short-term capital gain or loss; if an
equity put option purchased by the Trust is closed, the Trust will recognize
long or short-term capital gain or loss, depending on the holding period of the
put option.
Section 1092 of the Internal Revenue Code, which applies to certain
straddles, may affect the taxation of the Trust's transactions in options on
portfolio securities and in financial futures (and related options). As a result
of rules under that section, the Trust may be required to postpone recognition
of losses incurred in certain closing purchase transactions under the year in
which the other leg of the straddle is closed. The Treasury Department has
issued temporary regulations on the holding period of straddles held by
regulated investment companies.
The Internal Revenue Service has ruled publicly that an exchange-traded
call option on a particular security is a security for the purpose of the 50% of
assets diversification test and that its issuer is the issuer of the underlying
security, not the writer of the option, for purposes of diversification
requirements. In contrast, the Internal Revenue Service has ruled privately that
the issuer of a broad-based financial futures option such as a stock index
futures contract (or an option on such a contract) is the writer of the
instrument and not the issuers of the group of stocks or securities which
comprise the index. Accordingly, the Trust much treat such a futures contract
(or option on it) as issued by a single issuer for purposes of meeting the
diversification tests.
In other private rulings, the Internal Revenue Service has addressed other
tax issues arising from investments by regulated investment companies in options
and future contracts. In particular, the Internal Revenue Service has stated in
private rulings that the gains recognized as a result of the deemed sale or
certain options under the marked-to-market rule (which are treated as 60/40
gain) will not be treated as gains from the sale or exchange of securities held
for less than three months, regardless of the actual holding period to year end.
The Internal Revenue Service also has stated in private rulings that gains or
losses with respect to index futures contracts on securities (and related
options) are gains and losses from the sale or exchange of securities.
The legislative history of the Tax Reform Act of 1986 provides that income
realized in connection with writing covered and uncovered put and call options
is intended by Congress to be qualifying income for purposes of the 90% passive
income test. However, the requirement that less than 30% of the Trust's gross
income be derived from gains from the sale or other disposition of securities
held for less than three months will restrict the Trust in its ability to write
covered call options or securities that it has held less than three months, to
effect closing purchase transactions with respect to options that have been held
less than three months, and to effect closing purchase transactions with respect
43
<PAGE>
to options that have been written less than three months prior to such
transactions. Consequently, in order to avoid realizing a gain within the
three-month period, the Trust may be required to defer the closing out of an
option beyond the time when it might otherwise be advantageous to do so.
The Tax Reform Act of 1986 revised the rules concerning gains from sales
of assets held less than three months in the case of a "designated hedge". In
the case of a "designated hedge", recognized gains may be offset by unrecognized
declines in value of the other leg of the hedge during the period of the hedge
for purposes of determining whether gains from sales of securities held for less
than three months equal or exceed 30% of gross income. For example, if a fund
sells a one-month call at $95 on stock it owns which is worth $100 for $4, the
stock declines in value of $94 and the option is not exercised, the $4 of
recognized gain on lapse of the option is offset by the $6 decline in value of
the stock and there is no net gain for purposes of the three-month gains test.
The $4 is recognized under the usual rules for other purposes. The Conference
Committee Report on the 1986 Act established procedures for identification of a
"designated hedge" prior to issuance of regulations on the topic.
There are unanswered questions in this area. In particular, the Internal
Revenue Service has declined to determine whether any gain is derived from
securities held less than three months if a taxpayer buys a regulated futures
contract just prior to the end of its taxable year, has the contract
marked-to-market at year end, and then actually closes the contract within three
months of its initial purchase in the following taxable year. Furthermore, since
taxpayers other than the taxpayer requesting a particular private ruling are not
entitled to rely on it, the Trust intends to keep its activity in options at a
low volume until the Service rules publicly, or the Treasury Department issues
final regulations, on open issues.
If, in any taxable year, the Trust fails to qualify as a regulated
investment company, the Trust would be taxed in the same manner as an ordinary
corporation and the distributions to its shareholders would not be deductible by
the Trust in computing its taxable income. In addition, in the event of such
failure to qualify, the Trust's distributions, to the extent derived from the
Trust's current or accumulated earnings and profits, would be taxable to its
shareholders as ordinary income dividends, even if those dividends might
otherwise have been considered distributions of capital gains.
PORTFOLIO SECURITY TRANSACTIONS
Decisions to buy and sell portfolio securities for the Trust are made
pursuant to recommendations by the Investment Adviser. The Trust, through the
Investment Adviser, seeks to execute portfolio security transactions on the most
favorable terms and in the most effective manner possible. In seeking such
execution, the Investment Adviser will use its best judgment in evaluating the
terms of a transaction and will give consideration to various relevant factors,
including without limitation the size and type of the transaction, the nature
and character of the markets for the security, the confidentiality, speed and
certainty of effective execution required for the transaction, the reputation,
experience and financial condition of the broker-dealer and the quality of
services rendered by the broker-dealer in other transactions, and the
reasonableness of the brokerage commission, if any.
It is expected that on frequent occasions, there will be many
broker-dealer firms which will meet the foregoing criteria for a particular
transaction. In selecting among such firms, the Trust, through the Investment
Adviser, may give consideration to those firms which have sold, or are selling,
shares of the Trust. In addition, the Investment Adviser may allocate Trust
brokerage business on the basis of brokerage and research services and other
information provided by broker-dealer firms, which may involve the payment of
reasonable brokerage commissions in excess of those chargeable by other
broker-dealer firms for effecting the same transactions. Such "brokerage and
research services" may be used for other of the Investment Adviser's advisory
accounts and all such services may not be used by the Investment Adviser in
managing the Trust. The term "brokerage and research services" includes advice
as to the value of the securities; the advisability of investing in, purchasing
or selling securities; the availability of securities, or purchasers or sellers
of securities; furnishing analyses and reports concerning issuers, industries,
securities, economic factors and trends; portfolio strategy and the performance
of accounts; and effecting securities transactions and performing functions
incidental thereto (such as clearance and settlement).
The policy referred to above of considering sales of shares of the Trust
as one of the factors in the selection of broker-dealer firms to execute
portfolio transactions, subject to the requirement of seeking best execution, is
specifically permitted by a rule of the National Association of Securities
Dealers, Inc. The rule also provides, however, that no member firm shall favor
or disfavor the distribution of shares of any particular fund or group of funds
on the basis of brokerage commissions received or expected by such firm from any
source.
The Trust and one or more of the other investment companies or accounts
for which the Investment Adviser or its affiliates render investment advisory
services on occasion may simultaneously be engaged in the purchase or sale of
the same security. In such event the transactions in such security normally will
be averaged as to price and allocated as to amount among the several clients or
accounts in a manner deemed equitable to all. It is recognized that in some
cases this system could have a detrimental effect on the price or volume of the
security as far as the Trust is concerned. In other cases, however, it is
believed that the ability to participate in volume transactions will produce
better executions for the Trust.
To the extent consistent with the policy of seeking best price and
execution, a portion of the Trust's portfolio transactions may be executed
through the Distributor, Meeschaert & Co., Inc., which is an affiliate of the
Investment Adviser. In the event that this occurs, it will be on the basis of
what management believes to be current information as to rates which are
generally competitive with the rates available from other responsible brokers
and the lowest rates, if any, currently offered by the Distributor.
44
<PAGE>
During 1997, 1996, and 1995, commissions paid to broker-dealers by the
Trust were $13,640, $16,689, and $7,779, respectively. During 1997, 1996, and
1995, brokerage commissions of $10,190, $3,091, and $1,506, respectively, were
paid by the Trust to Meeschaert & Co., Inc. For the year ended December 31,
1997, the percentage of total commissions paid to Meeschaert & Co., Inc. was
74.71%. During 1997 the Trust's purchases and sales of securities, exclusive of
United States government securities and short-term notes, amounted to $641,198
and $2,471,532, respectively. 62.289% 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 1997 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.
The portfolio turnover rates for 1997, 1996, and 1995 were 21%, 37%, and 12%,
respectively.
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, 200 Clarendon Street, 16th Floor, Boston, Massachusetts 02116,
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, 579
Pleasant Street, Suite 4, Paxton, Massachusetts 01612, serves as transfer agent
and dividend-paying agent for the Trust.
Independent Public Accountants
For the fiscal year ended December 31, 1997, the Trust employed Livingston
& Haynes, P.C., 40 Grove Strret, Wellesley, Massachusetts 02181, to certify its
financial statements and to prepare its federal and state income tax returns.
Registration Statement
This Statement of Additional Information does not contain all the
information set forth in the Registration Statement and the exhibits and
schedules relating thereto, which the Trust has filed with, and which are
available at the Securities and Exchange Commission, Washington, D.C., under the
Securities Act of 1933, as amended, and the Investment Company Act of 1940, as
amended, to which reference is hereby made.
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, 579 Pleasant
Street, Suite 4, Paxton, Massachusetts 01612, or by calling Anchor Investment
Management Corporation at (508) 831-1171.
45
<PAGE>
- ------------------------------------------------------------------
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 years
ended December 31, 1997
Included in Part B:
Report of Independent Public Accountants*
Statement of Assets and Liabilities December 31,1997*
Statement of Operations for the year ended
December 31, 1997*
Statement of Changes in Net Assets for the years
ended December 31, 1997 and December 31, 1996*
Schedule of Investments, December 31, 1997*
Notes to Financial Statements*
* Included in Registrant's annual report to
shareholders for December 31, 1997 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 31,1997.
Exhibit 17. Power of Attorney, dated April 19, 1998 and Certified Resolution.
Exhibit 27. Financial Data Schedule.
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, 1998, 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 59.51%
Wall Street Station
New York, NY 10268
Merrill Lynch 250 Vessey Street 39.53%
World Financial Center
North Tower
New York, NY 10281
Item 26. Number of Holders of Securities.
The number of holders of record of securities of the Registrant as of
March 31, 1997 is as follows:
Title of Class: Number of Holders
of Record
Common Shares 8
Class A Shares 0
46
<PAGE>
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 400, Newton Centre, Massachusetts 02159; the address of the
investment adviser and the transfer agent and dividend paying agent is
579 Pleasant St., Ste 4,Paxton, Massachusetts 01612; and the address of
the custodian is Financial Product Services, 200 Clarendon St.,
Boston, Massachusetts 02116.
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.
47
<PAGE>
- ------------------------------------------------------------------
SIGNATURES
- ------------------------------------------------------------------
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all the
requirements for effectiveness of this Registration Statement pursuant to Rule
485(b) and has duly caused this Amendment to the Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Paxton and the Commonwealth of Massachusetts on the 19th day of April, 1998.
ANCHOR STRATEGIC ASSETS TRUST
By: DAVID Y. WILLIAMS
David Y. Williams, President
Pursuant to the Securities Act of 1933, this Amendment to this
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated.
Signature Title Date
DAVID W.C. PUTNAM Chairman and Trustee April 19, 1998
David W. C. Putnam
J. STEPHEN PUTNAM Treasurer (Principle April 19, 1998
J. Stephen Putnam Financial Officer)
MAURICE A. DONAHUE Trustee April 19, 1998
Maurice A. Donahue
SPENCER H. LEMENAGER Secretary and Trustee April 19, 1998
Spencer H. LeMenager
DAVID Y. WILLIAMS President and Trustee April 19, 1998
David Y. Williams
*By: PETER K. BLUME April 19, 1998
-----------------
Peter K. Blume
Attorney-in-Fact
48
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 /x/
Pre-Effective Amendment No. / /
Post-Effective Amendment No. 6 /x/
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT
OF 1940 /x/
Amendment No. 7 /x/
----------------------------------------
ANCHOR STRATEGIC ASSETS TRUST
----------------------------------------
EXHIBITS
49
<PAGE>
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) p.51 Consent of Independent Public Accountants.
(12) p.52 Trust's Annual Report to Shareholders,
December 31, 1996.
(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) p.65 Power of Attorney, dated April 19, 1998 and
Certified Resolutions.
(27) p.67 Financial Data Schedule.
50
Livingston & Haynes, P.C.
Certified Public Accountants
40 Grove Street
Wellesley, MA 02181
(617) 237-3339
Member AICPA Division for CPA Firms
Private Companies Practice Section
SEC Practice Section
INDEPENDENT AUDITORS' CONSENT
We consent to the use in this Registration Statement of Anchor Strategic
Assets Trust on the amended Form N-1A our report dated January 14, 1998,
appearing in the prospectus, which is part of such Registration Statement, and
to the reference to us under the captions, "Condensed Financial Information and
Selected Per Share Data and Ratios".
LIVINGSTON & HAYNES
Wellesley, Massachusetts
April 26, 1998
51
- ------------------------------------------------------------------
ANCHOR
STRATEGIC
ASSETS
TRUST
ANNUAL REPORT
DECEMBER 31, 1997
52
<PAGE>
- ------------------------------------------------------------------
ANCHOR STRATEGIC ASSETS TRUST
- ------------------------------------------------------------------
Comparison of the Change in Value of a $10,000 Investment in the
Anchor Strategic Assets Trust and the Barron's Gold Mining Index
[GRAPHIC OMITTED]
<PAGE>
- ------------------------------------------------------------------
ANCHOR STRATEGIC ASSETS TRUST
- ------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1997
Assets:
Investments at quoted market value (cost $5,313,040 ;
see Schedule of Investments, Notes 1, 2, & 5)....... $4,662,417
Cash ................................................ 56,579
Dividends and interest receivable.................... 531
-----------
Total assets..................................... 4,719,527
-----------
Liabilities:
Payable for capital shares redeemed.................. 6,574
Accrued expenses and other liabilities (Note 3 )..... 15,635
-----------
Total liabilities................................ 22,209
-----------
Net Assets:
Capital stock (unlimited shares authorized at $1.00 par
value, amount paid in on 1,203,322 shares outstanding)
(Note 1) ........................................... 6,441,529
Accumulated undistributed net investment income
(Note 1)............................................ (320,338)
Accumulated realized loss from security transactions,
net (Note 1)........................................ (773,250)
Net unrealized depreciation in value of investments
(Note 2)............................................. (650,623)
-----------
Net assets (equivalent to $3.90 per share, based on
1,203,322 capital shares outstanding)........... $4,697,318
===========
<PAGE>
==================================================================
ANCHOR STRATEGIC ASSETS TRUST
==================================================================
STATEMENT OF OPERATIONS
DECEMBER 31, 1997
Income:
Dividends........................................... $ 9,759
Interest............................................ 98,133
-----------
Total income..................................... 107,892
-----------
Expenses:
Management fees, net (Note 3)....................... 86,010
Pricing and bookkeeping fees (Note 4)............... 18,500
Legal fees.......................................... 8,391
Audit and accounting fees........................... 6,000
Custodian fees...................................... 5,139
Transfer fees (Note 4).............................. 3,000
Trustees' fees and expenses......................... 1,000
Other expenses...................................... 6,431
-----------
Total expenses................................... 134,471
Fees paid indirectly (Note 4)............... (3,639)
-----------
Net expenses................................ 130,832
-----------
Net investment loss.................................. (22,940)
-----------
Realized and unrealized loss on investments:
Realized loss on investments-net................... (486,770)
Decrease in net unrealized appreciation in
investments....................................... (731,850)
-----------
Net loss on investments.......................... (1,218,620)
===========
Net decrease in net assets resulting from operations.. $(1,241,560)
===========
<PAGE>
==================================================================
ANCHOR STRATEGIC ASSETS TRUST
==================================================================
STATEMENTS OF CHANGES IN NET ASSETS
Year Ended Year Ended
December 31, December 31,
1997 1996
------------------------------
From operations:
Net investment loss.................... $ (22,940) $ (113,849)
Realized loss on investments, net...... (486,770) (72,237)
(Decrease) increase in net
unrealized appreciation
in investments......................... (731,850) 472,229
------------ -----------
Net (decrease) increase in net assets
resulting from operations.......... (1,241,560) 286,143
------------ -----------
Distributions to shareholders:
From net investment income............. -- --
From net realized gain on investments.. -- --
------------ -----------
Total distributions to shareholders.. -- --
------------ -----------
From capital share transactions:
Number of Shares
1997 1996
------- ---------
Proceeds from sale of
shares............... 218,740 774,469 950,843 3,891,921
Shares issued to
shareholders in
distributions
reinvested.......... -- -- -- --
Cost of shares
redeemed........... (699,780) (274,859) (3,194,210) (1,409,327)
---------- -------- ----------- -------------
(Decrease) increase
in net assets resulting
from capital
share transactions...(481,040) 499,610 (2,243,367) 2,482,594
========= ========= ------------ -----------
Net (decrease) increase in net assets.... (3,484,927) 2,768,737
Net assets:
Beginning of period.................... 8,182,245 5,413,508
============ ===========
End of period (including undistributed
net investment income of ($320,338)
and ($280,789), respectively).......... $ 4,697,318 $ 8,182,245
============ ===========
<PAGE>
==================================================================
ANCHOR STRATEGIC ASSETS TRUST
==================================================================
SELECTED PER SHARE DATA AND RATIOS
(for a share outstanding throughout each period)
Year Ended December 31,
1997 1996 1995 1994 1993
-------------------------------------------------
Investment income..$ 0.40 $0.01 $0.03 $(3.40) $ 0.19
Expenses, net...... 0.50 0.03 0.06 (7.86) 2.19
-------------------------------------------------
Net investment
income (loss)...... (0.10) (0.02) (0.03) 4.46 (2.00)
Net realized and
unrealized
gain (loss) on
investments....... (0.86) 0.31 0.12 (5.41) --
Distributions to
shareholders:
From net
investment
income........... -- -- -- -- --
From net
realized gain
on investments.. -- -- -- -- --
-------------------------------------------------
Net increase
(decrease)in
net asset value... (0.96) 0.29 0.09 (0.95) (2.00)
Net asset value:
Beginning of
period............ 4.86 4.57 4.48 5.43 7.43
------------------------------------------------
End of period..... $3.90 $4.86 $4.57 $4.48 $5.43
=================================================
Ratio of expenses
to average
net assets........ 2.35% 1.98% 1.99% 2.19% 30.85%
Ratio of net
investment loss
loss to average
net assets........ (0.40)% (1.49)% (1.10)% (1.24)% (28.14)%
Portfolio turnover. 0.21 0.37 0.12 0.42 --
Average commission
rate paid......... 0.0386 0.0568 0.0433 0.0345 --
Number of shares
outstanding at end
of period.......... 1,203,322 1,684,362 1,184,752 1,044,287 12,000
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
assets............ -- -- -- -- 32.35%
Ratio of net
investment loss to
average net assets. -- -- -- -- (29.64)%
<PAGE>
==================================================================
ANCHOR STRATEGIC ASSETS TRUST
==================================================================
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1997
Value
Quantity (Note 1)
COMMON STOCKS -- 32.60%
Gold/Silver Mining Stocks
40,000 Aquiline Resources Corporation................. $ 4,000
10,000 Barrick Gold Corporation....................... 185,630
25,000 Cambior Incorporated........................... 148,250
30,000 Euro-Nevada Mining Corporation................. 401,700
18,000 Franco-Nevada Mining Corporation............... 349,740
33,500 Guyanor Resources, Class B..................... 32,830
65,000 Miramar Mining Corporation..................... 124,800
8,000 Newmont Mining Corporation..................... 233,000
47,300 Northern Orion Exploration Limited............. 51,084
----------
Total common stocks (cost $1,855,755).......... 1,531,034
----------
FOREIGN TIME DEPOSITS -- 47.36%.....
13,337,78French Franc maturing 01/05/98
at 3.25% (cost $2,231,412)..................... 2,224,743
----------
PRECIOUS METALS -- 19.30%
Gold Bullion
3,139 Ounces gold bullion (cost $1,225,873) ......... 906,640
----------
Total investments (cost $5,313,040)............ 4,662,417
----------
CASH & OTHER ASSETS, LESS LIABILITIES -- 0.74%.......... 34,901
==========
Total Net Assets...............................$4,697,318
==========
<PAGE>
==================================================================
ANCHOR STRATEGIC ASSETS TRUST
==================================================================
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
1. Significant accounting policies:
Anchor Strategic Assets Trust, a Massachusetts business trust (the "Trust"),
is registered under the Investment Company Act of 1940, as amended, as a
diversified, open-end investment management company. The following is a
summary of significant accounting policies followed by the Trust which are in
conformity with those generally accepted in the investment company industry.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
A. Investment securities--
Security transactions are recorded
on the date the investments are purchased or sold. Each day, at noon,
securities traded on national security exchanges are valued at the last sale
price on the primary exchange on which they are listed, or if there has been
no sale by noon, at the current bid price. Other securities for which market
quotations are readily available are valued at the last known sales price,
or, if unavailable, the known current bid price which most nearly represents
current market value. Options are valued in the same manner. Foreign
currencies and foreign denominated securities are translated at current
market exchange rates as of noon.The gold bullion is valued each day at noon
based on the New York spot gold price. Temporary cash investments are stated
at cost, which approximates market value. Dividend income is recorded on the
ex-dividend date and interest income is recorded on the accrual basis. Gains
and losses from sales of investments are calculated using the "identified
cost" method for both financial reporting and federal income tax purposes.
B. Income Taxes-- The Trust has elected to comply with the requirements of
the Internal Revenue Code applicable to regulated investment companies and
to distribute each year all of its taxable income to its shareholders. No
provision for federal income taxes is necessary since the Trust intends to
qualify for and elect the special tax treatment afforded a "regulated
investment company" under subchapter M of the Internal Revenue Code. Income
and capital gains distributions are determined in accordance with federal
tax regulations and may differ from those determined in accordance with
generally accepted accounting principles. To the extent these differences
are permanent, such amounts are reclassified within the capital accounts
based on their federal tax basis treatment; temporary differences do not
require such reclassification. During the current fiscal year, permanent
differences, primarily due to foreign currency losses offset by net
investment income, resulted in a net decrease in undistributed net
investment income and an increase in accumulated realized loss from security
transactions. This reclassification had no affect on net assets.
C. Capital Stock-- The Trust records the sales and redemptions
of its capital stock on trade date.
<PAGE>
==================================================================
ANCHOR STRATEGIC ASSETS TRUST
==================================================================
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
(Continued)
D. Foreign Currency-- Amounts denominated in or expected to settle in foreign
currencies are translated into United States dollars at rates reported by a
major Boston bank on the following basis:
A. Market value of investment securities, other assets and
liabilities at the 12:00 noon Eastern Time rate of exchange
at the balance sheet date.
B. Purchases and sales of investment securities, income and expenses at the
rate of exchange prevailing on the respective dates of such transactions (or
at an average rate if significant rate fluctuations have not occurred). The
Trust does not isolate that portion of the results of operations resulting
from changes in foreign exchange rates on investments from the fluctuations
arising from changes in market prices of securities held. Such fluctuations
are included with the net realized and unrealized gain or loss from
investments. Reported net realized foreign exchange gains or losses arise
from sales and maturities of short term securities, sales of foreign
currencies, currency gains or losses realized between the trade and
settlement dates on securities transactions, the difference between the
amounts of dividends, interest, and foreign withholding taxes recorded on
the Trust's books, and the United States dollar equivalent of the amounts
actually received or paid. Net unrealized foreign exchange gains and losses
arise from changes in the value of assets and liabilities other than
investments in securities at fiscal year end, resulting from changes in the
exchange rate.
2. Tax basis of investments:
At December 31, 1997, the total cost of investments for federal income tax
purposes was identical to the total cost on a financial reporting basis.
Aggregate gross unrealized appreciation in investments in which there was an
excess of market value over tax cost was $244,637. Aggregate gross unrealized
depreciation in investments in which there was an excess of tax cost over
market value was $895,260. Net unrealized depreciation in investments at
December 31, 1997 was $650,623.
3. Investment advisory service agreements:
The investment advisory contract with Anchor Investment Management
Corporation (the "investment adviser") provides that the Trust will pay the
adviser a fee for investment advice based on a rate of 1 1/2% per annum of
average daily net assets. At December 31, 1997, investment advisory fees of
$6,289 were due and were included in "Accrued expenses and other liabilities"
in the accompanying Statement of Assets and Liabilities. David Y. Williams, a
Trustee of the Trust, is President and a Director of the Investment Adviser.
<PAGE>
==================================================================
ANCHOR STRATEGIC ASSETS TRUST
==================================================================
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
(Continued)
4. Certain transactions:
Anchor Investment Management Corporation provides transfer agent services for
the Trust. Fees earned by Anchor Investment Management Corporation for
transfer agent services for the year ended December 31, 1997 were $3,000.
Certain officers and trustees of the Trust are directors and/or officers of
the investment adviser and distributor. Meeschaert & Co., Inc., the Trust's
distributor, received $10,190 in brokerage commissions during the year ended
December 31, 1997. Fees earned by Anchor Investment Management Corporation
for expenses related to daily pricing of the Trust shares and for bookkeeping
services for the year ended December 31, 1997 were $18,500. For the year
ended December 31, 1997 the total expense increase, as shown in the statement
of operations, is $3,639 as a result of an expense offset arrangement with
its custodian, Investors Bank & Trust Company. The Trust could have invested
the assets used by the custodian in an income producing asset if it had not
agreed to a reduction in fees under the expense offset arrangement. In
addition, the expense ratios in the Selected Per Share Data and Ratios are
based on the total expenses, which include amounts that would have been paid
in lieu of an expense offset arrangement
5. Purchases and sales:
Aggregate cost of purchases and the proceeds from sales and maturities on
investments for the year ended December 31, 1997 were:
Cost of securities acquired:
U.S. Government and investments backed by
such securities........................... $ 4,333,699
Other investments.......................... 89,117,258
=============
$ 93,450,957
=============
Proceeds from sales and maturities:
U.S. Government and investments backed by
such securities...........................$ 5,320,101
Other investments......................... 88,621,107
=============
$ 93,941,208
=============
<PAGE>
==================================================================
ANCHOR STRATEGIC ASSETS TRUST
==================================================================
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Trustees of Anchor Strategic Assets Trust:
We have audited the accompanying statement of assets and liabilities of Anchor
Strategic Assets Trust (a Massachusetts business trust), including the schedule
of investments, as of December 31, 1997, the related statement of operations for
the year then ended, the statements of changes in net assets for each of the two
years in the period then ended, and the selected per share data and ratios for
each of the five years in the period then ended. These financial statements and
per share data and ratios are the responsibility of the Trust's management. Our
responsibility is to express an opinion on these financial statements and per
share data and ratios based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and per share data
and ratios are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1997 by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and selected per share data and ratios
referred to above present fairly, in all material respects, the financial
position of Anchor Strategic Assets Trust as of December 31, 1997, the results
of its operations for the year then ended, the changes in its net assets for
each of the two years in the period then ended, and the selected per share data
and ratios for each of the five years in the period then ended, in conformity
with generally accepted accounting principles.
LIVINGSTON & HAYNES, P.C.
Wellesley, Massachusetts,
January 14, 1998.
<PAGE>
==================================================================
ANCHOR STRATEGIC ASSETS TRUST
==================================================================
OFFICERS AND TRUSTEES
DAVID W.C. PUTNAM Chairman
Chairman, Board of Directors, F.L. Putnam and Trustee
Investment Management Corporation
President and Director, F.L. Putnam
Securities Company Incorporated
J. STEPHEN PUTNAM Vice President and
President, Robert Thomas Securities Treasurer
SPENCER H. LE MENAGER Secretary
President, Equity Inc. and Trustee
MAURICE A. DONAHUE Trustee
Director and Professor, Institute for
Governmental Services and
Walsh-Saltonstall Professor of Practical
Politics, University of Massachusetts
DAVID Y. WILLIAMS President
President and Director, Meeschaert & Co., and Trustee
Inc., President and Director, Anchor
Investment Management Corporation
<PAGE>
==================================================================
ANCHOR STRATEGIC ASSETS TRUST
==================================================================
INVESTMENT ADVISER AND TRANSFER AGENT
Anchor Investment Management Corporation
579 Pleasant St., Suite 4, Paxton, Massachusetts 01612
(508) 831-1171
DISTRIBUTOR
Meeschaert & Co., Inc.
579 Pleasant St., Suite 4, Paxton, Massachusetts 01612
CUSTODIAN
Investors Bank & Trust Company
89 South Street, Boston, Massachusetts 02111
INDEPENDENT PUBLIC ACCOUNTANT
Livingston & Haynes, P.C.
40 Grove St., Wellesley, Massachusetts 02181
LEGAL COUNSEL
Yukevich, Blume, Marchetti & Zangrilli
One Gateway Center, Pittsburgh, Pennsylvania 15222
This report is not authorized for distribution to prospective investors in the
Trust unless preceded or accompanied by an effective prospectus which includes
information concerning the Trust's record or other pertinent information.
POWER OF ATTORNEY
We, the undersigned officers and Trustees of Anchor Stratecic 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
David W. C. Putnam Chairman and Trustee April 19, 1998
J. STEPHEN PUTNAM
J. Stephen Putnam Treasurer (Principle April 19, 1998
Financial Officer)
SPENCER H. LEMENAGER
Spencer H. LeMenager Secretary and Trustee April 19, 1998
MAURICE A.DONAHUE
Maurice A. Donahue Trustee April 19, 1998
DAVID Y. WILLIAMS
David Y. Williams President and Trustee April 19, 1998
* 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.
65
<PAGE>
CERTIFIED RESOLUTIONS
The undersigned, Christopher Y. Williams, Assistant Secretary of
Anchor Strategic Assets, DOES HEREBY CERTIFY that the following resolutions
were duly adopted by the Trustees of the Trust, and that such resolutions
have not been amended, modified or rescinded and remain in full force and
effect on the date hereof.
RESOLVED: That Peter K. Blume, Esquire, attorney for the
Trust, be and hereby is named and constituted agent
for service with respect to the aforesaid
Registration Statement to receive notices and
communication with respect to the 1993 Act and the
1940 Act, with all power consequent upon such
designation of and under the rules and regulations
of the Commission.
RESOLVED: That the signature of any officer of the Trust required
by law to be affixed to the Registration Statement, or
to any amendment thereof, may be affixed by said officer
personally or by an attorney-in-fact duly constituted in
writing by said officer to sign his name thereto.
IN WITNESS WHEREOF, I have executed this Certificate as of April 19, 1998.
CHRISTOPHER Y. WILLIAMS
Christopher Y. Williams
66
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
ANCHOR STRATEGIC ASSETS TRUST DECEMBER 31, 1997 ANNUAL REPORT AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO THE ANNUAL REPORT.
Item Item Description
Number
1997
3(a) Net asset value:
Beginning of year $4.86
3(a) Net investment income
(loss)........... (0.10)
3(a) Net realized and
unrealized gain
(loss) on
investments...... 0.31
3(a) Distributions to
shareholders:
3(a) From net investment
income (loss).... --
3(a) From net realized
gains on
investments...... --
3(a) Net asset value:
End of year.... $3.90
=====
3(a) Ratio of expenses to
average net
assets........... 2.35%
67
</TABLE>
