As filed with the Securities and Exchange Commission on July 21, 1999
Registration No. 333-_________
811-8706
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
[X] Pre-Effective Amendment No. 1 [__] Post-Effective Amendment No.
---
ANCHOR RESOURCE AND COMMODITY TRUST
(Exact Name of Registrant as Specified in Charter)
579 PLEASANT STREET, SUITE 4, PAXTON, MASSACHUSETTS 01612
(Address of Principal Executive Offices)
(508) 831-1171
(Registrant's Telephone Number, including Area Code)
PETER K. BLUME, ESQUIRE
THORP REED & ARMSTRONG
ONE RIVERFRONT CENTER
20 STANWIX STREET
PITTSBURGH, PA 15222
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering: As soon as practicable after
the effective date of this
Registration Statement.
No filing fee is required under the Securities Act of 1933, as amended, because
an indefinite number of shares of beneficial interest have previously been
registered pursuant to Rule 24f-2 under the Investment Company Act of 1940, as
amended.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
ANCHOR RESOURCE AND COMMODITY TRUST
CROSS REFERENCE SHEET
Rule 481(a) Cross-Reference
to Prospectus Caption
Part A: Information Required in
Prospectus
1. Beginning of Cover Page; Cross Reference
Registration Statement Sheet
and Outside Front Cover
Page of Prospectus
2. Beginning and Outside Table of Contents
Back Cover Page of
Prospectus
3. Fee Table, Synopsis Summary; Principal Risk
Information and Risk Factors; Comparison of
Factors Investment Objectives and
Policies
4. Information about the Summary; Reasons for the
Transaction Reorganization; Information
About the Reorganization;
Comparative Information on
Shareholder Rights; Exhibit
A (Plan of Reorganization)
5. Information about the Cover Page; Summary;
Registrant Principal Risk Factors;
Comparison of Investment Objectives and
Policies; Information About the
Reorganization; Comparative Information
on Distribution Arrangements;
Comparative Information on Shareholder
Services; Comparative Information on
Shareholder Rights; Management;
Additional Information About the Funds;
Current Prospectus of Registrant dated
May 1, 1998
6. Information about the Summary; Comparison of
Company Being Acquired Investment Objectives and
Policies; Information About
the Reorganization;
Comparative Information on
Distribution Arrangements;
Comparative Information on
Shareholder Services;
Comparative Information on
Shareholder Rights;
Additional Information
About the Funds; Prospectus
of Registrant dated May 1,
1999
<PAGE>
7. Voting Information Summary; Information About the
Reorganization; Comparative
Information on Shareholder Rights;
Voting Information
8. Interest of Certain Not Applicable
Persons and Experts
9. Additional Information Not Applicable
Required for Reoffering
By Persons Deemed to be
Underwriters
Part B: Information Required in Statement of Additional Information
Statement of Additional Heading
Information
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. Additional Statement of Additional
Information about the Information dated May 1,
Registrant 1999
Prospectus dated May 1, 1999
13. Additional
Information about the Statement of Additional
Company Being Acquired Information dated May 1,
1999
14. Financial Statements
Annual Report of the
Acquired Fund
Annual Report of the
Acquiring Fund
Information Incorporated by
Reference
15. Information
Incorporated by
Reference
Part C
Information required to be included in Part C is set forth under the appropriate
item, so numbered, in Part C of this Registration Statement.
<PAGE>
ANCHOR RESOURCE AND COMMODITY TRUST
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement contains the following pages and documents:
Front Cover
Contents Page
Letter to Shareholders of Anchor Strategic Assets Trust
Letter to Shareholders of Anchor Resource and Commodity Trust
Notice of Special Meeting of Shareholders of Anchor Strategic Assets Trust
Notice of Special Meeting of Shareholders of Anchor Resource and Commodity
Trust
Part A - Prospectus/Joint Proxy Statement Concerning the Acquisition of Assets
of Anchor Strategic Assets Trust by Anchor Resource and Commodity Trust and the
Elimination of a Fundamental Investment Restriction by Anchor Resource and
Commodity Trust
Part B - Statement of Additional Information
Part C - Other Information
Signature Page
Exhibits
<PAGE>
ANCHOR STRATEGIC ASSETS TRUST
ANCHOR RESOURCE AND COMMODITY TRUST
QUESTIONS AND ANSWERS
Both Anchor Strategic Assets Trust and Anchor Resource and Commodity Trust will
hold a special meeting of their respective shareholders on August 4, 1999. It is
important for you to vote on the issues described in this Prospectus/Joint Proxy
Statement. We recommend that you read the Prospectus/Joint Proxy Statement in
its entirety; the explanations it includes will help you decide how to vote.
Following is an introduction to the proposal and the process.
Q. WHY AM I RECEIVING THIS MATERIAL AND WHAT IS THE ISSUE I AM BEING ASKED
TO VOTE ON?
A. Mutual funds are required to obtain shareholders' votes for certain types of
changes, like the ones included in this Prospectus/Joint Proxy Statement. You
have a right to vote on this change.
In the case of shareholders of Anchor Strategic Assets Trust, you are being
asked to approve a tax-free reorganization of Anchor Strategic Assets Trust into
Anchor Resource and Commodity Trust. If you are a shareholder of Anchor Resource
and Commodity Trust, you are being asked to approve the elimination of a
restriction on the Trust's ability to invest in commodities and commodity
contracts which comprise certain of the investments of Anchor Strategic Assets
Trust. The approval of each such proposal is conditioned upon approval of the
often proposal.
Q. WHY IS THIS TRANSACTION BEING PROPOSED?
A. During the last few months of 1998, Anchor Strategic Assets Trust's asset
base was decreased substantially by the redemption of over 20% of the Trust's
total assets by its major shareholder, Societe d'Etudes et de Gestion
Financieres, Meeschaert, S.A. The Board of Trustees of Anchor Strategic Assets
Trust believes that, in the current competitive environment, Anchor Strategic
Assets Trust is too small to manage effectively in a cost-efficient manner,
which may affect its performance. Although Anchor Resource and Commodity Trust
has a smaller asset base then Anchor Strategic Assets Trust, the Trustees of
both Trusts believe that the broader investment strategies and techniques of
Anchor Resource and Commodity Trust are more appropriate for achieving the
investment objectives of Anchor Strategic Assets Trust shareholders.
Q. WHAT WILL HAPPEN TO MY SHARES?
A. Anchor Strategic Assets Trust shareholders will receive shares of Anchor
Resource and Commodity Trust with a total net asset value equal to the total net
asset value of the shares that you exchanged. There are no sales charges in
connection with the transaction.
Q. WHAT ARE THE TAX EFFECTS OF THE TRANSACTION?
A. It is intended that neither Anchor Strategic Assets Trust nor Anchor Resource
and Commodity Trust nor any of their shareholders will have to pay any federal
income tax as a result of the transaction. If a shareholder chooses to redeem
shares from Anchor Strategic Assets Trust before the reorganization, it will be
a taxable transaction.
<PAGE>
Q. HOW DO ANCHOR RESOURCE AND COMMODITY TRUST AND ANCHOR STRATEGIC ASSETS
TRUST COMPARE?
A. Anchor Strategic Assets Trust and Anchor Resource and Commodity Trust have
similar investment objectives and investment strategies, and the success of each
Fund's investment program depends to a high degree on the Investment Adviser's
ability to anticipate the onset and termination of inflationary and deflationary
cycles. The primary investment objective of both Anchor Resource and Commodity
Trust and Anchor Strategic Assets Trust is long-term capital appreciation and
preservation of the purchasing power of shareholders' capital. The secondary
investment objective of both Anchor Resource and Commodity Trust and Anchor
Strategic Assets Trust is to seek to generate current income consistent with the
preservation of shareholders' purchasing power. Under normal circumstances, when
the Investment Adviser expects an inflationary cycle, Anchor Resource and
Commodity Trust pursues its investment objectives by investing at least 65% of
its total assets in equity securities of domestic and foreign companies having
substantial natural resource assets or that engage in natural resource or
energy-related activities, or that provide equipment or services primarily
devoted to the natural resource or energy-related activities of such companies.
Anchor Strategic Assets Trust pursues its investment objective during such
normal inflationary periods by investing at least 65% of its total assets in
precious metals and in domestic and foreign companies primarily engaged in
business related to precious metals, consisting of gold bullion, gold
certificates, and silver bullion, and other precious metals such as platinum and
palladium. Accordingly, the Funds differ in some respects with respect to the
types of securities in which they may invest to achieve their investment
objectives. Unlike Anchor Resource and Commodity Trust, Anchor Strategic Assets
Trust invests in other investment companies, options on securities, securities
indices and currencies, and transactions in precious metals and financial
futures contracts and related options. Both Funds utilize the same investment
strategy and may make the same types of investments during a deflationary cycle,
and during periods where there is no discernable trend with respect to inflation
or deflation.
The following data is as of June 1, 1999.
================================================================================
Anchor Resource and Commodity Anchor Strategic Assets
Trust Trust
================================================================================
Assets $795,411 $2,695,025
- --------------------------------------------------------------------------------
Inception Date January 12, 1995 January 5, 1994
- --------------------------------------------------------------------------------
30-day SEC Yield (2.18%) (1.42%)
- --------------------------------------------------------------------------------
30-day N/A N/A
Distribution Yield
- --------------------------------------------------------------------------------
3-Month Total (6.61%) (2.85%)
Return
- --------------------------------------------------------------------------------
Year-to-Date Total (13.19%) (12.34%)
Return
- --------------------------------------------------------------------------------
1-Year Total Return (24.90%) (10.72%)
- --------------------------------------------------------------------------------
3-Year Total Return (27.24%) (32.83%)
- --------------------------------------------------------------------------------
Annualized Total (3.65%) (7.76%)
Return Since
Inception
================================================================================
Past performance is not indicative of future results. Investment return and
principal value will fluctuate so when shares are redeemed, they may be worth
more or less than their original cost.
The 30-day SEC yield is calculated by dividing the net investment income per
share for the thirty days ended on the date of the calculation by the maximum
offering price per share on that date. This figure is compounded and annualized.
<PAGE>
The 30-day distribution yield reflects actual distributions to shareholders. It
is calculated by dividing the monthly annualized dividend plus short-term
capital gains, if any, by the average 30-day offering price.
Q. HOW DO THE TRUSTEES RECOMMEND THAT I VOTE?
A. After careful consideration, the Board of Trustees of Anchor Strategic Assets
Trust unanimously recommends that its shareholders vote FOR the proposal
approving the reorganization of the Trust into Anchor Resource and Commodity
Trust. After similar consideration, the Board of Trustees of Anchor Resource and
Commodity Trust unanimously recommends that its shareholders vote for the
proposal eliminating the Trust's Investment restriction on commodities
investments.
Q. HOW DO I CONTACT YOU IF I HAVE ANY QUESTIONS?
A. You may call collect (508) 831-1171, Monday through Friday, 9:00 a.m.
to 5:00 p.m. (Eastern Time).
IMPORTANT INFORMATION ABOUT THE PROPOSALS IS SET FORTH
IN THE ACCOMPANYING PROSPECTUS/JOINT PROXY STATEMENT.
PLEASE READ IT CAREFULLY.
PLEASE VOTE.
YOUR VOTE IS IMPORTANT
NO MATTER HOW MANY SHARES YOU OWN.
PLEASE COMPLETE AND RETURN YOUR PROXY CARD TO
AVOID ADDITIONAL EXPENSES TO
THE TRUSTS.
<PAGE>
ANCHOR STRATEGIC ASSETS TRUST
579 PLEASANT STREET, SUITE 4
PAXTON, MASSACHUSETTS 01612
Dear Shareholder:
The Board of Trustees of Anchor Strategic Assets Trust cordially invites you to
attend a Special Meeting of Shareholders of Anchor Strategic Assets Trust to be
held at the offices of Anchor Investment Management on August 4, 1999 at 2 p.m.
local time.
At this important meeting you will be asked to consider and approve a proposed
Agreement and Plan of Reorganization between Anchor Strategic Assets Trust (the
"Acquired Fund") and Anchor Resource and Commodity Trust (the "Acquiring Fund").
If the proposal is approved by the shareholders of the Acquired Fund, the
Acquiring Fund would acquire substantially all of the assets and assume certain
liabilities of the Acquired Fund. As a result, you, as a shareholder of the
Acquired Fund, would receive, in exchange for your shares of the Acquired Fund,
shares of the Acquiring Fund with an aggregate value equivalent to the aggregate
net asset value of your Acquired Fund shares at the time of the transaction. The
Acquired Fund would then be liquidated. The transaction is conditioned upon the
receipt of an opinion of counsel to the effect that the transaction would be
free from federal income taxes to you and the Acquired Fund. The transaction
will occur only if approved by the holders of a majority of the Acquired Fund's
outstanding shares as of the record date.
The Board of Trustees of the Acquired Fund has determined that the proposed
reorganization should provide benefits to shareholders of the Acquired Fund
because of the enhanced economies of scale and more efficient operations which
are expected to result from combining funds with similar investment objectives
and policies, the same investment adviser and service providers, and the same
sales charge structure.
I thank you for your participation as a shareholder and urge you to please
exercise your right to vote by completing, dating and signing the enclosed proxy
card. A self-addressed, postage-paid envelope has been enclosed for your
convenience. We look forward to receiving your vote.
IT IS VERY IMPORTANT THAT YOUR VOTING INSTRUCTIONS BE RECEIVED NO LATER THAN
AUGUST 4, 1999.
Instructions for shares held of record in the name of a nominee, such as a
broker-dealer, may be subject to earlier cut-off dates established by such
intermediaries to facilitate a timely response.
Sincerely,
/s/ David W. C. Putnam
Chairman of the Board of
Trustees
[mail date] July 23, 1999
<PAGE>
ANCHOR RESOURE AND COMMODITY TRUST
579 PLEASANT STREET, SUITE 4
PAXTON, MASSACHUSETTS 01612
Dear Shareholder:
The Board of Trustees of Anchor Resource and Commodity Trust cordially invites
you to attend a Special Meeting of Shareholders of Anchor Resource and Commodity
Trust (the "Trust") to be held at the offices of Anchor Investment Management on
August 4, 1999 at 2 p.m. local time.
At this important meeting you will be asked to consider and approve a proposal
(referred to as Proposal 2 in the enclosed Prospectus/Joint Proxy Statement) to
eliminate one of the Trust's fundamental investment limitations regarding
investments in commodities or commodity contracts. Approval of this proposal,
which would permit such investments by the Trust, is a condition to a proposed
Agreement and Plan of Reorganization (the "Plan") between Anchor Strategic
Assets Trust (the "Acquired Fund") and the Trust. Under this Plan, which has
been approved by the Trust's Board of Trustees but also requires the approval of
the Acquired Fund's shareholders, the Trust would acquire the assets of Anchor
Strategic Assets Trust, which may include commodities and commodity contracts.
This Plan, which is also contingent on your approval of this proposal, is
referred to as Proposal 1 in the Prospectus/Joint Proxy Statement enclosed.
The Board of Trustees of the Trust has determined that the proposed elimination
of the Trust's investment restriction prohibiting investments in commodities and
commodity contracts should benefit shareholders by enhancing the flexibility of
the Trust's investment strategies in a manner fully consistent with its emphasis
on natural resource - related investments.
I thank you for your participation as a shareholder and urge you to please
exercise your right to vote by completing, dating and signing the enclosed proxy
card. A self-addressed, postage-paid envelope has been enclosed for your
convenience. We look forward to receiving your vote.
IT IS VERY IMPORTANT THAT YOUR VOTING INSTRUCTIONS BE RECEIVED NO LATER THAN
AUGUST 4, 1999.
Instructions for shares held of record in the name of a nominee, such as a
broker-dealer, may be subject to earlier cut-off dates established by such
intermediaries to facilitate a timely response.
Sincerely,
/s/ David W. C. Putnam
Chairman of the Board of
Trustees
[mail date] July 23, 1999
<PAGE>
ANCHOR STRATEGIC ASSETS TRUST
579 PLEASANT STREET, SUITE 4
PAXTON, MASSACHUSETTS 01612
NOTICE OF SPECIAL MEETING
OF SHAREHOLDERS
TO BE HELD ON AUGUST 4, 1999
A Special Meeting of Shareholders of Anchor Strategic Assets Trust, a
Massachusetts business trust, will be held at the offices of Anchor Investment
Management Corporation, on August 4, 1999 at 2 p.m. local time (the "Meeting")
for the following purposes:
1. To approve or disapprove a proposed Agreement and Plan of
Reorganization (the "Plan") providing for the transfer of the assets of
Anchor Strategic Assets Trust (subject to certain liabilities) to Anchor
Resource and Commodity Trust (the "Acquiring Fund") in exchange for shares
of the Acquiring Fund, the distribution of such shares to shareholders of
Anchor Strategic Assets Trust and the subsequent liquidation of Anchor
Strategic Assets Trust ("Proposal 1" in the enclosed Prospectus/Joint
Proxy Statement); and
2. To approve or disapprove any matter incidental to the foregoing and to
transact such other business as may properly come before the Meeting and
any adjournments thereof.
The close of business on July 1, 1999 has been fixed as the record date
for the determination of shareholders entitled to notice of, and to vote
at, the Meeting and any adjournments thereof.
YOUR VOTE IS IMPORTANT REGARDLESS OF THE SIZE OF YOUR HOLDINGS IN THE FUND.
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING, PLEASE SIGN AND
RETURN THE ENLOSED PROXY CARD.
TO SECURE THE LARGEST POSSIBLE REPRESENTATION AND TO SAVE THE EXPENSE OF FURTHER
MAILINGS, PLEASE COMPLETE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE, WHICH NEEDS NO POSTAGE IF MAILED IN THE
UNITED STATES. IF YOU LATER DESIRE TO VOTE IN PERSON AT THE MEETING, YOU MAY
REVOKE YOUR PROXY.
By Order of the Board of
Trustees,
/s/ DAVID Y. WILLIAMS
David Y. Williams, Secretary
[mail date] July 23, 1999
Date of Notice
<PAGE>
ANCHOR RESOURCE AND COMMODITY
579 PLEASANT STREET, SUITE 4
PAXTON, MASSACHUSETTS 01612
NOTICE OF SPECIAL MEETING
OF SHAREHOLDERS
TO BE HELD ON AUGUST 4, 1999
A Special Meeting of Shareholders of Anchor Resource and Commodity Trust, a
Massachusetts business trust, will be held at the offices of Anchor Investment
Management Corporation, on August 4, 1999 at 2 p.m. local time (the "Meeting")
for the following purposes:
1. To approve or disapprove a proposed elimination of the Trust's
fundamental investment restriction concerning investments in commodities
or commodity contracts ("Proposal 2" in the enclosed Prospectus/Joint
Proxy Statement); and
2. To approve or disapprove any matter incidental to the foregoing and to
transact such other business as may properly come before the Meeting and
any adjournments thereof.
The close of business on July 1, 1999 has been fixed as the record date
for the determination of shareholders entitled to notice of, and to vote
at, the Meeting and any adjournments thereof.
YOUR VOTE IS IMPORTANT REGARDLESS OF THE SIZE OF YOUR HOLDINGS IN THE FUND.
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING, PLEASE SIGN AND
RETURN THE ENCLOSED PROXY CARD.
TO SECURE THE LARGEST POSSIBLE REPRESENTATION AND TO SAVE THE EXPENSE OF FURTHER
MAILINGS, PLEASE COMPLETE AND SIGN THE ENCLOSED PROXY CARD AND RETURN IT
PROMPTLY IN THE ENCLOSED ENVELOPE, WHICH NEEDS NO POSTAGE IF MAILED IN THE
UNITED STATES. IF YOU LATER DESIRE TO VOTE IN PERSON AT THE MEETING, YOU MAY
REVOKE YOUR PROXY.
By Order of the Board of
Trustees,
/s/DAVID Y. WILLIAMS
David Y. Williams, Secretary
[mail date] July 23, 1999
Date of Notice
<PAGE>
PROSPECTUS/JOINT PROXY STATEMENT
[MAIL DATE] JULY 23, 1999
Acquisition of the Assets of
ANCHOR STRATEGIC ASSETS TRUST
579 PLEASANT STREET, SUITE 4
PAXTON, MASSACHUSETTS 01612
(508) 831-1171
By and in Exchange for Shares of
ANCHOR RESOURCE AND COMMODITY TRUST
579 PLEASANT STREET, SUITE 4
PAXTON, MASSACHUSETTS 01612
(508) 831-1171
1. Proposal 1 Affecting Shareholders of Anchor Strategic Assets Trust.
This Prospectus/Joint Proxy Statement describes a proposed Agreement and Plan of
Reorganization (the "Plan") between Anchor Strategic Assets Trust and Anchor
Resource and Commodity Trust. Under this Plan, all of the assets of Anchor
Strategic Assets Trust (the "Acquired Fund") would be transferred to Anchor
Resource and Commodity Trust (the "Acquiring Fund"). In exchange for these
assets, the Acquiring Fund will issue shares of its common stock on a PRO RATA
basis to the Acquired Fund's shareholders. ("Acquiring Fund Shares") The
Acquired Fund would then be completely liquidated. As a result of the Plan, each
shareholder of Acquired Fund shares will become the owner of Acquiring Fund
Shares having a total net asset value equal to the total net asset value of his
or her holdings in the Acquired Fund.
2. Proposal 2 Affecting Shareholders of Anchor Resource and Commodity Trust.
This Prospectus/Joint Proxy Statement also describes a proposal to eliminate a
fundamental investment restriction of the Acquiring Fund prohibiting the Fund
from investing in commodities or commodity contracts. Approval of this proposal
by shareholders of the Acquiring Fund is a necessary condition to implementation
of the Plan described in Proposal 1.
This Prospectus/Joint Proxy Statement is furnished to the shareholders of the
Acquired Fund and the Acquiring Fund in connection with the solicitation of
proxies by and on behalf of both Funds' Boards of Trustees to be used at the
Special Meeting of Shareholders of the Acquired Fund and the Acquiring Fund to
be held at the offices of Anchor Investment Management Corporation, at 2 p.m.
local time on August 4, 1999 and at any adjournments thereof (the "Meeting").
This document also serves as a prospectus of the Acquiring Fund and covers the
proposed issuance of Acquiring Fund Shares.
Only shareholders of the Acquired Fund are permitted to vote on Proposal 1, and
only shareholders of the Acquiring Fund are permitted to vote on Proposal 2.
However, Acquiring Fund shareholders are urged to read the entire
Prospectus/Joint Proxy Statement, particularly the section entitled "PRINCIPAL
RISK FACTORS - Commodities," as it describes important risks of investments in
commodities.
THE BOARDS OF TRUSTEES OF ANCHOR STRATEGIC ASSETS TRUST AND ANCHOR RESOURCE
AND COMMODITY TRUST UNANIMOUSLY RECOMMEND APPROVAL OF PROPOSALS 1 AND 2,
RESPECTIVELY.
i
<PAGE>
The primary investment objective of the Acquired Fund is to achieve long-term
growth of capital and to protect the purchasing power of its shareholders'
capital by investing primarily in gold bullion, gold certificates, silver
bullion and other precious metals such as platinum and palladium. The primary
investment objective of the Acquiring Fund is to achieve long-term capital
appreciation and preservation of the purchasing power of shareholders' capital
by investing primarily in equity securities of domestic and foreign companies
having substantial natural resource assets or that engage in natural resource or
energy-related activities. The secondary investment objective of both Funds is
to seek to generate current income consistent with the preservation of
shareholders' purchasing power.
The Acquired Fund is a diversified open-end management investment company
registered under the Investment Company act of 1940, as amended (the "1940
Act'); however, the Acquiring Fund is a non-diversified open-end management
investment company registered under the 1940 Act. For a comparison of the
investment policies of the Acquired Fund and the Acquiring Fund (collectively,
the "Funds"). See "Comparison of Investment Objectives and Policies."
This Prospectus/Joint Proxy Statement, which should be retained for future
reference, sets forth concisely the information that shareholders of the
Acquired Fund and the Acquiring Fund should know before investing. This
Prospectus/Joint Proxy Statement is accompanied by the Prospectus of the
Acquiring Fund, dated May 1, 1999, which is incorporated herein by reference. A
Prospectus and Statement of Additional Information for the Acquiring Fund, each
dated May 1, 1999, as well as a Statement of Additional Information, dated May
1, 1999 (relating to this Prospectus/Joint Proxy Statement) containing
additional information relevant to the proposed transaction have been filed with
the Securities and Exchange Commission and are incorporated herein by reference.
Further information about the Acquiring Fund's performance is contained in the
Acquiring Fund's Annual Report for the fiscal year ended December 31, 1998,
which is incorporated herein by reference. Copies of these materials, the Annual
Report and other information about the Acquiring Fund may be obtained without
charge by writing to the Acquiring Fund at the following address: 579 Pleasant
Street, Suite 4, Paxton, Massachusetts 01612, or by calling collect (508)
831-1171.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS JOINT PROSPECTUS/PROXY STATEMENT. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS JOINT PROSPECTUS/PROXY
STATEMENT AND IN THE MATERIALS EXPRESSLY INCORPORATED HEREIN BY REFERENCE AND,
IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE ACQUIRED FUND OR THE ACQUIRING FUND.
SHARES OF THE ACQUIRING FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
OR ENDORSED BY, ANY BANK. SHARES OF THE ACQUIRING FUND ARE NOT FEDERALLY INSURED
BY, GUARANTEED BY, OBLIATIONS OF OR OTHERWISE SUPPORTED BY, THE U.S. GOVERNMENT,
THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY
OTHER GOVERNMENTAL AGENCY. AN INVESTMENT IN THE ACQUIRING FUND INVOLVES
INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF PRINCIPAL AMOUNT INVESTED.
[mail date] July 23, 1999
Date of Prospectus/Joint Proxy Statement
ii
<PAGE>
TABLE OF CONTENTS
Page
SUMMARY......................................................................1
PROPOSED REORGANIZATION (PROPOSAL 1).........................................1
COMPARATIVE FEE TABLES.......................................................4
PRINCIPAL RISK FACTORS.......................................................6
REASONS FOR THE REORGANIZATION..............................................10
INFORMATION ABOUT THE REORGANIZATION........................................11
COMPARISON OF INVESTMENT OBJECTIVES AND POLICIES............................13
COMPARATIVE INFORMATION ON DISTRIBUTION ARRANGEMENTS........................17
COMPARATIVE INFORMATION ON SHAREHOLDER SERVICES.............................17
FISCAL YEAR.................................................................17
COMPARATIVE INFORMATION ON SHAREHOLDER RIGHTS...............................17
MANAGEMENT..................................................................17
ADDITIONAL INFORMATION ABOUT THE FUNDS......................................18
VOTING INFORMATION..........................................................19
EXPERTS.....................................................................21
OTHER MATTERS...............................................................21
NO ANNUAL MEETING OF SHAREHOLDERS...........................................21
EXHIBIT A - AGREEMENT AND PLAN OF REORGANIZATION...........................A-1
STATEMENT OF ADDITIONAL INFORMATION........................................B-1
OTHER INFORMATION..........................................................C-1
EXHIBIT 11.................................................................
EXHIBIT 12.................................................................
EXHIBIT 14.................................................................
EXHIBIT 16.................................................................
EXHIBIT 17.................................................................
EXHIBIT 18.................................................................
iii
<PAGE>
SUMMARY
The following paragraphs summarize certain information contained in or
incorporated by reference in this Prospectus/Joint Proxy Statement. This summary
is not intended to be a complete statement of all material features of the
proposed Reorganization (as described more fully below) and is qualified in its
entirety by reference to the full text of this Prospectus/Joint Proxy Statement
and the documents referred to herein.
PROPOSED REORGANIZATION (PROPOSAL 1)
The Boards of Trustees of the Acquired Fund and the Acquiring Fund, including
their members who are not "interested persons" within the meaning of the 1940
Act, have approved a proposed Agreement and Plan of Reorganization (the "Plan")
providing for the transfer of all of the assets of the Acquired Fund to the
Acquiring Fund (subject to the assumption by the Acquiring Fund of the
liabilities of the Acquired Fund, in exchange for Acquiring Fund Shares to be
distributed pro rata to the Acquired Fund's shareholders in complete liquidation
of the Acquired Fund. The proposed transaction described above is referred to in
this Prospectus/Joint Proxy Statement as the "Reorganization." See "INFORMATION
ABOUT THE REORGANIZATION."
As a result of the Reorganization, an Acquired Fund shareholder will receive, in
exchange for his or her shares of the Acquired Fund, shares of the Acquiring
Fund with an aggregate value equal to the value of such shareholder's shares of
the Acquired Fund, calculated as of the close of business on the Valuation Date.
THE TRUSTEES OF THE ACQUIRED FUND RECOMMEND THAT THE SHAREHOLDERS OF THE
ACQUIRED FUND VOTE FOR APPROVAL OF THE PLAN IN PROPOSAL 1.
Approval of the Plan by the shareholders of the Acquired Fund is a condition of
the consummation of the Reorganization. The affirmative vote of the holders of a
majority of the outstanding shares (within the meaning of the 1940 Act) of the
Acquired Fund is required to approve the Plan. A "majority" vote is defined in
the 1940 Act as the favorable vote of the holders of the lesser of (a) 67% or
more of the voting securities present at the Meeting, if the holders of more
than 50% of the outstanding shares of the fund are present or represented by
proxy, or (b) more than 50% of the outstanding voting securities of the fund.
See "Voting Information" herein.
REASONS FOR THE REORGANIZATION. The primary reason for the Reorganization is the
recent withdrawal by the Acquired Fund's principal shareholder of over 20% of
the assets of the Acquired Fund, and the resulting need to improve the operating
efficiencies of the Acquired Fund by combining its assets with the assets of the
Acquiring Fund. In consideration of, among other things, the fact that the
Reorganization will be tax - free and will not dilute the interests of
shareholders, and the similarities in the investment objectives and certain
strategies of the Funds, the respective Boards of Trustees of each Fund adopted
the Plan as being in the best interests of their respective shareholders. In
doing so, the Trustees recognized that the Acquiring Fund is smaller in asset
size than the Acquired Fund. However, the Trustees determined that the Acquiring
Fund's more diversified investment strategies and techniques were more
appropriate for achieving the Acquired Fund's investment objectives, and that
the operating costs of the Acquired Fund would be reduced by combining its
assets with the Acquiring Fund. See "REASONS FOR THE REORGANIZATION."
FEDERAL INCOME TAX CONSEQUENCES. Shareholders of the Acquired Fund will
recognize no gain or loss for federal income tax purposes on their receipt of
shares of the Acquiring Fund, and shareholders of the Acquiring Fund will have
no tax consequence from the Reorganization. The Acquired Fund will incur no
federal tax liability as a result of the Reorganization, and the Acquiring Fund
will recognize no gain or loss for federal tax purposes upon its receipt of the
Acquired Fund's assets in exchange for its shares. See "INFORMATION ABOUT THE
REORGANIZATION - Federal Income Tax Consequences."
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES.
A. Principal Similarities.
Both the Acquired Fund and the Acquiring Fund have the same primary and
secondary investment objectives and many of the same investment policies and
restrictions. The nature of both Funds' investments will depend upon whether the
Investment Adviser anticipates an inflationary or deflationary economic cycle.
When the Adviser expects a deflationary cycle, both Funds will invest up to 90%
of their respective assets in U. S. or foreign government and government agency
fixed income securities of sufficiently long maturities to realize their shared
objective of long-term capital appreciation. The balances of their respective
assets during such deflationary periods are held in short-term U.S. or
foreign-denominated securities.
During periods when the Investment Adviser determines that there are no
discernable inflationary or deflationary trends, both Funds may invest up to
100% of their assets in cash or cash equivalents and high-quality short term
securities. Except as indicated below under "Principal Differences," the Fund's
have identical investment restrictions which are deemed fundamental.
B. Principal Differences.
The principal differences in the investment policies and restrictions of the
Acquired Fund and the Acquiring Fund occur during periods when the Investment
Adviser expects an inflationary cycle. During such periods, the Acquiring Fund
invests primarily in the equity securities of domestic and foreign companies
that have substantial natural resource assets (which can include precious
metals), or that engage in natural resource or energy - related activities. The
Acquired Fund's investments during such periods, however, are limited primarily
to precious metals themselves and to the equity securities of domestic and
foreign companies primarily engaged in businesses related to such precious
metals. In short, the Acquiring Fund invests less directly and less
predominantly than the Acquired Fund in precious metals by investing in
companies that may be involved with precious metals, rather than in the metals
themselves.
Set forth below is a list of the other key differences between the Funds'
respective investment policies and restrictions, each of which should be
considered carefully by Acquired Fund and Acquiring Fund shareholders:
1. The Acquiring Fund is a "diversified" investment company and the
Acquired Fund is a "non-diversified" investment company. This means that as to
75% of its total assets, the Acquiring Fund may not invest more than 5% of its
total assets in the securities of any one issuer (excluding the U. S. government
and its agencies and instrumentabilities) or more than 10% of the outstanding
voting securities of any one issuer - the Acquired Fund is not subject to this
restriction.
2. Unlike the Acquiring Fund, the Acquired Fund limits its concentration
of investments by not investing in any single industry if, immediately after
such investment, more than 25% of the Acquired Fund's total assets would be
invested in an industry other then gold mining, silver mining, companies mining
other precious metals, gold manufacturing and industrial production and silver
manufacturing and industrial production.
3. The Acquiring Fund currently does not invest directly in the following
types of investments, each of which is an integral investment of the Acquired
Fund: (a) physical commodities or in other natural resource assets; (b) option
transactions involving portfolio securities and securities indices; (c) options
on foreign currencies; and (d) financial futures and related options.
4. Although both Fund's are permitted to invest up to 10% of their total
assets in the securities of another investment company, the Acquiring Fund
currently intends not to make such investments.
5. The Acquired Fund's permitted investments in derivatives and options
transactions, including options on foreign currencies and financial futures and
related options, involve certain risks not present in the Acquiring Fund's
investments. These risks include leverage risk, liquidity risk and index risk.
For further information regarding such risks, see "PRINCIPAL RISK FACTORS"
herein.
<PAGE>
6. Both Funds may invest up to 100% of their total assets in foreign
securities. However, the Acquired Fund may also invest in options on foreign
currencies. Such investments entail special risks, including the lack of any
systematic reporting of last sale information for foreign currencies. For
further information regarding such risks, see "PRINCIPAL RISK FACTORS" herein.
Management and Other Service Providers. The business affairs of each Fund are
managed by its respective Board of Trustees. The Board of Trustees of each Fund
is comprised of the same members. The Funds also have the same investment
adviser and service providers: Anchor Investment Management Corporation serves
as investment adviser (the "Investment Adviser"); Investors Bank & Trust Company
serves as custodian; Meeschaert & Co., Inc. serves as distributor (the
"Distributor"); Cardinal Investment Services, Inc. serves as transfer agent and
dividend paying agent (the "Transfer Agent") and provides administration and
accounting services; and Livingston & Haynes, P.C. are the Independent Public
Accounts for both Funds. Such service providers perform their services for each
Fund on similar terms.
COMPARATIVE FEE TABLES
Fees and Expenses. The following tables summarize the shareholder transaction
expenses applicable to each Fund and the annual operating expenses for each Fund
on an individual basis and for the Acquiring Fund on a pro forma basis after
giving effect to the Reorganization. This table is followed by a helpful example
illustrating the effect of these expenses on a $1,000 investment in each Fund.
TABLE OF EXPENSES OF THE ACQUIRING FUND (INDIVIDUALLY AND ON A PRO FORMA
BASIS) AND THE ACQUIRED FUND (AS OF JUNE 1, 1999)
Anchor Strategic Assets Trust Anchor Resource and Commodity Trust
Annual Fund Operating Expenses (as a Annual Fund Operating Expenses (as a
Percentage of average net assets)** Percentage of average net assets)
Management Fees...................1.50% Management Fees...................0.75%
Distribution (12b-1) Fees.........None Distribution (12b-1) Fees.........None
Other Expenses....................1.04% Other Expenses....................0.75%
Total Annual Fund Total Annual Fund
Operating Expenses................2.54% Operating Expenses................1.50%
<PAGE>
Anchor Resource and Commodity Trust Pro forma
Annual Fund Operating Expenses (as a
Percentage of average net assets)
Management Fees...................0.75%
12b-1 Fees.........................None
Other Expenses....................0.52%
Operating Expenses................1.27%
Total Fund Operating Expenses.....1.27%
The purpose of this table is to assist an investor in understanding the various
costs and expenses that a shareholder of each Fund will bear, either directly or
indirectly. For more complete descriptions of the various costs and expenses,
see the sections entitled "Shareholder Information" in each Fund's Prospectus.
EXAMPLE:
You would pay the following expenses on a $1,000 investment assuming (1) 5%
annual return, (2) redemption at the end of each time period, and (3) that the
Trusts' operating expenses remain the same:
ANCHOR STRATEGIC ASSETS TRUST
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------ ------- ------- --------
$257 $791 $1,350 $2,875
ANCHOR RESOURCE AND COMMODITY TRUST
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------ ------- ------- --------
$153 $474 $818 $1,791
ANCHOR RESOURCE AND COMMODITY TRUST PRO FORMA
1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ------ ------- ------- --------
$129 $403 $697 $1,534
The above example should not be considered as a representation of past or future
expenses. Actual expenses may be greater or less than those shown.
Purchase, Redemption, Exchange and Distribution Procedures. Each Fund offers the
same purchase, redemption, exchange and distribution features, including the
absence of any sales loads, acceptance of redemption requests by mail, and
requests for the Fund to repurchase its shares as communicated through a broker,
provided that applicable conditions are met. Meeschaert & Co. serves on the
principal distributor for both Funds under identical Distribution Agreements.
Any request to redeem shares of the Acquired Fund received and processed prior
to the Reorganization will be treated as a redemption of shares of the Acquired
Fund. Any request to redeem shares received or processed after the
Reorganization will be treated as a request to redeem shares of the Acquiring
Fund. Neither Fund may redeem shares automatically without action by the
shareholder. Both Funds will accept common or preferred stock of companies
acceptable to the Investment Adviser in exchange for shares of the Fund.
Reference is made to the Prospectus for each Fund, each dated May 1, 1999, and
each of which is incorporated herein by reference thereto, for a complete
description of the purchase and redemption procedures applicable to each Fund.
<PAGE>
Dividends and Capital Gains. The Funds have identical policies with regard to
dividends and distributions. Each Fund's policy is to distribute at least
annually substantially all of its net investment income and net realized capital
gains. A shareholder of either Fund may elect to (1) receive both dividends and
capital gain distributions in additional shares, (2) receive dividends in cash
and capital gains distributions in additional shares, or (3) receive both
dividends and capital gain distributions in cash.
After the closing of the Reorganization, Acquired Fund shareholders who
currently have dividends reinvested will continue to have dividends reinvested
in the Acquiring Fund, and those who currently have capital gains reinvested
will continue to have capital gains reinvested in the Acquiring Fund. Acquired
Fund shareholders who currently receive dividends and capital gains in the form
of a cash distribution will continue to do so after the closing of the
Reorganization. The number of shares received in connection with any such
reinvestment will be based upon the net asset value per share of the shares of
the Acquiring Fund in effect on the record date. See "Comparative Information on
Shareholder Services" herein.
With respect to both Funds, interest and dividends and possible other amounts
received 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.
Services for Shareholders. There are no differences in the services offered to
the shareholders by each Fund. The Acquired Fund and the Acquiring Fund maintain
Open Accounts for their shareholders as described in each Fund's Prospectus
under "Services for Shareholders--Open Accounts." Both Funds also permit their
shareholders to invest by mail. See "COMPARATIVE INFORMATION ON
SHAREHOLDER SERVICE."
Minimum Account Size. Each Fund has a minimum account requirement of $500.
PRINCIPAL RISK FACTORS
In many respects, the investment risks of the Funds are similar because of their
similar investment objectives and policies. Each Fund is subject to domestic and
foreign market risk, and each Fund attempts to achieve its investment objectives
by relying upon the Investment Adviser's ability to anticipate inflationary or
deflationary economic cycles. However, the Acquired Fund's ability to achieve
its investment objective depends on the performance of precious metals,
precious-metals backed or indexed securities and in the equity or convertible
securities of U.S. or foreign companies primarily engaged in business related to
precious metals, whereas the Acquiring Fund's ability to achieve its investment
objective depends on the performance of equity securities of domestic and
foreign companies with substantial natural resource assets, natural resource or
energy-related activities, or that provide equipment or services primarily
devoted to the natural resource or energy-related activities of such companies.
Such natural resource assets and activities include precious metals such as
gold, silver, and platinum. Accordingly, the Acquiring Fund invests in precious
metals, but less directly than the Acquired Fund by investing in companies
involved with precious metals rather than in the metals themselves. The
performance of the Acquired Fund may also depend upon the performance of the
investment companies in which it invests, and upon the performance of options on
portfolio securities, securities indices and currencies as well as on precious
metals and financial futures contracts and related options that may be used as
hedging techniques, whereas the Acquiring Fund does not make such investments.
The Investment Adviser's failure to anticipate a deflationary cycle could result
in a Fund's assets being disproportionately invested in precious metals with
respect to the Acquired Fund, or natural resource-related equity securities with
respect to the Acquiring Fund. Conversely, a failure to predict an inflationary
cycle could result in either Fund's assets being disproportionately invested in
U.S. government securities. The success of a Fund's investment program will also
<PAGE>
be dependent to a high degree on the validity of the premise that the values of
gold and other precious metals with respect to the Acquired Fund, or
resource-related equity securities with respect to the Acquiring Fund, will move
in a different direction than the values of U.S. government securities during
periods of inflation or deflation. If values of both U.S. government securities
and precious metals with respect to the Acquired Fund, or U.S. government
securities and resource-related equity securities with respect to the Acquiring
Fund, move down during the same period of time, the value of a shareholder's
investment will decline rather than stabilize or increase, as anticipated,
regardless of whether the Acquired Fund is primarily invested in U.S. government
securities or precious metals, or whether the Acquiring Fund is primarily
invested in resource-related equity securities.
The profits of the companies in which the Acquiring Fund invests, and thus the
value of the Acquiring Fund's securities, are directly affected by the price of
the particular natural resource with which the issuer is involved. Events
occurring in nature, inflationary pressures and international politics can
affect the overall supply and demand of a natural resource, as can the
political, environmental and governmental regulation of natural resource
industries. The nature of such regulation continues to evolve in both the United
States and foreign countries, and changes in the governmental policies and the
need for regulatory approvals may have a material adverse effect on the products
and services of natural resource companies. Many natural resource companies
historically have been subject to significant costs associated with compliance
with environmental and other safety regulations and changes in the regulatory
climate. Such regulations may also hamper the development of new technologies,
and it is impossible to predict the direction, type or effect of any future
regulations. Competition is also intense for many natural resource companies. As
a result, many of these companies may be adversely affected in the future and
the value of securities issued by such companies may be subject to increased
price volatility.
There is no limitation on either Fund's investment in foreign securities, and it
is possible that during certain periods, up to 100% of either Fund's assets may
be invested in the securities of a foreign issuer. Each Fund is therefore
subject to foreign market risks - the possibility that stock and bond prices
will decline over short, or even extended periods, to a greater degree than
domestic investments, as a result of a variety of factors that can affect stock
and bond prices. Investments in foreign securities involve certain risks not
involved in domestic investments, including, but not limited to: (1) there may
be less public information available about foreign companies than is available
about United States companies; (2) foreign companies are not generally subject
to the uniform accounting, auditing and financial reporting standards and
practices applicable to United States companies; (3) foreign stock markets have
less volume than the United States markets, and the securities of some foreign
companies are less liquid and more volatile than the securities of comparable
United States companies; (4) there may be less governmental regulation of stock
exchanges, brokers, listed companies and banks in foreign countries than in the
United States; (5) a Fund may incur fees on currency exchanges when it changes
investments from one country to another; (6) a Fund'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 a Fund'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.
Each Fund is subject to the domestic market risk of the United States stock and
bond markets. U.S. government debt securities of the sort owned by each Fund
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; bonds having longer maturities will have
greater risk of decline based on a rise in interest rates. Such bonds generally
possess a high degree of dependability with respect to timely payment or
interest.
The U.S. government securities in which each Fund may invest also include
obligations of agencies and instrumentalities of the United States government.
Government National Mortgage Association ("GNMA") certificates are an example of
such an instrument. GNMA certificates have yield and maturity characteristics
that correspond 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
<PAGE>
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. Such reinvestments may be investments
in debt securities which offer lower 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.
The Acquired Fund may use certain specialized investment techniques, including
transactions in options on securities, securities indices and currencies, and
transactions in precious metals and financial futures contracts and related
options. Since the Acquiring Fund currently does not make such investments,
investors should be aware of the investment risks imposed by these investments
which are discussed below.
Commodities
The profits of the companies in which the Acquired Fund invests, and thus
the value of the Acquired Fund's securities, are directly affected by the
price of gold and other commodities. 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, international tensions, oil price changes, 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 devaluations and exchange controls. 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. The value of these investments may
also be affected by concentration of source of supply and lack of
regulation. There are currently only four major sources of supply of
primary gold production, and their market shares cannot be readily
ascertained: The Republic of South Africa, the United States, Australia,
and Russia. Political and economic conditions affecting any of these
countries may have a direct impact on that country's sale of gold. With
respect to 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 commodities 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 price 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.
Option Transactions Involving Portfolio Securities and Securities
Indices
The Acquired Fund 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 Acquired Fund 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 Acquired Fund's
net asset value, and not for speculative purposes (i.e., not for profit).
In no event will the Acquired Fund purchase such options where the value
of the options, either singly or in the aggregate, would exceed 50% of the
value of the Acquired Fund'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
<PAGE>
securities may not be listed on any domestic or foreign exchange. The
Acquired Fund 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 Acquired
Fund will always be able to close out options positions at acceptable
prices. The Acquired Fund pays a premium upon the purchase of an option,
which may be lost if the option proves to be of no ultimate value.
It should be recognized that the Acquired Fund pays brokerage commissions
in connection with the writing and purchasing of options as well as for
purchases and sales of underlying securities. The writing of options could
result in significant increases in the Acquired Fund's portfolio turnover
rate, especially during periods when market prices of the underlying
securities appreciate.
Options on Foreign Currencies
The Acquired Fund may purchase put and call options on foreign currencies.
The Acquired Fund may purchase such options where economically appropriate
as a hedging technique to reduce the risks in management of its portfolio,
and to preserve its net asset value, and not for speculative purposes
(i.e., not for profit). In no event will the Acquired Fund purchase such
options where the value of the options, either singly or in the aggregate,
would exceed 50% of the value of its assets at the time of purchase.
The Acquired Fund'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 Acquiring Fund may not correspond to the price
movements of its portfolio securities and may therefore cause the options
transactions to result in losses to the Acquired Fund.
Financial And Precious Metals Futures and Related Options
Financial futures contracts consist of interest rate futures contracts,
securities index futures contracts and currency future 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 as 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 Acquired Fund may purchase or sell any financial or precious metals
future 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. exchange or boards of
trade. Options relating to U.S. futures contracts are generally also
traded on the same exchanges or boards of trade.
<PAGE>
The Acquired Fund 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 Acquired Fund's
investment objectives and legally permissible for the Acquired Fund.
Limitations on Futures Contracts And Related Options
The Acquired Fund 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 Acquired Fund 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 Acquired Fund's existing futures and related options
positions and the premiums paid for related options would exceed 5% of the
market value of the Acquired Fund'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 Acquired Fund's initial margin deposit with respect thereto will be
deposited in a segregated account with the Acquired Fund's custodian bank
to collateralize fully the Acquired Fund's position and thereby ensure
that it is not leveraged.
To the extent to which the Acquired Fund 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.
Both Funds may invest up to 100% of their respective assets in repurchase
agreements and lend up to 30% of their respective total assets. See "Comparison
of Investment Objectives and Policies" herein. In addition, such risks are more
fully discussed under "Investment Strategy" and "Specialized Investment
Technique and Related Risks" in each Fund's Prospectus.
Both the Acquired Fund and the Acquiring Fund may purchase the securities of
other investment companies which results in the layering of expenses such that
investors indirectly bear a proportionate share of the expenses of such
investment companies including operating costs and advisory and administrative
fees.
The Acquiring Fund is a diversified open-end investment company, whereas the
Acquired Fund is non-diversified. A non-diversified investment portfolio does
not have any limits with respect to the percentage of assets which can be
invested in any single issuer. An investment in the Acquired Fund, therefore,
will entail greater risk than investment in a diversified portfolio of
securities because the higher percentage of investments among fewer issuers may
result in greater fluctuation in the total market value of the Acquired Fund's
portfolio. Any economic, political, or regulatory developments affecting the
value of the securities in the Acquired Fund's portfolio will have a greater
impact on the total value of the portfolio than would be the case if the
portfolio were diversified among more issuers.
There can be no assurance, of course, that either Fund will achieve its
investment objectives since there is uncertainty in every investment.
A full discussion of the risks inherent in an investment in the Acquiring Fund
and the Acquired Fund is set forth in each Fund's Prospectus and Statement of
Additional Information, dated May 1, 1999, each of which is incorporated herein
by reference thereto.
REASONS FOR THE REORGANIZATION
On August 6, 1998, and December 24, 1998, the Acquired Fund's principal
shareholder and parent of the Investment Adviser and Distributor for both Funds,
Societe d'Etudes et de Gestion Financieres, Meeschaert, S.A. (Societe d'Etudes),
withdrew a substantial portion of its assets from the Acquired Fund, thereby
reducing the Acquired Fund's assets by over 20%. As a result of such withdrawal,
the Acquired Fund has been operating with a very small asset base. The Board of
Trustees has proposed that the Acquired Fund consider the transfer of all of its
assets to the Acquiring Fund as a means of improving the Acquired Fund's
efficiency of operations.
<PAGE>
In considering the proposed Reorganization, the Board of Trustees of the
Acquired Fund took into consideration a number of factors, including: (1) the
withdrawal by Societe d'Etudes of a substantial part of its assets from the
Acquired Fund and the resulting smaller asset base; (2) the capabilities and
resources of the Investment Adviser with respect to the services that it
provides to the Acquiring Fund; (3) expense ratios and published information
regarding the fees and expenses of the Acquiring Fund in relation to similar
funds; (4) the comparative performance of the Acquired Fund and the Acquiring
Fund as well as the performance of similar funds; (5) the terms and conditions
of the Reorganization and whether the Reorganization would result in the
dilution of shareholder interests; (6) the tax consequences of the
Reorganization; (7) the compatibility of the Acquired Fund's and the Acquiring
Fund's investment objectives, policies, and restrictions, as well as identical
service features available to shareholders of the respective Funds.
While recognizing that the Acquiring Fund has a smaller asset base than the
Acquired Fund, the trustees of both Funds determined that the broader investment
strategies and techniques of the Acquiring Fund involve less direct dependence
on metals' prices and are more appropriate for achieving the Acquired Fund's
investment objectives.
The Trustees of the Acquired Fund, including a majority of the Trustees who are
not interested persons of the Acquired Fund, determined that participation in
the Reorganization was in the best interests of the Acquired Fund's shareholders
and that the interests of existing Acquired Fund shareholders would not be
diluted as a result of effecting the transaction. This conclusion was based on a
number of factors, including the following:
1. The Reorganization would permit the shareholders of the Acquired Fund to
pursue similar investment goals in a fund with a combined larger asset base
which would be more conducive to enabling shareholders to benefit from economies
of scale with respect to operating expenses, thereby reducing such expenses.
2. The Reorganization would permit the shareholders of the Acquired Fund to
benefit from more diversified investment strategies and techniques of the
Acquiring Fund which the Trustees believe are more appropriate for achieving
their investment objectives.
3. Shareholders will not suffer any adverse tax consequences as a result
of the Reorganization.
For the foregoing reasons, the Board of Trustees of the Acquired Fund
unanimously voted to approve, and to recommend to the Fund's shareholders the
approval of, the Reorganization.
The Board of Trustees of the Acquiring Fund likewise considered the
Reorganization and approved the Plan for the foregoing reasons. The Trustees of
the Acquiring Fund, including a majority of the Trustees who are not interested
persons of the Acquiring Fund, determined that participation in the transaction
was in the best interests of the Acquiring Funds' shareholders and that the
interests of existing Acquiring Fund shareholders would not be diluted as a
result of effecting the transaction.
As reflected in the capitalization table in "Information About the
Reorganization--Capitalization" set forth below, both Funds are small. As a
result, both Funds' expenses are relatively high. Although the Acquiring Fund is
smaller than the Acquired Fund, by combining the assets of the Acquired Fund
with the assets of the Acquiring Fund, the Acquired Fund will, over time,
benefit from certain economies of scale. In particular, more efficient portfolio
management should result from a larger asset base. A larger asset base is
expected to be beneficial to shareholders because it may reduce the negative
effect which the adverse performance of any one portfolio security may have on
the performance of the portfolio as a whole. Because each Fund has the same
Investment Adviser, Custodian, Transfer Agent and Distributor, combining the
Acquired Fund with the Acquiring Fund will, over time, produce administrative
economies of scale resulting in net benefits to the Acquired Fund's
shareholders.
The Acquired Fund's Board of Trustees believes that the benefits resulting from
the Reorganization substantially offset the risks to the shareholders of the
Acquired Fund that may result from investments in equity securities of domestic
and foreign companies with substantial natural resource assets and natural
resource or energy-related activities as compared to the investments made by the
<PAGE>
Acquired Fund in precious metals, precious-metal backed or indexed securities
issued by U.S. or foreign private or governmental issuers, options and futures
on securities, securities indices and currencies, and financial and
precious-metal futures and related options.
THE BOARD OF TRUSTEES OF THE ACQUIRED FUND BELIEVES THAT THE PROPOSED
REORGANIZATION IS IN THE BEST INTERESTS OF THE SHAREHOLDERS OF THE ACQUIRED FUND
AND RECOMMENDS THAT SHAREHOLDERS OF THE ACQUIRED FUND VOTE FOR THE
REORGANIZATION.
INFORMATION ABOUT THE REORGANIZATION
At a meeting held on June 21, 1999, the Board of Trustees of the Acquired Fund
approved the Plan of Reorganization substantially in the form set forth as
Exhibit A to this Prospectus/Joint Proxy Statement.
Plan of Reorganization. The Plan of Reorganization provides that at the Closing,
the Acquiring Fund will acquire all of the assets of the Acquired Fund (subject
to the assumption by the Acquiring Fund of all of the liabilities of the
Acquired Fund reflected on an unaudited statement of assets and liabilities) in
exchange for Acquiring Fund Shares. The aggregate net asset value of full and
fractional Acquiring Fund Shares to be issued to shareholders of the Acquired
Fund will equal the value of the aggregate net assets of the Acquired Fund as of
the close of business on the business day immediately prior to the Closing (the
"Valuation Date.") The number of shares to be issued to the Acquired Fund will
be determined by dividing (a) the aggregate net assets of shares of the Acquired
Fund by (b) the net asset value per share of the Acquiring Fund, each computed
as of the close of business on the Valuation Date. Portfolio securities of the
Acquired Fund will be valued in accordance with the valuation practices of the
Acquiring Fund which are described under the caption "Determination of Net Asset
Value" of the Acquiring Fund Prospectus and which are identical to those of the
Acquired Fund.
The Acquiring Fund will assume all liabilities, expenses, costs, charges and
reserves reflected on an unaudited statement of assets and liabilities of the
Acquired Fund prepared as of the close of business on the Valuation Date in
accordance with generally accepted accounting principles consistently applied
from the prior audited period. The Acquiring Fund will assume only those
liabilities of the Acquired Fund reflected in that unaudited statement of assets
and liabilities and will not assume any other liabilities. Such statement of
assets and liabilities will reflect all liabilities known to the Acquired Fund
as of the date thereof. At or prior to the Closing, the Acquired Fund shall
declare a dividend or dividends which, together with all prior such dividends,
shall have the effect of distributing to the Acquired Fund's shareholders all of
the Acquired Fund's investment company income for all taxable years ending at or
prior to the Closing (computed without regard to any deduction for dividends
paid) and all of its net capital gains realized (after reduction for any capital
loss carry-forward) in all taxable years ending at or prior to the Closing.
At or as soon as practicable after the Closing, the Acquired Fund will liquidate
and distribute pro rata to its shareholders of record as of the close of
business on the Valuation Date the full and fractional Acquiring Fund Shares
received by the Acquired Fund. Such liquidation and distribution will be
accomplished by the establishment of shareholder accounts on the share records
of the Acquiring Fund in the name of each such shareholder of the Acquired Fund,
representing the respective pro rata number of full and fractional Acquiring
Fund Shares due such shareholder. All of the Acquiring Fund's future
distributions attributable to the shares issued in the Reorganization will be
paid to shareholders in cash or invested in additional shares of the Acquiring
Fund at the price in effect as described in the Acquiring Fund's current
Prospectus on the respective payment dates in accordance with instructions
previously given by the shareholder to the Acquired Fund's transfer agent. To
the extent that a shareholder received a certificate evidencing his or her
ownership of shares of the Acquired Fund, then, as of the Closing, such
certificates will be rendered null and void and nonnegotiable; upon special
request and surrender of such certificates to the Transfer Agent, holders of
these nonnegotiable certificates shall be entitled to receive certificates
representing the number of Acquiring Fund Shares issuable with respect thereto.
Consummation of the Reorganization is subject to the conditions set forth in the
Plan, including receipt of an opinion in form and substance satisfactory to each
Fund, as described under the caption "Federal Income Tax Consequences" herein.
Notwithstanding approval by shareholders of the Acquired Fund, the Plan of
<PAGE>
Reorganization may be terminated at any time prior to the consummation of the
Reorganization with respect to the Acquired Fund without liability on the part
of the Acquired Fund or its Trustees, officers or shareholders, if circumstances
should develop that, in the opinion of the Trustees, make proceeding with the
Reorganization with respect to Acquired Fund inadvisable. The Plan of
Reorganization may be amended, waived or supplemented in such manner as may be
mutually agreed upon by the authorized officers of the Acquired Fund; provided,
however, that following the Meeting, no such amendment, waiver or supplement may
have the effect of changing the provision for determining the number of
Acquiring Fund Shares to be issued to the shareholders of the Acquired Fund to
the detriment of such shareholders without their further approval.
The expenses incurred in connection with entering into and carrying out the
provisions of the Plan of Reorganization, whether or not the Reorganization is
consummated, will be paid for by the Acquiring Fund. Such expenses include, but
are not limited to: legal fees; registration fees; transfer taxes (if any); the
fees of banks and transfer agents; and the costs of preparing, printing,
photocopying and mailing proxy solicitation materials to the Acquired Fund's
shareholders and the costs of holding the Special Meeting of Shareholders.
Description of Acquiring Fund Shares. Full and fractional shares of the
Acquiring Fund will be issued to the Acquired Fund shareholders in accordance
with the procedures under the Plan of Reorganization as described above. Each
share will be fully paid and non-assessable when issued and transferable without
restrictions and will have no preemptive or cumulative voting rights and have
only such conversion or exchange rights as the Board of Trustees of the Acquired
Fund may grant in its discretion.
Federal Income Tax Consequences. As a condition to the Reorganization, each Fund
will receive an opinion from Thorp Reed & Armstrong, LLP to the effect that on
the basis of existing provisions of the Internal Revenue code of 1986, as
amended (the "Code"), current administrative rules and court decisions, for
federal income tax purposes: (i) the Reorganization as set forth in the Plan
will constitute a tax-free reorganization under Section 368(a)(1)(D) of the
Code; (ii) no gain or loss will be recognized by the Acquiring Fund upon its
receipt of the Acquired Fund's assets in exchange for Acquiring Fund Shares;
(iii) the holding period and basis for the Acquired Fund's assets acquired by
the Acquiring Fund will be the same as the holding period and the basis to the
Acquired Fund immediately prior to the Reorganization; (iv) no gain or loss will
be recognized by the Acquired Fund upon the transfer of its assets to the
Acquiring Fund in exchange for Acquiring Fund Shares or upon the distribution of
the Acquiring Fund Shares to the Acquired Fund's shareholders in exchange of
their Acquired Fund shares; (v) no gain or loss will be recognized by
shareholders of the Acquired Fund upon the exchange of their shares for
Acquiring Fund Shares; (vi) the holding period of Acquiring Fund Shares received
by an Acquired Fund shareholder pursuant to the Plan will be the same as the
holding period of the Acquired Fund shares exchanged therefor, provided the
Acquired Fund shares were held as capital assets on the date of the
Reorganization; and (vii) the basis of the Acquiring Fund assets received by
shareholders of the Acquired Fund pursuant to the Plan will be the same as the
basis of Acquired Fund shares held immediately prior to the Reorganization. The
receipt of such opinion upon the Closing is a condition to the Reorganization.
See "Information About the Reorganization" herein.
Shareholders of the Acquired Fund should consult their tax advisers regarding
the effect, if any, of the proposed Reorganization in light of their individual
circumstances. The foregoing discussion only relates to the federal income tax
consequences of the Reorganization, and shareholders of the Acquired Fund should
also consult their tax advisers as to state and local tax consequences, if any,
of the Reorganization.
Capitalization. The following table sets forth the capitalization of the
Acquired Fund and the Acquiring Fund as of June 1, 1999, and on a pro forma
basis as of that date giving effect to each and the proposed acquisition of
assets at net asset value. The pro forma data reflects an exchange ratio of
0.503059695 for shares of the Acquiring Fund issued for each share of the
Acquired Fund.
<PAGE>
Combined Anchor
Strategic
Anchor Anchor Resource Assets
Strategic and Commodity Trust/Anchor
Assets Trust Trust Fund Resource and
Commodity Trust
After
Reorganization
Net assets (in 000s)....... $2,685,352 $784,637 $3,469,989
Net asset value per share.. $3.41 $6.78 $6.78
Shares outstanding......... 787,014 115,683 511,598
The table set forth above should not be relied on to reflect the number of
shares to be received in the Reorganization; the actual number of shares to be
received will depend upon the net asset value and number of shares outstanding
of each Fund at the time of Reorganization.
The following table sets forth the number of outstanding shares of common stock
of each Fund as of June 1, 1999.
Fund Total Shares
Outstanding
Anchor Strategic Assets
Trust...................... 787,014
Anchor Resource and
Commodity Trust............ 115,683
COMPARISON OF INVESTMENT OBJECTIVES AND POLICIES
Information about the investment objectives and policies of the Funds is
summarized below. More complete information regarding the same is set forth in
the Prospectus of each Fund, dated May 1, 1999, each of which is incorporated
herein by reference, and in each Fund's Statement of Additional Information,
dated May 1, 1999, each of which has been filed with the Securities and Exchange
Commission and is incorporated herein by reference thereto. Shareholders should
consult each Fund's Prospectus and Statement of Additional Information for a
more detailed comparison.
Investment Objectives. The primary investment objective of both the Acquiring
Fund and the Acquired Fund is to achieve long-term growth of capital and to
protect the purchasing power of its shareholders' capital The secondary
investment objective of both Funds is to seek to generate current income
consistent with the preservation of shareholders' purchasing power.
Investment Policies. Each Fund's investments will vary depending upon whether
the Investment Adviser anticipates an inflationary or deflationary economic
cycle. With respect to each Fund, 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 made based
upon constant study of numerous economic and monetary factors, including, but
not necessarily limited to:
-actual and anticipated rates of change in the 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.
<PAGE>
I. When, based on an analysis of such economic and monetary factors, the
Investment Adviser expects an inflationary cycle, the:
A. Acquired Fund will invest at least 65% of the value of its total
assets in:
-gold bullion, gold certificates, and silver bullion;
-any other precious metals such as platinum and palladium;
-indexed or precious metals-backed securities (securities which
are redeemable at a specified conversion rate for precious metals or
which are guaranteed by precious metals), which may be issued by
either U.S. or foreign private or governmental issuers, including,
without limitation, the government of South Africa and South African
companies;
-equity or convertible securities of U.S. or foreign companies
primarily engaged in the exploration, mining or processing of
gold and other precious metals;
-options on securities, securities indices and currencies;
-precious metals and financial futures contracts and related
options; and
-repurchase agreements.
As an integral part of this strategy, the Acquired Fund 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;
-invest up to 35% of its total assets in bank deposits, bank
currency forward contracts and certificates of deposit;
-invest up to 50% of the value of its assets in options on domestic
and foreign securities and securities indices.
In selecting equity securities for investment, the Acquired Fund's
Investment Adviser looks primarily for companies involved in gold
operations which have established records, as well as companies having
low-cost reserves to bring into production. The Investment Adviser also
considers a company's potential for growth in reserves and production.
Investors should refer to the section of Acquired Fund's Prospectus
entitled "What are the Principal Securities in which the Trust Invests?"
for a definition of such terms as "precious metals-backed security,"
"indexed securities," "equity securities" and "convertible securities."
The Acquired Fund may also invest in the securities of other investment
companies and, to the extent permitted by relevant provisions of the
Commodity Exchange Act, the Acquired Fund may also engage in options and
futures transactions (as more fully described in "Principal Risk Factors"
herein).
B. Acquiring Fund will invest at least 65% of its total assets in equity
securities of domestic and foreign companies with substantial natural
resource assets, natural resource or energy-related activities, or that
provide equipment or services primarily devoted to the natural resource or
energy-related activities of such companies.
Natural resource assets consist of precious metals (e.g., gold, silver and
platinum), ferrous and nonferrous metals (e.g., iron, aluminum, and
copper), strategic metals (e.g., uranium, and titanium), hydrocarbons
(e.g., coal, oil, and natural gas), timberland, developed and undeveloped
real property and agricultural commodities.
The Investment Adviser will identify companies that, in its opinion, have
substantial holdings of resource assets so that when compared to the
company's capitalization, revenues, or operating profits, such assets are
of enough magnitude that changes in the assets' economic value will affect
the market of the company. The Acquiring Fund will consider a company to
be a natural resource company (Natural Resource Company) if, at the time
the Acquiring Fund acquires its securities, at least 50% of the company's
assets, capitalization, gross revenues or operating profits in the most
recent or current fiscal year are: (1) involved in or result from
(directly or indirectly through subsidiaries) exploring, mining, refining,
processing, transporting, fabricating, dealing in or owning resource
assets; or (2) are involved in or result from energy-related activities
directly or indirectly through subsidiaries.
Energy-related activities consist of those activities which relate to the
development and use of energy sources, such as:
<PAGE>
1. the generation of power from hydroelectric, geothermal, tidal, or
other naturally occurring sources, or from natural resource
manufacturing by-products or refuse;
2. the development of synthetic fuels;
3. transportation of energy producing sources such as coal, oil,
electricity, or nuclear fuels;
4. the development and application of techniques and devices for
conservation or efficient use of energy; and,
5. the control of pollution related to energy industries and waste
disposal.
Generally, a company will be considered to provide equipment or services
to such Natural Resource companies if at least 50% of the company's assets
are invested in such Natural Resource Companies, or at least 50% of its
income is derived from providing equipment or services to such Natural
Resource companies. Examples of this kind of company are:
1. manufacturers of mining or earth moving equipment
2. providers of seismology testing services; and,
3. providers of supplies and maintenance services to offshore
drilling sites.
C. Acquired Fund and Acquiring Fund
Lending Portfolio Securities. The Funds may also seek to increase their
income by lending portfolio securities. The total value of the securities
loaned at any time will not be permitted to exceed 30% of a Fund's
respective total assets. As with other extensions of credit, there are
risks of delay in recovery or even loss or 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 Fund's
management to be of good standing and when, in the judgment of a Funds'
management, the consideration to be earned justified the attendant risk.
Repurchase Agreements. Both Funds may invest in repurchase agreements. A
repurchase agreement is an agreement under which a Fund 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 a Fund and is unrelated to the interest rate on the underlying
instrument. No more than an aggregate of 10% of a Fund's respective 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 a Fund's assets with respect
to investments in repurchase agreements having maturities of less than
seven days.
Foreign Investments.
The Acquiring Fund and the Acquired Fund may also invest up to 100% of their
assets in securities principally traded on foreign securities markets and in
securities of foreign issuers that trade on U.S. securities markets, including
American Depository Receipts. Both Funds may invest in securities of foreign
issuers of both developed and developing countries. The Acquiring Fund will
limit the investments in the debt securities of foreign corporations to those
securities which, at the time of purchase, are determined by the Investment
Adviser to have a quality comparable to securities receiving investment grade
<PAGE>
ratings (BBB by S&P or Fitch, or Baa by Moody's) or higher. Unlike the Acquiring
Fund, the Acquired Fund also invests in options on foreign currencies.
II. When, based on an analysis of numerous economic and monetary factors,
the Investment Adviser expects a deflationary cycle:
Each Fund will invest up to 90% of its respective total assets in U.S. or
foreign government and government agency fixed income securities of sufficiently
long maturities to realize their objective of long-term capital appreciation.
During such periods, each Fund will hold the balance of its assets in short-term
U.S. or foreign denominated securities.
III. If, in the opinion of the Investment Adviser, there are periods when there
is a very small rate of change in the Consumer Price Index, and other leading
economic indicators offer no evidence of inflationary or deflationary trends,
each Fund may invest up to 100% of its respective assets in cash or cash
equivalents (in U.S. dollars and foreign currencies) and high-quality short-term
securities, including money market securities (such as certificates of deposit,
commercial paper and bankers' acceptances) and repurchase agreements.
The money market instruments in which the Acquiring Fund may invest will have a
minimum credit rating of AAA by S&P or Aaa by Moody's, and the money market
instruments in which the Acquired Fund may invest will have a minimum credit
rating of AA by S&P or Aa by Moody's. Both Funds will invest only in commercial
paper which has the highest ratings assigned by Moody's, S&P, and Fitch. The
above references to ratings apply to a security at the time of purchase. If such
securities are unrated, then they shall be selected only if the Investment
Adviser has determined that they are of comparable quality to the ratings of
each Fund's permitted investments.
Investment Restrictions. In addition to the policies and limitations set forth
above, the Funds are subject to certain additional investment policies and
limitations described in their respective Prospectus and Statements of
Additional Information, each dated May 1, 1999, which set forth in full the
investment objectives, policies and limitations of each Fund under the headings
"What are the Trust's Main Investment Strategies" and "Investment Restrictions,"
all of which are incorporated herein by reference thereto.
The Acquiring Fund is a "diversified investment company," as that term is
defined in the 1940 Act. As a diversified company, the Acquired Fund, with
respect to 75% of its total assets, may not invest more than 5% of its total
assets in the securities of any one issuer (excluding the U.S. government and
its agencies and instrumentalities) or own more than 10% of the outstanding
voting securities of any one issuer. The Acquired Fund is a non-diversified
fund, and as such it is not subject to the foregoing restriction.
Unlike the Acquiring Fund, the Acquired Fund has a concentration policy that
it will not invest in a company in any single industry, if, immediately after
such investment, more than 25% of the Acquired Fund'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. The Acquiring Fund typically will invest 25% or more of its total
assets in global natural resource industries.
The Acquired Fund 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 Acquired Fund 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 its Statement of
Additional Information under "Investment Strategies and Risks." Neither the
Acquired Fund nor the Acquiring Fund may issue senior securities.
Unlike the Acquired Fund, the Acquiring Fund has been restricted from investing
directly in: (a) physical commodities or in other natural resource assets or
contracts related to natural resource assets; (b) option transactions involving
portfolio securities and securities indices; (c) options or foreign currencies,
or (d) financial futures and related options.
<PAGE>
COMPARATIVE INFORMATION ON DISTRIBUTION ARRANGEMENTS
There are no sales charges or other distribution fees imposed on the shares of
either Fund.
COMPARATIVE INFORMATION ON SHAREHOLDER SERVICES
The Funds offer the same shareholder services, including: reinvestment
privileges; the ability to establish Open Accounts as described in each Fund's
Prospectus under the section entitled "Services for Shareholders--Open
Accounts;" the ability to invest by mail; and the ability to redeem shares or
request a Fund to repurchase its shares. Because each Fund currently offers the
same shareholder services, after the closing of the proposed Reorganization, the
same services will continue to be available to the shareholders of the Acquired
Fund.
FISCAL YEAR
Each Fund operates on a fiscal year ending December 31.
COMPARATIVE INFORMATION ON SHAREHOLDER RIGHTS
Each Fund is a Massachusetts business trust governed by its Articles of
Incorporation and By-laws. The rights of shareholders of each Fund are
identical. Each share of a Fund represents an equal proportionate interest in
the assets and liabilities belonging to that Fund. As such, each share is
entitled to dividends and distributions out of the income (after expenses)
belonging to that Fund as declared by the Board of Trustees. The foregoing is
only a summary of certain of the provisions of each Fund's Articles of
Incorporation and By-laws. Shareholders should refer directly to the provisions
of the Articles of Incorporation and By-laws for their full text.
MANAGEMENT
The business affairs of each Fund are managed by its respective Board of
Trustees. The investment adviser for each of the Funds is Anchor Investment
Management Corporation. The Investment Adviser is charged with the overall
responsibility for managing the investment portfolios and business affairs of
the Funds, subject to the authority of each Fund's Board of Trustees. As of
December 31, 1998, the Investment Adviser had assets of approximately
$22,470,050 under management. The persons who are primarily responsible for the
day-to-day management of the Funds' portfolios are Paul Jaspard and his son,
Alain Jaspard. Paul Jaspard, who is a Vice President of the Investment Adviser,
is President of Linden Investment Advisors, S.A., an investment advising firm
headquartered in Belgium, and has been actively engaged in the investment
counseling business for more then 20 years for a wide variety of individual and
institutional clients, including mutual funds. Alan Jaspard, who is also a Vice
President of the Investment Adviser, has been engaged continuously in the
investment management business, including the management of investment company
assets, since September 1997. From September, 1996 to September, 1997, he was
employed as an investment analyst with Global Equity Managers, an investment
advisory firm based in Luxenbourg. From September, 1993 to September, 1996, he
was employed as the head of personnel recruitment and training for a Belgian
transportation firm.
The maximum annual investment advisory fee for the Acquiring Fund is 0.75% of
average daily net assets. The maximum annual investment advisory fee for the
Acquired Fund is 1.50% of average daily net assets.
For its fiscal year ended December 31, 1998, the Acquired Fund's ratio of
expenses to average daily net assets was 2.54%.
Based on expenses during the fiscal year ending December 31, 1998, the total
operating expenses anticipated for the Acquired Fund are 1.27%.
For its fiscal year ended December 31, 1998, the Acquiring Fund's ratio of
expenses to average daily net assets was 1.50%.
<PAGE>
The Investment Adviser and 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.
For each of the Funds, Investors Bank & Trust Company serves as Custodian,
Cardinal Investment Services, Inc. serves as transfer agent and dividend paying
agent and provides administrative and portfolio accounting services, and
Livingston & Haynes, P.C. are the Independent Public Accountants. Each of the
foregoing service providers provide such services to the Funds at comparable
terms.
ADDITIONAL INFORMATION ABOUT THE FUNDS
Information about the Acquiring Fund is included in its current Prospectus,
dated May 1, 1999, a copy of which is included herewith and incorporated herein
by reference. Additional information about the Acquiring Fund is included in its
Statement of Additional Information, dated May 1, 1999. The Acquiring Fund's
Statement of Additional Information is accompanied by the Acquiring Fund's
Annual Report for the year ended December 31, 1998, both of which have been
filed with the Securities and Exchange Commission and both of which are
incorporated herein by reference. The Statement of Additional Information
relating to this Joint Prospectus/Proxy Statement has been filed with the
Securities and Exchange Commission and is also incorporated herein by reference.
Copies of the Acquiring Fund's Statement of Additional Information, Annual
Report, and the Statement of Additional Information relating to this Joint
Prospectus/Proxy Statement may be obtained without charge by writing to Anchor
Strategic Assets Trust, 579 Pleasant Street, Suite 4, Paxton, Massachusetts
01612, or by calling collect (508) 831-1171.
The Acquiring Fund is subject to the informational requirements of the
Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as
amended, and the 1940 Act, and in accordance therewith files proxy material,
reports and other information with the Securities and Exchange Commission.
Reports, proxy and information statements filed by the Acquiring Fund can be
obtained by calling or writing the Acquiring Fund and can also be inspected and
copied by the public at the Public Reference Facilities maintained by the
Securities and Exchange Commission in Washington, D. C. located at Room 1024,
450 Fifth Street, NW, Washington, DC 20549, as well as at the following regional
offices: New York Regional Office, 14th Floor, 75 Park Place, New York, NY
10007; and Chicago Regional Office, Room 1204, Everett McKinley Dirksen
Building, 219 South Dearborn Street, Chicago, IL 60604. Copies of such material
can also be obtained from the Public Reference Branch, Office of Consumer
Affairs and Information Services, Securities and Exchange Commission, 450 Fifth
Street, NW, Washington, DC 20549 at prescribed rates, or obtained electronically
from the Securities and Commission's Internet Web site (http://www.sec.gov).
This Joint Prospectus/Proxy Statement, which constitutes part of a Registration
Statement filed by the Acquiring Fund with the Securities and Exchange
Commission under the Securities Act of 1933, as amended, omits certain of the
information contained in the Registration Statement. Reference is hereby made to
the Registration Statement and to the exhibits thereto for further information
with respect to the Acquiring Fund and the shares offered hereby. Statements
contained herein concerning the provisions of documents are necessarily
summaries of such documents, and each such statement is qualified in its
entirety by reference to the copy of the applicable documents filed with the
Securities and Exchange Commission.
Information about the Acquired Fund may be found in the Acquired Fund's current
Prospectus dated May 1, 1999, and its Statement of Additional Information dated
May 1, 1999, which are incorporated herein by reference. Audited Financial
Statements for the Acquired Fund for the year ended December 31, 1999 may be
found in the Acquired Fund's Annual Report, dated December 31, 1998, which is
incorporated herein by reference. Copies of the Acquired Fund's Annual Report,
Prospectus and Statement of Additional Information may be obtained without
charge from the Acquired Fund by calling collect (508) 831-1171 or by writing to
the Acquired Fund at 579 Pleasant Street, Suite 4, Paxton, Massachusetts 01612.
<PAGE>
The Acquired Fund is subject to the information requirements of the Securities
Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, and
the 1940 Act, and in accordance therewith files proxy material, reports and
other information with the Securities and Exchange Commission. Reports, proxy
and information statements filed by the Acquired Fund can be obtained by calling
or writing the Acquired Fund and can also be inspected and copied by the public
at the Public Reference Facilities maintained by the Securities and Exchange
Commission at the addresses listed in the previous section. Such information may
also be obtained electronically from the Securities and Exchange Commission's
Internet Web site.
PROPOSED ELIMINATION OF FUNDAMENTAL INVESTMENT RESTRICTION (PROPOSAL 2)
The Acquiring Fund is seeking approval of its shareholders of the elimination of
its fundamental investment restriction which prohibits investments of the
Acquiring Fund's assets in commodities or commodity contracts. The immediate
purpose of eliminating this restriction is to enable the Acquiring Fund to
acquire the precious metals, such as gold and silver bullion, platinum and
palladium and other commodities which from time to time may constitute a portion
of the Acquired Fund's assets, as provided under the Plan of Reorganization
described in this Prospectus/Joint Proxy Statement. Currently the Acquired Fund
does not own any such commodities. Approval of this Proposal by the holders of a
majority of the outstanding shares of the Acquiring Fund (within the meaning of
the 1940 Act as defined hereinafter) is a condition to implementation of the
Plan of Reorganization. In deciding to recommend to the shareholders approval of
this proposal, the Acquiring Fund's Board of Trustees determined that permitting
investments in commodities and commodities contracts enhances the flexibility of
the trust's investment strategies in a manner fully consistent with its emphasis
on natural resource - related investments. Because the Acquiring Fund is, and
will continue to be, limited by its fundamental objectives and policies as to
the types of securities in which it will focus its investments, elimination of
the restriction on commodity investments will not significantly change the way
in which the Acquiring Fund's assets are managed. There are certain unique risks
associated with investments in commodities or commodities contracts. Before
voting on this proposal, shareholders of the Acquiring Fund are urged to read
the section in this Prospectus/Joint Proxy Statement entitled "PRINCIPAL RISK
FACTORS - Commodities." The Board of Trustees of the Acquiring Fund recommends
that shareholders of the Acquiring Fund vote for this Proposal 2.
VOTING INFORMATION
This Prospectus/Joint Proxy Statement is furnished in connection with the
solicitation by the Board of Trustees of the Acquired Fund and the Acquiring
Fund of proxies for use at the Special Meetings of Shareholders of the Funds
(the "Meeting") to be held on August 4, 1999. The proxies confer discretionary
authority on the persons designated therein to vote on other business not
currently contemplated which may properly come before the Meeting. A proxy, if
properly executed, duly returned and not revoked, will be voted in accordance
with the specifications thereon; if no instructions are given, such proxies will
be voted in favor of the Plan of Reorganization (Proposal 1) in the case of the
Acquired Fund shareholder proxies, and in favor of elimination of investment
restrictions on commodities (Proposal 2) in the case of the Acquiring Fund
shareholders and, in the discretion of the persons named herein as proxies, to
take such further action as they may determine appropriate in connection with
any other matter which may properly come before the Meeting or any adjournments
thereof. A shareholder may revoke a proxy at any time prior to use by filing
with the Secretary of the applicable Fund an instrument revoking the proxy, or
by submitting a proxy bearing a later date, or by attending and voting at the
meeting. Proxies, instruments revoking a proxy, or proxies bearing a later date
may be received by telephone, by electronic means, including facsimile, or by
mail.
The cost of the solicitation, including the printing and mailing of proxy
materials, will be borne by the Acquiring Fund. In addition to solicitations
through the mails, proxies may be solicited by officers, employees, and agents
of the Funds at no additional costs to the Funds. Such solicitations may be by
<PAGE>
telephone, telegraph, or otherwise. Any telephonic solicitations will follow
procedures designed to ensure accuracy and prevent fraud, including requiring
identifying shareholder information, recording the shareholder's instructions,
and confirming to the shareholder after the fact. Shareholders who communicate
proxies by telephone or by other electronic means have the same power and
authority to issue, revoke, or otherwise change their voting instruction as
currently exists for instructions communicated in written form. The Investment
Adviser will reimburse custodians, nominees, and fiduciaries for the reasonable
costs incurred by them in connection with forwarding solicitation materials to
the beneficial owners of shares held of record by such persons.
The Boards of Trustees of the Acquired Fund and the Acquiring Fund have fixed
the close of business on July 1, 1999 as the record date (the "Record Date") for
the determination of shareholders entitled to notice of and to vote at the
Meeting and any adjournment thereof. As of the Record Date, there were
approximately 787,014 issued and outstanding shares of the Acquired Fund, and
115,683 issued and outstanding shares of the Acquiring Fund. Each Acquired Fund
and Acquiring Fund share is entitled to one vote and fractional shares have
proportionate voting rights.
On the Record Date the following persons of record, each acting in various
capacities for numerous accounts, owned of record more than 5% of the Acquiring
Fund's outstanding shares:
Name and Address of Holder Percentage of Shares Owned
Wendel & Co. 60.913
23 Rue Droust
75009, Paris, Francis
Merrill Lynch 38.88
250 Vessey Street
World Financial Center
New York, NY 10281
On the Record Date, the Trustees and officers of the Acquired Fund, as a group,
and the Trustees and officers of the Acquiring Fund, as a group, each owned less
than 1% of the outstanding shares of their respective Funds.
The following entity, as of July 1, 1999, owned or was the shareholder of record
of 60.8% of the outstanding shares of the Acquired Fund and 99.5% of the
outstanding shares of the Acquiring Fund:
Name and Address of
Holder
Wendel & Co.*
23 Rue Drouot
75009, Paris, France
* Wendel & Co. is an indirect nominee of Societe d'Etudes et de Gestion
Financieres, Meeschaert, S.A. 23 Rue Drouot, Paris, France, a privately owned
corporation organized under the laws of France ("Societe D'Etudes"). The
Funds' investment adviser and distributor are affiliated through common
control with Societe d'Etudes. Societe d'Etudes was the beneficial owner of
60.8% of the outstanding shares of the Acquired Fund and 99.5% of the
outstanding shares of the Acquiring Fund.
Shareholders owning 25% or more of outstanding Fund shares may be in control and
be able to affect the outcome of certain matters presented for a vote of
shareholders.
<PAGE>
The names, addresses and share ownership of the entities that would beneficially
own of record more than 5% of the outstanding shares of the pro forma combined
Acquiring Fund upon consummation of the Reorganization are the same as those
shown in the preceding table.
The Investment Adviser's affiliates have indicated to the Acquired Fund and the
Acquiring Fund that with respect to their shares of each Fund they intend to
vote for and against the proposal in the same relative proportion as do the
other shareholders of each Fund who cast votes at the Meeting.
The Board of Trustees of the Acquired Fund currently does not know of any matter
to be considered at such Fund's Meeting other than the proposal to approve the
Plan of Reorganization.
The Board of Trustees of the Acquiring Fund currently does not know of any
matter to be considered at such Fund's Meeting other then the proposal to
approve the elimination of the investment restriction on investments in
commodities or commodity contracts.
The affirmative vote of the holders of a majority of the outstanding shares of
the Acquired Fund (within the meaning of the 1940 Act) is required to approve
the Plan of Reorganization on behalf of the Acquired Fund in accordance with its
Declaration of Trust and By-laws. Similarly, the affirmative vote of the holders
of a majority of the outstanding shares of the Acquiring Fund (within the
meaning of the 1940 Act) is required to approve the elimination of restrictions
on investments in commodities or commodity contracts. Under the 1940 Act, the
vote of a majority of the outstanding shares means the favorable vote of the
lesser of (a) 67% or more of the voting securities present at the Meeting, if
the holders or more than 50% of the outstanding shares of the fund are present
or represented by proxy or (b) more than 50% of the outstanding voting
securities of the fund. Approval of the Plan of Reorganization by the
shareholders of the Acquired Fund, and approval of the elimination of the
investment restriction on commodities investments by the Acquiring Fund
shareholders are conditions of the consummation of the Reorganization. If such
proposals are not approved, the Trustees of the Acquired Fund will continue the
management of the Acquired Fund and may consider other alternatives in the best
interests of the Acquired Fund's shareholders.
For purposes of determining the presence of a quorum for transacting business at
the Meeting and for determining whether sufficient votes have been received for
approval of the proposal to be acted upon at the Meeting, abstentions and broker
"non-votes" (that is, proxies from brokers or nominees indicating that such
persons have not received instructions from the beneficial owner or other
persons entitled to vote shares on a particular matter with respect to which the
brokers or nominees do not have discretionary power) will be treated as shares
that are present at the Meeting, but which have not been voted. For this reason,
abstentions and broker non-votes will assist the Acquired Fund and the Acquiring
Fund in obtaining a quorum, but both have the practical effect of a "no" vote
for purposes of obtaining the requisite vote for approval of the proposals to be
acted upon at the Meeting.
The holders of a majority of the shares of the Acquired Fund and the Acquiring
Fund outstanding at the close of business on the Record Date present in person
or represented by proxy constitute a quorum for the respective Meetings however,
as noted above, the affirmative vote of a majority of the shares of each such
Fund is required to approve the proposals to be voted on at the Meeting
applicable to such Fund. In the event a quorum is not present at the Meeting or
in the event a quorum is present at the Meeting but sufficient votes to approve
the proposals are not received, the persons named as proxies may propose one or
more adjournments without further notice to shareholders of the Meeting to
permit further solicitation of proxies. Any such adjournment will require the
affirmative vote of a plurality of shares that are represented at the Meeting in
person or by proxy. If a quorum is present, the persons named as proxies will
vote those proxies which they are entitled to vote FOR the proposals in favor of
such adjournments, and will vote those proxies required to be voted AGAINST such
proposal against any adjournment. Proxies properly executed and marked with a
negative vote or an abstention will be considered to be present at the Meting
for purposes of determining the existence of a quorum for the transaction of
business.
Shareholders of the Acquired Fund objecting to the Reorganization have no
appraisal rights under the Acquired Fund's Declaration of Trust or under the
laws of the Commonwealth of Massachusetts. Shareholders have the right, however,
to redeem their Acquired Fund shares at net asset value until the Closing Date,
and thereafter shareholders may redeem Acquiring Fund Shares acquired by them in
the Reorganization at net asset value.
<PAGE>
THE TRUSTEES OF THE ACQUIRED FUND, INCLUDING THE INDEPENDENT TRUSTEES OF THE
ACQUIRED FUND, RECOMMEND APPROVAL BY THE ACQUIRED FUND'S SHAREHOLDERS OF THE
PLAN OF REORGANIZATION (PROPOSAL 1).
THE TRUSTEES OF THE AQUIRING FUND, INCLUDING THE INDEPENDENT TRUSTEES OF THE
ACQUIRING FUND, RECOMMEND APPROVAL BY THE ACQUIRING FUND'S SHAREHOLDERS OF THE
ELIMINATION OF THE TRUST'S FUNDAMENTAL RESTRICTION ON INVESTMENTS IN COMMODITIES
OR COMMODITY CONTRACTS (PROPOSAL 2).
EXPERTS
Audited financial statements of each Fund are included in each Fund's respective
Annual Report. A Fund's Annual Reports must accompany its respective Statement
of Additional Information when delivered to shareholders. The Annual Report of
each Fund is incorporated herein by reference in reliance on the reports of
Livingston & Haynes, P.C., independent public accountants, given on the
authority of that firm as experts in accounting and auditing. Certain legal
matters with respect to the issuance of the shares of the Acquiring Fund will be
passed upon by Thorp Reed & Armstrong, Pittsburgh, Pennsylvania.
OTHER MATTERS
The Board of Trustees does not intend to present any other business at the
Meeting, nor are they aware that any shareholder intends to do so. If, however,
any other matters are properly brought before the Meeting, the persons named in
the accompanying proxy will vote thereon in accordance with their judgment.
NO ANNUAL MEETING OF SHAREHOLDERS
There will be no annual or further special meetings of shareholders of the
Acquired Fund or the Acquiring Fund unless required by applicable law or called
by the Trustees of the Acquired Fund or the Acquiring Fund in their discretion.
Shareholders wishing to submit proposals for inclusion in a proxy statement for
subsequent shareholder meeting should send their written proposals to the
Secretary of the Company, 579 Pleasant Street, Suite 4, Paxton, Massachusetts
01612. Shareholder proposals should be received in a reasonable time before
the solicitation is made.
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE FILL IN, DATE AND SIGN THE
ENCLOSED PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE. NO POSTAGE IS
NECESSARY IF IT IS MAILED IN THE UNITED STATES.
<PAGE>
EXHIBIT A
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION dated as of June 21, 1999 by and between
Anchor Strategic Assets Trust, a Massachusetts business trust (the "Acquired
Fund"), and Anchor Resource and Commodity Trust, a Massachusetts business trust
(the "Acquiring Fund," and together with the Acquired Fund, the "Funds").
WITNESSETH:
WHEREAS, each Fund is an open-end management investment company registered under
the Investment Company Act of 1940, as amended (the "1940 Act");
WHEREAS, this Plan is intended to be, and is adopted as, a plan of
reorganization and liquidation within the meaning of Section 368(a)(1)(C) of the
Internal Revenue Code of 1986, as amended, such reorganization to consist of the
transfer of all of the assets of the Acquired Fund in exchange solely for shares
of common stock of the Acquiring Fund ("Acquiring Fund Shares") and the
assumption by the Acquiring Fund of certain liabilities of the Acquired Fund and
the distribution, after the Closing hereinafter referred to, of Acquiring Fund
Shares to the shareholders of the Acquired Fund in liquidation of the Acquired
Fund, all upon the terms and conditions hereinafter set forth in this Plan; and
WHEREAS, the Trustees of each Fund, including a majority of the Trustees of each
Fund who are not interested persons, have determined that participating in the
transaction contemplated by this Plan is in the best interests of each Fund.
NOW, THEREFORE, in consideration of the mutual promises herein contained, the
parties hereto agree as follows:
1. Transfer of Assets. Subject to the terms and conditions set forth herein, at
the closing provided for in Section 3 (the "Closing"), the Acquired Fund shall
transfer all of its assets, and assign all Assumed Liabilities (as hereinafter
defined) to the Acquiring Fund, and the Acquiring Fund shall acquire all such
assets, and shall assume all such Assumed Liabilities, upon delivery to the
Acquired Fund of Acquiring Fund Shares having a net asset value equal to the
value of the net assets of the Acquired Fund transferred (the "New Shares").
"Assumed Liabilities" shall mean all liabilities, including all expenses, costs,
charges and reserves, reflected in an unaudited statement of assets and
liabilities of the Acquired Fund as of the close of business on the Valuation
Date (as hereinafter defined), determined in accordance with generally accepted
accounting principles consistently applied from the prior audited period. The
net asset value of the New Shares and the value of the net assets of the
Acquired Fund to be transferred shall be determined as of the close of regular
trading on the New York Stock Exchange on the business day immediately prior to
the Closing (the "Valuation Date") using the valuation procedures set forth in
the then current prospectus and statement of additional information of the
Acquiring Fund. All Assumed Liabilities of the Acquired Fund, to the extent that
they exist at or after the Closing, shall after the Closing attach to the
Acquiring Fund and may be enforced against the Acquiring Fund to the same extent
as if the same had been incurred by the Acquiring Fund.
2. Liquidation of the Acquired Fund. At or as soon as practicable after the
Closing, the Acquired Fund will be liquidated and the New Shares will be
distributed to the shareholders of the Acquired Fund, each shareholder to
receive New Shares equal to the pro rata portion of shares of beneficial
interest of the Acquired Fund held by such shareholder as of the close of
business on the Valuation Date. Such liquidation and distribution will be
accompanied by the establishment of an open account on the share records of the
Acquiring Fund in the name of each shareholder of the Acquired Fund and
representing the respective pro rata number of New Shares due such shareholder.
As soon as practicable after the Closing, the Trustees of the Acquired Fund
shall take all steps necessary to effect a complete liquidation and dissolution
of the Acquired Fund. As of the Closing, each outstanding certificate which,
prior to the Closing, represented shares of the Acquired Fund will be deemed for
A-1
<PAGE>
all purposes to evidence ownership of the number of Acquiring Fund Shares
issuable with respect thereto pursuant to the Reorganization. After the Closing,
certificates originally representing shares of the Acquired Fund will be
rendered nonnegotiable; upon special request and surrender of such certificates
to the transfer agent, holders of these nonnegotiable certificates shall be
entitled to receive certificates representing the number of Acquiring Fund
Shares issuable with respect thereto.
3. Conditions Precedent. The obligations of the Acquired Fund and the
Acquiring Fund to effectuate the plan of reorganization and liquidation
hereunder with respect to such Acquired Fund shall be subject to the
satisfaction of the following conditions:
(a) At or immediately prior to the Closing, the Acquired Fund shall have
declared and paid a dividend or dividends which, together with all
previous such dividends, shall have the effect of distributing to the
shareholders of the Acquired Fund all of the Acquired Fund's investment
company taxable income for taxable years ending at or prior to the Closing
(computed without regard to any deduction for dividends paid) and all of
its net capital gain, if any, realized in taxable years ending at or prior
to the Closing (after reduction for any capital loss carry-forward);
(b) A registration statement of the Company on behalf of the Acquiring
Fund on Form N-14 under the Securities Act of 1933, as amended (the
"Securities Act"), registering the New Shares under the Securities Act,
and such amendment or amendments thereto as are determined by the Board of
Trustees of the Acquiring Fund to be necessary and appropriate to effect
such registration of the New Shares (the "Registration Statement"), shall
have been filed with the Securities and Exchange Commission (the
"Commission") and the Registration Statement shall have become effective,
and no stop-order suspending the effectiveness of such Registration
Statement shall have been issued, and no proceeding for that purpose shall
have been initiated or threatened by the Commission (and not withdrawn or
terminated);
(c) The New Shares shall have been duly qualified for offering to the
public in all states in which such qualification is required for
consummation of the transactions contemplated hereunder;
(d) The Acquiring Fund and the Acquired Fund shall have received an
opinion from Thorp Reed & Armstrong regarding certain tax matters in
connection with the Reorganization;
(e) The Acquiring Fund shall have received a limited review report, in
accordance with established accounting standards for such reports, of
Livingston & Haynes, P.C., auditors for the Acquiring Fund, as to the
unaudited statement of assets and liabilities described in Section 1 of
this Plan; and
(f) A vote approving this plan of reorganization contemplated hereby shall
have been adopted by at least a majority of the outstanding shares of
common stock of the Acquired Fund entitled to vote at the special meeting
of shareholders of the Acquired Fund duly called for such purpose.
(g) A vote approving the elimination of an investment restriction
concerning investments in commodities and commodity contracts shall have
been adopted by at least a majority of the outstanding shares of common
stock of the Acquiring Fund entitled to vote at a special meeting of
shareholders of the Acquiring Fund duly called for such purpose.
4. Closing. The Closing shall be held at the offices of Anchor Investment
Management Corporation, and shall occur (a) immediately prior to the opening of
business on the first Monday following receipt of all necessary regulatory
approvals and the final adjournment of the meeting of shareholders of the
Acquired Fund at which this Plan is considered or (b) such later time as the
parties may agree. All acts taking place at the Closing shall be deemed to take
place simultaneously unless otherwise provided. At, or as soon as may be
practicable following, the Closing, the Acquiring Fund shall distribute the New
Shares to the Acquired Fund Record Holders (as herein defined) by instructing
the Acquiring Fund to register the appropriate number of New Shares in the names
of the Acquired Fund's shareholders, and the Acquiring Fund agrees promptly to
comply with said instruction. The shareholders of record of the Acquired Fund as
of the close of business on the Valuation Date shall be certified by the
Acquiring Fund's transfer agent (the "Acquired Fund Record Holders").
A-2
<PAGE>
5. Expenses. The expenses incurred in connection with the transaction
contemplated by this Plan, whether or not the transaction contemplated hereby
is consummated, will be borne by the Acquiring Fund.
6. Termination. This Plan and the transactions contemplated hereby may be
terminated and abandoned by the Acquired Fund by resolution of its Board of
Trustees at any time prior to the Closing if circumstances should develop that,
in the opinion of the Board of Trustees, in its sole discretion, make proceeding
with this Plan inadvisable. In the event of any such termination, there shall be
no liability for damages on the part of the Acquired Fund or the Acquiring Fund,
or to either Fund's Trustees or officers, or to any other person.
7. Amendments. This Plan may be amended, waived or supplemented in such manner
as may be mutually agreed upon in writing by the authorized officers of each
Fund; provided, however, that following the meeting of the Acquired Funds'
shareholders pursuant to Section 3(f) of this Plan, no such amendment, waiver or
supplement may have the effect of changing the provisions for determining the
number of Acquiring Fund Shares to be issued to the Acquired Funds' shareholders
under this Plan to the detriment of such shareholders without their further
approval.
8. Governing Law. This Plan shall be governed and construed in accordance
with the laws of the Commonwealth of Massachusetts, except as to matters of
conflicts of laws.
9. Further Assurances. The Funds and their appropriate officers shall
take such further action, prior to, at, and after the Closing, as may be
necessary or desirable and proper to consummate the transaction contemplated
hereby.
A-3
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
ACQUISITION OF ASSETS OF
ANCHOR STRATEGIC ASSETS TRUST
579 PLEASANT STREET, SUITE 4
PAXTON, MASSACHUSETTS 01612
(508) 831-1171
BY
ANCHOR RESOURCE AND COMMODITY TRUST
579 PLEASANT STREET, SUITE 4
PAXTON, MASSACHUSETTS 01612
(508) 831-1171
This Statement of Additional Information, which is not a prospectus, supplements
and should be read in conjunction with, the Prospectus/Joint Proxy Statement
dated July 23, 1999. A copy of the Prospectus/Joint Proxy Statement may be
obtained without charge by calling or writing the Acquiring Fund collect at the
telephone number set forth above or by writing the Acquiring Fund at the address
set forth above.
The date of this Statement of Additional Information is July 23, 1999.
B-1
<PAGE>
TABLE OF CONTENTS
This Statement of Additional Information, relating specifically to the proposed
transfer of the assets of Anchor Strategic Assets Trust (the "Acquired Fund"),
in exchange for shares of common stock of, and the assumption of certain
liabilities by, Anchor Resource and Commodity Trust (the "Acquiring Fund"),
consists of this page and the following described documents, each of which is
attached hereto and incorporated by reference herein:
1. Statement of Additional Information of the Acquiring Fund dated May 1, 1999;
2. Prospectus of the Acquired Fund dated May 1, 1999;
3. Statement of Additional Information of the Acquired Fund dated May 1,1999;
4. Annual Report of the Acquired Fund for the year ended December 31, 1998;
5 Annual Report of the Acquiring Fund for the year ended December 31, 1998;
6. Information Incorporated by Reference; and
7. Pro forma financial statements for the Acquiring Fund.
B-2
<PAGE>
INFORMATION INCORPORATED BY REFERENCE
1. The Prospectus and Statement of Additional Information of Anchor Resource
and Commodity Trust (the "Acquiring Fund") is incorporated by reference to
the Acquiring Fund's Post-Effective Amendment No. 5 to its Registration
Statement on Form N-1A (File No. 33-82998), which was filed with the
Securities and Exchange Commission on April 29, 1999. A copy may be obtained
from the Acquiring Fund at 579 Pleasant Street, Suite 4, Paxton,
Massachusetts 01612. Telephone: (508) 831-1171.
2. The Prospectus and the Statement of Additional Information of Anchor
Strategic Assets Trust (the "Acquired Fund") is incorporated by reference to
the Acquired Fund's Post-Effective Amendment No. 8 to its Registration
Statement on Form N-1A (File No. 33-32262), which was filed with the
Securities and Exchange Commission on April 29, 1999. Copies may be obtained
from the Acquired Fund at 579 Pleasant Street, Suite 4, Paxton,
Massachusetts 01612. Telephone: (508) 831-1171.
3. The audited financial statements of the Acquiring Fund are incorporated by
reference to the Acquiring Fund's Annual Report which was filed with the
Securities and Exchange Commission pursuant to Section 30(b)2 of the Investment
Company Act of 1940, as amended, on February 22, 1999.
4. The audited financial statements of the Acquired Fund are incorporated by
reference to the Acquired Fund's Annual Report which was filed with the
Securities and Exchange Commission pursuant to Section 30(b)2 of the Investment
Company Act of 1940, as amended, on February 22, 1999.
B-3
<PAGE>
ANCHOR STRATEGIC ASSETS TRUST
ANCHOR RESOURCE AND COMMODITY TRUST
NOTES TO PRO FORMA FINANCIAL STATEMENTS (UNAUDITED)
The accompanying unaudited Anchor Resource and Commodity Trust Pro Forma
Combining Statement of Assets and Liabilities reflects the accounts of the
Acquiring Fund and the Acquired Fund at and for the most recent fiscal year-end
of such Funds at December 31, 1998. The accompanying unaudited Anchor Resource
and Commodity Trust Pro Forma Combining Statement of Operations has been derived
from the audited financial statements of each Fund as of December 31, 1998.
The Pro Forma Financial Statements should be read in conjunction with the
historical financial statements of the Funds which have been incorporated by
reference in the Statement of Additional Information. The Funds follow generally
accepted accounting principals applicable to management investment companies
which are disclosed in the historical financial statements of each Fund.
The Pro Forma statements give effect to the proposed transfer of assets from the
Acquired Fund in exchange for shares of the Acquiring Fund. Under generally
accepted accounting principles, Anchor Resource and Commodity Trust will be the
surviving entity for accounting purposes.
B-4
<PAGE>
ANCHOR RESOURCE AND COMMODITY TRUST
579 Pleasant Street, Suite 4
Paxton, Massachusetts 01612
(508) 831-1171
STATEMENT OF ADDITIONAL INFORMATION
Dated May 1, 1999
This Statement of Additional Information (SAI) is not a prospectus but should be
read in conjunction with the current Prospectus of Anchor Resource and Commodity
Trust (the "Trust") dated May 1, 1999, and the financial statements contained in
the Trust's Annual Report for the year ended December 31, 1998. The Trust's
Annual Report is incorporated by reference in this SAI. You may obtain the
Trust's Prospectus and Annual Report without charge by writing or calling the
Trust collect at (508) 831-1171.
1
<PAGE>
TABLE OF CONTENTS
THE TRUST..................................................................B-1
INVESTMENT STRATEGIES AND RISKS............................................B-1
Investment Strategy..................................................B-1
Lending..............................................................B-3
Repurchase Agreements................................................B-3
Investment Risks.....................................................B-5
PORTFOLIO TURNOVER.........................................................B-5
INVESTMENT RESTRICTIONS....................................................B-6
MANAGEMENT OF THE TRUST....................................................B-8
Officers and Trustees................................................B-8
Compensation of Officers and Trustees...............................B-10
Principal Holders of Securities ....................................B-10
Investment Adviser..................................................B-10
Investment Advisory Contract........................................B-11
Administrator.......................................................B-12
Principal Underwriter...............................................B-12
CAPITALIZATION............................................................B-12
PURCHASE, REDEMPTION AND PRICING OF SHARES................................B-13
Purchase of Shares..................................................B-13
Determination of Net Asset Value....................................B-14
Redemption and Repurchase of Shares.................................B-14
Redemptions in Kind.................................................B-15
DISTRIBUTIONS ............................................................B-15
TAXES.....................................................................B-16
General.............................................................B-16
PORTFOLIO SECURITY TRANSACTIONS ..........................................B-17
OTHER INFORMATION.........................................................B-18
Custodian, Transfer Agent and Dividend-Paying Agent ................B-18
Independent Public Accountants .....................................B-18
Registration Statement .............................................B-18
FINANCIAL STATEMENTS......................................................B-18
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THE TRUST
Anchor Resource and Commodity Trust (Trust) is a diversified open-end management
investment company and 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 Equity Plus Trust to Anchor Equity Plus Trust and again in
1994 to change the name to Anchor Resource and Commodity Trust.
INVESTMENT STRATEGIES AND RISKS
The Trust's Prospectus describes the investment objectives and policies of the
Trust. The Prospectus also briefly describes specialized techniques that the
Trust may use in order to achieve its investment objectives. There can be no
assurance that the Trust will achieve its investment objectives. The following
discussion is intended to provide further information concerning investment
techniques and risk considerations which the Investment Adviser believes to be
of interest to investors.
Investment Strategy
The Trust's investments will vary depending upon whether the Investment Adviser
anticipates an inflationary or deflationary economic cycle.
The Investment Adviser's determination as to whether the economy is inflationary
or deflationary will be made based upon constant study of numerous economic and
monetary factors. These factors will include, but not necessarily be limited to:
oactual and anticipated rates of change in the Consumer Price Index (CPI) over
specified periods of time; oactual and anticipated changes and rates of changes
in the U.S. dollar in relation to other key currencies, e.g., the German mark,
the British pound and the Japanese yen; oactual and anticipated changes, and
rates of change, in short and long-term interest rates and real interest rates,
i.e., inflation adjusted interest rates; oactual and anticipated changes in the
money supply; and oactual and anticipated governmental fiscal and monetary
policy.
The Investment Adviser believes that, based upon past performance, the
securities of specific companies that hold different types of substantial
resource assets or engage in natural resource-related or energy-related
activities may move relatively independently of one another during different
stages of inflationary or deflationary cycles because of different degrees of
demand for, or market values of, their respective natural resource holdings or
resource-related or energy-related business during particular portions of such
cycles. For example, during the period 1976 to 1980, the prices of oil company
stocks increased relatively more than the price of coal company stocks when
compared to the performance of relevant stock market indices.
The Investment Adviser will seek to identify companies which it believes are
attractively priced relative to the intrinsic value of the underlying resource
assets or resource-related or energy-related business or are especially well
positioned to benefit during particular portions of inflationary or deflationary
cycles. The Trust's approach of active investment management enables it to
switch its emphasis among various industry groups, depending upon the Investment
Adviser's outlook with respect to prevailing economic trends and developments
affecting natural resource demand.
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Investment in U.S. and other government debt securities in anticipation of
deflationary periods is intended to preserve capital, while providing a
relatively secure income, and to provide an opportunity for capital appreciation
if interest rates decline in such deflationary periods.
U. S. government securities include Treasury bills, notes and bonds, which
differ in their interest rates, maturities, and times of issuance. Treasury
bills have maturities of one year or less. Treasury notes have maturities of
one to ten years, and Treasury bonds have maturities of greater than ten
years at the date of issuance. U.S. government securities also include
obligations of agencies and instrumentalities of the U.S. government.
Agencies and instrumentalities of the U.S. government include, but are not
limited to: Federal Land Banks; Farmers Home Administration; Central Bank of
Cooperatives; Federal Intermediate Credit Banks; Federal Home Loan Banks; and
Federal National Mortgage Association.
Some obligations of the U.S. government agencies and instrumentalities, such as
Treasury bills, government National Mortgage Association (GNMA) certificates,
are supported by the full faith and credit of the United States; others, such as
securities of Federal Home Loan Banks, are supported by the right of the issuer
to borrow from the U.S. Treasury; still others, such as bonds issued by the
Federal National Mortgage Association, a private corporation, are supported only
by the credit of the instrumentality. These securities are not insured by the
U.S. government and there can be no assurance that the U.S. government will
support an instrumentality it sponsors. The Trust will invest in the securities
issued by such an instrumentality only when its Investment Adviser determines
that the credit risk with respect to the instrumentality does not make its
securities unsuitable investments.
Foreign securities are securities of issuers based outside the U.S. They are
primarily denominated in foreign currencies and are traded outside of the
U.S. In addition to the risks associated with U.S. securities of the same
type, investments in foreign securities involve risks relating to political,
social and economic developments abroad as well as risks resulting from the
differences between the regulations to which U.S. and foreign issuers and
markets are subject.
These risks may include expropriation, confiscatory taxation,
withholding taxes on dividends and interest, limitations on the use or
transfer of portfolio assets, and political or social instability.
Enforcing legal rights may be difficult, costly and slow in foreign
countries, and there may be special problems enforcing claims against
foreign governments. In addition, foreign companies may not be subject
to accounting standards or governmental supervision comparable to U.S.
companies, and there may be less public information about their
operations.
Foreign markets may be less liquid and more volatile than U.S. markets
and may offer less protection to investors such as the Trust. Equity
securities traded in certain foreign countries may trade at high
price-earnings multiples that are unsustainable.
Since foreign securities often trade in currencies other that the U.S.
dollar, changes in currency exchange rates will affect the Trust's net
asset value, the value of dividends and interest earned, and gains and
losses realized on the sale of securities. An increase in the U.S.
dollar relative to these other currencies will adversely affect the
value of the Trust.
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The Trust may invest in issuers located in developing countries.
Developing countries are generally defined as countries in the
initial stages of their industrialization cycles with low per capita
income.
All the risks of investing in foreign securities are heightened by
investing in developing countries.
The markets of developing countries have been more volatile than
the markets of developed countries with more mature economies. These
markets often have provided higher rates of return, and greater
risks to investors.
If, in the opinion of the Investment Adviser, there are periods when there is a
very small rate of change in the Consumer Price Index, and other leading
economic indicators, such as interest rates and the value of the U.S. dollar,
offer no clear evidence of inflationary or deflationary trends, then, 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.
Lending
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
Repurchase Agreements are transactions in which the Trust buys a security from a
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dealer or bank and agrees to sell the security back at a mutually agreed upon
time and price. The resale price reflects an agreed upon interest rate effective
for the period the instrument is held by the Trust and is unrelated to the
interest rate on the underlying instrument.
The Trust will effect repurchasing agreements only with large well-capitalized
banks whose deposits are insured by the Federal Deposit Insurance Corporation
and which have the capital and undivided surplus of at least $200,000,000. The
instrument acquired by the Trust in these transactions (including accrued
interest) must have a total value in excess of the value of the repurchase
agreement and will be held by the Trust's custodian bank until repurchased.
The Trustees of the Trust will monitor the Trust's repurchase agreement
transactions on a continuous basis and will require that the applicable
collateral will be retained by the Trust's custodian bank. No more than an
aggregate of 10% of the Trust's total assets, at the time of investment, will be
invested in repurchase agreements having maturities longer than seven days and
other investments subject to legal or contractual restrictions on resale, or
which are not readily marketable. There is no limitation on the Trust's assets
with respect to investments in repurchase agreements having maturities of less
than seven days.
Investment Risks
Because of the following considerations, an investment in the Trust should not
be considered a complete investment program.
oInvestment Strategy
The success of the Trust's investment program will be dependent to a high degree
on the Investment Adviser's ability to anticipate the onset and termination of
inflationary and deflationary cycles. A failure to anticipate a deflationary
cycle could result in the Trust's assets being disproportionately invested in
natural resource-related equity securities. 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, including its method of selecting
equity securities, will also be dependent to a high degree on the validity of
the premise that the values of resource-related equity securities will move in a
different direction than the values of U.S. government securities during period
of inflation or deflation. If values of both resource-related equity securities
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 natural resource or U.S.
government securities.
oNatural Resource-Related Companies
The value of natural resources may fluctuate directly with respect to various
stages of the inflationary cycle and perceived inflationary trends and is
subject to numerous factors, including national and international politics. The
Trust's investments in companies are expected to be subject to irregular
fluctuations in earnings, because these companies are effected by changes in the
availability of money, the level of interest rates, and other factors.
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oForeign Investments
Investment on an international basis involves certain risks not involved in
domestic investments, including fluctuations in foreign exchange rates, higher
foreign brokerage costs, costs of currency conversion, currency blockage,
different accounting standards, difficulty in obtaining foreign court judgments,
future political and economic developments, and the possible imposition of
exchange controls or other foreign governmental laws or restrictions. In
addition, the Trust may be unable to obtain accurate or complete information
regarding foreign companies and their securities.
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 country in which
the investment is made.
oRepurchase Agreements
The use of repurchase agreements involves certain risks. For example, if the
seller under a repurchase agreement defaults on its obligation to repurchase the
underlying instrument at a time when the value of the instrument has declined,
the Trust may incur a loss upon its disposition. If the seller becomes insolvent
and subject to liquidation or reorganization under bankruptcy or other laws, a
bankruptcy court may determine that the underlying instrument is collateral for
a loan by the Trust and therefore is subject to sale by the trustee in
bankruptcy.
Finally, it is possible that the Trust may not be able to substantiate its
interest in the underlying instrument.
Prepayment Risks Associated with GNMA Certificates
GNMA certificates have yield and maturity characteristics corresponding to the
underlying mortgage loans. Thus, unlike U.S. Treasury bonds, which pay a fixed
rate of interest until maturity when the entire principal amount comes due,
payments on GNMA certificates include both interest and a partial prepayment of
principal. Additional prepayments of principal may result from the prepayment,
refinancing or foreclosure of the underlying mortgage loans. Although maturities
of the underlying mortgage loans range up to 30 years, such prepayments shorten
the effective maturities to approximately 12 years (based upon current
government statistics). GNMA certificates currently offer yields higher than
those available from other types of U.S. government securities, but because of
the prepayment feature may be less effective than other types of securities as a
means of "locking in" attractive long-term interest rates. This is caused by the
need to reinvest prepayments of principal generally and the possibility of
significant unscheduled prepayments resulting from declines in mortgage interest
rates. As a result, GNMA certificates may have less potential for capital
appreciation during periods of declining interest rates than other investments
of comparable maturities, while having a comparable risk of decline during
periods of rising interest rates.
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There are certain other risks associated with GNMA certificates. Prepayments and
scheduled payments of principal will be reinvested at prevailing interest rates
which may be less than the rate of interest for the securities on which such
payments are made. When prevailing interest rates rise, the value of the GNMA
security may decrease as do other debt securities, but when prevailing interest
rates decline, the value of GNMA securities is not likely to rise on a
comparable basis with other debt securities because of the prepayment feature of
GNMA securities. If a GNMA certificate is purchased at a premium above principal
because its fixed rate of interest exceeds the prevailing level of yields, the
premium is not guaranteed and a decline in value to par may result in a loss of
the premium especially in the event of prepayments.
Portfolio Turnover
The Trust will generally purchase securities for possible long-term appreciation
and not for short-term trading profits. However, when the Investment Adviser
deems changes appropriate, it will not be limited by the rate of portfolio
turnover. The Trust's annual portfolio turnover rate will normally not exceed
50%. A rate of turnover of 100% could occur, for example, if the value of the
lesser of purchases and sales of portfolio securities for a particular year
equaled the average monthly value of portfolio securities owned during the year
(excluding short-term securities).
If the Trust has a high rate of portfolio turnover, it will pay greater
brokerage commissions and other costs. The Trust must bear these increased costs
directly and thus its shareholders will bear them indirectly. There may also be
the realization of larger amounts of short-term capital gains which are taxable
to shareholders as ordinary income.
The portfolio turnover rates for the years 1998 and 1997 were 49% and 9%,
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.
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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. The Trust has no current intention of pledging its assets.
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 asset (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. The Trust has no current intention of investing in other investment
companies.
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. The Trust has no current intention of selling
securities 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 make investments in real estate or indirect interests
in real estate.
13. The Trust will not issue senior securities.
14. The Trust will not invest in commodities or commodity contracts.
As a diversified investment company, the Trust is subject to the following
limitations as to 75% of its total assets: (a) the Trust may not invest more
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than 5% of its total assets in the securities of any one issuer, except
obligations of the U.S. government and its agencies and instrumentalities; (b)
the Trust may not own more than 10% of the outstanding voting securities of any
one issuer. These policies are fundamental policies and may not be changed
without shareholder approval.
For purposes of the above limitations: (i) all percentage limitations apply
immediately after a purchase or initial investment; and (ii) any subsequent
change in any applicable percentage resulting from market fluctuations or other
changes in total or net assets does not require elimination of any security from
the portfolio.
As a non-fundamental policy, the Trust presently does not intend to invest
directly in: (a) physical commodities or in other natural resource assets or
contracts related to natural resource assets; (b) option transactions involving
portfolio securities and securities indices; (c) options on foreign currencies;
(d) financial futures and related options. The Trust presently does not intend
to invest directly in natural resource assets or contracts related to natural
resource assets.
MANAGEMENT OF THE TRUST
Officers and Trustees
The Trustees of the Trust are responsible for managing the Trust's business
affairs and for exercising all the powers of the Trust, except those reserved to
the shareholders. The Trust's officers and Trustees, their positions with the
Trust and their principal occupations during the past five years are listed
below. Unless otherwise noted, the business address of each officer and Trustee
is 579 Pleasant Street, Suite 4, Paxton, Massachusetts 01612, which is also the
address of the Trust's Investment Adviser, Progressive Investment Management
Incorporated. An asterisk (*) indicates Trustees who are interested persons, as
defined in the Investment Company Act of 1940, of either the Trust or the
Investment Adviser.
Positions with Principal Occupation
Name, Address and Birth date the Trust During the Past 5 Years
- ---------------------------- --------- -----------------------
ERNEST BUTLER, Trustee President, I.E. Butler
Born June 17, 1928 Securities (securities
11809 Hinson Road, Suite 400 dealer); formerly Senior
Little Rock, AR 72212 Executive Vice President
Stephens, Inc.
(securities dealer)
(1982-February 1998).
SPENCER H. LEMENAGER, Trustee President, Equity, Inc.
Born January 25, 1938 (private investment
222 Wisconsin Avenue company)
P.O. Box 390
Lake Forest, IL 60045
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DAVID W. C. Chairman Chairman and Trustee,
PUTNAM, and Trustee Progressive Capital
Born October 8, 1939 Accumulation Trust
10 Langley Road (formerly Anchor Capital
Newton Centre, MA 02159 Accumulation Trust),
Anchor International Bond
Trust, Anchor Strategic
Assets Trust, Anchor
Resource and Commodity
Trust, and Anchor Gold and
Currency Trust (investment
companies); President and
Director, F. L. Putnam
Securities Company, Inc.
and subsidiaries
(investment advisor).
J. STEPHEN PUTNAM, Vice President and President, Robert Thomas
Born May 21, 1943 Treasurer Securities, Inc.
880 Carillon Parkway (securities dealer);
P.O. Box 12749 Director, F.L. Putnam
St. Petersburg, FL 33733 Securities Company, Inc.
(investment advisor)
DAVID Y. WILLIAMS2*, Trustee, President President and Director,
Born November 24, 1930 & Secretary Anchor Investment
579 Pleasant St., Suite 4 Management Corporation
Paxton, MA 01612 (investment adviser);
President and Director,
Meeschaert & Co., Inc.
(securities dealer);
Vice President,
Secretary and Treasurer,
Progressive Investment
Management,
Inc.(investment adviser)
CHRISTOPHER Y. WILLIAMS2, Vice President and Vice President and Asst.
Born December 12, 1964 Asst. Secretary Secretary, Progressive
579 Pleasant St., Suite 4 Investment Management
Paxton, MA 01612 Inc. (investment
adviser),; Vice
President and Secretary,
Anchor Investment
Management Corporation
(investment adviser);
Vice President and
Secretary, Meeschaert &
Co. Inc. (securities
dealer); President and
Secretary, Cardinal
Investment Services,
Inc. (financial
administrative services)
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JOSEPH C. Vice President and Vice President and Asst.
WILLIAMS2, Asst. Treasurer Treasurer, Progressive
Born January 13, 1971 Investment Management
579 Pleasant St., Suite 4 Inc. (investment
Paxton, MA 01612 adviser); Vice President
and Treasurer, Anchor
Investment Management
Corporation; Vice
President and Treasurer,
Meeschaert & Co. Inc.
(securities dealer);
Vice President and
Treasurer, Cardinal
Investment Services,
Inc. (financial
administrative services)
1. David W.C. Putnam and J. Stephen Putnam are brothers.
2. David Y. Williams is the father of Christopher Y. Williams and Joseph C.
Williams. Christopher Y. Williams and Joseph C. Williams are brothers.
The Officers and Trustees of the Trust as group owned less than one percent (1%)
of the Trust's shares outstanding on December 31, 1998.
Messrs. David Putnam, Ernest Butler and Spencer LeMenager are the Trustees
who are not interested persons (as defined in the Investment Company Act of
1940) of the Trust.
The standing audit committee is composed of Messrs. LeMenager and Butler.
The Trust does not have a nominating or compensation committee.
Compensation of Officers and Trustees
The Trust does not and will not pay any compensation to any of its officers or
Trustees who are interested persons (as defined in the Investment Company Act of
1940) of the Trust or of any investment adviser or distributor of the Trust. The
Trust pays an annual fee of up to $1,000 to each Trustee who is not an
interested person. The Trust did not pay any person, including directors,
officers, or employees, in excess of $60,000.00 during its most recent fiscal
year.
Principal Holders of Securities
As of the date of this SAI, Wendel & Co., c/o Bank of New York, P.O. Box 1066,
Wall Street Station, New York, New York, 10268 as an indirect nominee of Societe
D'Etudes et de Gestin Financieres Meeschaert, S.A. 23 Rue Drouot, 75009, Paris,
France, a privately owned corporation organized under the laws of France, held
of record 99.47% of the outstanding shares of the Trust.
Shareholders owning 25% or more of outstanding Trust shares may be in control
and be able to affect the outcome of certain matters presented for a vote of
shareholders.
Investment Adviser
The Investment Adviser, Anchor Investment Management Corporation (formerly
Meeschaert Investment Management Corporation), is located at 579 Pleasant
Street, Suite 4, Paxton, Massachusetts 01612.
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The Investment Adviser and Meeschaert & Co., Inc., the Trust's principal
underwriter, are affiliated through common control with Societe D'Etudes et de
Gestion Financieres Meeschaert, S.A., one of France's largest privately-owned
investment management firms. The Meeschaert organization was established in
Roubaix, France in 1935 by Emile C. Meeschaert. The Meeschaert organization
presently manages, with full discretion, an aggregate amount of approximately
$1.5 billion, including $250 million in French mutual funds, for about 8,000
individual and institutional customers.
On September 7, 1983, Emile C. Meeschaert and David Y. Williams purchased the
Investment Adviser from F. L. Putnam Securities Company Incorporated ("Putnam
Securities"). As of November 14, 1990, Luc E. Meeschaert purchased all of
the outstanding shares of the Investment Adviser previously owned by Emile C.
Meeschaert.
The Investment Adviser's Directors and Officers are as follows:
Luc E. Meeschaert, Chairman - Mr. Meeschaert is Chief Executive Officer of
Societe D'Etudes et de Gestion Financieres Meeschaert, S.A., 23 Rue Druout,
75009, Paris, France.
David Y. Williams, President and Director - Mr. Williams is also a Trustee of
the Trust and President and a Director of Meeschaert & Co., Inc., the Trust's
Distributor.
Paul Jaspard, Vice President - Mr. Jaspard is President of Linden Investment
Advisors, S.A. 67 Avenue Terlinden, La Hulpe, Belgium B1310 (investment
adviser). Mr. Jaspard manages other portfolios for the Meeschaert
organization. He is primarily responsible for the investment decisions of
the Trust.
Christopher Y. Williams, Vice President and Assistant Secretary Mr. Williams is
also the Vice President and Assistant Secretary of the Trust and Vice President
and Secretary of the Distributor.
Joseph C. Williams, Vice President and Assistant Treasurer - Mr. Williams is
also the Vice President and Assistant Treasurer of the Trust and Vice President
and Treasurer of the Distributor.
Investment Advisory Contract
The Trust and the Investment Adviser entered into an Investment Advisory
Contract dated June 22, 1998 which was approved on such date by the Trust's
shareholders.
The Investment Adviser manages the investments and affairs of the Trust, subject
to the supervision of the Trust's Board of Trustees. The Investment Adviser
furnishes to the Trust investment advice and assistance, administrative
services, office space, equipment and clerical personnel. The Investment Adviser
also furnishes investment advisory, statistical and research facilities.
The Trust pays all its expenses not specifically assumed by the Investment
Adviser under the contract, including without limitation, the fees and expenses
of the Trust's custodian and transfer agent; costs incurred in determining the
Trust's net asset value and keeping its books; the cost of share certificates;
membership dues in investment company organizations; distributions and brokerage
commissions and fees; fees and expenses of registering its shares; expenses of
reports to shareholders, proxy statements and other expenses of shareholders';
meetings; insurance premiums; printing and mailing expenses; interest, taxes and
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corporate fees; legal and accounting expenses; and fees and expenses of Trustees
not affiliated with the Investment Adviser. The Trust will also bear any
expenses incurred in connection with litigation in which the Trust is a party
and the related legal obligation that the Trust may have to indemnify its
officers and trustees. For the fiscal year ended December 31, 1998, the Trust
paid expenses of $98,382, which represented 1.5% of the Trust's average net
assets.
The Trust pays the Investment Adviser, as compensation under the Investment
Advisory Contract, a monthly fee at the rate of 0.75% per annum of the average
daily net assets of the Trust. This fee may be higher than that paid by most
other investment companies. For the Investment Adviser's services to the Trust,
Trust paid the Investment Adviser fees of $63,710 in 1996, $90,466 in 1997 and
$49,052 in 1998. The Investment Adviser may voluntarily waive a portion of its
fee or reimburse the Trust for certain operating expenses.
The Investment Advisory Contract remains in effect until June 21, 2000. In
general, the contract may be extended from year to year upon its expiration if
approved at least annually (a) by the vote of a majority of the outstanding
shares of the Trust or by the Board of Trustees, and in either case, (b) by vote
of a majority of the Trustees of the Trust who are not parties to the contract
or interested persons (as that term is defined in the Investment Company Act of
1940) of any such party cast in person at a meeting called for the purpose.
Amendments to the contract require similar approval by the shareholders and
disinterested Trustees. The contract is terminable at any time without penalty
by the Trustees of the Trust or by vote of the holders of a majority of the
Trust's shares on 60 days' written notice or by the Investment Adviser on 90
days' written notice. The contract terminates automatically in the event of its
assignment (which includes the transfer of a controlling interest in the
Investment Adviser).
The Investment Advisory Contract provides that the Investment Advisor shall not
be liable to the Trust or its shareholders for anything other than willful
misfeasance, bad faith, gross negligence or reckless disregard of its
obligations or duties. The Investment Advisory Contract also provides that the
Investment Advisor and its officers, directors and employees may engage in other
business, devote time and attention to any other business whether of a similar
or dissimilar nature, and render investment advisory services to others.
Administrator
The Trust has entered into an administration agreement (the Administration
Agreement) with Anchor Investment Management Corporation (the Administrator),
579 Pleasant Street, Paxton, Massachusetts 01612. Under the Administration
Agreement, the Administrator is required generally to administer the Trust's
business. The Administrator's duties, which may be assigned to a
sub-administrator, include specifically the following. The Administrator
calculates the Trust's net asset value and prepares and files all registration
or other material required by federal and state laws for the registration or
other qualification of the Trust and its shares for sale to the public as
required by those laws. The Administrator also prepares and files or mails all
reports and statements that the Trust is required by federal and state laws to
file or send to all authorities and shareholders of the Trust. The Administrator
maintains contact with and coordinates the Trust's public accountants, legal
counsel, custodian, transfer and service agent and other service providers, all
of whose fees are paid independently by the Trust. The Administrator also
coordinates the Trust's portfolio transactions and cash management with the
Trust's custodian and receives, confirms and pays over to the Trust's custodian
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the proceeds of sales by the Trust of its shares. The Administrator administers
and confirms to the Trust's transfer agent and shareholders the sales of Trust
shares and prepares and maintains on behalf of the Trust such records of the
Trust's business transactions as are not maintained by other service providers
to the Trust. The Administrator is also required, at its own expense, to furnish
office space, facilities, and equipment necessary for the administration of the
Trust. For its services under the Administration Agreement, the Administrator
receives a monthly fee at the annual rate of $14,500. The Trust paid the
administrator, Anchor Investment Management Corporation, fees of $6,000, $14,500
and $14,500 in 1996, 1997 and 1998 respectively, for its services to the Trust.
The Administration Agreement will remain in effect until terminated by either
party. The Administration Agreement may be terminated, without payment of
penalty, at any time upon mutual consent of the Trust and the Administrator or
by either party upon not more than 60 days' and not less than 30 days' written
notice to the other party.
The Administration Agreement also provides that the Administrator shall not be
liable to the Trust or its shareholders for anything other than willful
misfeasance, bad faith, gross negligence or reckless disregard of its
obligations or duties. The Administration Agreement also provides that the
Administrator and its officers, directors and employees may engage in other
business, devote time and attention to any other business whether of a similar
or dissimilar nature, and render investment advisory services to others.
Principal Underwriter
Meeschaert & Co., Inc. (the Distributor) is the principal underwriter of the
Trust's shares. The Distributor is located at 579 Pleasant Street, Suite 4,
Paxton, Massachusetts 01612. Several of the officers and directors of the
Distributor are also officers and Trustees of the Trust. See "MANAGEMENT OF
THE FUND - Officers and Trustees" above.
CAPITALIZATION
The capitalization of the Trust consists of an unlimited number of shares of
beneficial interest, without par value, designated as "common shares," which
participate equally in dividends and distributions. Issued shares are fully paid
and non-assessable and are transferable on the books of the Trust. The shares
have no preemptive rights. The shares each have one vote and proportionate
liquidation rights.
The Trust will normally not hold annual meetings of shareholders to elect
Trustees. If less than a majority of the Trustees holding office have been
elected by shareholders, a meeting of shareholders will be called to elect
Trustees. The Trust will, if requested by at least ten percent of the Trust's
outstanding shares, call a meeting for the purpose of voting on the removal of a
Trustee or 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
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of the Trust for all losses and expenses of any shareholder held personally
liable for the obligations of the Trust. Thus, the risk of a shareholder
incurring a financial loss on account of his or her liability as a shareholder
of the Trust is limited to circumstances in which the Trust itself would be
unable to meet its obligations. The possibility that these circumstances would
occur is remote. Upon payment of any liability incurred by the Trust, the
shareholder paying the liability will be entitled to reimbursement from the
general assets of the Trust. The Trustees intend to conduct the operations of
the Trust to avoid, to the extent possible, ultimate liability of shareholders
for liabilities of the Trust.
PURCHASE, REDEMPTION AND PRICING OF SHARES
Purchase of Shares
Investors may purchase shares of the Trust from the Distributor at 579 Pleasant
Street, Suite 4, Paxton, Massachusetts 01612. Investors pay no sales charge or
commission upon investment. For new shareholders initiating accounts, the
minimum investment is $500, except for exchanges of securities for Trust shares,
where the minimum is $5,000. (See "SHAREHOLDER INFORMATION -- Exchanges of
Shares" in the Prospectus). There is no minimum for shareholders making
additional investments to existing accounts.
The Distributor sells shares to the public as agent for the Trust and is the
sole principal underwriter for the Trust under a Distributor's Contract dated
November 23, 1994. The contract automatically terminates upon assignment (which
includes the transfer of a controlling interest in the Distributor) by either
party. The contract also provides that it may be continued from year to year
upon approval by a majority of the Trust's shares or by the Board of Trustees as
well as, the approval, by vote cast in person at a meeting called for the
purpose, by a majority of the Independent Trustees. Under the contract, the
Distributor pays expenses of sales literature, including copies of the Trust's
Prospectus delivered to investors. The Trust pays for its registration and
registration of its shares under the federal Securities and Investment Company
Acts and state securities acts and other expenses in which it has a direct
interest.
During the years ended December 31, 1998, December 31,1997 and December 31,
1996, the Distributor received no sales commission from the Trust.
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Determination of Net Asset Value
The Trust's net asset value is determined as of 12:00 p.m. Eastern Time on each
business day on which the New York Stock Exchange is open for trading. The Trust
may determine net asset value on any day that the Trust is open, but the New
York Stock Exchange is not open for business if an event occurs which might
materially affect the net asset value.
The manner of determination of the net asset value is briefly as follows:
securities traded on a United States national, or other foreign securities
exchange are valued at the last sale price on the primary exchange on which they
are listed, or if there has been no sale that day, at the current bid price.
Other United States and foreign securities for which market quotations are
readily available are valued at the last known sales price, or, if unavailable,
the known current bid price which most nearly represents current market value.
Other securities (including limited trade securities) and all other assets are
valued at market value as determined in good faith by the Trustees of the Trust.
The market price of all the Trust's investments are added together, liabilities
are deducted from the total, and the resulting amount is divided by the number
of shares outstanding.
Each day investment securities traded on a national securities exchange are
valued at the noon sales price; securities traded in the over-the-counter market
are valued at the last sale price as of 12:00 p.m. Eastern Time. Gold bullion is
valued each day at 12:00 p.m. Eastern Time based on the New York spot gold
price. Gold coins, foreign currencies, and foreign denominated securities for
which market quotations are readily available are valued at the known bid prices
as of 12:00 p.m. Eastern Time. Temporary cash investments are stated at cost. In
the absence of a reliable market for a particular metal, security or currency,
an investment therein will be valued at fair value as determined in good faith
by the Trustees.
Redemption and Repurchase of Shares
Any shareholder may require the Trust to redeem his shares. The Trust also
maintains a continuous offer to repurchase its shares. If a shareholder uses the
services of a broker in selling his shares in the over-the-counter market, the
broker may charge a reasonable fee for his service. Redemptions and repurchases
will be made in the following manner:
1. A shareholder may mail or present a written request that the Trust redeem his
shares to the Trust's transfer agent, Anchor Investment Management Corporation,
at 579 Pleasant Street, Suite 4, Paxton, Massachusetts 01612. If a shareholder
has share certificates, the investor should properly endorse them with
signatures guaranteed in the manner described below and include them with the
written request. The redemption price will be the net asset value next
determined after the Trust receives the request and, if applicable, the
certificates.
2. A shareholder's broker may present request for repurchase to the Trust. The
repurchase price will be the net asset value next determined after Trust
receives the request. If the broker receives the request before 12:00 p.m.
Eastern Time and transmits it to the Trust before 1:00 p.m. Eastern Time the
same day, the repurchase price will be the net asset value determined as of
12:00 p.m. Eastern Time that day. If the broker receives the request after 12:00
p.m. Eastern Time, the repurchase price will be the net asset value determined
as of 12:00 p.m. Eastern Time the following day. If an investor uses the
services of a broker in having his shares repurchased, the broker may charge a
reasonable fee for his services.
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The Trust will pay for shares redeemed or repurchased within seven days after it
receives the request and any required documents, properly endorsed. The
signature(s) on the share certificate or request must be guaranteed by a
commercial bank or trust company or by a member of the New York, American,
Pacific Coast, Boston or Chicago Stock Exchange. The Trust will not accept
signature guarantees by a savings bank, or savings and loan association or
notarization by a notary public.
To insure proper authorization, the Trust's transfer agent may request
additional documents, including stock powers, trust instruments, certificates of
death, appointments as executor, certificates of corporate authority or waiver
of tax forms (required in some states from selling or exchanging estates before
redeeming shares).
The right of redemption may be suspended or the payment date postponed at
certain times. These include days when the New York Stock Exchange is closed for
other than customary weekend or holiday closings, or when trading on the New
York Stock Exchange is restricted, as determined by the Securities and Exchange
Commission, or for any period when an emergency (as defined by rules of the
Commission) exists or during any period when the Commission has, by order,
permitted a suspension. In case of a suspension of the right of redemption, a
shareholder who has tendered a certificate for redemption or made a request for
redemption through a broker may withdraw his request or certificate. Otherwise,
he will receive payment of the net asset value determined next after the
suspension has been terminated.
A shareholder may receive more or less than he paid for his shares, depending on
the net asset value of the shares at the time of redemption or repurchase.
Redemptions in Kind
Under unusual circumstances, when the Board of Trustees deems it in the best
interests of the Trust's shareholders, the Trust may pay for shares repurchased
or redeemed partly or entirely in securities or other assets of the Trust taken
at current values. If any such redemption in kind is to be made, the Trust
intends to make an election pursuant to Rule 18(f)(1) under the Investment
Company Act of 1940. This will require the Trust to redeem with cash at a
shareholder's election in any case where the redemption involves less than
$250,000 (or 1% of the Trust's net assets at the beginning of each 90-day period
during which such redemptions are in effect, if that amount is less than
$250,000). If payment is made in securities, the redeeming shareholder may incur
brokerage costs in converting his securities to cash.
DISTRIBUTIONS
The Trust distributes any income dividends and any capital gain distributions in
additional Common Shares, or, at the option of the shareholder, in cash. In
accordance with his distribution option, a shareholder may elect (1) to receive
both dividends and capital gain distributions in additional Common Shares or (2)
to receive dividends in cash and capital gain distributions in additional Common
Shares or (3) to receive both dividends and capital gain distributions in cash.
A shareholder may change his distribution option at any time by notifying the
transfer agent in writing. To be effective with respect to a particular dividend
or distribution, the Trust's transfer agent must receive the new distribution
option at least 30 days prior to the close of the fiscal year. All accounts with
a cash dividend option will be changed to reinvest both dividends and capital
gains automatically if the Trust's transfer agent determines that the address of
record for the account is not current.
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Dividends and capital gain distributions received in shares will be made to the
Trust's transfer agent, as agent for the shareholder, and credited to the
shareholder's Open Account in full and fractional shares computed at the record
date closing net asset value.
Interest and dividends, and possible other amounts received by the Trust in
respect of foreign investments, may be subject to withholding and other taxes at
the source, depending upon the laws of the country in which the investment is
made.
TAXES
General
The Trust intends to qualify each year as a regulated investment company under
Subchapter M of the Internal Revenue Code, as subsequently amended or reenacted.
In order to so qualify, the Trust, must, among other things, do the following:
(i) derive at least 90% of its gross income from dividends, interest, payments
as to certain securities loans and gains from the sale of securities; (ii)
derive less than 30% of its gross income from gains from the sale or other
disposition of securities held for less than three months; (iii) distribute at
least 90% of its dividend, interest and certain other taxable income each year;
(iv) maintain at least 50% of the value of its total assets in cash, cash items,
U.S. government securities, securities of other regulated investment companies,
and other securities so that no more than 5% of its assets are invested in the
securities of one issuer and it owns no more than 10% of the value of any
issuer's voting securities; and (v) have no more than 25% of its assets invested
in the securities (other than those of the U.S. government or other regulated
investment companies) of any one issuer or of two or more issuers which the
Trust controls and which are engaged in the same, similar or related trades and
businesses. To the extent the Trust qualifies for treatment as a regulated
investment company, the Trust will not be subject to Federal income tax on
income paid to its shareholders in the form of dividends or capital gains
distributions.
Dividends paid by the Trust will generally not qualify for the
dividends-received deductions for corporations. The Trust will notify
shareholders each year of the amount of dividends and distributions, including
the amount of any distribution of long-term capital gains.
The Trust will be subject to a nondeductible 4% excise tax in any calendar year
to the extent that its fails to distribute at least 98% of its ordinary income
for that calendar year and 98% of its capital gain net income for the one-year
period ending on October 31 of that calendar year. In addition, to the extent
that the Trust fails to distribute 100% of its ordinary and capital gain net
income for any calendar year, the amount of the shortfall is subject to the
excise tax unless distributed for the following calendar year. For a
distribution to qualify as a distribution for a calendar year under the
foregoing rules, the Trust must declare it before December 31 of the year and
pay it before the following February 1. These distributions will be taxable to
taxable shareholders in the year the distributions are declared rather than the
year in which the distributions are received.
The Trust's foreign investments may be subject to foreign withholding taxes and
other taxes at the source. The Trust will be entitled to claim a deduction for
any foreign withholding taxes for federal income tax purposes. Any such taxes,
however, will reduce the income available for distribution to shareholders.
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Under the Interest and Dividend Compliance Act of 1983, the Trust will be
required to withhold and remit to the U.S. Treasury 20% of the dividends and
proceeds of redemptions paid to any shareholder who fails to furnish the Trust
with a correct taxpayer identification number, who underreported dividends or
interest income, or who fails to certify that he or she is not subject to such
withholding. An individual's tax identification number is his or her social
security number.
PORTFOLIO SECURITY TRANSACTIONS
Decisions to buy and sell portfolio securities for the Trust are made pursuant
to recommendations by the Trust's Investment Adviser. The Trust, through the
Investment Adviser, seeks to execute portfolio security transactions on the most
favorable terms and in the most effective manner possible. The Investment
Adviser uses its best judgment in evaluating the terms of a transaction and will
give consideration to various relevant factors, including the size and type of
the transaction, the nature and character of the markets for the security, the
confidentiality, speed and certainty of effective execution required for the
transaction, the reputation, experience and financial condition of the
broker-dealer and the quality of services rendered by the broker-dealer in other
transactions, and the reasonableness of the brokerage commission, if any.
The Trust expects that many broker-dealer firms will meet the foregoing criteria
for a particular transaction. In selecting among the firms, the Trust, through
the Investment Adviser, may give consideration to those firms which have sold,
or are selling, shares of the Trust. In addition, the Investment Adviser may
allocate Trust brokerage business on the basis of brokerage and research
services and other information provided by broker-dealer firms, which may
involve the payment of reasonable brokerage commissions in excess of those
chargeable by other broker-dealer firms for effecting the same transactions.
These brokerage and research services may be used for some of the Investment
Adviser's other advisory accounts. The Investment Adviser may not use all of
these services in managing the Trust. The term "brokerage and research services"
includes services as to the value of securities; the advisability of investing
in, purchasing or selling securities; the availability of securities, or
purchasers or sellers of securities; the furnishing of analyses and reports
concerning issuers, industries, securities, economic factors and trends;
portfolio strategy and the performance of account; and effecting securities
transactions and performing related functions (such as clearance and
settlement).
This policy of considering sales or shares of the Trust as one of the factors in
the selection of broker-dealer firms to execute portfolio transactions, subject
to the requirement of seeking best execution, is specifically permitted by a
rule of the National Association of Securities Dealers, Inc. The rule also
provides, however, that no member firm shall favor or disfavor the distribution
of shares of any particular fund or group of funds on the basis of brokerage
commissions received or expected by such firm from any source.
The Trust and one or more of the other investment companies or accounts for
which the Investment Adviser or its affiliates services may occasionally engage
in the purchase or sale of the same security at the same time. In this event,
the Investment Adviser will usually average the price and allocate the amount of
the security purchased or sold among the several clients or accounts in a manner
deemed equitable to all. In some cases this system could have a detrimental
effect on the price or volume of the security allocated to the Trust. In other
cases, however, the ability to participate in volume transactions may produce
better executions for the Trust.
To the extent consistent with the policy of seeking best price and execution, a
portion of the Trust's portfolio transactions may be executed through the
Trust's Distributor, which is an affiliate of the Investment Adviser. If this
occurs, it will be on the basis of what management believes to be current
information as to rates which are generally competitive with the rates available
from other responsible brokers and the lowest rates, if any, currently offered
by the Distributor.
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During 1998, 1997 and 1996, the Trust paid commissions to broker-dealers of
$28,848, $9,315 and $10,228. During 1998, 1997 and 1996 the Trust paid brokerage
commissions of $17,563, $7,815 and $4,078 to the Distributor. For the year ended
December 31, 1998, the percentage of total commissions paid to the Distributor
was 60.88%. During 1998, the Trust's purchases and sales of securities,
exclusive of United States government securities and short-term notes, amounted
to $2,385,679 and $9,072,941, respectively. Of these transactions, $287,531 in
purchases and $7,617,829 in sales were effected through the Distributor.
The Trust's portfolio turnover rates were 49% for 1998 and 9% for 1997.
OTHER INFORMATION
Custodian, Transfer Agent and Dividend-Paying Agent
All securities, cash and other assets of the Trust are received, held in custody
and delivered or distributed by the Trust's custodian bank, Investors Bank &
Trust Company, Financial Products Services, 200 Clarendon Street, 16th Floor,
Boston, Massachusetts 02116. In cases where foreign securities must, as a
practical matter, be held abroad, the Trust's custodian bank and the Trust will
make appropriate arrangements so that foreign securities may be legally held
abroad. The Trust's custodian bank does not decide on purchases or sales of
portfolio securities or the making of distributions. As of April 1, 1999,
Cardinal Investment Services, Inc., 579 Pleasant Street, Suite 4, Paxton,
Massachusetts 01612, succeeded Anchor Investment Management Corporation as
transfer agent and dividend-paying agent for the Trust.
Independent Public Accountants
For the fiscal year ending December 31, 1998, the Trust employed Livingston &
Haynes, P.C., 40 Grove Street, Wellesley, Massachusetts 02181, to certify its
financial statements and to prepare its federal and state income tax returns.
Registration Statement
This Statement of Additional Information does not contain all the information
set forth in the Registration Statement and the exhibits and schedules relating
thereto, which the Trust has filed with, and which are available at the
Securities and Exchange commission, Washington, D.C., under the Securities Act
of 1933, as amended, and the Investment Company Act of 1940, as amended, to
which reference is hereby made.
FINANCIAL STATEMENTS
The financial statements and related report of Livingston & Haynes, P.C.,
independent public accountants, contained in Anchor Resource and Commodity
Trust's Annual Report to shareholders for the year ended December 31, 1998, are
hereby incorporated by reference. A copy of the Trust's Annual Report may be
obtained without charge by writing to Anchor Investment Management Corporation,
579 Pleasant Street, Suite 4, Paxton, Massachusetts 01612, or by calling Anchor
Investment Management Corporation at (508) 831-1171.
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PROSPECTUS
ANCHOR STRATEGIC ASSETS TRUST
The primary investment objective of the Anchor Strategic Assets Trust (Trust) is
long-term capital appreciation and preservation of the purchasing power of
shareholders' capital. As a secondary investment objective, the Trust will seek
to generate current income consistent with the preservation of the shareholders'
purchasing power.
The Trust's investments will vary depending upon whether the Investment Adviser
anticipates an inflationary or deflationary economic cycle.
When the Investment Adviser expects an inflationary cycle, the Trust will invest
at least 65% of the value of its total assets in:
- -gold bullion, gold certificates, and silver bullion;
- -any other precious metals and any precious metal-backed or indexed securities,
which may be issued by either U. S. or foreign, private or governmental
issuers, including, without limitation, the government of South Africa and
South African companies;
- -equity or convertible securities of U.S. or foreign companies primarily
engaged in business related to precious metals;
- -options on securities, securities indices and currencies;
- -precious metal and financial futures contracts and related options; and
- -repurchase agreements.
When the Investment Adviser expects a deflationary cycle, the Trust will invest
up to 90% of its total assets in U.S. or foreign government and government
agency fixed-income securities of sufficient maturities to realize its objective
of long-term capital appreciation.
Trust Shares are not bank deposits, federally insured, or guaranteed, and may
lose value.
As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved these securities or passed upon the adequacy of this
prospectus. Any representation to the contrary is a criminal offense.
CONTENTS
Risk/Return Summary
Fees and Expenses of the Trust
What are the Trust's Investment Strategies?
What are the Principal Securities in Which
the Trust Invests?
What are the Specific Risks of Investing in
the Trust?
Management and Organization
Shareholder Information
Other Information
Financial Information
Application and Registration Form
PROSPECTUS DATED MAY 1, 1999
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RISK/RETURN SUMMARY
WHAT IS THE TRUST'S INVESTMENT OBJECTIVE?
The primary investment objective of the Trust is long-term capital appreciation
and preservation of the purchasing power of shareholders' capital. As a
secondary investment objective, the Trust will seek to generate current income
consistent with the preservation of the shareholders' purchasing power.
Protection of the purchasing power of its shareholders' capital means that the
Trust seeks to protect generally shareholders' invested capital against erosion
of the value of the U.S. dollar through inflation.
What are the Trust's Main Investment Strategies?
When, based on an analysis of numerous economic and monetary factors, the
Investment Adviser expects an inflationary cycle, the Trust will invest at least
65% of the value of its total assets in:
- -gold bullion, gold certificates, and silver bullion;
- -any other precious metals and any precious metal-backed or indexed securities,
which may be issued by either U. S. or foreign, private or governmental
issuers, including, without limitation, the government of South Africa and
South African companies;
- -equity or convertible securities of U.S. or foreign companies primarily
engaged in business related to precious metals;
- -options on securities, securities indices and currencies;
- -precious metal and financial futures contracts and related options; and
- -repurchase agreements.
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;
- -invest up to 35% of its total assets in bank deposits, bank currency
forward contracts and certificates of deposit;
- -invest up to 50% of the value of its assets in options on domestic and foreign
securities and securities indices.
In selecting equity securities for investment, the Trust's Investment Adviser
looks primarily for companies involved in gold operations which have established
records, as well as companies having low-cost reserves to bring into production.
The Investment Adviser also considers a company's potential for growth in
reserves and production.
When, based on an analysis of numerous economic and monetary factors, the
Investment Adviser expects a deflationary cycle, the Trust will invest up to 90%
of its total assets in U.S. or foreign government and government agency
fixed-income securities of sufficiently long maturities to realize its secondary
objective of current income. During such periods, the Trust will hold the
balance of its assets in short-term U.S. or foreign denominated securities.
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The Trust selects fixed income securities for investment based on the Investment
Adviser's analysis of current economic and securities market conditions,
particularly changes in interest rates, which guide the selection of maturity
and duration of portfolio debt securities. When it is not discernable whether
there is an inflationary or deflationary economic environment, the Trust may
depart from the principal investment strategies discussed above by investing its
assets in cash, cash items, and shorter-term, U.S. government or other high
quality debt securities. The Trust may also do this to minimize potential losses
and maintain liquidity to meet shareholder redemptions during adverse market
conditions. Such shorter-term investments may cause the Trust to give up greater
investment returns while maintaining the safety of principal (i.e., the original
amount invested by shareholders).
What are the Main Risks of Investing in the Trust?
An investment in the Trust is subject to risks, and it is possible to lose money
by investing in the Trust. The Trust is non-diversified. A non-diversified
investment portfolio does not have any limits with respect to the percentage of
assets which can be invested in any single issuer. An investment in the Trust,
therefore, will entail greater risk than investment in a diversified portfolio
of securities because the higher percentage of investments among fewer issuers
may result in greater fluctuation in the total market value of the Trust's
portfolio. Any economic, political, or regulatory developments affecting the
value of the securities in the Trust's portfolio will have a greater impact on
the total value of the portfolio than would be the case if the portfolio were
diversified among more issuers. Changes in the value of the Trust's portfolio
may result from general changes in the market or the economy.
The primary factors that may reduce the Trust's returns include:
oThe Investment Adviser may be incorrect in anticipating the onset and
termination of inflationary and deflationary economic cycles. This could
cause the Trust to be disproportionately invested in precious metals
during a deflationary cycle or in U.S. government securities during an
inflationary cycle.
oThe values of fixed income investments, including some of the debt
instruments in which the Trust invests, generally rise and fall in
response to changes in interest rates. Declining interest rates generally
raise the value of investments in debt instruments, while rising interest
rates generally lower the value of investments in debt instruments.
Changes in the values of the Trust's investments will affect the value of
the Trust's shares.
oIf the value of gold and precious metals and U.S.
government securities decrease during the same period of
time, the value of a shareholder's investment in the
Trust will decrease.
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oBecause the price of gold fluctuates, the value of your investment in the
Trust will go up and down. This means you could lose money over short or
even extended periods of time. The price of gold is affected by how much
of the worldwide supply of gold is held among several major producers.
Economic, political, or other conditions affecting one of the major
sources could have a substantial effect on the world's gold supply in
countries throughout the world.
oBecause the stocks the Trust holds fluctuate in price, the value of your
investment in the Trust will go up and down. These fluctuations could be a
sustained trend or a dramatic movement. The Trust's portfolio will reflect
changes in prices of individual portfolio assets or general changes in
asset valuations. Consequently, the Trust's share price may decline and
you could lose money. Gold operation companies involve special
considerations. Prices of their securities will be affected by the price
of gold and precious metals. They may also be affected by changing costs
of production.
oCredit risk is the possibility that an issuer will default (the issuer
fails to repay interest and principal when due). If an issuer defaults,
the Trust will lose money. Many fixed income securities receive credit
ratings from companies such as Standard & Poor's and Moody's Investor
Services. Fixed income securities receive different credit ratings
depending on the rating company's assessment of the likelihood of default
by the issuer. The lower the rating of the fixed income security, the
greater the credit risk. Fixed income securities generally compensate for
greater credit risk by paying interest at a higher rate. The difference
between the yield of the security and the yield of a U.S. Treasury
security with a comparable maturity (the "spread") measures the additional
interest received for taking risk. Spreads may increase generally in
response to adverse economic or market conditions. A security's spread may
also increase if the security rating is lowered, or the security is
perceived to have an increased credit risk. An increase in the spread will
cause the price of the security to decline.
oCall risk is the possibility that an issuer may redeem a fixed income
security before maturity ("call") at a price below it's current market
price. An increase in the likelihood of the call may reduce the security's
price. If a fixed income security is called, the Trust may have to
reinvest the proceeds in other fixed income securities with lower interest
rates, higher credit risks, or other less favorable characteristics.
oForeign securities pose additional risks because foreign economic or
political conditions may be less favorable than those of the United
States. Foreign financial markets may also have fewer investor
protections. Securities in foreign markets may also be subject to taxation
policies that reduce returns for U.S. investors. Due to these risk
factors, foreign securities may be more volatile and less liquid than
similar securities traded in the U.S.
oDepending upon how they are used and the relationship between the market
value of a derivative contract and the underlying asset, options, futures
and forward contracts (derivative contracts) may be volatile and involve
credit risk, currency risk, leverage risk, liquidity risk and index risk.
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For a more detailed discussion of these and other risks, see "Specific Risks of
Investing in the Trust."
Bar Chart and Performance Table
The bar chart and performance table below indicate the risks of investing in the
Trust. The chart shows the annual total returns of the Trust on a calendar year
basis for each of the past ten years.
[GRAPHIC OMITTED]
The graphic presentation displayed here consists of a bar chart representing
the annual total returns of Anchor Strategic Assets Trust as of the calendar
year-end for each of 5 years.
The total returns displayed for the Trust do not reflect the payment of any
sales charges or recurring shareholder account fees. If these charges or fees
were included, the returns shown would be lower.
Within the period shown in the chart, the Trust's highest quarterly return was
12.91% for the quarter ended March 31, 1996. Its lowest quarterly return was
(11.46%) for the quarter ended December 31, 1994.
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Average Annual Total Return
for the periods ended December 31, 1998
1 Year Life of
Trust(1)
- -------------------------------------------------------
The Trust 1.81% (6.07%)
Barrons Gold Mining Index (17.13%) (18.10%)
Gold Bullion (0.38%) (5.96%)
(1) Initial subscription of shares was January 5, 1994.
The table shows the Trust's total returns averaged over a period of years as
compared to The Barrons Gold Mining Index, which is a broad-based securities
market index, and Gold Bullion.
The bar chart and the performance table provide you with historical performance
information so that you can analyze the potential fluctuations in the Trust's
returns and analyze the risks of investing in the Trust. Past results of the
Trust, however, do not necessarily indicate how the Trust will perform in the
future.
FEES AND EXPENSES OF THE TRUST
This table describes the fees and expenses that you may pay if you buy and hold
shares of the Trust.
Shareholder Fees
(fees paid directly from your investment)
Maximum sales charge (load) imposed on
purchases (as a percentage of
offering price) None
Maximum deferred sales charge (load)
(as a percentage of offering price) None
Redemption fee (as a percentage
of amount redeemed) None
Exchange fee None
Annual Fund Operating Expenses
(expenses that are deducted from fund
assets)
Management fees 1.50%
Other expenses 1.04%
Total annual Fund operating expenses 2.54%
Example
The following example is intended to help you compare the cost of investing in
the Trust with the cost of investing in other mutual funds.
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The example assumes that you invest $10,000 in the Trust for the time periods
indicated. The example also assumes that your investment has a 5% return each
year and that the Trust's operating expenses remain the same.
Although your actual costs may be higher or lower, under these assumptions your
costs would be:
Assuming redemption Assuming no
at the end of each redemption
period
One Year $257 $257
Three Years: $791 $791
Five Years $1,350 $1,350
Ten Years $2,875 $2,875
WHAT ARE THE TRUST'S INVESTMENT STRATEGIES?
Historically, during periods of increasing inflation and during periods of
economic or monetary instability:
othe prices of gold and silver and other precious metals have tended to increase
as rapidly or more rapidly than the rate of inflation; ocurrencies of countries
not involved in inflationary circumstances may increase in value relative to the
U.S. dollar; and ointerest rates have tended to increase, causing the market
value of debt instruments to decline.
Conversely, during periods of deflation (when inflationary forces are reversed):
othe price of high grade debt instruments has tended to increase while the value
of precious metals has tended to decline; and oforeign currencies (relative to
the U.S. dollar) may also decline in value at such times.
Accordingly, the Investment Adviser will seek to anticipate oncoming
inflationary and deflationary economic cycles and will attempt to achieve the
Trust's investment objectives by following two distinct investment approaches
depending upon whether it perceives the economy as being in an inflationary or
deflationary environment, as follows:
1. When, by reason of a rising rate of change in the U.S. Consumer Price Index
(CPI), rising interest rates, and/or a decline in the value of the U.S. dollar,
the Investment Adviser expects an inflationary cycle, the Trust will invest at
least 65% of the value of its total assets in:
- -gold bullion, gold certificates, and silver bullion;
- -any other precious metals and any precious metal-backed or indexed securities,
which may be issued by either U. S. or foreign, private or governmental
issuers, including, without limitation, the government of South Africa and
South African companies;
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- -equity or convertible securities of U.S. or foreign companies primarily
engaged in business related to precious metals;
- -options on securities, securities indices and currencies;
- -precious metal and financial futures contracts and related options; and
- -repurchase agreements.
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;
- -invest up to 35% of its total assets in bank deposits, bank currency
forward contracts and certificates of deposit;
- -invest up to 50% of the value of its assets in options on domestic and foreign
securities and securities indices.
In selecting equity securities for investment, the Trust's Investment Adviser
looks primarily for companies involved in gold operations which have established
records, as well as companies having low-cost reserves to bring into production.
The Investment Adviser also considers a company's potential for growth in
reserves and production.
2. When, by reason of a declining rate of change in the CPI, declining interest
rates, and/or an increase in the value of the U.S. dollar, a deflationary cycles
is anticipated by the Investment Adviser the Trust will invest up to 90% of its
total assets in U.S. or foreign government and government agency fixed-income
securities of sufficiently long maturities to realize its secondary objective of
current income. During such periods, the Trust will hold the balance of its
assets in short-term U.S. or foreign denominated securities.
It should be emphasized that the Investment Adviser will not apply a rigid,
mechanical determination in assessing whether the economy is in an inflationary
or disinflationary environment. Rather, its determination will be the result of
its subjective judgment of all factors it considers to be relevant. These
factors include:
-actual and anticipated rates of change in the CPI over specified periods
of time;
-actual and anticipated changes and rates of change in the U.S. dollar
in relation to other key currencies, e.g., the German mark, the
British pound and the Japanese yen;
-actual and anticipated changes, and rates of change, in short and
long-term interest rates and real interest rates, i.e., inflation
adjusted interest rates;
-actual and anticipated changes in the money supply; and
-actual and anticipated governmental fiscal and monetary policy.
If, in the opinion of the Investment Adviser, there are periods of less
favorable economic and/or market conditions, such as when there is no
discernible trend in the rate of change in the Consumer Price Index and other
leading economic indicators offer no evidence of inflationary or deflationary
trends, the Trust may depart from the principal investment strategies discussed
above by investing its assets in cash, cash items, and shorter-term, higher
quality debt securities.
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Temporary Investments. The Trust may make temporary investments to minimize
potential losses and maintain liquidity to meet shareholder redemptions during
adverse market conditions. Investing in temporary investments may cause the
Trust to give up greater investment returns while maintaining the safety of
principal (i.e., the original amount invested by shareholders).
WHAT ARE THE PRINCIPAL SECURITIES IN WHICH THE TRUST INVESTS?
Inflationary Cycle:
Gold bullion, gold certificates, silver bullion, precious metals, and any
precious metals-backed or indexed securities issued by either U.S. or foreign
private or governmental issuers, including, without limitation, the government
of South Africa and South African companies.
oPrecious metals-backed securities means securities which are redeemable
at a specified conversion rate for precious metals or which are guaranteed by
precious metals.
oIndexed securities means securities comprising one of the exchange-listed
stock indices on which precious metals-related futures contracts and options can
be purchased and sold, e.g., Gold/Silver Index listed on the Philadelphia Stock
Exchange.
Equity or convertible securities of U.S. or foreign companies primarily engaged
in business related to precious metals.
oEquity securities means common or preferred shares in a corporation,
whether or not transferable or denominated "stock," or similar security,
interests of a limited partnership in a limited partnership, or warrants or
rights other than rights to convert, purchase, sell or subscribe to a share,
security or interest of a kind previously specified.
oConvertible securities means debentures or preferred stock that may be
exchanged by the owner for common or preferred stock, usually of the same
company, or precious metals bullion, in accordance with the terms of the issue.
Derivatives. To achieve its investment objective, the Trust may also use
specialized investment techniques by engaging in a variety of transactions using
"derivatives." Derivatives are financial instruments whose value depends upon,
or is derived from, the value of something else, such as one or more underlying
securities, indices or currencies. such as options on securities and securities
indices, or currencies. These include transactions in options on securities,
securities indices and currencies, and precious metals, and transactions in
financial futures contracts and related options. The use of derivatives involves
special risks and may result in losses to the Trust. See "Specific Risks of
Investing in the Trust."
oOptions on securities and securities indices. When the Investment Adviser
decides it is appropriate, the Trust may writ call options contracts or
purchase put or call options with respect to portfolio securities and with
respect to securities indices. A call option is a short-term contract,
usually nine months or less in duration, that gives the purchaser the
right to buy from the seller (writer) the underlying security at a
specified exercise price, regardless of the market price of the security.
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The buyer pays a premium to the writer for undertaking the obligations of
the option contract. Because the writer foregoes the opportunity to profit
from an increase in the market price of the underlying security above the
exercise price, the premium may represent the profit. If the price of the
security declines, on the other hand, the premium represents an offset to
the loss.
A put option is short-term contract that gives the purchaser of the option
the right to sell to the writer of the option the underlying security at a
specified exercise price. These options will be covered options (options
relating to securities which the Trust owns).
The Trust may purchase a put option on an underlying security that the
Trust owns as a defensive technique to protect against an anticipated
decline in the value of the security. For example, the Trust may purchase
a put option to protect unrealized appreciation of a security where the
Investment Adviser deems it desirable to continue to hold the security
because of tax considerations. The premium paid for the put option would
reduce any capital gain when the security is eventually sold.
Options on U.S. securities are generally listed on a
national securities exchange. Options on foreign
securities and on some U.S. securities may not be
listed on any U.S. or foreign exchange.
The Trust will write or purchase options only as a hedging technique to
reduce the risks in management of its portfolio and not for speculative
purposes (i.e., not for profit).
oOptions on foreign currencies. A put option on a foreign currency is a
short-term contract (generally having a duration of nine months or less)
which gives the purchaser of the put option, in return for a premium, the
right to sell the underlying currency at a specified price during the term
of the option.
A call option on a foreign currency is a short-term contract which gives
the purchaser of the call option, in return for a premium, the right to
buy the underlying currency at a specified price during the term of the
option.
The purchase of put and call options on foreign currencies is analogous to
the purchase of puts and calls on stocks. The Trust will purchase such
options as a hedging technique to reduce the risks in management of its
portfolio, and to preserve the Trust's net asset value, and not for
speculative purposes.
oPrecious metals and financial futures contracts and related options. To
the extent permitted by relevant provisions of the Commodity Exchange Act,
the Trust may engage in option transactions and futures transactions.
Financial futures contracts consist of interest rate futures contracts,
securities index futures contracts and currency futures contracts.
Precious metal futures contracts consist of futures contracts for the
purchase or sale of gold, silver and other precious metals.
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A futures contract obligates the seller of the contract to deliver, and
the purchaser to take delivery of, the subject assets called for in the
contract at a specified future time and at a specified price. Futures
contracts traded Over-The Counter (OTC) are frequently referred to as
"forward contracts."
An option on the futures contract gives the purchaser the right to assume
a position in the contract (a long position if the option is a call and a
short position if the option is a put) at a specified exercise price at
any time during the period of the option. Futures are considered to be
commodity contracts.
The Trust may purchase or sell any financial or precious metals futures
contracts which are traded on an exchange or board of trade or other
market.
The Trust may, following written notice thereof to its shareholders, take
advantage of opportunities in the area of precious metals related index
options and futures contracts and options on futures contracts which are
not currently available but which may be developed, to the extent such
opportunities are consistent with the Trust' investment objectives and
legally permissible for the Trust.
Lending of Portfolio Securities: The Trust may seek to increase its income by
lending portfolio securities. Any loan will be continuously secured by
collateral at least equal to the market value of the security loaned. The total
value of the securities loaned at any time will not exceed 30% of the Trust's
total assets. The Trust will make loans only to U.S. entities which the Trust
deems to be creditworthy. In addition, in any loan transactions, the Trust will
have the right to call the loan and obtain the securities loaned at any time on
five days' notice.
Repurchase Agreements: The Trust may engage in transactions in repurchase
agreements. These are agreements under which the Trust acquires a money market
instrument (such as a security issued by the U.S. government or one of its
agencies, a bankers' acceptance or a certificate of deposit) from a commercial
bank, subject to resale to the seller at a specified price and date (normally
the next business day). The resale price reflects an agreed-upon interest rate
effective for the period that the Trust holds the security and is not related to
the interest rate or the underlying instrument.
The Trust will enter into repurchase agreements only with banks whose deposits
are insured by the Federal Deposit Insurance Corporation and which have capital
and undivided surplus of at least $200,000,000. The Trust will require that the
repurchase agreements be secured by acceptable collateral. The Trust may not
invest more than 10% of its assets in repurchase agreements having maturities
longer than seven days or other investments subject to legal or contractual
restrictions on resale or which are not readily marketable.
Deflationary Cycle:
U.S. or foreign government and government agency fixed-income
securities of sufficiently long maturities to realize the
Trust's secondary objective of current income. U.S. government
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securities include U.S. Treasury bills, notes and bonds and
obligations of agencies and instrumentalities of the U.S.
government. Such agencies include Federal Land Banks; Farmers
Home Administration; Central Bank of Cooperatives; Federal
Intermediate Credit Banks; Federal Home Loan Banks; and Federal
National Mortgage Association.
Some obligations of the U.S. government agencies and instrumentalities, such as
Treasury bills and Government National Mortgage Association (GNMA) certificates,
are supported by the full faith and credit of the United States. Other
government related debt securities are not supported by the full faith and
credit of the United States. Such securities include those issued by Federal
Home Loan Banks; which are supported by the right of the issuer to borrow from
the U.S. Treasury, and bonds issued by the Federal National Mortgage
Association, a private corporation, supported only by the credit of the
instrumentality. There can be no assurance that the U.S. government will support
an instrumentality it sponsors.
Foreign government securities generally consist of fixed income securities
supported by national, state or provincial governments or similar political
subdivisions. Foreign government securities also include debt obligations of
supranational entities, such as international organizations designed or
supported by governmental entities to promote economic reconstruction or
development, international banking institutions and related government agencies.
Examples of these include, but are not limited to, the International Bank for
Reconstruction and Development (the World Bank), the Asian Development Bank, the
European Investment Bank and the Inter-American Development Bank.
Foreign government securities also include fixed income securities of "quasi-
governmental agencies" which are either issued by entities that are owned by a
national, state or equivalent government or are obligations of a political unit
that are not backed by the national government's full faith and credit and
general taxing powers. Further, foreign government securities include mortgage-
related securities issued or guaranteed by national, state or provincial
governmental instrumentalities, including quasi-governmental agencies.
Temporary Investment Strategy: (when neither an inflationary nor
deflationary cycle is discernable)
Short-term U.S. or foreign denominated securities. For temporary defensive
purposes, the Trust may invest in short-term U.S. government securities and
other money market instruments, cash or cash equivalents. Money market
instruments include high-grade commercial paper (promissory notes issued by
corporations to finance their short-term credit needs), negotiable certificates
of deposit, non-negotiable fixed time deposits, bankers' acceptances and
repurchase agreements.
WHAT ARE THE SPECIFIC RISKS OF INVESTING IN THE TRUST?
The Trust is non-diversified. A non-diversified investment portfolio does not
have any limits with respect to the percentage of assets which can be invested
in any single issuer. An investment in the Trust, therefore, will entail greater
risk than investment in a diversified portfolio of securities because the higher
percentage of investments among fewer issuers may result in greater fluctuation
in the total market value of the Trust's portfolio. Any economic, political, or
regulatory developments affecting the value of the securities in the Trust's
portfolio will have a greater impact on the total value of the portfolio than
would be the case if the portfolio were diversified among more issuers.
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Investment Strategy
The success of the Trust's investment program will be dependent to a high degree
on:
othe Investment Adviser's ability to anticipate the onset and termination
of inflationary and deflationary cycles. A failure to anticipate a
deflationary cycle could result in the Trust's assets being
disproportionately invested in precious metals, in which case the Trust
will lose money, and failure to predict an inflationary cycle could result
in the Trust's assets being disproportionately invested in U.S. government
securities, in which case the Trust could generate less capital
appreciation.
othe validity of the premise that the value of gold and other precious
metals will move in a different direction than the value of U.S.
government securities during periods of inflation or deflation. If the
value of both precious metals and U.S. government securities move down
during the same period of time, the value of the shareholder's investment
will decline rather than stabilize or increase, as anticipated, regardless
of whether the Trust is primarily invested in precious metals or U.S.
government securities.
Equity Securities
While stocks have historically outperformed other asset classes over the long
term, they tend to go up and down more dramatically over the shorter term. These
price movements may result from factors affecting individual companies, or
industries or the securities market or the economy as a whole. If the stocks the
Trust holds fluctuate in price, the value of an investment in the Trust will go
up and down. This means you could lose money over short or even extended periods
of time. Natural resource-related companies involve special considerations which
are discussed below.
Gold and Precious Metals
The profits of the companies in which the Trust invests, and thus the value of
the Trust's securities, are directly affected by the price of gold and other
precious metals.
Historically, the price of gold has been more volatile than the price of equity
securities, generally. The price of gold may fluctuate substantially over short
periods of time so the Trust's share price may be more volatile than other types
of investments.
The price of gold and other precious metals is affected by several factors,
including:
-how much of the worldwide supply of gold is held among four major
producers: Republic of South Africa; United States; Australia; and Russia.
Economic, political, or other conditions affecting one of the major
sources could have a substantial effect on the world's gold supply in
countries throughout the world;
-increased environmental, labor or other costs in mining;
-changes in laws relating to mining or gold production or sales; and
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-unpredictable monetary policies and economic and political
conditions in countries throughout the world; for example, if Russia
decides to sell some of its gold reserves, the supply would go up, and the
price would generally go down.
Changes in U.S. or foreign tax, currency or mining laws may make it more
expensive and/or difficult to pursue the Trust's investment strategies.
In addition, gold bullion does not generate income, and offers only the
potential for capital appreciation or depreciation.
Convertible Securities
Convertible securities, including convertible bonds and preferred stock, are
convertible into common stock. Because of the conversion feature, the interest
or dividend rate on a convertible security is generally less than would be the
case for a security which is not convertible. The value of a convertible
security will be affected by both its stated interest or dividend rate and the
value of the underlying security. Its value will thus be affected by the factors
that affect both debt securities (such as interest rates) and equity security
securities (such as stock market movements generally). In addition, some
convertible securities, by their terms, permit the issuer to require the Trust
to resell the convertible security, which could occur at a time that is not
favorable to the Trust based on then-prevailing interest rates or equity values.
Foreign Investing
During certain periods, the Trust may invest up to 100% of its assets in foreign
securities. Foreign securities pose additional risks because foreign economic or
political conditions may be less favorable than those of the United States.
Foreign financial markets may also have fewer investor protections. Securities
in foreign markets may also be subject to taxation policies that reduce returns
for U.S. investors. Due to these risk factors, foreign securities may be more
volatile and less liquid than similar securities traded in the U.S. In
particular, investments in foreign securities are subject to the following
specific risks:
Country Risk. General securities market movements in any country where the
Trust has investments are likely to affect the value of the Trust's
securities which trade in that country. These movements will affect the
Trust's share price.
The political, economic and social structures of some countries in which
the Trust invests may be less stable and more volatile than those in the
U. S. The risks of investing in these countries include the possibility of
the imposition of exchange controls, expropriation, restrictions on
removal of currency or other assets, nationalization of assets and
punitive taxes.
The Trust's investments in developing or emerging markets are subject to
all of the risks of foreign investing generally, and have additional
heightened risks due to a lack of legal, business and social frameworks to
support securities markets.
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Typically, investments by the Trust in developing or emerging markets
constitute less than 25% of the Trust's total assets.
Company Risk. Foreign companies are not subject to the
same accounting, auditing, and financial reporting
standards and practices as U. S. companies and their
stocks may not be as liquid as stocks of similar U.S.
companies. Foreign stock exchanges, brokers and
companies generally have less government supervision
and regulation than in the U.S. The Trust may have
greater difficulty voting proxies, exercising
shareholder rights, pursuing legal remedies and
obtaining judgments with respect to foreign investments
in foreign courts than with respect to U.S. companies
in U.S. courts.
Currency. Many of the Trust's investments are
denominated in foreign currencies. Changes in foreign
currency exchange rates will affect the value of what
the Trust owns and the Trust's share price. Generally,
when the U.S. dollar rises in value against a foreign
currency, an investment denominated in that country's
currency loses value because that currency is worth
fewer U.S. dollars.
Euro. On January 1, 1999, the European Monetary Union introduced a new
single currency, the euro, which replaced the national currency for
participating member countries. The Trust's investments in countries with
currencies replaced by the euro, the investment process, including
trading, foreign exchange, payments, settlements, cash accounts, custody
and accounting will be affected.
Because this change to a single currency is new and untested, the
establishment of the euro may result in market volatility. Also, it is not
possible to predict the impact of the euro on the business or financial
condition of European issuers which the Trust may hold in its portfolio,
and their impact on the value of Trust shares. To the extent the Trust
holds non-U.S. dollar (euro or other) denominated securities, it will
still be exposed to currency risk due to fluctuations in those currencies
versus the U.S. dollar.
Fixed Income Securities
The values of fixed income investments, including some of the debt instruments
in which the Trust invests, usually rise and fall in response to changes in
interest rates. Declining interest rates generally raise the value of debt
instruments, while rising interest rates generally lower the value of debt
instruments. Debt instruments with longer maturities are usually subject to a
greater risk of an adverse movement in interest rates and a decline in the price
of the instruments. Changes in the values of the Trust's investments will affect
the value of the Trust's shares.
Traditional debt instruments typically pay a fixed rate of interest until
maturity, when the entire principal amount is due. An issuer may redeem its debt
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securities before maturity at a price below its current market price. An issuer
may also prepay its debt instruments voluntarily or as a result of a
refinancing, or the instruments may be prepaid as a result of a foreclosure. The
Trust may have to invest proceeds that it receives from prepayment on its
investments in debt securities with lower interest rates, higher credit risks or
other less favorable terms.
Call Risk. Traditional debt instruments typically pay a fixed rate of
interest until maturity, when the entire principal amount is due. An
issuer may redeem its debt securities before maturity at a price below its
current market price. An issuer may also prepay its debt instruments
voluntarily or as a result of a refinancing, or the instruments may be
prepaid as a result of a foreclosure. The Trust may have to invest
proceeds that it receives from prepayment on its investments in debt
securities with lower interest rates, higher credit risks or other less
favorable terms.
Credit Risk. Credit risk is the possibility that an issuer will default
(the issuer fails to pay interest and principal when due). If an issuer
defaults, the Trust will lose money.
Many fixed income securities receive credit ratings from companies such as
Standard & Poor's and Moody's Investor Services. Fixed income securities
receive different credit ratings depending on the rating company's
assessment of the likelihood of default by the issuer. The lower the
rating of the fixed income security, the greater the credit risk.
Fixed income securities generally compensate for greater credit risk by
paying interest at a higher rate. The difference between the yield of the
security and the yield of a U.S. Treasury security with a comparable
maturity (the "spread") measures the additional interest received for
taking risk. Spreads may increase generally in response to adverse
economic or market conditions. A security's spread may also increase if
the security's rating is lowered, or the security is perceived to have an
increased credit risk. An increase in the spread will cause the price of
the security to decline.
Foreign fixed income securities pose additional risks because of fewer
investor protections, adverse tax policies, less public information
regarding issues, and more volatile political and economic conditions and
currency exchange rates.
Derivatives
The Trust may engage in transactions using derivatives, including options and
futures. Derivatives allow the Trust to increase or decrease the level of risk
to which the Trust is exposed more quickly and efficiently than transactions in
other types of instruments. Derivatives, however, are volatile and involve
significant risks, including the following:
Credit Risk. There is the risk that the other party on
a derivative transaction will be unable to honor its
financial obligation to the Trust.
Currency Risk. There is the risk that changes in the
exchange rate between two currencies will adversely
affect the value (in U.S. dollar terms) of the
investment.
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Leverage Risk. Leverage risk is created when an investment exposes the
Trust to a level of risk that exceeds the amount invested. Changes in the
value of such an investment magnify the Trust's risk of loss and potential
for gain. Investments can have these same results if their returns are
based on a multiple of a specified index, security or other benchmark.
Liquidity Risk. There is the risk that certain securities may be difficult
or impossible to sell at the time the seller would like or at the price
that the seller believes the security is currently worth.
Index Risk. If the derivative is linked to the performance of an index, it
will be subject to the risks associated with changes in that index. If the
index changes, the Trust could receive lower interest payments or
experience a reduction in the value of the derivative to below what the
Trust paid. Certain indexed securities may create leverage, to the extent
that they increase or decrease in vale at a rate that is a multiple of the
changes in the applicable index.
The Trust may use the following types of derivative instruments:
oFutures. Futures may involve leverage risk and currency
risk.
oForwards. Forwards involve credit risk and leverage risk,
and may involve currency risk.
oOptions. Options may involve leverage risk. Private
options also involve credit risk and liquidity risk.
Options may also involve currency risk.
Loans of Portfolio Securities and Repurchase Agreements
If the Trust makes loans of portfolio securities or uses repurchase agreements,
there is a risk that the other party to the transaction may not be able to
fulfill its obligations to the Trust. In the event a default by the borrower in
a loan of portfolio securities, the Trust may not be able to recover its
securities. In the event of a default by the other party to a repurchase
agreement, the Trust may lose its interest in the underlying security.
Year 2000
The "Year 2000" problem is the potential for computer errors or failures because
certain computer systems may be unable to interpret dates after December 31,
1999. The Year 2000 problem may cause systems to process information incorrectly
and could disrupt businesses that rely on computers, like the Trust.
While it is impossible to determine in advance all of the risks to the Trust,
the Trust could experience interruptions in basic financial and operational
functions. Trust shareholders could experience errors or disruptions in Trust
share transactions or Trust communications.
The Trust's service providers are making changes to their computer systems to
fix any Year 2000 problems. In addition, they are working to gather information
from third-party providers to determine their Year 2000 readiness.
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Year 2000 problems could also increase the risks of the Trust's investments. To
assess the potential effect of the Year 2000 problem, the Investment Adviser is
reviewing information regarding the Year 2000 readiness of issuers of securities
that the Trust may purchase.
The financial impact of these issues for the Trust is still being determined.
There can be no assurance that potential Year 2000 problems would not have a
material adverse effect on the Trust.
MANAGEMENT AND ORGANIZATION
Trustees
Under the terms of the Declaration of Trust establishing the Trust, which is
governed by the laws of the Commonwealth of Massachusetts, the Trustees of the
Trust are ultimately responsible for the management of its business and affairs.
The Statement of Additional Information contains background information
regarding each Trustee and executive officer of the Trust.
Investment Adviser
The Investment Adviser, Anchor Investment Management Corporation (formerly known
as Meeschaert Investment Management Corporation), manages the Trust's
investments and affairs, subject to the supervision of the Trustees. Its
principal services to the Trust are managing the investment and reinvestment of
the Trust's assets and providing, either directly or through a
sub-administrator, various administrative services to the Trust, including the
provision of all necessary office facilities, equipment and personnel for
administering the business of the Trust. The Investment Adviser has been engaged
continuously in the investment management business, including the management of
investment company assets, since 1983. The principal offices of both the Trust
and the Investment Adviser are located at 579 Pleasant Street, Suite 4, Paxton,
Massachusetts 01612.
The person who is primarily responsible for the day-to-day management of the
Trust's portfolio is Paul Jaspard, who is a Vice President of the Investment
Adviser. Mr. Jaspard is president of Linden Investment Advisors, S.A., an
investment advisory firm headquartered in Belgium. He has managed other
portfolios for the Meeschaert organization (described below) for more than
fifteen years. He has been in the investment counseling business for more than
twenty years, giving investment advice to a wide variety of individual and
institutional clients. For its service under its Investment Advisory Contract
with the Trust, the Investment Adviser receives a fee, payable monthly,
calculated at 1.50% per annum of the average daily net assets of the Trust. This
fee is higher than that of most other investment companies. For the fiscal year
ended December 31, 1998, the Investment Adviser received investment advisory
fees of $69,013 for its services to the Trust.
The Investment Adviser and Meeschaert & Co., Inc., the Trust's principal
underwriter, are affiliated through common control with Societe D'Etudes et de
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Gestion Financieres Meeschaert, S.A., one of France's largest privately-owned
investment management firms. The Meeschaert organization was established in
Roubiax, France in 1935 by Emile C. Meeschaert, and presently manages, with full
discretion, approximately $1.5 billion (including $250 million in French mutual
funds) for about 8,000 individual and institutional customers.
SHAREHOLDER INFORMATION
Purchase of Shares
You may purchase Trust shares directly from the Distributor, Meeschaert & Co.,
Inc., 579 Pleasant Street, Suite 4, Paxton, Massachusetts 01612. An application
for your use in making an initial investment in the Trust is included in the
back of the Prospectus.
Investment Minimums
To establish a new account, the minimum investment is $500. There is no
minimum for shareholders who make additional investments to existing
accounts.
To exchange other securities for Trust shares, the minimum investment is
$5,000. See "EXCHANGES" below.
Share Price
The Trust's share price is its net asset value next determined after the
Distributor receives and accepts your order. The Trust calculates its net asset
value as of 12:00 noon Eastern Time on each day on which the New York Stock
Exchange is open for trading. The Trust may determine net asset value on a day
on which the New York Stock Exchange is closed but the Trust is open for
business if an event occurs that might materially affect net asset value.
In calculating net asset value, the Trust uses market prices of securities
traded on U.S. or foreign securities exchanges when available. The market price
of a security is equal to the last known sale price, or if there has been no
sale of the security, the known current bid price. If a particular security's
market price is not available, the Trust will determine the appropriate price
based on its "fair value". This means that the Trust may value such securities
at fair value as determined in good faith by or under the direction of the
Trust's Board of Trustees. The market prices of all of the Trust's investments
are added together, liabilities of the Trust are deducted from the total, and
the resulting amount is divided by the number of shares outstanding.
Trading in foreign securities may be completed at times which vary from the
closing of the New York Stock Exchange (NYSE). In computing its net asset value,
the Trust values foreign securities at the latest closing price on the exchange
on which they are traded immediately prior to the time when the net asset value
of the Trust is calculated. All assets and liabilities of the Trust denominated
in foreign currencies are valued in U.S. dollars based on the exchange rate last
quoted by a major bank prior to the time when the net asset value of the Trust
is calculated.
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Exchanges of Shares
The Trust will accept common or preferred stock of companies acceptable to the
Investment Adviser in exchange for shares of the Trust. The minimum value of
securities accepted for deposit is $5,000. The Trust will value securities
accepted for exchange in the same manner provided for valuing its portfolio
securities (see "Share Price" above).
If the Trust, upon acceptance of securities for exchange of fund shares,
determines to sell these securities, the Trust will pay any liquidation costs
involved in disposing of these securities.
You should forward securities for exchange, in proper form for transfer to the
Trust, together with a completed and signed letter of transmittal in approved
form (available from the Distributor) to the Trust's custodian as follows:
Investors Bank & Trust Company
Financial Product Services Group
Attn: Anchor Strategic Assets Trust
200 Clarendon Street, 16th Floor
Boston, Massachusetts 02116
Exchanges of shares must be done as follows:
1. You must forward all securities under a single Letter of Transmittal. In
certain instances indicated in the instructions to the Letter of
Transmittal, multiple Letters of Transmittal must be attached and
transmitted as a single exchange. The Trust may reject securities
presented for exchange for any reason, and will only accept securities
which are delivered in proper form.
2. If you wish to exchange securities for Trust shares, your securities must
not be subject to any restrictions that would affect their resale by the
Trust for any reason. The Trust will not accept securities for exchange
if, in the opinion of its counsel, acceptance would violate any federal or
other law affecting the Trust. The Trust may reject securities for any
reason.
3. If you are contemplating an exchange of securities for Trust shares, you
or your representative should contact the Distributor before you forward
the securities so that the Distributor can determine in advance whether
the securities are acceptable to the Trust.
4. If the Trust finds that securities presented for exchange are in good
order only in part, the Trust may issue the appropriate number of Trust
shares for that part and return the balance to you. The Trust will issue a
confirmation for Trust shares to you after securities that it has accepted
for exchange have cleared for transfer to the Trust. Certificates will not
be issued unless you so request.
5. By tendering securities for exchange, you agree to accept the
determination of their market value that the Trust makes at the time it
determines the Trust's net asset value per share. The number of shares of
the Trust to be issued in exchange for other securities will be the value
of the accepted securities determined as described above, divided by the
net asset value per Trust share next determined after the Trust's
acceptance of the securities.
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6. You may realize a gain for federal income tax purposes in connection with
your exchange of securities for Trust shares. You should consult your tax
advisor about the tax consequences of exchanging securities for Trust
shares.
Redemption and Repurchase of Shares
You may require the Trust to redeem your shares. The Trust also maintains a
continuous offer to repurchase its shares. Redemptions and repurchases will be
made in the following manner:
1. You may mail or present a written request written request that the
Trust redeem your shares to the Trust's transfer agent at 579 Pleasant
Street, Suite 4, Paxton, Massachusetts 01612. If you have share
certificates, you should properly endorse them and include them with your
request. The redemption price will be the net asset value next determined
after the Trust receives your request and/or certificates.
2. Your broker may present your request for repurchase to the Trust. The
repurchase price will be the net asset value next determined after the
Trust receives the request. If the broker receives the request before
12:00 p.m. Eastern Time and transmits it to the Trust before 1:00 p.m.
Eastern Time the same day, the repurchase price will be the net asset
value determined as of 12:00 p.m. Eastern Time that day. If the broker
receives the request after 12:00 p.m., the repurchase price will be the
next asset value determined as of 12:00 p.m. Eastern Time the following
day. If you use a broker, the broker may charge a reasonable fee for his
services.
The Trust will pay you for shares that it redeems or repurchases within seven
days after it receives your shares, or other required documents, properly
endorsed. Your signature on an issued certificate must be guaranteed by a
commercial bank or trust company or by a member of the New York, American,
Pacific, Boston or Chicago Stock Exchange. The Trust will not accept a signature
guarantee by a savings bank or savings and loan association or notarization by a
notary public.
To ensure proper authorization, the Trust's transfer agent may request
additional documents. These may include stock powers, trust instruments,
certificates of death, appointments as executor, certificates of corporate
authority or waiver of tax (required in some states from selling or exchanging
estates before redeeming shares).
There are no circumstances under which the Trust may redeem shares automatically
without action by the shareholder.
The right of redemption may be suspended or the payment date postponed at
certain times. These include days when the New York Stock Exchange is closed for
other than customary weekend and holiday closings, when trading on the New York
Stock Exchange is restricted, as determined by the Securities and Exchange
Commission, or for any period when an emergency (as defined by rules of the
Commission) exists, or during any period when the Commission has, by order,
permitted a suspension. In case of a suspension of the right of redemption, a
shareholder who has rendered a certificate for redemption through a broker may
withdraw his request or certificate. Otherwise, he will receive payment of the
net asset value determined next after the suspension has been terminated.
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You may receive more or less than you paid for your shares, depending on the net
asset value of the shares at the time of redemption or repurchase.
Redemptions in Kind
Under unusual circumstances, when the Board of Trustees deems it in the best
interests of the Trust's shareholders, the Trust may pay for shares repurchased
or redeemed partly or entirely in securities or other assets of the Trust taken
at current values. If any such redemption in kind is to be made, the Trust
intends to make an election pursuant to Rule 18(f)(1) under the Investment
Company Act of 1940. This will require the Trust to redeem with cash at a
shareholder's election in any case where the redemption involves less than
$250,000 (or 1% of the Trust's net assets at the beginning of each 90-day period
during which such redemptions are in effect, if that amount is less than
$250,000). If payment is made in securities, the redeeming shareholder may incur
brokerage costs in converting his securities to cash.
Services for Shareholders
Open Accounts: For your convenience, all shares of the Trust registered in your
name are automatically credited to an Open Account maintained for you on the
books of the Trust. All shares that you acquire will be credited to your Open
Account and share certificates will not be issued unless you so request.
Certificates representing fractional shares will not be issued in any case. You
may surrender certificates previously acquired to the Trust's transfer agent.
These certificates will be canceled and the shares so represented will continue
to be credited to your Open Account.
Each time shares are credited to or withdrawn from your Open Account, you will
receive a statement showing the details of the transaction and your then current
balance of shares. Shortly after the end of each calendar year you will also
receive a complete annual statement of your Open Account, as well as information
as to the Federal tax status of dividends and capital gain distributions, if
any, paid by the Trust during the year.
You may transfer shares credited to an Open Account upon proper written
instructions to the Trust's transfer agent. You may also redeem or sell shares
in the manner shown under the "Redemption and Repurchase of Shares."
Invest-By-Mail: An Open Account provides a single and convenient way of setting
up a flexible investment program for the accumulation of shares of the Trust.
You may purchase additional shares for your Open Account at any time by sending
a check (payable to the order of the Trust) to Anchor Investment Management
Corp. Shareholders Services, Attn: Anchor Strategic Assets Trust, 579 Pleasant
Street, Suite 4, Paxton, Massachusetts 01612 (giving the full name or names of
your account). The Trust will bear the cost of administering shareholders' Open
Accounts as an expense of all its shareholders.
Distributions
The Trust currently intends to distribute any income dividends and capital gains
distributions in additional Trust shares or, if you elect, in cash. You may
elect (1) to receive both dividends and capital gain distributions in additional
shares or (2) to receive dividends in cash and capital gain distributions in
additional shares or (3) to receive both dividends and capital gain
distributions in cash.
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You may change your distribution option at any time by notifying the Trust's
transfer agent in writing. The new distribution option must be received by the
Trust's transfer agent at least 30 days prior to the close of the fiscal year.
If you have an account with a cash dividend option, and the Trust's transfer
agent discovers that your address of record is not current, your account will be
changed to reinvest both dividends and capital gains automatically.
Dividends and capital gain distributions received in shares will be made to the
Trust's transfer agent, as your agent, and credited to your Open Account in full
at the closing net asset value on the record date of the distributions.
Tax Consequences
Shareholders will be subject to federal income taxes on distributions made by
the Trust whether they are received in cash or additional Trust shares.
Distributions of net investment income and short-term capital gains, if any,
will be taxable to shareholders as ordinary income. Distributions of long-term
capital gains, if any, will be taxable to shareholders as long-term capital
gains, without regard to how long a shareholder has held shares of the Trust.
Dividends paid by the Trust will generally not qualify for the dividends
received deductions for corporations. The Trust will notify shareholders each
year of the amount of dividends and distributions, including the amount of any
distribution of long-term capital gains.
The Trust's foreign investments may be subject to foreign withholding taxes. The
Trust will be entitled to claim a deduction for such foreign withholding taxes
for federal income tax purposes. However, any such taxes will reduce the income
available for distribution to shareholders.
The Trust is required to withhold 20% of the dividends paid with respect to any
shareholder who fails to furnish the Trust with a correct taxpayer
identification number, who under-reported dividend or interest income, or who
fails to certify to the Trust that he or she is not subject to such withholding.
An individual's tax identification is his or her social security number.
Please consult your tax adviser for further information regarding your federal,
state, and local tax liability.
OTHER INFORMATION
Custodian, Transfer Agent and Paying Agent
Investors Bank & Trust Company, Financial Product Services, 200 Clarendon
Street, 16th Floor, Boston, Massachusetts 02116 is the Trust's custodian bank.
The custodian bank receives and holds securities, cash and other assets of the
Trust and also makes distributions on behalf of the Trust. In cases where
foreign securities must, as a practical matter, be held abroad, the Trust's
custodian bank and the Trust will make appropriate arrangements so that such
securities may legally be so held abroad. The Trust's custodian bank does not
decide on purchases or sales or portfolio securities or the making of
distributions. As of April 1, 1999, Cardinal Investment Services, Inc., 579
Pleasant Street, Suite 4, Paxton, Massachusetts 01612, succeeded Anchor
Investment Management Corporation, as the transfer agent and dividend-paying
agent for the Trust.
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Capitalization
The capitalization of the Trust consists of an unlimited number of shares of
beneficial interest, without par value, designated Common Shares, which
participate equally in dividends and distributions. Issued shares are fully paid
and non-assessable and transferable on the books of the Trust. The shares have
no preemptive rights. The shares each have one vote and proportionate
liquidation rights.
Additional Information
You can find more detailed information about the Trust, its investment
strategies and risks of investing in the Trust in the Statement of Additional
Information.
Shareholder Inquiries
For further information about the Trust, you may call the Trust collect at
(508)831-1171. You may address any written inquiries to Anchor Strategic Assets
Trust, 579 Pleasant Street, Suite 4, Paxton, Massachusetts 01612.
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FINANCIAL INFORMATION
FINANCIAL HIGHLIGHTS
The following financial highlights will help you understand the Trust's
financial performance for its past five fiscal years. Some of the information is
presented on a per share basis. The total returns in the table represent the
rate an investor would have earned (or lost) on an investment in the Trust,
assuming reinvestment of all dividends and distributions.
This information has been audited by Livingston & Haynes, P. C., whose report,
along with the Trust's audited financial statements, is included in the Annual
Report.
Year ended December 31
---------------------------------------------
1998 1997 1996 1995 1994
---------------------------------------------
Net Asset Value,
Beginning of Year $3.90 $4.86 $4.57 $4.48 $5.43
- -----------------------------------------------------------------------
Income From Investment
Operations:
Net Investment Income (0.03) (0.10) (0.02) (0.03) 4.46
Net realized and
unrealized gain(loss)
on investments 0.10 (0.86) 0.31 0.12 (5.41)
- -----------------------------------------------------------------------
Total income from
investment Operations (0.07) (0.96) 0.29 0.09 (0.95)
- -----------------------------------------------------------------------
Less Distributions::
Dividends from net
investment Income (0.08) -- -- -- --
Distributions from
capital gains -- -- -- -- --
- -----------------------------------------------------------------------
Total distributions (0.08) -- -- -- --
Net Asset Value, End
of Year $3.89 $3.90 $4.86 $4.57 $4.48
- -----------------------------------------------------------------------
Total Return 1.31% (19.75%) 6.35% 2.01% (17.50%)
- -----------------------------------------------------------------------
Ratios/Supplemental Data:
Net assets, end of year $3.2 $4.6 $8.1 $5.4 $4.6
(in millions)
Ratio of expenses to
average net assets 2.54% 2.35% 1.98% 1.99% 2.19%
Ratio of net income
to average Net assets (0.19%) (0.40%) (1.49%) (1.10%) (1.24%)
Portfolio turnover rate 60% 21% 37% 12% 42%
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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.)
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III. INVEST-BY-MAIL SERVICE: for periodic share accumulation (whether or
not dividends are received in shares)
[GRAPHIC OMITTED] Please check if you wish to utilize the Trust's Invest-By-Mail
Service. This is a voluntary service involving no extra charge to the
shareholder, and it may be changed or discontinued at any time.
IV. SHAREHOLDER'S SIGNATURE: Should be the same as name in Account
Registration.
__________________________________ ________________________________________
Signature Signature of Co-Owner (if any)
(I have received a current prospectus of the Trust and I understand that my
account will be covered by the provisions on the reverse side of this
Application.I also understand that I may terminate any of these services at any
time.)
DEALER AUTHORIZATION:
(please print)
Representative
_________________________________ ______________________________________
Dealer's Name (Representative's Name)
_________________________________ ______________________________________
Home Office Address Telephone Number(Representative's Number)
Branch Office:
_________________________________ ______________________________________
City State Zip Address
_________________________________ ______________________________________
Authorized Signature of Dealer City State Zip
_________________________________
Telephone Number
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ANCHOR STRATEGIC ASSETS TRUST
For investors who want more information about the Trust, the following documents
are available free upon request:
Annual Reports: Additional information about the Trust's investments is
available in the Trust's annual report to shareholders. The Trust's annual
report includes a discussion of the market conditions and investment strategies
that significantly affected the Trust's performance during its last fiscal year.
Statement of Additional Information (SAI): The SAI provides more detailed
information and is incorporated into this Prospectus by reference.
You can get free copies of the Trust's annual reports and SAIs
by writing or calling the Trust collect at:
Anchor Strategic Assets Trust
579 Pleasant Street, Suite 4
Paxton, Massachusetts 01612
Telephone (collect):(508) 831-1171
Fax: (508) 831-1191
You can also review the Trust's reports and SAIs at the Public Reference Room of
the Securities and Exchange Commission.
You can obtain copies from the Securities and Exchange Commission as follows:
For a fee, by writing to or calling the Commission's
Public Reference Room, Washington, D.C. 20549
Telephone: 1-800-SEC-0330
Free from the Commission's Internet website at
http://www.sec.gov.
Investment Company Act File No. 811-5963
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ANCHOR STRATEGIC ASSETS TRUST
579 Pleasant Street, Suite 4
Paxton, Massachusetts 01612
(508) 831-1171
STATEMENT OF ADDITIONAL INFORMATION
Dated May 1, 1999
This Statement of Additional Information (SAI) is not a prospectus but should be
read in conjunction with the current Prospectus of Anchor Strategic Assets Trust
(the "Trust") dated May 1, 1999, and the financial statements contained in the
Trust's Annual Report for the year ended December 31, 1998. The Trust's Annual
Report is incorporated by reference in this SAI. You may obtain the Trust's
Prospectus and Annual Report without charge by writing or calling the Trust
collect at 508-831-1171.
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TABLE OF CONTENTS
THE TRUST.......................................................B-1
INVESTMENT STRATEGIES AND RISKS.................................B-1
Investment Strategy ......................................B-1
Option Transactions Involving Portfolio Securities and
Securities Indices........................................B-2
Index Options ............................................B-4
Risks of Options on Indices ..............................B-4
Options on Foreign Currencies ............................B-5
Risks of Foreign Currency Option Activities ..............B-7
Special Risks of Foreign Currency options ................B-8
Financial and Precious Metals Futures Contracts and Related
Options ..................................................B-9
Limitations on Futures Contracts and Related Options.....B-11
Risks Relating to Futures Contracts and Related Option...B-11
Other Investment Companies...............................B-13
Lending..................................................B-13
Repurchase Agreements....................................B-13
Investment Risks.........................................B-13
Investment Strategy......................................B-14
Foreign Investments......................................B-14
Precious Metals..........................................B-14
Risks Relating to Repurchase Agreements..................B-16
Prepayments Risks Associated with GNMA Certificates......B-16
PORTFOLIO TURNOVER.............................................B-16
INVESTMENT RESTRICTIONS........................................B-17
MANAGEMENT OF THE TRUST........................................B-18
Officers and Trustees.....................................B-18
Compensation of Officers and Trustees.....................B-20
Principal Holders of Securities...........................B-20
Investment Adviser........................................B-20
Investment Advisory Contract..............................B-21
Administrator.............................................B-22
Principal Underwriter.....................................B-23
Rule 12b-1 Plan...........................................B-23
CAPITALIZATION.................................................B-24
PURCHASE, REDEMPTION AND PRICING OF SHARES.....................B-25
Purchase of Shares.......................................B-25
Determination of Net Asset Value.........................B-25
Redemption and Repurchase of Shares......................B-26
Redemptions in Kind......................................B-26
DISTRIBUTIONS .................................................B-27
TAXES..........................................................B-27
General..................................................B-27
Tax Treatment of Options.................................B-28
PORTFOLIO SECURITY TRANSACTIONS ...............................B-30
OTHER INFORMATION..............................................B-31
Custodian, Transfer Agent and Dividend-Paying Agent .....B-31
Independent Public Accountants ..........................B-32
Registration Statement ..................................B-32
FINANCIAL STATEMENTS...........................................B-32
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THE TRUST
Anchor Strategic Assets Trust (Trust) is a non-diversified, open-end management
investment company that was established as an unincorporated business trust
under the laws of Massachusetts by a Declaration of Trust dated 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.
INVESTMENT STRATEGIES AND RISKS
The Trust's Prospectus describes the investment objectives and policies of the
Trust. The Prospectus also briefly describes specialized techniques that the
Trust may use in order to achieve its investment objectives. There can be no
assurance that the Trust will achieve its investment objectives. The following
discussion is intended to provide further information concerning investment
techniques and risk considerations which the Investment Adviser believes to be
of interest to investors.
Investment Strategy
The Trust's investments will vary depending upon whether the Investment Adviser
anticipates an inflationary or deflationary economic cycle.
The Investment Adviser's determination as to whether the economy is inflationary
or deflationary will be made based upon constant study of numerous economic and
monetary factors. These factors will include, but not necessarily be limited to:
-actual and anticipated rates of change in the CPI over specified periods
of time;
-actual and anticipated changes and rates of change in the U.S. dollar
in relation to other key currencies, e.g., the German mark, the
British pound and the Japanese yen;
-actual and anticipated changes, and rates of change, in short and
long-term interest rates and real interest rates, i.e., inflation
adjusted interest rates;
-actual and anticipated changes in the money supply; and
-actual and anticipated governmental fiscal and monetary policy.
Investment in precious metals and related securities in anticipation of
inflationary periods is intended not only to preserve capital in the projected
ensuing inflationary period, but also to provide opportunity for capital
appreciation of the precious metals and related investments during such
inflationary period. The broad range of precious metals and currency related
investment vehicles that may be utilized by the Trust during such inflationary
periods is intended to allow the Trust the widest possible latitude in
attempting to determine the most attractive investment posture for the current
period.
Investment in U.S. and other government securities in anticipation of
deflationary periods is intended to preserve capital, while providing a
relatively secure income, and to provide an opportunity for capital appreciation
if interest rates decline in such deflationary periods.
The Investment Adviser believes that by not remaining fully invested in gold and
silver and other precious metals or securities tied to their value during
periods of deflation, the Trust can avoid declines in the price of precious
3
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metals that typically occur during such periods and, at the same time, obtain
the benefit of the increase in value of debt instruments that typically occurs
when interest rates decline during such periods, thereby enhancing the Trust's
potential to achieve its investment objective of capital appreciation.
Investment in U.S. and other government securities in anticipation of
deflationary periods is intended to preserve capital, while providing a
relatively secure income, and to provide an opportunity for capital appreciation
if interest rates decline in such deflationary periods.
U. S. government securities include Treasury bills, notes and bonds, which
differ in their interest rates, maturities, and times of issuance. Treasury
bills have maturities of one year or less. Treasury notes have maturities of one
to ten years and Treasury bonds have maturities of greater than ten years at the
date of issuance. U.S. government securities also include obligations of
agencies and instrumentalities of the U.S. government. Agencies and
instrumentalities of the U.S. government include, but are not limited to:
Federal Land Banks; Farmers Home Administration; Central Bank of Cooperatives;
Federal Intermediate Credit Banks; Federal Home Loan Banks; and Federal National
Mortgage Association. Some obligations of the U.S. government agencies and
instrumentalities, such as Treasury bills, government National Mortgage
Association (GNMA) certificates, are supported by the full faith and credit of
the United States; others, such as securities of Federal Home Loan Banks, are
supported by the right of the issuer to borrow from the U.S. Treasury; still
others, such as bonds issued by the Federal National Mortgage Association, a
private corporation, are supported only by the credit of the instrumentality.
These securities are not insured by the U.S. government and there can be no
assurance that the U.S. government will support an instrumentality it sponsors.
The Trust will invest in the securities issued by such an instrumentality only
when its Investment Adviser determines that the credit risk with respect to the
instrumentality does not make its securities unsuitable investments.
If, in the opinion of the Investment Adviser, there are periods of less
favorable economic and/or market conditions, such as when there is no
discernible trend in the rate of change in the Consumer Price Index and other
leading economic indicators offer no evidence of inflationary or deflationary
trends, then, for temporary defensive purposes, the Trust may invest in
short-term U.S. government securities and other money market instruments, cash
or cash equivalents. Money market instruments include high-grade commercial
paper (promissory notes issued by corporation to finance their short-term credit
needs), negotiable certificates of deposit, non-negotiable fixed time deposits,
bankers' acceptances and repurchase agreements. Investments in commercial paper
will be rated Prime-1 by Moody's Investors Services, Inc. or A-1 by Standard &
Poor's or F-1 by Fitch Investors Service, Inc., which are the highest ratings
assigned by these agencies. Money market instruments will be limited to U.S.
dollar denominated instruments which are rated in the top two categories by an
independent nationally recognized rating organization or, if not rated, are of
comparable quality as determined by the Trustees. Investments in bank
instruments will be in instruments which are issued by U.S. or foreign banks
having capital and undivided surplus at the time of investment of $200,000,000
or more and which mature in one year or less from the date of acquisition.
To achieve its investment objective, the Trust may also use specialized
investment techniques by engaging in a variety of transactions including
transactions in options on securities, securities indices and currencies,
transactions in financial futures contracts and related options, loans of
portfolio securities, transactions in repurchase agreements. The use of
derivatives involves special risks and may result in losses to the Trust.
A portion of the Trust's net asset value may be invested in debt securities of
non-U.S. issuers. Foreign securities pose additional risks because foreign
economic or political conditions may be less favorable than those of the United
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States. There is usually less public information available about foreign
companies than about U.S. companies. Foreign financial markets may also have
fewer investor protections. Securities in foreign markets may also be subject to
taxation policies that reduce returns for U.S. investors. Due to these risk
factors, foreign securities may be more volatile and less liquid than similar
securities traded in the U.S. In particular, investments in foreign securities
are subject to the following specific risks:
Country Risk. Debt securities market movements in any country will likely
affect the value of the securities the Trust owns which trade in that
country. These movements will affect the Trust's share price.
The political, economic and social structures of some countries in which
the Trust invests may be less stable and more volatile than those in the
U. S. The risks of investing in these countries include the possibility of
the imposition of exchange controls, expropriation, restrictions on
removal of currency or other assets, nationalization of assets and
punitive taxes.
The Trust's investments in developing or emerging markets are subject to
all of the risks of foreign investing generally, and have additional
heightened risks due to a lack of legal, business and social frameworks to
support securities markets. Typically, investments by the Trust in
developing or emerging markets constitute less than 5% of the Trust's
total assets.
Company Risk. Foreign companies are not subject to the same accounting,
auditing, and financial reporting standards and practices as U. S.
companies and their stocks may not be as liquid as stocks of similar U.S.
companies. Foreign stock exchanges, brokers and companies generally have
less government supervision and regulation that in the U.S. The Trust may
have greater difficulty voting proxies, exercising shareholder rights,
pursuing legal remedies and obtaining judgments with respect to foreign
investments in foreign courts than with respect to U.S.
companies in U.S. courts.
Currency. Many of the Trust's investments are
denominated in foreign currencies. Changes in foreign
currency exchange rates will affect the value of
securities the Trust owns and the Trust's share price.
Generally, when the U.S. dollar rises in value against
a foreign currency, an investment denominated in that
country's currency loses value because that currency is
worth fewer U.S. dollars.
Euro. On January 1, 1999, the European Monetary Union introduced a new
single currency, the euro. The euro will replace the national currency for
participating member countries. The Trust's investments in countries with
currencies replaced by the euro, the investment process, including
trading, foreign exchange, payments, settlements, cash accounts, custody
and accounting, will be affected.
Because this change to a single currency is new and untested, the establishment
of the euro may result in market volatility. Also, it is not possible to predict
the impact of the euro on the business or financial condition of European
issuers which the Trust may hold in its portfolio, and their impact on the value
of Trust shares. To the extent the Trust holds non-U.S. dollar (euro or other)
denominated securities, it will still be exposed to currency risk due to
fluctuations in those currencies versus the U.S.
dollar.
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oOptions Transactions Involving Portfolio Securities and Securities Indices
The writing of call option contracts and the purchasing of put options is a
highly specialized activity which involves investment techniques and risks
different from those ordinarily associated with investment companies. The
Investment Adviser believes that the assets of the Trust may be increased by
realizing premiums from the writing of call options and by purchasing put
options with respect to securities held by the Trust.
The Trust may write call option contracts or purchase put or call options with
respect to portfolio securities and with respect to securities indices at such
times as its management determines to be appropriate.
Call options are written and put options are purchased solely as covered options
(a call is "covered" if the writer, at all times while obligated as a writer,
either owns the underlying securities (or comparable securities satisfying the
cover requirements of the securities exchanges ), or has the right to acquire
such securities through immediate conversion of securities, and such options
(which generally correspond to the securities represented by the index in the
case of index options) on domestic securities are generally listed on a national
securities exchange.
Exchanges on which such options currently are traded are the Chicago Board of
Options Exchange and the American, Pacific, and Philadelphia Stock Exchanges.
Options on foreign securities and some domestic securities may not be listed on
any domestic or foreign exchange.
The Trust receives a premium on the sale of an option, but gives up the
opportunity to profit from any increase in the price of the security or
representative securities in the case of an index option above the exercise
price of the option. The Trust pays a premium upon the purchase of an option,
which may be lost if the option proves to be of no ultimate value.
There can be no assurance that the Trust will always be able to close out
options positions at acceptable prices. The Trust will write or purchase such
options only where economically appropriate as a hedging technique to reduce the
risks in management of its portfolio, and to preserve the Trust's net asset
value, and not for speculative purposes (i.e., not for profit). In no event will
the Trust purchase such options where the value of the options, either singly or
in the aggregate, would exceed 50% of the value of the Trust's assets at the
time of purchase.
The Trust may also purchase put and call options for a premium. The Trust may
sell a put or call option which it has previously purchased prior to the sale of
the underlying security. Such a sale would result in a net gain or loss
depending on whether the amount received on the sale is more or less than the
premium and other transaction costs paid.
When a security is sold from the Trust's portfolio, the Trust effects a closing
call purchase or put sale transaction so as to close out any existing option on
the security. A closing transaction may be made only on an Exchange or other
market which provides a secondary market for an option with the main exercise
price and expiration date. There is no assurance that a liquid secondary market
on an Exchange or otherwise will exist for any particular option or at any
particular time, and for some options no secondary market on an Exchange or
otherwise may exist. If the Trust is unable to effect a closing transaction, in
the case of a call option, the Trust will not be able to sell the underlying
security until the option expires or the Trust delivers the underlying security
upon exercise.
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The Trust pays brokerage commissions in connection with the writing and
purchasing of options and efficient closing transactions, as well as for
purchases and sales of underlying securities. The writing of options could
result in significant increases in the Trust's portfolio turnover rate,
especially during periods when market prices of the underlying securities
appreciate.
If a call option expires on its stipulated expiration date or if the Trust
enters into a closing purchase transaction, the Trust will realize a gain (or
less if the cost of a closing purchase transaction exceeds the premium received
when the option was sold) without regard to any unrealized gain or loss on the
underlying security, and the liability related to such option will be
extinguished. If a call option is exercised, the Trust will realize a gain or
loss from the sale of the underlying security and the proceeds of the sale will
be increased by the premium originally received.
Because the Trust intends to qualify as a regulated investment company under the
Internal Revenue Code of 1986, the Trust may be subject to other restrictions on
the Trust's ability to enter into option transactions may apply from time to
time. See "Taxes--Tax Treatment of Options and Futures Transactions."
oIndex Options
The Trust may purchase put or call index options. A call option on a securities
index is similar to a call option on an individual security, except that the
option's value depends on the weighted value of the group of securities
constituting the index. Also, all settlements on index options are made in cash.
When the Trust purchases index options, a multiplier is used. A multiplier for
an index option performs a function similar to the unit of trading for an option
on an individual security. It determines the total dollar value per contract of
each point between the exercise price of the option and the current level of the
underlying index. A multiplier of 100 means that a one-point difference will
yield $100. Options on different indices may have different multipliers.
The Trust currently trades index options relating to, among others, the Standard
& Poor's 100 and 500 Composite Stock Price Indices and Gold/Silver Index. The
Trust may write call options and purchase put and call options on any other
traded indices. Call options on securities indices written by the Trust will be
"covered' by identifying the specific portfolio securities being utilized. A
call is "covered" if the writer, at all times while obligated as a writer,
either owns the underlying securities (or comparable securities satisfying the
cover requirements of the securities exchanges ), or has the right to acquire
such securities through immediate conversion of securities.
To secure the obligation to deliver the underlying securities in the case of an
index call option written by the Trust, the Trust will be required to deposit
qualified securities. A "qualified security" is a security against which the
Trust has not written a call option and which has not been hedged by the Trust
by the sale of a financial futures contract.
If at the close of business on any day the market value of the qualified
securities falls below 100% of the current index value times the multiplier
times the number of contracts, the Trust will deposit an amount of cash or
liquid assets equal in value to the amount by which the call is "in-the-money"
(when the market price of the index is above the exercise price of the call)
times the multiplier times the number of contracts. Any amount segregated may be
applied to the Trust's obligation to segregate additional amounts in the event
that the market value of the qualified securities falls below 100% of the
contract index value times the multiplier times the number of contracts.
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oRisks of Options on Portfolio Securities and Indices
Because the value of an index option depends upon movements in the level of the
index rather than the price of a particular security, whether the Trust will
realize a gain or loss on the purchase or sale of an option on an index depends
upon movements in the level of prices in the market generally or in an industry
or market segment, rather than movements in the price of an individual security.
Accordingly, successful use by the Trust of options on indices will be subject
to the Investment Adviser's ability to predict correctly movements in the
direction of the market generally or of a particular industry. This requires
different skills and techniques than predicting changes in the price of
individual securities.
Index prices may be distorted if trading of certain securities included in the
index is interrupted. Trading in index options also may be interrupted in
certain circumstances, such as if trading were halted in a substantial number of
securities included in the index. If this occurred, the Trust would not be able
to close out options which it has purchased or written and, if restriction on
exercise were imposed, might be unable to exercise an option it purchased, which
could result in substantial losses to the Trust. However, it is the Trust's
policy to purchase or write options only on indices which include a sufficient
number of securities so that the likelihood of a trading halt in the index is
minimized.
Because the exercise of an index option is settled in cash, an index call writer
cannot determine the amount of its settlement obligation in advance. Further,
unlike call writing on portfolio securities, the writer cannot provide in
advance for its potential settlement obligation by holding the underlying
securities.
Price movements in securities in the Trust's portfolio will not correlate
perfectly with movements in the level of the index. Therefore, the Trust bears
the risk that the price of the securities held by the Trust may not increase as
much as the index. In this event, the Trust would bear a loss on the call which
would not be completely offset by movements in the prices of the Trust's
portfolio securities. It is also possible that the index may rise when the
Trust's portfolio securities do not. If this occurred, the Trust would
experience a loss on the call which would not be offset by an increase in the
value of its portfolio and also might experience a loss in its portfolio.
Unless the Trust has other liquid assets which will satisfy the exercise of a
call on an index, the Trust will have to liquidate portfolio securities in order
to satisfy the exercise. Because an exercise must be settled within hours after
receiving the notice of exercise, if the Trust fails to anticipate an exercise,
it may have to borrow from a bank (in amounts not exceeding 5% of the Trust's
total assets) pending settlement of the sale of securities in its portfolio and
would incur interest charges thereon.
When the Trust has written a call on an index, there is also a risk that the
market may decline between the time the Trust has the call exercised against it,
at a price which is fixed as of the closing level of the index on the date of
exercise, and the time the Trust is able to sell securities in its portfolio. As
with options on portfolio securities, the Trust will not learn that a call has
been exercised until the day following the exercise date. Unlike a call on a
portfolio security in settlement, the Trust may have to sell part of its
portfolio securities in order to make settlement in cash, and the price of such
securities might decline before they could be sold.
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If the Trust exercises a put option on an index which it has purchased before
final determination of the closing index value for that day, it runs the risk
that the level of the underlying index may change before closing. If this change
causes the exercised option to fall "out-of-the-money," the Trust will be
required to pay the difference between the closing index value and the exercise
price of the option (multiplied by the applicable multiplier) to the assigned
writer. The Trust may be able to minimize the risk by withholding exercise
instructions until just before the daily cutoff time or by selling rather than
exercising an option when the index level is close to the exercise price. The
Trust may not be able to eliminate this risk entirely because the cutoff times
for index options may be earlier than those fixed for other types of options and
may occur before definitive closing index values are announced.
The Trust pays brokerage commissions in connection with the writing and
purchasing of options and effecting closing transactions, as well as for
purchases and sales of underlying securities. The writing of options may cause
significant increases in the Trust's portfolio turnover rate, especially during
periods when the market prices of the underlying securities appreciate.
oOptions on Foreign Currencies
The Trust may purchase put and call options on foreign currencies. The Trust may
purchase such options where economically appropriate as a hedging technique to
reduce the risks in management of its portfolio, and to preserve the Trust's net
asset value, and not for speculative purposes (i.e., not for profit). In no
event will the Trust purchase such options where the value of the options,
either singly or in the aggregate, would exceed 50% of the value of the Trust's
assets at the time of purchase.
A put option on a foreign currency is a short-term contract (generally having a
duration of nine months or less) which gives the purchaser of the put option, in
return for a premium, the right to sell the underlying currency at a specified
price during the term of the option. A call option on a foreign currency is a
short-term contract which gives the purchaser of the call option, in return for
a premium, the right to buy the underlying currency at a specified price during
the term of the option. The purchase of put and call options on foreign
currencies is similar to the purchase of puts and calls on stocks.
Options on foreign currencies are currently traded in the United States on the
Philadelphia Stock Exchange and the Chicago Board of Options Exchange. Foreign
currencies options are currently traded in British pounds, Swiss francs,
Japanese yen, Deutsche marks and Canadian dollars. The Trust may use foreign
currency options to protect against the decline in the value of portfolio
securities resulting from changes in foreign exchange rates, as the following
examples illustrate:
1. In connection with the Trust's payment for securities of a foreign issuer at
some future date in a foreign currency, the Trust may purchase call options on
that foreign currency to hedge against the risk that the value of the foreign
currency might rise against the U. S. dollar, which would increase the cost of
the currency and the transaction.
EXAMPLE: The Trust must pay for the purchase of securities of a Swiss
issuer in Swiss francs. If the Trust is concerned that the price of Swiss
francs might rise in price (in U. S. dollars) from, for example, $.4780,
it might purchase Swiss franc June 48 call options for a premium of, for
example, $.50 (i.e. $.005 per Swiss franc times 62,500 Swiss francs per
contract, for a total premium of $312.50 -- plus transaction costs). This
would establish a maximum cost for Swiss francs and thus the maximum cost
in U.S. dollars for the Swiss securities. If Swiss francs subsequently
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appreciated to $.4950 and the premium on Swiss franc June 48 call options
increased to, for example, $1.95 (for a total premium of $1,219.75), the
Trust could sell the option at a profit ($1,219.75 less the original
premium paid of $312.50 and transaction costs) to offset the increased
cost of acquiring Swiss francs. Alternatively, the Trust could exercise
the option contract. If the Swiss franc remained below $.48, the Trust
could let its calls expire (losing its premium) and purchase the Swiss
francs at a lower price.
2. The Trust may purchase foreign currency options to protect against a decline
in the Trust's cash and short-term U.S.
government securities.
EXAMPLE: The Trust may have investments in cash and in short-term U.S.
government securities e.g., U.S. Treasury bills having maturities of less
than one year). In order to hedge against a possible decline in the value
of the U.S. dollar, the Trust might purchase Deutsche mark 40 calls. If
the Deutsche mark appreciates above $.40, then the Trust could exercise
its option contract and stabilize the value of its cash holdings and the
underlying value of the U.S. Treasury bills in its portfolio as a result
of the improved exchange rate between the Deutsche mark and the U.S.
dollar.
As is the case with other listed options, the effectiveness of foreign currency
options in carrying out the Trust's objective will depend on the exercise price
of the option held and the extent to which the value of such option will be
affected by changes in the exchange rates of the underlying currency. To
terminate its rights in options which it has purchased, the Trust would sell an
option of the same series in a closing sale transaction. The Trust will realize
a gain or loss, which will be offset by a loss or gain on the U.S. dollar,
depending on whether the sale price of the option is more or less than the
Trust's cost of establishing the position. If the transaction is not completed,
the option may be allowed to expire (causing loss of the option premium amount)
or liquidated for any remaining value.
Foreign currency options purchased for the Trust will be valued at the last sale
price on the principal exchange on which such option is traded or, in the
absence of a sale, the mean between the last bid and offering prices. Options
which are not actively traded will be valued at the difference between the
option price and the current market price of the underlying security, provided
that the put price is higher than such market price or the call price is lower
than such market price. In the event that a put price is lower than the current
market value of the underlying security, or a call price is higher than the
current market value of the underlying security, then the option will be
assigned no value.
Risks of Foreign Currency Option Activities
If a decline in the value of the Trust's portfolio is accompanied by a rise in
the value of a foreign currency in relation to the U.S. dollar, the purchase of
options on that foreign currency may generate gains which would partially offset
the decline. However, if after the Trust purchases an option, the value of the
Trust's portfolio moves in the opposite direction from that contemplated, the
Trust may experience losses to the extent of premiums it paid in purchasing the
options. This will reduce any gains the Trust would otherwise have. For this
reason, as well as supply and demand imbalances and other market factors, the
price movements of options on foreign currencies may not correspond to the price
movements of the Trust's portfolio securities. In these cases, the Trust may
incur losses on the options transactions.
The Trust's success in using options on foreign currencies depends, among other
things, on the Investment Adviser's ability to predict the direction and
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volatility of price movements in the options markets as well as the general
securities markets and on the Investment Adviser's ability to select the proper
type time and duration of options. Although the Investment Adviser has prior
experience in using currency options, this technique may not produce its
intended results. The price movements of options relating to currencies
purchased by the Trust may not correspond to the price movements of the Trust's
portfolio securities and the options transactions.
Option positions on foreign currencies may be closed out only on an exchange or
other market which provides a secondary market for options of the same series.
Options on foreign currencies are currently traded in the United States on the
Philadelphia Stock Exchange and the Chicago Board of Options Exchange. Trading
in options on foreign currencies may be interrupted, for example, because of
supply and demand imbalances arising from a lack of either buyers or sellers. In
addition, trading may be suspended after the price of an option has risen or
fallen more than a specified maximum amount. Exercise of foreign currency
options also could be restricted or delayed because of regulatory restrictions
or other factors. The ability to establish and close out positions in foreign
currency options will be subject to the development and maintenance of a liquid
secondary market. It is not certain that this market will continue. The Trust
will not purchase foreign currency options on any exchange or other market
unless and until, in the Investment Adviser's opinion, the market for such
options has developed sufficiently. Although the Trust intends to purchase
options only when there appears to be an active market for them, there can be no
assurance that there will be a liquid market when the Trust seeks to close a
particular option position. Accordingly, the Trust may experience losses as a
result of its inability to close out an options position.
The Trust also may be generally restricted in the purchase and sale of options
because the Trust intends to qualify as a regulated investment company under
Subchapter M of the Internal Revenue Code. One of the requirements for this
qualification is that less than 30% of the Trust's gross income must be derived
from gains on securities held for less than three months. Accordingly, the Trust
will be restricted in the purchasing of options on foreign currencies which
expire in less than three months, and in effecting closing purchase or sale
transactions relating to put options on foreign currencies which were purchased
less than three months prior to such transactions. The Trust may also be
restricted in the purchase of put options for the purpose of hedging underlying
foreign currencies because of the application of the short sale holding period
rules as to the underlying hedged currencies. Thus, the extent to which the
Trust may engage in option transactions may be materially limited by this 30%
test, by the additional Internal Revenue Code requirement that at least 90% of
the Trust's gross income be derived from dividends, interest, and gains from the
sale or other disposition of securities, and by other Internal Revenue Code
requirements.
oSpecial Risks of Foreign Currency Options
In addition to the risks described above, there are special risks associated
with foreign currency options, including the following:
1. The value of foreign currency options is dependent upon the value of foreign
currencies relative to the U.S. dollar. As a result, the prices of foreign
currency options may vary with changes in the value of either or both
currencies. Thus, fluctuations in the value of the U.S. dollar will affect
exchange rates and the value of foreign currency options, even in the case of an
otherwise stable foreign currency. Conversely, fluctuations in the value of a
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foreign currency will affect exchange rates and the value of foreign currency
options even if the value of the U.S. dollar remains relatively constant. Thus,
the Trust must consider carefully factors affecting both the U.S. economy and
the economy of the foreign country issuing the foreign currency underlying the
option.
2. The value of any currency, including U.S. dollars and foreign currencies, may
be affected by a number of complex factors applicable to the issuing country.
These factors include the prevailing monetary policy of that country, its money
supply, its trade deficit or surplus, its balance of payments, interest rates,
inflation rates and the extent or trend of its economic growth. In addition,
foreign countries may take a variety of actions, such as increasing or
decreasing the money supply or purchasing or selling government obligations,
which may have an indirect but immediate effect on exchange rates.
3. The exchange rates of foreign currencies (and therefore the value of foreign
currency options) could be significantly affected, fixed or supported directly
or indirectly by government actions. Any government intervention may increase
risks to investors since exchange rates may not be free to fluctuate in response
to other market forces.
4. Because foreign currency transactions occurring in the interbank market
involve substantially larger amounts than those likely to be involved in the
exercise of individual foreign currency option contracts, investors who buy or
write foreign currency options may be disadvantaged by having to deal in an odd
lot market for the underlying foreign currencies at prices that are less
favorable than for round lots. Because this price differential may be
considerable, it must be taken into account when assessing the profitability of
a transaction in foreign currency options.
5. There is no systematic reporting of last sale information for foreign
currencies. Reasonably current, representative bid and offer information
available on the floor of the exchange on which foreign currency options are
traded, in certain brokers' offices, in bank foreign trading offices, and to
others who wish to subscribe for their information. There is, however, no
regulatory requirement that those quotations be firm or revised on a timely
basis. The absence of last sale information and the limited availability of
quotations to individual investors may make it difficult for many investors to
obtain timely, accurate data about the state of the underlying market. In
addition, the quotation information that is available is representative of very
large transactions in the interbank market and does not reflect exchange rates
for smaller transactions. Since the relatively small amount of currency
underlying a single foreign currency option would be treated as an odd lot in
the interbank market (i.e., less than $5 million), available pricing information
from that market may not necessarily reflect prices pertinent to a single
foreign currency option contract. Investors who buy or sell foreign currency
options covering amounts of less than $5 million can expect to deal in the
underlying market at prices that are less favorable than for round lots.
6. Foreign governmental restrictions or taxes could result in adverse changes in
the cost of acquiring or disposing of foreign currencies. If the Options
Clearing Corporation ("OCC") determines that these restrictions or taxes would
prevent the orderly settlement of foreign currency option exercises or impose
undue burdens on parties to exercise settlements, it is authorized to impose
special exercise settlement procedures, which could adversely affect the Trust.
7. The interbank market in foreign currencies is a global, around-the-clock
market. Therefore, in contrast with the exchange markets for stock options, the
hours of trading for foreign currency options do not conform to the hours during
which the underlying currencies are traded. (Trading hours for foreign currency
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options can be obtained from a broker.) To the extent that the options markets
are closed while the market for the underlying currencies remain open,
significant price and rate movements may take place in the underlying market
that cannot be reflected in the options markets. The possibility of such
movements should be taken into account in (a) relating closing prices in the
options and underlying markets, and (b) determining whether to close out a short
options position that might be assigned in an exercise that takes place after
the options market is closed on the basis of underlying currency price movements
at a later hour.
8. Since settlement of foreign currency options must occur within the country
issuing that currency, investors through their brokers, must accept or make
delivery of the underlying foreign currency in conformity with any U.S. or
foreign restrictions or regulations regarding the maintenance of foreign banking
arrangements by U.S. residents. The Trust may be required to pay any fees, taxes
or charges associated with such delivery which are assessed in the issuing
country. Prior to the placing of any assets with a foreign custodian in
connection with the settlement of foreign currency options, the Trustees of the
Trust will determine that maintaining such assets in a particular country or
countries is consistent with the best interests of the Trust and its
shareholders, and that maintaining such assets with a particular foreign
custodian is consistent with the best interests of the Trust and its
shareholders. The Trust will approve, as consistent with the best interests of
the Trust and its shareholders, a written contract between the Trust and its
foreign custodian. The Trustees will also establish a system to monitor such
foreign custody arrangements. A majority of the Trustees, at least annually,
will review and approve the continuance of such arrangements as consistent with
the best interests of the Trust and its shareholders.
oFinancial and Precious Metals Futures Contracts and Related
Options
While the Trust's fundamental policies permit the Trust to engage in financial
and precious metals futures transactions, including the writing of covered call
options and the purchase and sale of put and call options in connection
therewith, the Trust may engage in such futures and related option transactions
only for hedging purposes.
The Trust may not currently purchase or sell precious metals or financial
futures contracts or related options if, immediately thereafter, the sum of the
amount of initial margin deposits on the Trust's existing futures and related
options positions and the premiums paid for related options would exceed 5% of
the market value of the Trust's total assets after taking into account
unrealized profits and losses on any such contracts. At the time of purchase of
a futures contract or an option on a futures contract, an amount of cash, U.S.
government securities or other appropriate high-grade debt obligations equal to
the market value of the futures contract, minus the Trust's initial margin
deposit with respect thereto, will be deposited in a segregated account with the
Trust's custodian bank to collateralize fully the position and thereby ensure
that it is not leveraged.
The Trust may use financial and precious metals futures contracts and related
options to hedge against changes in currency exchange rates or in the market
value of its portfolio assets or assets which it intends to purchase. Hedging is
accomplished when an investor takes a position in the futures market opposite to
his cash market position. There are two types of hedges--long (or buying) and
short (or selling) hedges. Historically, prices in the futures market have
tended to move in concert with cash market prices and prices in the futures
market have maintained a fairly predictable relationship to prices in the cash
market. Thus, a decline in the market value of securities in the Trust's
portfolio may be protected against to a considerable extent by gains realized on
futures contracts sales. Similarly, futures contracts may protect against an
increase in the market price of assets which the Trust may wish to purchase in
the future.
The Trust may purchase or sell any financial or precious metals futures
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contracts which are traded on an exchange or board of trade or other market. A
United States public market presently exists in interest rate futures contracts
on long-term U.S. Treasury bonds, U.S. Treasury notes and three-month U.S.
Treasury bills. Securities index futures contracts are currently traded with
respect to the Standard & Poor's 500 composite Stock Price Index and such other
broad-based stock market indices as the New York Stock Exchange Composite Stock
Index and the Value Line Composite Stock Price Index. A clearing corporation
associated with the exchange or board of trade on which a financial futures
contact trades assumes responsibility for the completion of transactions and
also guarantees that open futures contracts will be performed. Currency and
precious metals futures contracts are also traded on various U.S. Exchanges or
boards of trade. Options relating to U.S. futures contracts are generally also
traded on the same exchanges or boards of trade.
In contrast to the situation where the Trust purchases or sells a security, the
Trust does not deliver or receive a security upon the purchase or sale of a
futures contract. Initially, the Trust will be required to deposit in a
segregated account with its custodian bank an amount of cash or U.S. Treasury
bills. This amount is known as initial margin and is in the nature of a
performance bond or good faith deposit on the contract. The current initial
margin deposit on the contract is approximately 5% of the contract amount.
Brokers may establish deposit requirements higher than this minimum. Subsequent
payments, called variation margin, will be made to and from the account on a
daily basis as the price of the futures contract fluctuates.
This process is known as marking to market.
The writer of an option on a futures contract is required to deposit margin
pursuant to requirements similar to those applicable to futures contracts. Upon
exercise of an option on a futures contract, the delivery of the futures
position by the writer of the option to the holder of the option will be
accompanied by delivery of the accumulated balance in the writer's margin
account. This amount will be equal to the amount by which the market price of
the futures contract at the time of exercise exceeds, in the case of a call, or
is less than, in the case of a put, the exercise price of the option on the
futures contract.
Although futures contracts by their terms call for actual delivery or acceptance
of currencies or securities or other assets, in most cases the contracts are
closed out before the settlement date without the making or taking of delivery.
Closing out is accomplished by effecting an offsetting transaction.
A futures contract sale is closed out by effecting a futures contract purchase
for the same aggregate amount of securities and the same delivery date. If the
sale price exceeds the offsetting purchase price, the seller is immediately paid
the difference and realizes a gain. If the offsetting purchase price exceeds the
sale price, the seller immediately pays the difference and realizes a loss.
Similarly, a futures contract purchase is closed out by effecting a futures
contract sale for the same securities and the same delivery date. If the
offsetting sale price exceeds the purchase price, the purchaser realizes a gain.
If the purchase price exceeds the offsetting sale price, the purchaser realizes
a loss.
The Trust will pay commissions on futures contracts and related options
transactions. These commissions may be higher than those which would apply to
purchases and sales of securities directly.
oLimitations on Futures Contracts and Related Options
The Trust may not currently engage in transactions in futures contracts or
related options for speculative purposes, but only as a hedge against
anticipated changes in exchange rates or the market value of its portfolio
securities or other assets or securities or other assets which it intends to
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purchase. Also, the Trust may not currently purchase or sell precious metals or
financial futures contracts or related options if, immediately thereafter, the
sum of the amount of initial margin deposits on the Trust's existing futures and
related options positions and the premiums paid for related options would exceed
5% of the market value of the Trust's total assets after taking into account
unrealized profits and losses on any such contracts. At the time of purchase of
a futures contract or an option on a futures contract, the trust must deposit an
amount of cash, U.S. government securities or other appropriate high-grade debt
obligations equal to the market value of the futures contract minus the Trust's
initial margin deposit with respect thereto in a segregated account with the
Trust's custodian bank to collateralize fully the Trust's position and thereby
ensure that it is not leveraged.
The Trust's ability to enter into futures contracts and related
options also may be limited by the requirements of the Internal
Revenue Code of 1986 for qualification as a regulated investment
company. See "Taxes--Tax Treatment of Options and Futures
Transactions."
oRisks Relating to Futures Contracts and Related Options
The Trust may close out positions in futures contracts and related options only
on an exchange or other market which provides a secondary market for such
contracts or options. The Trust will enter into futures or related options
positions only if there appears to be a liquid secondary market. However, there
can be no assurance that a liquid secondary market will exist for any particular
futures or related option contract at any specific time. Thus, it may not be
possible to close out a futures or related option position. If there are adverse
price movements in the Trust's futures positions, the Trust will continue to be
required to make daily margin payments. In this situation, if the Trust has
insufficient cash to meet daily margin requirements it may have to sell
portfolio assets at a time when it may be disadvantageous to do so. In addition,
the Trust may be required to take or make delivery of the securities underlying
the futures contracts it holds. The inability to close out futures positions
also could have an adverse impact on the Trust's ability to hedge its portfolio
effectively.
There are several risks in connection with the use of futures contracts as a
hedging device. While hedging can provide protection against an adverse movement
in the market prices, it can also preclude a hedger's opportunity to benefit
from a favorable market movement. In addition, investing in futures contracts
and options on futures contracts will cause the Trust to incur additional
brokerage commissions and may cause an increase in the Trust's portfolio
turnover rate.
The successful use of futures contracts and related options also depends on the
ability of the Trust's Investment Adviser to forecast correctly the direction
and extent of currency exchange rate and market movements within a given time
frame. To the extent exchange rate and market prices remain stable during the
period the Trust holds a futures contract or option, or prices move in a
direction opposite to that anticipated, the Trust may realize a loss on the
hedging transaction which is not offset by an increase in the value of its
portfolio securities. As a result, the Trust's total return for the period may
be less than if it had not engaged in the hedging transaction.
The Trust's use of futures contracts involves the risk of imperfect correlation
in movements in the price of futures contracts and movements in the price of the
currencies or securities or other assets which are being hedged. If the price of
the futures contract moves more or less than the price of the currencies or
securities or other assets being hedged, the Trust will experience a gain or
loss which will not be completely offset by movements in the price of the
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currencies or securities or other assets. It is possible that, where the Trust
has sold futures contracts to hedge its portfolio securities and other assets
against a decline in the market, the market may advance and the value of
securities held in the Trust's portfolio (or related currencies) may decline. If
this occurred, the Trust would lose money on the futures contract and would also
experience a decline in value in its portfolio securities and other assets.
Where futures are purchased to hedge against a possible increase in the prices
of securities or other assets before the Trust is able to invest its cash (or
cash equivalents) in securities (or options) in an orderly fashion, it is
possible that the market may decline. If this occurred, the Trust would lose
money on the futures contract and the value of its portfolio securities would
decline. If the Trust futures to hedge against a possible increase in the prices
of securities before the trust is able to invest its cash (or cash equivalents)
in securities (or options) in an orderly fashion, the market may decline. If the
Trust then determines not to invest in securities (or options) at that time
because of concern as to possible further market decline or for other reasons,
the Trust will realize a loss on the futures that would not be offset by a
reduction in the price of securities purchased.
The market prices of futures contracts may be affected if participants in the
futures market elect to close out their contract through offsetting transactions
rather than to meet margin deposit requirements. In such case, distortions in
the normal relationship between the cash and futures markets could result. Price
distortions could also result if investors in futures contracts opt to make or
take delivery of the underlying securities rather than to engage in closing
transactions due to the resultant reduction in the liquidity of the futures
market. In addition, due to the fact that, from the point of view of
speculators, the deposit requirements in the futures markets are less onerous
than margin requirements in the cash market, increased participation by
speculators in the futures market could cause temporary price distortions. Due
to the possibility of price distortions in the futures market and because of the
imperfect correlation between movements in the prices of currencies and
securities and other assets and movements in the prices of futures contracts, a
correct forecast of market trends may still not result in a successful hedging
transaction.
Compared to the purchase or sale of futures contracts, the purchase of put or
call options on futures contracts involves less potential risk for the Trust
because the maximum amount at risk is the premium paid for the options plus
transaction costs. However, there may be circumstances when the purchase of an
option on a futures contract would result in a loss to the Trust while the
purchase or sale of the futures contract would not have resulted in a loss, such
as when there is no movement in the price of the underlying securities.
oOther Investment Companies
The Trust's purchase of securities of other investment companies results in the
layering of expenses such that investors indirectly bear a proportionate share
of the expenses of such investment companies including operating costs and
advisory and administrative fees. The Trust will not invest more than 10% of its
total assets in such securities.
oLending
The Trust may seek to increase its income by lending portfolio securities. Any
such loan will be continuously secured by collateral at least equal to the
market value of the security loaned. The Trust would have the right to call a
loan and obtain the securities loaned at any time upon five days' notice. During
the existence of a loan, the Trust would continue to receive the equivalent of
the interest or dividends paid by the issuer on the securities loaned and would
also receive a fee, or the interest on investment of the collateral, if any.
The total value of the securities loaned at any time will not be permitted to
exceed 30% of the Trust's total assets. As with other extensions of credit,
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there are risks of delay in recovery or even loss of rights in the collateral
should the borrower of the securities fail financially. However, the loans would
be made only to U.S. domestic organizations deemed by the Trust's management to
be of good standing and when, in the judgment of the Trust's management, the
consideration to be earned justified the attendant risk.
oRepurchase Agreements
Repurchase Agreements are transactions in which the Trust buys a security from a
dealer or bank and agrees to sell the security back at a mutually agreed upon
time and price. The resale price reflects an agreed upon interest rate effective
for the period the instrument is held by the Trust and is unrelated to the
interest rate on the underlying instrument.
The Trust will effect repurchasing agreements only with large well-capitalized
banks whose deposits are insured by the Federal Deposit Insurance Corporation
and which have the capital and undivided surplus of at least $200,000,000. The
instrument acquired by the Trust in these transactions (including accrued
interest) must have a total value in excess of the value of the repurchase
agreement and will be held by the Trust's custodian bank until repurchased.
The Trustees of the Trust will monitor the Trust's repurchase agreement
transactions on a continuous basis and will require that the applicable
collateral will be retained by the Trust's custodian bank. No more than an
aggregate of 10% of the Trust's total assets, at the time of investment, will be
invested in repurchase agreements having maturities longer than seven days and
other investments subject to legal or contractual restrictions on resale, or
which are not readily marketable. There is no limitation on the Trust's assets
with respect to investments in repurchase agreements having maturities of less
than seven days.
Investment Risks
Because of the following considerations, an investment in the Trust should not
be considered a complete investment program (additional risk considerations are
discussed below).
Investment Strategy
The success of the Trust's investment program will be dependent to a high degree
on the Investment Adviser's ability to anticipate the onset and termination of
inflationary and deflationary cycles. A failure to anticipate a deflationary
cycle could result in the Trust's assets being disproportionately invested in
precious metals. Conversely, a failure to predict an inflationary cycle could
result in the Trust's assets being disproportionately invested in U.S.
government securities. The success of the Trust's investment program will also
be dependent to a high degree on the validity of the premise that the values of
gold and other precious metals will move in a different direction than the
values of U.S. government securities during period of inflation or deflation. If
values of both precious metals and U.S. government securities move down during
the same period of time, the value of the shareholder's investment will decline
rather than stabilize or increase, as anticipated, regardless of whether the
Trust is primarily invested in precious metals or U.S. government securities.
oForeign Investments
Investment on an international basis involves certain risks not involved in
domestic investments, including fluctuations in foreign exchange rates, higher
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foreign brokerage costs, costs of currency conversion, currency blockage,
different accounting standards, difficulty in obtaining foreign court judgments,
future political and economic developments, and the possible imposition of
exchange controls or other foreign governmental laws or restrictions.
Since the Trust may invest in securities denominated or quoted in currencies
other than the U.S. dollar, changes in foreign currency exchange rates will
affect the value of securities in the portfolio and the unrealized appreciation
or depreciation of investments.
In addition, with respect to certain foreign countries there is the possibility
of expropriation and nationalization of assets, confiscatory taxation, political
or social instability or diplomatic developments which could affect investments
in those countries. Interest and dividends, and possibly other amounts receive
by the Trust in respect of foreign investments, may be subject to withholding
and other taxes at the source, depending upon the laws of the county in which
the investment is made.
oPrecious Metals
Any investment in gold and silver bullion and other precious metals is subject
to certain risks. For example, dramatic upward or downward price movements may
occur in gold or silver over short periods of time, influenced by many factors
such as international tensions, oil price changes, interest rate policies,
political uncertainties, rumors, supply and demand factors and lack of
regulation. Furthermore, the value of these investments may be affected by such
factors as the following:
1. Price Fluctuations: The price of gold has recently been subject to dramatic
upward and downward price movements over short periods of time. Such prices have
ranged from a low $37.39 per troy ounce on January 7, 1971 to a high of over
$800 per troy ounce in 1980. Such prices have been influenced by, among other
things, industrial and commercial demand, investment and speculation, and
monetary and fiscal policies of central banks and governments and their
agencies, including gold auctions conducted by the U.S. Treasury Department and
the International Monetary Fund.
2. Concentration of Source of Supply and Control of Sales: At the current time
there are only four major sources of supply of primary gold production, and
their market shares cannot be readily ascertained. The Republic of South Africa,
the United States, Australia and Russia are the four largest producers.
Political and economic conditions affecting either country may have a direct
impact on that country's sales of gold. The only legally authorized sales agent
for gold produced in South Africa is the Reserve Bank of South Africa, which
controls the time and place of any sale of South African bullion in accordance
with its retention policies. The South African Ministry of Mines determines gold
mining policy and has required mining companies to produce lower grades of ore
when gold prices are rising. South Africa depends predominantly on gold sales
for the foreign exchange necessary to finance its imports, so that its sales
policy is necessarily subject to national economic and political developments.
3. Tax and Currency Laws: Changes in the tax or currency laws
of the U.S. or of foreign countries may inhibit the Trust's
ability to pursue, or may increase the cost of pursing, its
precious metals investment program.
4. Unpredictable Monetary Policies, Economic and Political Conditions: The
Trust's precious metals assets may be less liquid or the change in the value of
such assets may be more volatile (and less related to general price movements in
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the United States securities markets) than would be the case with investments in
the securities of larger U.S. companies, particularly because the price of gold
and other precious metals may be affected by unpredictable international
monetary policies, conditions of scarcity and surplus and speculation. For
instance, major civil strife in South Africa could seriously influence the price
of gold. In addition, the use of gold or Special Drawing Rights (which are also
used by members of the International Monetary Fund for international
settlements) to settle net deficits and surpluses in trade and capital movements
between nations subjects the supply and demand of gold and therefore its price,
to a variety of economic factors which normally would not affect other types of
commodities.
5. New and Developing Market: Between 1933 and December 31, 1974, a gold market
did not exist in the United States for individual investment purposes. Since the
latter date, markets have been developing. Certain entities, including the U.S.
Treasury and the International Monetary Fund, have from time to time conducted
sales of relatively large amounts of gold bullion and may continue to do so from
time to time in the future. Large purchases or sales of gold bullion, including
sales by such banks and agencies or by the U.S. government, are likely to affect
the price of gold bullion.
6. Lack of Regulation: The trading of gold bullion in the United States is not
currently subject to existing rules which govern the trading of agricultural and
certain other commodities and commodity futures. The absence of such regulation
may adversely affect the continued development of an orderly market in gold
bullion. The development of a regulated futures market in gold bullion might
also affect the development of the market in and the price of gold bullion in
the United States.
In addition to being affected by many of the same factors influencing the
pricing of gold, silver prices may also be affected by labor relations in the
silver and copper mining industries (a significant portion of U.S. silver ore
production is a by-product of copper). Prices of other precious metals may be
similarly and otherwise affected.
Since investments in precious metals do not generate any interest or dividends,
the only source of return from such investments will be from any gains (less any
losses) realized from sales of such metals. It is expected that any such income
will be taxable as capital gain in the manner applicable to ordinary business
corporations.
Prices at which gold and silver bullion and other precious metals are purchased
or sold normally include dealer markups or markdowns, insurance expenses, assay
charges and shipping costs. For example, all such charges under current market
conditions for 400 troy ounces of gold bullion of at least 995/1000 purity do
not generally in the aggregate exceed 2% of the price. Such costs and expenses
may be a grater or lesser percentage of the price from time to time, depending
on whether the price of gold bullion decreases or increases. Such charges will
vary in respect of other precious metals. In addition, the Trust will incur
ongoing storage costs for its precious metals.
oRisks Relating to Repurchase Agreements
The use of repurchase agreements involves certain risks. For example, if the
seller under a repurchase agreement defaults on its obligation to repurchase the
underlying instrument at a time when the value of the instrument has declined,
the Trust may incur a loss upon its disposition. If the seller becomes insolvent
and subject to liquidation or reorganization under bankruptcy or other laws, a
bankruptcy court may determine that the underlying instrument is collateral for
a loan by the Trust and therefore is subject to sale by the trustee in
bankruptcy.
Finally, it is possible that the Trust may not be able to substantiate its
interest in the underlying instrument. While the Trust's Trustees acknowledge
these risks, it is expected that they can be controlled through careful
monitoring procedures.
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oPrepayment Risks Associated with GNMA Certificates
GNMA certificates have yield and maturity characteristics corresponding to the
underlying mortgage loans. Thus, unlike U.S. Treasury bonds, which pay a fixed
rate of interest until maturity when the entire principal amount comes due,
payments on GNMA certificates include both interest and a partial prepayment of
principal. Additional prepayments of principal may result from the prepayment,
refinancing or foreclosure of the underlying mortgage loans. Although maturities
of the underlying mortgage loans range up to 30 years, such prepayments shorten
the effective maturities to approximately 12 years (based upon current
government statistics). GNMA certificates currently offer yields higher than
those available from other types of U.S. government securities, but because of
the prepayment feature may be less effective than other types of securities as a
means of "locking in" attractive long-term interest rates. This is caused by the
need to reinvest prepayments of principal generally and the possibility of
significant unscheduled prepayments resulting from declines in mortgage interest
rates. As a result, GNMA certificates may have less potential for capital
appreciation during periods of declining interest rates than other investments
of comparable maturities, while having a comparable risk of decline during
periods of rising interest rates.
There are certain other risks associated with GNMA certificates. Prepayments and
scheduled payments of principal will be reinvested at prevailing interest rates
which may be less than the rate of interest for the securities on which such
payments are made. When prevailing interest rates rise, the value of the GNMA
security may decrease as do other debt securities, but when prevailing interest
rates decline, the value of GNMA securities is not likely to rise on a
comparable basis with other debt securities because of the prepayment feature of
GNMA securities. If a GNMA certificate is purchased at a premium above principal
because its fixed rate of interest exceeds the prevailing level of yields, the
premium is not guaranteed and a decline in value to par may result in a loss of
the premium especially in the event of prepayments.
Portfolio Turnover
The Trust will generally purchase securities for possible long-term appreciation
and not for short-term trading profits. However, when the Investment Adviser
deems changes appropriate, it will not be limited by the rate of portfolio
turnover. The Trust's annual portfolio turnover rate will normally not exceed
50%. A rate of turnover of 100% could occur, for example, if the value of the
lesser of purchases and sales of portfolio securities for a particular year
equaled the average monthly value of portfolio securities owned during the year
(excluding short-term securities).
If the Trust has a high rate of portfolio turnover, it will pay greater
brokerage commissions and other costs. The Trust must bear these increased costs
directly and thus its shareholders will bear them indirectly. There may also be
the realization of larger amounts of short-term capital gains which are taxable
to shareholders as ordinary income.
The portfolio turnover rates for the years 1998 and 1997 were 60%
and 21%, respectively.
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INVESTMENT RESTRICTIONS
The Trust has adopted the following investment restrictions which are
fundamental policies and cannot be changed without approval by the holders of a
majority of the outstanding voting securities of the Trust. This means the
lesser of either (i) a majority of the outstanding shares of the Trust or (ii)
67% or more of the shares represented at a meeting if more than 50% of such
shares are present or represented by proxy at the meeting):
1. The Trust will not purchase any securities (other than securities of the U.S.
government, its agencies, or instrumentalities) if as a result more than 5% of
the Trust's total assets (taken at current value) would then be invested in
securities of a single issuer.
2. The Trust will not make loans, except that the Trust may (a) purchase a
portion of an issue or publicly distributed bonds, debentures, or similar debt
securities (including so called "repurchase agreements" whereby the Trust's cash
is, in effect, deposited on a secured basis with a bank for a period and yields
a return; provided, however, that no more than an aggregate of 10% of the
Trust's total assets, immediately after such investment, will be invested in
repurchase agreements having maturities longer than seven days and other
investments subject to legal or contractual restrictions on resale, or which are
not readily marketable), and (b) lend portfolio securities upon such conditions
as may be imposed from time to time by the Securities and Exchange Commission,
provided that the value of securities loaned at any time may not exceed 30% of
the Trust's total assets.
3. The Trust will not borrow in excess of 5% of its total assets, taken at
market or other fair value, at the time such borrowing is made, and any such
borrowing may be undertaken only as a temporary measure for extraordinary or
emergency purposes; and the Trust may not pledge, mortgage, or hypothecate its
assets taken at market to an extent greater than 15% of the Trust's gross assets
taken at cost.
4. The Trust will not purchase any securities if such purchase would cause more
than 10% of the total outstanding voting securities of such issuer (other than
any wholly-owned subsidiary of the Trust) to be held by the Trust.
5. The purchase or retention of the securities of any issuer is prohibited if
the officers and Trustees of the Trust or its Investment Adviser owning
beneficially more than 1/2 of 1% of the securities of such issuer together own
beneficially more than 5% of the securities of such issuer.
6. The purchase of the securities of any other investment company is prohibited,
except that the Trust may make such a purchase in the open market involving no
commission or profit to a sponsor or dealer (other than the customary broker's
commission), provided that not more than 10% of the Trust's total assets (taken
at market or other fair value) would be invested in such securities and not more
than 3% of the voting stock of another investment company would be owned by the
Trust immediately after the making of any such investment, and the Trust may
make such a purchase as part of a merger, consolidation or acquisition of
assets.
7. The purchase of securities of companies with a record (including that of
their predecessors) of less than three years' continuous operation is prohibited
if such purchase would cause the Trust's investments in such companies taken at
cost to exceed 5% of the total assets of the Trust taken at current values,
except that this restriction shall not apply to any of the Trust's investments
in any of its wholly-owned subsidiaries.
8. The Trust will not participate in a joint venture or on a
joint and several basis in any securities trading account.
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9. The Trust will not act as an underwriter of securities issued by others,
except to the extent it may be deemed such in connection with the disposition of
securities owned by it.
10. The Trust will not make short sales of securities unless at all times when a
short position is open, it owns an equal amount of such securities or owns
securities convertible into or exchangeable for, without payment of any further
consideration, securities of the same issue as, and at least equal in amount to,
the securities sold short.
11. The Trust will not purchase securities on margin, but may obtain such
short-term credits as may be necessary for the clearance of purchases and sales
of securities.
12. The Trust will not invest in a company in any single industry, if,
immediately after such investment, more than 25% of the Trust's total assets
would be invested in an industry other than gold mining, silver mining,
companies mining other precious metals, gold manufacturing and industrial
production and silver manufacturing and industrial production.
13. The Trust will not make investments in real estate or
indirect interests in real estate.
14. The Trust will not write, purchase or sell puts, calls or combinations
thereof or take positions in commodities or commodity futures contracts or
related options except that the Trust may (a) write covered call options with
respect to securities, securities indices and currencies and enter into closing
purchase or sale transactions with respect to such written options, (b) purchase
put or call options with respect to securities, securities indices and
currencies, and (c) engage in financial and precious metals futures contracts
and related options transactions, all as described in the Prospectus and above
under "Investment Strategies and Risks."
15. The Trust will not issue senior securities
MANAGEMENT OF THE TRUST
Officers and Trustees
The Trustees of the Trust are responsible for managing the Trust's business
affairs and for exercising all the powers of the Trust, except those reserved to
the shareholders. The Trust's officers and Trustees, their positions with the
Trust and their principal occupations during the past five years are listed
below. Unless otherwise noted, the business address of each officer and Trustee
is 579 Pleasant Street, Suite 4, Paxton, Massachusetts 01612, which is also the
address of the Trust's Investment Adviser, Anchor Investment Management
Corporation. An asterisk (*) indicates Trustees who are interested persons, as
defined in the Investment Company Act of 1940, of either the Trust or the
Investment Adviser.
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Positions with Principal Occupation
Name, Address and Birth the Trust During the Past 5
date Years
ERNEST BUTLER, Trustee President, I.E.
Born June 17, 1928 Butler Securities
11809 Hinson Road, Suite (securities dealer);
400 formerly Senior
Little Rock, AR 72212 Executive Vice
President Stephens,
Inc. (securities
dealer)
(1982-February 1998).
SPENCER H. Trustee President, Equity,
LEMENAGER, Inc. (private
Born January 25, 1938 investment company)
222 Wisconsin Avenue
P.O. Box 390
Lake Forest, IL 60045
DAVID W. C. Chairman Chairman and Trustee,
PUTNAM, and Trustee Progressive Capital
Born October 8, 1939 Accumulation Trust
10 Langley Road (formerly Anchor
Newton Centre, MA 02159 Capital Accumulation
Trust), Anchor International Bond
Trust, Anchor Strategic Assets
Trust, Anchor Resource and
Commodity Trust, and Anchor Gold
and Currency Trust (investment
companies); President and
Director, F. L. Putnam Securities
Company, Inc. and subsidiaries
(investment advisor).
J. STEPHEN PUTNAM, Vice President President, Robert
Born May 21, 1943 and Treasurer Thomas Securities,
880 Carillon Parkway Inc. (securities
P.O. Box 12749 dealer); Director,
St. Petersburg, FL 33733 F.L. Putnam
Securities Company,
Inc. (investment
advisor)
DAVID Y. WILLIAMS2*, Trustee, President and
Born November 24, 1930 President & Director, Anchor
579 Pleasant St., Suite 4 Secretary Investment Management
Paxton, MA 01612 Corporation
(investment adviser);
President and
Director, Meeschaert
& Co., Inc.
(securities dealer);
Vice President,
Secretary and
Treasurer,
Progressive
Investment
Management,
Inc.(investment
adviser)
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CHRISTOPHER Y. WILLIAMS2, Vice President Vice President and
Born December 12, 1964 and Asst. Asst. Secretary,
579 Pleasant St., Suite 4 Secretary Progressive
Paxton, MA 01612 Investment Management
Inc. (investment
adviser),; Vice
President and
Secretary, Anchor
Investment Management
Corporation
(investment adviser);
Vice President and
Secretary, Meeschaert
& Co. Inc.
(securities dealer);
President and
Secretary, Cardinal
Investment Services,
Inc. (financial
administrative
services)
JOSEPH C. Vice President Vice President and
WILLIAMS2, and Asst. Asst. Treasurer,
Born January 13, 1971 Treasurer Progressive
579 Pleasant St., Suite 4 Investment Management
Paxton, MA 01612 Inc. (investment
adviser); Vice
President and
Treasurer, Anchor
Investment Management
Corporation; Vice
President and
Treasurer, Meeschaert
& Co. Inc.
(securities dealer);
Vice President and
Treasurer, Cardinal
Investment Services,
Inc. (financial
administrative
services)
1. David W.C. Putnam and J. Stephen Putnam are brothers.
2. David Y. Williams is the father of Christopher Y. Williams and
Joseph C. Williams. Christopher Y. Williams and Joseph C.
Williams are brothers.
The Officers and Trustees of the Trust as group owned less than one percent (1%)
of the Trust's shares outstanding on December 31, 1998.
Messrs. David Putnam, Ernest Butler and Spencer LeMenager are the
Trustees who are not interested persons (as defined in the
Investment Company Act of 1940) of the Trust.
The standing audit committee is composed of Messrs. LeMenager and Butler. The
Trust does not have a nominating or compensation committee.
Compensation of Officers and Trustees
The Trust does not and will not pay any compensation to any of its officers or
Trustees who are interested persons (as defined in the Investment Company Act of
1940) of the Trust or of any investment adviser or distributor of the Trust. The
Trust pays an annual fee of up to $1,000 to each Trustee who is not an
interested person. The Trust did not pay any person, including directors,
officers, or employees, in excess of $60,000.00 during its most recent fiscal
year.
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Principal Holders of Securities
As of the date of this Statement of Additional Information, Wendel & Co., c/o
Bank of New York, P.O. Box 1066, Wall Street Station, New York, NY 10268, as
indirect nominees of Societe D'Etudes, et de Gestion Financieres S.A., a
privately-owned corporation organized under the laws of France, 23 Rue Drouot,
75009, Paris, France, held of record 62.10% of the outstanding shares of the
Trust. Merrill Lynch, 250 Vessey Street, World Financial Center, North Tower,
New York, NY 10281, held of record 37.67% of the outstanding shares of the
Trust.
Shareholders owing 25% or more of outstanding Trust shares may be in control and
be able to affect the outcome of certain matters presented for a vote of
shareholders.
Investment Adviser
The Investment Adviser, Anchor Investment Management Corporation
(formerly Meeschaert Investment Management Corporation), is
located at 579 Pleasant Street, Suite 4, Paxton, Massachusetts
01612.
The Investment Adviser and Meeschaert & Co., Inc., the Trust's principal
underwriter, are affiliated through common control with Societe D'Etudes et de
Gestion Financieres Meeschaert, S.A., one of France's largest privately-owned
investment management firms. The Meeschaert organization was established in
Roubaix, France in 1935 by Emile C. Meeschaert. The Meeschaert organization
presently manages, with full discretion, an aggregate amount of approximately
$1.5 billion, including $250 million in French mutual funds, for about 8,000
individual and institutional customers.
On September 7, 1983, Emile C. Meeschaert and David Y. Williams
purchased the Investment Adviser from F. L. Putnam Securities
Company Incorporated ("Putnam Securities"). As of November 14,
1990, Luc E. Meeschaert purchased all of the outstanding shares
of the Investment Adviser previously owned by Emile C. Meeschaert.
The Investment Adviser's Directors and Officers are as follows:
Luc E. Meeschaert, Chairman - Mr. Meeschaert is Chief Executive
Officer of Societe D'Etudes et de Gestion Financieres Meeschaert,
S.A., 23 Rue Druout, 75009, Paris, France.
David Y. Williams, President and Director - Mr. Williams is also a Trustee of
the Trust and President and a Director of Meeschaert & Co., Inc., the Trust's
Distributor.
Paul Jaspard, Vice President - Mr. Jaspard is President of Linden
Investment Advisors, S.A. 67 Avenue Terlinden, La Hulpe, Belgium
B1310 (investment adviser). Mr. Jaspard manages other portfolios
for the Meeschaert organization. He is primarily responsible for
the investment decisions of the Trust.
Christopher Y. Williams, Vice President and Assistant Secretary Mr. Williams is
also the Vice President and Assistant Secretary of the Trust and Vice President
and Secretary of the Distributor.
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Joseph C. Williams, Vice President and Assistant Treasurer - Mr. Williams is
also the Vice President and Assistant Treasurer of the Trust and Vice President
and Treasurer of the Distributor.
Investment Advisory Contract
The Trust and the Investment Adviser entered into an Investment Advisory
Contract dated June 22, 1998 which was approved by the shareholders of the Trust
on the same date.
The Investment Adviser manages the investments and affairs of the Trust, subject
to the supervision of the Trust's Board of Trustees. The Investment Adviser
furnishes to the Trust investment advice and assistance, administrative
services, office space, equipment and clerical personnel. The Investment Adviser
also furnishes investment advisory, statistical and research facilities.
The Trust pays all its expenses not specifically assumed by the Investment
Adviser under the contract, including without limitation, the fees and expenses
of the Trust's custodian and transfer agent; costs incurred in determining the
Trust's net asset value and keeping its books; the cost of share certificates;
membership dues in investment company organizations; distributions and brokerage
commissions and fees; fees and expenses of registering its shares; expenses of
reports to shareholders, proxy statements and other expenses of shareholders'
meetings; insurance premiums; printing and mailing expenses; interest, taxes and
corporate fees; legal and accounting expenses; and fees and expenses of Trustees
not affiliated with the Investment Adviser. The Trust will also bear any
expenses incurred in connection with litigation in which the Trust is a party
and the related legal obligation that the Trust may have to indemnify its
officers and trustees. For the fiscal year ended December 31, 1998, the Trust
paid expenses of $117,207, which represented 2.54% of the Trust's average net
assets.
The Trust pays the Investment Adviser, as compensation under the Investment
Advisory Contract, a monthly fee of 0.125% (equivalent to 1 1/2 of 1% annually)
of the average daily net assets of the Trust. This fee may be higher than that
paid by other investment companies. For the Investment Adviser's services to the
Trust, Trust paid the Investment Adviser fees of $113,048 in 1996, $86,010 in
1997 and $69,013 in 1998. The Investment Adviser may voluntarily waive a portion
of its fee or reimburse the Trust for certain operating expenses.
The Investment Advisory Contract remains in effect until June 21, 2000. In
general, the contract may be extended from year to year upon its expiration if
approved at least annually (a) by the vote of a majority of the outstanding
shares of the Trust or by the Board of Trustees, and in either case, (b) by vote
of a majority of the Trustees of the Trust who are not parties to the contract
or interested persons (as that term is defined in the Investment Company Act of
1940) of any such party cast in person at a meeting called for the purpose.
Amendments to the contract require similar approval by the shareholders and
disinterested Trustees. The contract is terminable at any time without penalty
by the Trustees of the Trust or by vote of the holders of a majority of the
Trust's shares on 60 days' written notice or by the Investment Adviser on 90
days' written notice. The contract terminates automatically in the event of its
assignment (which includes the transfer of a controlling interest in the
Investment Adviser).
The Investment Advisory Contract provides that the Investment Advisor shall not
be liable to the Trust or its shareholders for anything other than willful
misfeasance, bad faith, gross negligence or reckless disregard of its
obligations or duties. The Investment Advisory Contract also provides that the
Investment Advisor and its officers, directors and employees may engage in other
business, devote time and attention to any other business whether of a similar
or dissimilar nature, and render investment advisory services to others.
26
<PAGE>
Administrator
The Trust has entered into an administration agreement (the Administration
Agreement) with Anchor Investment Management Corporation (the Administrator),
579 Pleasant Street, Paxton, Massachusetts 01612. Under the Administration
Agreement, the Administrator is required generally to administer the Trust's
business. The Administrator's duties, which may be assigned to a
sub-administrator, include the following. The Administrator calculates the
Trust's net asset value and prepares and files all registration or other
material required by federal and state laws for the registration or other
qualification of the Trust and its shares for sale to the public as required by
those laws. The Administrator also prepares and files or mails all reports and
statements that the Trust is required by federal and state laws to file or send
to all authorities and shareholders of the Trust. The Administrator maintains
contact with and coordinates the Trust's public accountants, legal counsel,
custodian, transfer and service agent and other service providers, all of whose
fees are paid independently by the Trust. The Administrator also coordinates the
Trust's portfolio transactions and cash management with the Trust's custodian
and receives, confirms and pays over to the Trust's custodian the proceeds of
sales by the Trust of its shares. The Administrator administers and confirms to
the Trust's transfer agent and shareholders the sales of Trust shares and
prepares and maintains on behalf of the Trust such records of the Trust's
business transactions as are not maintained by other service providers to the
Trust. The Administrator is also required, at its own expense, to furnish office
space, facilities, and equipment necessary for the administration of the Trust.
For its services under the Administration Agreement, the Administrator receives
a monthly fee at the annual rate of $18,500. The Trust paid the administrator,
Anchor Investment Management Corporation, fees of $16,000, $18,500 and $18,500
in 1996, 1997 and 1998, respectively, for its services to the Trust.
The Administration Agreement will remain in effect until terminated by either
party. The Administration Agreement may be terminated, without payment of
penalty, at any time upon mutual consent of the Trust and the Administrator or
by either party upon not more than 60 days' and not less than 30 days' written
notice to the other party.
The Administration Agreement also provides that the Administrator shall not be
liable to the Trust or its shareholders for anything other than willful
misfeasance, bad faith, gross negligence or reckless disregard of its
obligations or duties. The Administration Agreement also provides that the
Administrator and its officers, directors and employees may engage in other
business, devote time and attention to any other business whether of a similar
or dissimilar nature, and render investment advisory services to others.
Principal Underwriter
Meeschaert & Co., Inc. (the Distributor) is the principal
underwriter of the Trust's shares. The Distributor is located at
579 Pleasant Street, Suite 4, Paxton, Massachusetts 01612.
Several of the officers and directors of the Distributor are also
officers and Trustees of the Trust. See "MANAGEMENT OF THE FUND
- - Officers and Trustees" above.
27
<PAGE>
CAPITALIZATION
The capitalization of the Trust consists of an unlimited number of shares of
beneficial interest, without par value, designated as Common Shares, which
participate equally in dividends and distributions. Issued shares are fully paid
and non-assessable and are transferable on the books of the Trust. The shares
have no preemptive rights. The shares each have one vote and proportionate
liquidation rights.
The Trust will normally not hold annual meetings of shareholders to elect
Trustees. If less than a majority of the Trustees holding office have been
elected by shareholders, a meeting of shareholders will be called to elect
Trustees. Under the Declaration of Trust and the Investment Company Act of 1940,
the record holders of not less than two-thirds of the outstanding shares of the
Trust may remove a Trustee by votes cast in person or by proxy at a meeting
called for the purpose or by a written declaration filed with the Trust's
custodian bank. Except as described above, the Trustees will continue to hold
office and may appoint successor Trustees.
Under Massachusetts law, shareholders could, under certain circumstances, be
held personally liable for the obligations of the Trust. However, the
Declaration of Trust disclaims shareholder liability for acts or obligations of
the Trust and requires that notice of this disclaimer be given in each
agreement, obligation or instrument entered into or executed by the Trust or a
Trustee. The Declaration of Trust provides for indemnification from the assets
of the Trust for all losses and expenses of any shareholder held personally
liable for the obligations of the Trust. Thus, the risk of a shareholder
incurring a financial loss on account of his or her liability as a shareholder
of the Trust is limited to circumstances in which the Trust itself would be
unable to meet its obligations. The possibility that these circumstances would
occur is remote. Upon payment of any liability incurred by the Trust, the
shareholder paying the liability will be entitled to reimbursement from the
general assets of the Trust. The Trustees intend to conduct the operations of
the Trust to avoid, to the extent possible, ultimate liability of shareholders
for liabilities of the Trust.
PURCHASE, REDEMPTION AND PRICING OF SHARES
Purchase of Shares
Investors may purchase shares of the Trust from the Distributor at 579 Pleasant
Street, Suite 4, Paxton, Massachusetts 01612. Investors pay no sales charge or
commission upon investment. For new shareholders initiating accounts, the
minimum investment is $500, except for exchanges of securities for Trust shares,
where the minimum is $5,000. (See "SHAREHOLDER INFORMATION -Exchanges of Shares"
in the Prospectus). There is no minimum for shareholders making additional
investments to existing accounts.
The Distributor sells shares to the public as agent for the Trust and is the
sole principal underwriter for the Trust under a Distributor's Contract dated
July 21, 1993. The contract automatically terminates upon assignment (which
includes the transfer of a controlling interest in the Distributor) by either
party. The contract also provides that it may be continued from year to year
upon approval by a majority of the Trust's shares or by the Board of Trustees as
well as, the approval, by vote cast in person at a meeting called for the
purpose, by a majority of the Independent Trustees. Under the contract, the
Distributor pays expenses of sales literature, including copies of the Trust's
Prospectus delivered to investors. The Trust pays for its registration and
registration of its shares under the federal Securities and Investment Company
Acts and state securities acts and other expenses in which it has a direct
interest.
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<PAGE>
During the years ended December 31, 1998, December 31,1997 and December 31,
1996, the Distributor received no sales commission from the Trust.
Determination of Net Asset Value
The Trust's net asset value is determined as of 12:00 p.m. Eastern Time on each
business day on which the New York Stock Exchange is open for trading. The Trust
may determine net asset value on any day that the Trust is open, but the New
York Stock Exchange is not open for business if an event occurs which might
materially affect the net asset value.
The manner of determination of the net asset value is briefly as follows:
securities traded on a United States national, or other foreign securities
exchange are valued at the last sale price on the primary exchange on which they
are listed, or if there has been no sale that day, at the current bid price.
Other United States and foreign securities for which market quotations are
readily available are valued at the last known sales price, or, if unavailable,
the known current bid price which most nearly represents current market value.
Other securities (including limited trade securities) and all other assets are
valued at market value as determined in good faith by the Trustees of the Trust.
The market prices of all of the trust's investments are added together,
liabilities are deducted from the total, and the resulting amount is divided by
the number of shares outstanding.
Each day investment securities traded on a national securities exchange are
valued at the noon sales price; securities traded in the over-the-counter market
are valued at the last sale price as of 12:00 p.m. Eastern Time. Gold bullion is
valued each day at 12:00 p.m. Eastern Time based on the New York spot gold
price. Gold coins, foreign currencies, and foreign denominated securities for
which market quotations are readily available are valued at the known bid prices
as of 12:00 p.m. Eastern Time. Temporary cash investments are stated at cost. In
the absence of a reliable market for a particular metal, security or currency,
an investment therein will be valued at fair value as determined in good faith
by the Trustees.
Redemption and Repurchase of Shares
Any shareholder may require the Trust to redeem his shares. The Trust also
maintains a continuous offer to repurchase its shares. If a shareholder uses the
services of a broker in selling his shares in the over-the-counter market, the
broker may charge a reasonable fee for his service. Redemptions and repurchases
will be made in the following manner:
1. A Shareholder may mail or present a written request that the Trust redeem his
shares to the Trust's transfer agent, Anchor Investment Management Corporation,
at 579 Pleasant Street, Suite 4, Paxton, Massachusetts 01612. If a shareholder
has share certificates, the investor should properly endorse them and include
them with the written request. The redemption price will be the net asset value
next determined after the Trust receives the request and, if applicable, the
certificates.
2. A Shareholder's broker may present request for repurchase to the Trust. The
repurchase price will be the net asset value next determined after Trust
receives the request. If the broker receives the request before 12:00 p.m.
Eastern Time and transmits it to the Trust before 1:00 p.m. Eastern Time the
same day, the repurchase price will be the net asset value determined as of
12:00 p.m. Eastern Time that day. If the broker receives the request after 12:00
p.m., the repurchase price will be the net asset value determined as of 12:00
p.m. Eastern Time the following day. If an investor uses the services of a
broker in having his shares repurchased, the broker may charge a reasonable fee
for his services.
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The Trust will pay for shares redeemed or repurchased within seven days after it
receives the request and any required documents, properly endorsed. The
signature(s) on the share certificate or request must be guaranteed by a
commercial bank or trust company or by a member of the New York, American,
Pacific Coast, Boston or Chicago Stock Exchange. The Trust will not accept
signature guarantee by a savings bank, or savings and loan association or
notarization by a notary public.
To insure proper authorization, the Trust's transfer agent may request
additional documents, including stock powers, trust instruments, certificates of
death, appointments as executor, certificates of corporate authority or waiver
of tax forms (required in some states from selling or exchanging estates before
redeeming shares).
The right of redemption may be suspended or the payment date postponed at
certain times. These include days when the New York Stock Exchange is closed for
other than customary weekend or holiday closings, or when trading on the New
York Stock Exchange is restricted, as determined by the Securities and Exchange
Commission, or for any period when an emergency (as defined by rules of the
Commission) exists or during any period when the Commission has, by order,
permitted a suspension. In case of a suspension of the right of redemption, a
shareholder who has tendered a certificate for redemption or made a request for
redemption through a broker may withdraw his request or certificate. Otherwise,
he will receive payment of the net asset value determined next after the
suspension has been terminated.
A shareholder may receive more or less than he paid for his shares, depending on
the net asset value of the shares at the time of redemption or repurchase.
Redemptions in Kind
Under unusual circumstances, when the Board of Trustees deems it in the best
interests of the Trust's shareholders, the Trust may pay for shares repurchased
or redeemed partly or entirely in securities or other assets of the Trust taken
at current values. If any such redemption in kind is to be made, the Trust
intends to make an election pursuant to Rule 18(f)(1) under the Investment
Company Act of 1940. This will require the Trust to redeem with cash at a
shareholder's election in any case where the redemption involves less than
$250,000 (or 1% of the Trust's net assets at the beginning of each 90-day period
during which such redemptions are in effect, if that amount is less than
$250,000). If payment is made in securities, the redeeming shareholder may incur
brokerage costs in converting his securities to cash.
DISTRIBUTIONS
The Trust distributes any income dividends and any capital gain distributions in
additional Common Shares, or, at the option of the shareholder, in cash. In
accordance with his distribution option, a shareholder may elect (1) to receive
both dividends and capital gain distributions in additional Common Shares or (2)
to receive dividends in cash and capital gain distributions in additional Common
Shares or (3) to receive both dividends and capital gain distributions in cash.
A shareholder may change his distribution option at any time by notifying the
transfer agent in writing. To be effective with respect to a particular dividend
or distribution, the Trust's transfer agent must receive the new distribution
option at least 30 days prior to the close of the fiscal year. All accounts with
a cash dividend option will be changed to reinvest both dividends and capital
gains automatically if the Trust's transfer agent determines that the address of
record for the account is not current.
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Dividends and capital gain distributions received in shares will be made to the
Trust's transfer agent, as agent for the shareholder, and credited to the
shareholder's Open Account in full and fractional shares computed at the record
date closing net asset value.
Interest and dividends, and possible other amounts received by the Trust in
respect of foreign investments, may be subject to withholding and other taxes at
the source, depending upon the laws of the country in which the investment is
made.
TAXES
General
The Trust intends to qualify each year as a regulated investment company under
Subchapter M of the Internal Revenue Code, as subsequently amended or reenacted.
In order to so qualify, the Trust, must, among other things, do the following:
(i) derive at least 90% of its gross income from dividends, interest, payments
as to certain securities loans and gains from the sale of securities; (ii)
derive less than 30% of its gross income from gains from the sale or other
disposition of securities held for less than three months; (iii) distribute at
least 90% of its dividend, interest and certain other taxable income each year;
(iv) maintain at least 50% of the value of its total assets in cash, cash items,
U.S. government securities, securities of other regulated investment companies,
and other securities so that no more than 5% of its assets are invested in the
securities of one issuer and it owns no more than 10% of the value of any
issuer's voting securities; and (v) have no more than 25% of its assets invested
in the securities (other than those of the U.S. government or other regulated
investment companies) of any one issuer or of two or more issuers which the
Trust controls and which are engaged in the same, similar or related trades and
businesses. To the extent the Trust qualifies for treatment as a regulated
investment company, the Trust will not be subject to Federal income tax on
income paid to its shareholders in the form of dividends or capital gains
distributions.
Dividends paid by the Trust will generally not qualify for the
dividends-received deductions for corporations. The Trust will notify
shareholders each year of the amount of dividends and distributions, including
the amount of any distribution of long-term capital gains.
The Trust will be subject to a nondeductible 4% excise tax in any calendar year
to the extent that its fails to distribute at least 98% of its ordinary income
for that calendar year and 98% of its capital gain net income for the one-year
period ending on October 31 of that calendar year. In addition, to the extent
that the Trust fails to distribute 100% of its ordinary and capital gain net
income for any calendar year, the amount of the shortfall is subject to the
excise tax unless distributed for the following calendar year. For a
distribution to qualify as a distribution for a calendar year under the
foregoing rules, the Trust must declare it before December 31 of the year and
pay it before the following February 1. These distributions will be taxable to
taxable shareholders in the year the distributions are declared rather than the
year in which the distributions are received.
The Trust's foreign investments may be subject to foreign withholding taxes and
other taxes at the source. The Trust will be entitled to claim a deduction for
any foreign withholding taxes for federal income tax purposes. Any such taxes,
however, will reduce the income available for distribution to shareholders.
Under the Interest and Dividend Compliance Act of 1983, the Trust will be
required to withhold and remit to the U.S. Treasury 20% of the dividends and
proceeds of redemptions paid to any shareholder who fails to furnish the Trust
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with a correct taxpayer identification number, who underreported dividends or
interest income, or who fails to certify that he or she is not subject to such
withholding. An individual's tax identification number is his or her social
security number.
Tax Treatment of Options and Futures Transactions
In connection with its operations, the Trust may write and purchase options. The
tax consequences of transactions in options will vary depending upon whether the
option expires or is exercised, sold or closed. The Trust may also affect
transactions in financial futures contracts and related options. The tax
consequences of certain of these transactions were changed or clarified by
amendments made to the Internal Revenue Code by the Deficit Reduction Act of
1984. Although final regulations have not been adopted under the Deficit
Reduction Act, the following discussion reflects the Trust's interpretation of
applicable changes made by the Deficit Reduction Act.
The Trust will seek principally to purchase or write futures contracts and
options that will be classified as regulated futures contracts, equity options
or non-equity options, to the extent consistent with its investment objective
and opportunities which appear available.
"Regulated Contracts" are contracts which are marked-to-market under a daily
cash flow system of the type used by United States futures exchanges to
determine the amount which must be deposited (in the case of losses) and the
amount which may be withdrawn (in the case of gains) as a result of price
changes with respect to the contract during the day, and which are traded on and
subject to the rules of a qualified board of trade or exchange.
"Equity options" are any options to buy or sell stock, or any option, the value
of which is determined directly or indirectly by reference to any stock (or
group of stocks) or stock index. Equity options do not include any options as to
any group of stocks or stock index if the Commodity Futures Trading Commission
has designated a contract market for a contract based on that group of stocks or
index, or the Secretary of the Treasury determines that the option meets the
requirements of law for such a designation.
"Non-equity options" are any listed options which are not equity options.
"Regulated futures contracts" and "non-equity options" are defined as "Section
1256 Contracts" under the Deficit Reduction Act, are subject to a
marked-to-market rule for federal income tax purposes. Under this rule, each
such contract and option held by the Trust at the end of each fiscal year will
be treated as sold for fair market value on the last business day or such fiscal
year. As described below, up to 60% of the gain or loss resulting from the sale,
disposition, closing out, expiration or other termination of such options will
be treated as long-term capital gain or loss, and up to 40% will be treated as
short-term capital gain or loss (60/40 gain or loss). Equity options, on the
other hand, are not subject to the marked-to-market rule. The character of gain
or loss resulting from the sale, disposition, closing out, expiration or other
termination of equity options is not subject to the 60/40 gain or loss rule.
The Trust will not realize gain or loss on the receipt or payment of a premium.
If a call option written by the Trust expires without being exercised, the Trust
will recognize the premium received as a gain (60/40 gain or loss for a
non-equity call option or short-term for an equity call option). If a put option
purchased by the Trust expires without being exercised, the Trust will recognize
the premium paid as a loss (60/40 gain or loss for a non-equity put option or
short or long-term for an equity put option, depending on the holding period of
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the put). If, however, the Trust acquired the put option on the same day it
acquired the property intended to be used in exercising the put, the premium
paid will be added to the basis of the underlying securities. If a non-equity or
equity call option written by the Trust is exercised (or a non-equity or equity
put option purchased by the Trust is sold), the Trust will recognize a short or
long-term capital gain or loss depending on the holding period of the underlying
securities. If a regulated futures contract or non-equity call option written by
the Trust or non-equity put option purchased by the Trust is closed (i.e., the
Trust's obligations are terminated other than through exercise or lapse), the
Trust will recognize 60/40 gain or loss. If an equity call option written by the
Trust is closed, the Trust will recognize short-term capital gain or loss. If an
equity put option purchased by the Trust is closed, the Trust will recognize
long or short-term capital gain or loss, depending on the holding period of the
put option.
Section 1092 of the Internal Revenue Code, which applies to certain straddles,
may affect the taxation of the Trust's transactions in options on portfolio
securities and in financial futures (and related options). As a result of rules
under that section, the Trust may be required to postpone recognition of losses
incurred in certain closing purchase transactions until the year in which the
other leg of the straddle is closed. The Treasury Department has issued
temporary regulations on the holding period of straddles held by regulated
investment companies.
The Internal Revenue Service has ruled publicly that an exchange-traded call
option on a particular security is a security for purpose of the 50% of assets
diversification test and that its issuer is the issuer of the underlying
security, not the writer of the option, for purposes of diversification
requirements.
In contrast, the Internal Revenue Service has ruled privately that the issuer of
a broad-based financial futures option such as a stock index futures contract
(or an option on such a contract) is the writer of the instrument and not the
issuers of the group of stocks or securities which comprise the index.
Accordingly, the Trust must treat such a futures contract (or option on it) as
issued by a single issuer for purposes of meeting the diversification tests.
In other private rulings, the Internal Revenue Service has addressed other tax
issues arising from investments by regulated investment companies in options and
futures contracts. In particular, the Internal Revenue Service has stated in
private rulings that the gains recognized as a result of the deemed sale of
certain options under the marked-to-market rule (which are treated as 60/40
gain) will not be treated as gains from the sale or exchange of securities held
for less than three months, regardless of the actual holding period prior to
year end. The Internal Revenue Service has also stated in private rulings that
gains or losses with respect to index futures contracts on securities (and
related options) are gains and losses from the sale or exchange of securities.
The legislative history of the Tax Reform Act of 1986 provides that income
realized in connection with writing covered and uncovered put and call options
is intended by Congress to be qualifying income for purposes of the 90% passive
income test. However, the requirement that less than 30% of the Trust's gross
income be derived from gains from the sale or other disposition of securities
held for less than three months will restrict the Trust's ability to write
covered call options on securities that it has held less than three months, to
write options that expire in less than three months, to sell securities that
have been held less than three months, to effect closing purchase transactions
as to options that have been held less than three months, and to effect closing
purchase transactions as to options that have been written less than three
months prior to such transactions. Consequently, to avoid realizing a gain
within the three-month period, the Trust may be required to defer the closing
out of an option beyond the time when it might otherwise be advantageous to do
so.
33
<PAGE>
The Tax Reform Act of 1986 revises the rules concerning gains from sales of
assets held less than three months in the case of a "designated hedge." In the
case of a "designated hedge," recognized gains may be offset by unrecognized
declines in value of the other leg of the hedge during the period of the hedge
for purposes of determining whether gains from sales of securities held for less
than three months equal or exceed 30% of gross income. For example, if a fund
sells for $4 one-month call at $95 on stock it owns which is worth $100, the
stock declines in value to $94 and the option is not exercised, the $4 of
recognized gain on lapse of the option is offset by the $6 decline in value of
the stock and there is no net gain for purposes of the three-month gains test.
The $4 is recognized under the usual rules for other purposes. The Conference
Committee Report on the 1986 Act established procedures for identification of a
"designated hedge" prior to issuance of regulations on the topic.
There are unanswered questions in the area. In particular, the Internal Revenue
Service has declined to determine whether any gain is derived from securities
held less than three months if a taxpayer buys a regulated futures contract just
prior to the end of its taxable year, has the contract marked-to-market at year
end, and then actually closes the contract within three months of its initial
purchase in the following taxable year. Furthermore, since taxpayers other than
the taxpayer requesting a particular private ruling are not entitled to rely on
it, the Trust intends to keep its activity in options at a low volume until the
Service rules publicly, or the Treasury Department issues final regulations, on
open issues.
If, in any taxable year, the Trust fails to qualify as a regulated investment
company, the Trust would be taxed in the same manner as an ordinary corporation
and distributions to its shareholders would not be deductible by the Trust in
computing its taxable income. In addition, in the event of such failure to
qualify, the Trust's distributions, to the extent derived from the Trust's
current or accumulated earnings and profits, would be taxable to its
shareholders as ordinary income dividends, even if those dividends might
otherwise have been considered distributions of capital gains.
PORTFOLIO SECURITY TRANSACTIONS
Decisions to buy and sell portfolio securities for the Trust are made pursuant
to recommendations by the Trust's Investment Adviser. The Trust, through the
Investment Adviser, seeks to execute portfolio security transactions on the most
favorable terms and in the most effective manner possible. The Investment
Adviser uses its best judgment in evaluating the terms of a transaction and will
give consideration to various relevant factors, including the size and type of
the transaction, the nature and character of the markets for the security, the
confidentiality, speed and certainty of effective execution required for the
transaction, the reputation, experience and financial condition of the
broker-dealer and the quality of services rendered by the broker-dealer in other
transactions, and the reasonableness of the brokerage commission, if any.
The Trust expects that many broker-dealer firms will meet the foregoing criteria
for a particular transaction. In selecting among the firms, the Trust, through
the Investment Adviser, may give consideration to those firms which have sold,
or are selling, shares of the Trust. In addition, the Investment Adviser may
allocate Trust brokerage business on the basis of brokerage and research
services and other information provided by broker-dealer firms, which may
involve the payment of reasonable brokerage commissions in excess of those
chargeable by other broker-dealer firms for effecting the same transactions.
These brokerage and research services may be used for some of the Investment
Adviser's other advisory accounts. The Investment Adviser may not use all of
these services in managing the Trust. The term "brokerage and research services"
includes services as to the value of securities; the advisability of investing
in, purchasing or selling securities; the availability of securities, or
purchasers or sellers of securities; the furnishing of analyses and reports
34
<PAGE>
concerning issuers, industries, securities, economic factors and trends;
portfolio strategy and the performance of account; and effecting securities
transactions and performing related functions (such as clearance and
settlement). This policy of considering sales or shares of the Trust as one of
the factors in the selection of broker-dealer firms to execute portfolio
transactions, subject to the requirement of seeking best execution, is
specifically permitted by a rule of the National Association of Securities
Dealers, Inc. The rule also provides, however, that no member firm shall favor
or disfavor the distribution of shares of any particular fund or group of funds
on the basis of brokerage commissions received or expected by such firm from any
source.
The Trust and one or more of the other investment companies or accounts for
which the Investment Adviser or its affiliates services may occasionally engage
in the purchase or sale of the same security at the same time. In this event,
the Investment Adviser will usually average the price and allocate the amount of
the security purchased or sold among the several clients or accounts in a manner
deemed equitable to all. In some cases this system could have a detrimental
effect on the price or volume of the security allocated to the Trust. In other
cases, however, the ability to participate in volume transactions may produce
better executions for the Trust.
To the extent consistent with the policy of seeking best price and execution, a
portion of the Trust's portfolio transactions may be executed through the
Trust's Distributor, which is an affiliate of the Investment Adviser. If this
occurs, it will be on the basis of what management believes to be current
information as to rates which are generally competitive with the rates available
from other responsible brokers and the lowest rates, if any, currently offered
by the Distributor.
During 1998, 1997 and 1996, the Trust paid commissions paid to broker-dealers of
$19,315, $13,640 and $16,689. During 1998, 1997 and 1996 the Trust paid
brokerage commissions of $10,005, $10,190 and $3,091 to the Distributor. For the
year ended December 31, 1998, the percentage of total commissions paid to the
Distributor was 51.80%. During 1998, the Trust's purchases and sales of
securities, exclusive of United States government securities and short-term
notes, amounted to $1,369,478 and $2,692,985, respectively. Of these
transactions $759,850 in purchases and $1,551,137 in sales were effected through
the Distributor.
The Trust's portfolio turnover rates were 60% for 1998 and 21%
for 1997.
OTHER INFORMATION
Custodian, Transfer Agent and Dividend-Paying Agent
All securities, cash and other assets of the Trust are received, held in custody
and delivered or distributed by the Trust's custodian bank, Investors Bank &
Trust Company, Financial Products Services, 200 Clarendon Street, 16th Floor,
Boston, Massachusetts 02116. In cases where foreign securities must, as a
practical matter, be held abroad, the Trust's custodian bank and the Trust will
make appropriate arrangements so that foreign securities may be legally held
abroad. The Trust's custodian bank does not decide on purchases or sales of
portfolio securities or the making of distributions. Cardinal Investment
Services, Inc., 579 Pleasant Street, Suite 4, Paxton, Massachusetts 01612,
succeeded Anchor Investment Management, Inc. as transfer agent and
dividend-paying agent for the Trust.
Independent Public Accountants
For the fiscal year ending December 31, 1998, the Trust employed Livingston &
Haynes, P.C., 40 Grove Street, Wellesley, Massachusetts 02181, to certify its
financial statements and to prepare its federal and state income tax returns.
35
<PAGE>
Registration Statement
This Statement of Additional Information does not contain all the information
set forth in the Registration Statement and the exhibits and schedules relating
thereto, which the Trust has filed with, and which are available at the
Securities and Exchange Commission, Washington, D.C., under the Securities Act
of 1933, as amended, and the Investment Company Act of 1940, as amended, to
which reference is hereby made.
FINANCIAL STATEMENTS
The financial statements and related report of Livingston & Haynes, P.C.,
independent public accountants, contained in Anchor Strategic Assets Trust's
Annual Report to shareholders for the year ended December 31, 1998, are hereby
incorporated by reference. A copy of the Trust's Annual Report may be obtained
without charge by writing to Anchor Investment Management Corporation, 579
Pleasant Street, Suite 4, Paxton, Massachusetts 01612, or by calling Anchor
Investment Management Corporation collect at (508) 831-1171.
36
<PAGE>
ANCHOR
STRATEGIC
ASSETS
TRUST
ANNUAL REPORT
DECEMBER 31, 1998
1
<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]
2
<PAGE>
- --------------------------------------------------------------------------------
ANCHOR STRATEGIC ASSETS TRUST
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
Assets:
Investments at quoted market value (cost $3,645,382;
see Schedule of Investments, Notes 1, 2, & 5)................. $3,198,870
Cash ......................................................... 133,672
Dividends and interest receivable.............................. 234
Other Assets................................................... 1,224
------------
Total assets.............................................. 3,334,000
------------
Liabilities:
Payable for capital shares redeemed............................ 55,744
Accrued expenses and other liabilities (Note 3)................ 14,874
------------
Total liabilities......................................... 70,618
------------
Net Assets:
Capital stock (unlimited shares authorized at $1.00 par value,
amount paid in on 839,279 shares outstanding) (Note 1)........ 5,088,681
Accumulated undistributed net investment income (Note 1)....... (320,023)
Accumulated realized loss from security transactions, net (Note 1) (1,058,764)
Net unrealized depreciation in value of investments (Note 2)... (446,512)
------------
Net assets (equivalent to $3.89 per share, based on
839,279 capital shares outstanding)...................... $3,263,382
============
3
<PAGE>
================================================================================
ANCHOR STRATEGIC ASSETS TRUST
================================================================================
STATEMENT OF OPERATIONS
DECEMBER 31, 1998
Income:
Dividends..................................................... $ 9,828
Interest......................................................
98,487
------------
Total income.............................................. 108,315
------------
Expenses:
Management fees, net (Note 3)................................. 69,013
Pricing and bookkeeping fees (Note 4)......................... 18,500
Legal fees.................................................... 12,000
Audit and accounting fees..................................... 6,500
Transfer fees (Note 4)........................................ 3,500
Custodian fees................................................ 2,994
Trustees' fees and expenses................................... 1,000
Other expenses................................................ 3,700
------------
Total expenses............................................ 117,207
------------
Net investment loss............................................ (8,892)
------------
Realized and unrealized loss on investments:
Realized loss on investments-net............................. (210,713)
Increase in net unrealized appreciation in investments....... 204,111
------------
Net loss on investments................................... (6,602)
============
Net decrease in net assets resulting from operations........... $ (15,494)
============
4
<PAGE>
================================================================================
ANCHOR STRATEGIC ASSETS TRUST
================================================================================
STATEMENTS OF CHANGES IN NET ASSETS
Year Ended Year Ended
December 31, December 31,
1998 1997
-------------------------------
From operations:
Net investment loss............................ $ (8,892) $ (22,940)
Realized loss on investments, net.............. (210,713) (486,770)
Increase (decrease) in net
unrealized 204,111 (731,850)
appreciation in investments..................
-------------- ------------
Net decrease in net assets
resulting from operations................. (15,494) (1,241,560)
-------------- ------------
Distributions to shareholders:
From net investment income ($0.08 per share in (65,594) --
1998)
From net realized gain on investments.......... -- --
-------------- ------------
Total distributions to shareholders......... (65,594) --
-------------- ------------
From capital share transactions:
Number of Shares
1998 1997
Proceeds from sale of
shares.................... 381,788 218,740 1,541,119 950,843
Shares issued to share-
holders in distributions
reinvested................ 16,930 -- 65,517 --
Cost of shares redeemed...(762,761) (699,780) (2,959,484) (3,194,210)
--------- --------- ------------ -----------
Decrease in net
assets resulting from
capital
share transactions........(364,043) (481,040) (1,352,848) (2,243,367)
========= ========== ------------ -----------
Net decrease in net assets....................... (1,433,936) (3,484,927)
Net assets:
Beginning of period............................ 4,697,318 8,182,245
============== ============
End of period (including undistributed
net investment income of ($320,023) and
($320,338), respectively).................. $ 3,263,382 4,697,318
============== ============
5
<PAGE>
================================================================================
ANCHOR STRATEGIC ASSETS TRUST
================================================================================
SELECTED PER SHARE DATA AND RATIOS
(for a share outstanding throughout each period)
Year Ended December 31,
1998 1997 1996 1995 1994
--------------------------------------------------------
Investment income...... $ 0.45 $ 0.40 $0.01 $0.03 $(3.40)
Expenses, net.......... 0.48 0.50 0.03 0.06 (7.86)
--------------------------------------------------------
Net investment income
(loss)................. (0.03) (0.10) (0.02) (0.03) 4.46
Net realized and
unrealized
gain (loss) on
investments............ 0.10 (0.86) 0.31 0.12 (5.41)
Distributions to
shareholders:
From net investment
income.............. (0.08) -- -- -- --
From net realized
gain -- -- -- -- --
on investments......
--------------------------------------------------------
Net increase (decrease)
in net asset value.... (0.01) (0.96) 0.29 0.09 (0.95)
Net asset value:
Beginning of period... 3.90 4.86 4.57 4.48 5.43
--------------------------------------------------------
End of period......... $3.89 $3.90 $4.86 $4.57 $4.48
========================================================
Total Return........... 1.31% (19.75%) 6.35% 2.01% (17.50%)
Ratio of expenses to
average net assets.... 2.54% 2.35% 1.98% 1.99% 2.19%
Ratio of net investment
loss to average net
assets................. (0.19)% (0.40)% (1.49)% (1.10)% (1.24)%
Portfolio turnover..... 0.60 0.21 0.37 0.12 0.42
Average commission
rate paid............. 0.0446 0.0386 0.0568 0.0433 0.0345
Number of shares out-
standing at end of
period................ 839,279 1,203,322 1,684,362 1,184,752 1,044,287
6
<PAGE>
================================================================================
ANCHOR STRATEGIC ASSETS TRUST
================================================================================
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1998
Value
Quantity (Note 1)
COMMON STOCKS -- 28.04%
Gold/Silver Mining Stocks
40,000 Aquiline Resources Corporation...........................$ 1,600
30,000 Euro-Nevada Mining Corporation........................... 487,500
18,000 Franco-Nevada Mining Corporation......................... 345,960
33,500 Guyanor Resources, Class B*.............................. 12,060
65,000 Miramar Mining Corporation............................... 59,800
47,300 Northern Orion Exploration Limited*...................... 8,041
-----------
Total common stocks (cost $1,307,807).................... 914,961
-----------
FOREIGN TIME DEPOSITS -- 69.26%
12,640,709 French Franc, maturing 01/04/99
at 2.875% (cost $2,251,239).............................. 2,260,159
-----------
GOLD OPTIONS -- 0.73%
5,000 Gold Bullion March 1999 300 Call......................... 15,000
5,000 Gold Bullion April 1999 310 Call....................... 8,750
-----------
Total gold options (cost $86,336)........................ 23,750
-----------
Total investments (cost $3,645,382)...................... 3,198,870
-----------
CASH & OTHER ASSETS, LESS LIABILITIES -- 1.97%..................... 64,512
-----------
Total Net Assets........................................ $3,263,382
===========
* Non income producing security
7
<PAGE>
================================================================================
ANCHOR STRATEGIC ASSETS TRUST
================================================================================
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
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. 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 gains increasing net
investment income, resulted in a net increase in undistributed net
investment income and an increase in accumulated realized loss from
security transactions. This reclassification had no affect on net assets.
C. Capital Stock-- The Trust records the sales and redemptions of its
capital stock on trade date.
8
<PAGE>
================================================================================
ANCHOR STRATEGIC ASSETS TRUST
================================================================================
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
(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, 1998, the total cost of investments for federal income tax
purposes was identical to the total cost on a financial reporting basis.
Aggregate gross unrealized appreciation in investments in which there was an
excess of market value over tax cost was $314,934. Aggregate gross unrealized
depreciation in investments in which there was an excess of tax cost over
market value was $761,446. Net unrealized depreciation in investments at
December 31, 1998 was $446,512.
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, 1998, investment advisory fees of
$4,726 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.
9
<PAGE>
================================================================================
ANCHOR STRATEGIC ASSETS TRUST
================================================================================
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
(Continued)
4. Certain transactions:
Anchor Investment Management Corporation provides transfer agent services for
the Trust. Fees earned by Anchor Investment Management Corporation for
transfer agent services for the year ended December 31, 1998 were $3,500.
Certain officers and trustees of the Trust are directors and/or officers of
the investment adviser and distributor. Meeschaert & Co., Inc., the Trust's
distributor, received $10,005 in brokerage commissions during the year ended
December 31, 1998. Fees earned by Anchor Investment Management Corporation
for expenses related to daily pricing of the Trust shares and for bookkeeping
services for the year ended December 31, 1998 were $18,500.
5. Purchases and sales:
Aggregate cost of purchases and the proceeds from sales and maturities on
investments for the year ended December 31, 1998 were:
Cost of securities acquired:
U.S. Government and investments backed by such
securities....................................... $ 5,864,585
Other investments................................ 63,265,933
===============
$ 69,130,518
===============
Proceeds from sales and maturities:
U.S. Government and investments backed by such
securities....................................... $ 5,864,585
Other investments................................ 64,722,878
===============
$ 70,587,463
===============
10
<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, 1998, the related statement of operations for
the year then ended, the statements of changes in net assets for each of the two
years in the period then ended, and the selected per share data and ratios for
each of the five years in the period then ended. These financial statements and
per share data and ratios are the responsibility of the Trust's management. Our
responsibility is to express an opinion on these financial statements and per
share data and ratios based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and per share data
and ratios are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1998 by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and selected per share data and ratios
referred to above present fairly, in all material respects, the financial
position of Anchor Strategic Assets Trust as of December 31, 1998, the results
of its operations for the year then ended, the changes in its net assets for
each of the two years in the period then ended, and the selected per share data
and ratios for each of the five years in the period then ended, in conformity
with generally accepted accounting principles.
LIVINGSTON & HAYNES, P.C.
Wellesley, Massachusetts,
January 19, 1999.
11
<PAGE>
================================================================================
ANCHOR STRATEGIC ASSETS TRUST
================================================================================
OFFICERS AND TRUSTEES
ERNIE BUTLER Trustee
President, I.E. Butler Securities
MAURICE A. DONAHUE Trustee
Director and Professor, Institute for Governmental
Services and Walsh-Saltonstall Professor of
Practical Politics, University of Massachusetts
SPENCER H. LE MENAGER Trustee
President, Equity Inc.
DAVID W.C. PUTNAM Chairman
Chairman, Board of Directors, F.L. Putnam and Trustee
Investment Management Corporation
President and Director, F.L. Putnam Securities
Company Incorporated
J. STEPHEN PUTNAM Vice President and
President, Robert Thomas Securities Treasurer
DAVID Y. WILLIAMS President, Secretary
President and Director, Meeschaert & Co., Inc., and Trustee
President and Director, Anchor Investment
Management Corporation
12
<PAGE>
================================================================================
ANCHOR STRATEGIC ASSETS TRUST
================================================================================
INVESTMENT ADVISER, ADMINISTRATOR AND TRANSFER AGENT
Anchor Investment Management Corporation
579 Pleasant St., Suite 4, Paxton, Massachusetts 01612
(508) 831-1171
DISTRIBUTOR
Meeschaert & Co., Inc.
579 Pleasant St., Suite 4, Paxton, Massachusetts 01612
CUSTODIAN
Investors Bank & Trust Company
89 South Street, Boston, Massachusetts 02111
INDEPENDENT PUBLIC ACCOUNTANT
Livingston & Haynes, P.C.
40 Grove St., Wellesley, Massachusetts 02482
LEGAL COUNSEL
Thorp Reed & Armstrong
One Riverfront Center, Pittsburgh, Pennsylvania 15222
This report is not authorized for distribution to prospective investors in the
Trust unless preceded or accompanied by an effective prospectus which includes
information concerning the Trust's record or other pertinent information.
13
<PAGE>
ANCHOR
RESOURCE
AND
COMMODITY
TRUST
ANNUAL REPORT
DECEMBER 31, 1998
1
<PAGE>
- --------------------------------------------------------------------------------
ANCHOR RESOURCE AND COMMODITY TRUST
- --------------------------------------------------------------------------------
Comparison of the Change in Value of a $10,000 Investment in the Anchor
Resource and Commodity Trust and the Dow Commodity Index
[GRAPHIC OMITTED]
2
<PAGE>
- --------------------------------------------------------------------------------
ANCHOR RESOURCE AND COMMODITY TRUST
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 1998
Assets:
Investments at quoted market value (cost $1,266,644;
see Schedule of Investments, Notes 1, 2, & 5)................. $ 924,651
Cash ......................................................... 9,040
Dividends and interest receivable.............................. 992
------------
Total assets.............................................. 934,683
------------
Liabilities:
Accrued expenses and other liabilities (Note 3 )............... 13,148
------------
Total liabilities......................................... 13,148
------------
Net Assets:
Capital stock (unlimited shares authorized at $1.00 par value,
amount paid in on 117,975 shares outstanding) (Note 1)........ 2,257,922
Accumulated undistributed net investment income (Note 1)....... 9,226
Accumulated realized loss from security transactions, net (Note 1) (1,003,620)
Net unrealized depreciation in value of investments (Note 2)... (341,993)
------------
Net assets (equivalent to $7.81 per share, based on
117,975 capital shares outstanding)...................... $ 921,535
============
3
<PAGE>
ANCHOR RESOURCE AND COMMODITY TRUST
STATEMENT OF OPERATIONS
DECEMBER 31, 1998
Income:
Dividends..................................................... $ 78,398
Interest...................................................... 76,305
------------
Total income.............................................. 154,703
------------
Expenses:
Management fees, net (Note 3)................................. 49,052
Pricing and bookkeeping fees (Note 4)......................... 14,500
Legal fees.................................................... 14,000
Audit and accounting fees..................................... 6,500
Transfer fees (Note 4)........................................ 6,000
Trustees' fees and expenses................................... 3,600
Custodian fees................................................ 1,230
Other expenses................................................ 3,500
------------
Total expenses............................................ 98,382
------------
Net investment income.......................................... 56,321
------------
Realized and unrealized loss on investments:
Realized loss on investments-net............................. (670,858)
Decrease in net unrealized appreciation in investments....... (1,092,930)
------------
Net loss on investments................................... (1,763,788)
============
Net decrease in net assets resulting from operations........... $ (1,707,467)
============
4
<PAGE>
================================================================================
ANCHOR RESOURCE AND COMMODITY TRUST
================================================================================
STATEMENTS OF CHANGES IN NET ASSETS
Year Ended Year Ended
December 31, December 31,
1998 1997
----------------------------
From operations:
Net investment income........................... $ 56,321 $ 108,043
Realized loss on investments, net............... (670,858) (135,336)
Decrease in net unrealized
appreciation in investments.................... (1,092,930) (749,780)
------------ ------------
Net decrease in net assets
resulting from operations............. (1,707,467) (777,073)
-------------- ------------
Distributions to shareholders:
From net investment income ($0.65 per share in (70,599) --
1998)
From net realized gain on investments.......... -- --
-------------- ------------
Total distributions to shareholders......... (70,599) --
-------------- ------------
From capital share transactions:
Number of Shares
1998 1997
---------- -----------
Proceeds from
sale of shares.......... 56,849 121,833 494,745 1,316,315
Shares issued to share-
holders in distributions
reinvested................ 9,026 -- 70,492 --
Cost of shares redeemed....(1,035,378)(141,349) (8,560,276) (1,416,537)
--------- --------- -------------- ------------
Decrease in net
assets resulting from
capital (969,503) (19,516) (7,995,039) (100,222)
share transactions........========= =========== -------------- ------------
Net decrease in net assets....................... (9,773,105) (877,295)
Net assets:
Beginning of period............................ 10,694,640 11,571,935
============ ============
End of period (including undistributed net
investment income of $9,226 and $9,172,
respectively).................................. $ 921,535 $ 10,694,640
============ ============
5
<PAGE>
================================================================================
ANCHOR RESOURCE AND COMMODITY TRUST
================================================================================
SELECTED PER SHARE DATA AND RATIOS
Year Ended December 31,
1998 1997 1996 1995 1994
--------------------------------------------------
Investment income........... $1.97 $0.22 $0.15 $0.89 $0.22
Expenses, net............... 1.25 0.13 0.09 0.32 2.20
--------------------------------------------------
Net investment income (loss) 0.72 0.09 0.06 0.57 (1.98)
Net realized and unrealized
(loss) gain on investments (2.09) 0.71) 1.08 0.13 --
Distributions to
shareholders:
From net investment
income................. (0.65 ) -- -- (0.58) --
From net realized gain
on investments........... -- -- -- -- --
-------------------------------------------------
Net increase (decrease)
in net asset value......... (2.02) (0.62) 1.14 0.12 (1.98)
Net asset value:
Beginning of period........ 9.83 10.45 9.31 9.19 11.17
-------------------------------------------------
End of period.............. $7.81 $9.83 $10.45 $9.31 $9.19
=================================================
Total Return................ (14.99%) (5.93%) 12.24% 7.63% (17.74%)
Ratio of expenses to
average net assets......... 1.50% 1.13% 1.10% 1.11% 20.12%
Ratio of net investment in-
come (loss) to average net 0.86% 0.89% 0.85% 2.01% (18.13)%
assets......................
Portfolio turnover.......... 0.49 0.09 0.20 0.33 --
Average commission rate paid 0.0633 0.0575 0.0752 0.0374 --
Number of shares out-
standing at end of period.. 117,975 1,087,478 1,106,994 782,903 12,000
Per share data and ratios
assuming
no waiver of advisory fees:
Expenses.................... -- -- -- -- $ 2.28
Net investment loss......... -- -- -- -- $ (2.06)
Ratio of expenses to
average net assets......... -- -- -- -- 20.87%
Ratio of net investment
loss to average net
assets..................... -- -- -- -- (18.88)%
6
<PAGE>
================================================================================
ANCHOR RESOURCE AND COMMODITY TRUST
================================================================================
SCHEDULE OF INVESTMENTS
DECEMBER 31, 1998
Value
Quantity (Note 1)
COMMON STOCKS -- 4.55%
Gold/Silver Mining Stocks -- 4.55%
40,000 Miramar Mining Corporation...............................$ 36,800
30,000 Northern Orion Exploration Limited....................... 5,100
-----------
Total common stocks (cost $383,400)...................... 41,900
-----------
FOREIGN TIME DEPOSITS -- 95.79%
4,937,086 French Franc, maturing 01/04/99,
at 2.875% (cost $883,244)............................... 882,751
-----------
Total investments (cost $1,266,644)...................... 924,651
-----------
CASH & OTHER ASSETS, LESS LIABILITIES -- (0.34)%................... (3,116)
-----------
Total Net Assets.........................................$ 921,535
===========
7
<PAGE>
================================================================================
ANCHOR RESOURCE AND COMMODITY TRUST
================================================================================
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
1. Significant accounting policies:
Anchor Resource and Commodity Trust (the "Trust"), a Massachusetts business
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. Temporary cash investments are
stated at cost, which approximates market value. Dividend income is
recorded on the ex-dividend date and interest income is recorded on the
accrual basis. Gains and losses from sales of investments are calculated
using the "identified cost" method for both financial reporting and federal
income tax purposes.
B.Income Taxes-- The Trust has elected to comply with the requirements of
the Internal Revenue Code applicable to regulated investment companies and
to distribute each year all of its taxable income to its shareholders. No
provision for federal income taxes is necessary since the Trust intends to
qualify for and elect the special tax treatment afforded a "regulated
investment company" under subchapter M of the Internal Revenue Code. Income
and capital gains distributions are determined in accordance with federal
tax regulations and may differ from those determined in accordance with
generally accepted accounting principles. To the extent these differences
are permanent, such amounts are reclassified within the capital accounts
based on their federal tax basis treatment; temporary differences do not
require such reclassification. During the current fiscal year, permanent
differences, primarily due to foreign currency gains increasing net
investment income, resulted in a net increase in undistributed net
investment income and an increase in accumulated realized loss from
security transactions. This reclassification had no affect on net assets.
8
<PAGE>
================================================================================
ANCHOR RESOURCE AND COMMODITY TRUST
================================================================================
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
(Continued)
C.Capital Stock-- The Trust records the sales and redemptions of its
capital stock on trade date.
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, 1998, the total cost of investments for federal income tax
purposes was identical to the total cost on a financial reporting basis.
There was no aggregate gross unrealized appreciation in investments in which
there was an excess of market value over tax cost. Aggregate gross unrealized
depreciation in investments in which there was an excess of tax cost over
market value was $341,993. Net unrealized depreciation in investments at
December 31, 1998 was $341,993.
3. Investment advisory service agreements:
The investment advisory contract with Anchor Investment Management
Corporation (the "investment adviser") provides that the Trust will pay the
adviser a fee for investment advice based on 3/4 of 1% per annum of average
daily net assets. At December 31, 1998, investment advisory fees of $564 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.
9
<PAGE>
================================================================================
ANCHOR RESOURCE AND COMMODITY TRUST
================================================================================
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1998
(Continued)
4. Certain transactions:
Anchor Investment Management Corporation provides transfer agent services for
the Trust. Fees earned by Anchor Investment Management Corporation for
transfer agent services for year ended December 31, 1998 were $6,000. 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 $17,563 in brokerage commissions during the year ended
December 31, 1998. Fees earned by Anchor Investment Management Corporation
for expenses related to daily pricing of the Trust shares and for bookkeeping
services for the year ended December 31, 1998 were $14,500.
5. Purchases and sales:
Aggregate cost of purchases and the proceeds from sales and maturities on
investments for year ended December 31, 1998 were:
Cost of securities acquired:
U.S. Government and investments backed by such
securities....................................... $ 3,454,487
Other investments................................ 38,363,540
===============
$ 41,818,027
===============
Proceeds from sales and maturities:
U.S. Government and investments backed by such
securities....................................... $ 4,393,989
Other investments................................ 45,345,340
===============
$ 49,739,329
===============
10
<PAGE>
================================================================================
ANCHOR RESOURCE AND COMMODITY TRUST
================================================================================
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Trustees of Anchor Resource and Commodity Trust:
We have audited the accompanying statement of assets and liabilities of Anchor
Resource and Commodity Trust (a Massachusetts business trust), including the
schedule of investments, as of December 31, 1998, the related statement of
operations for the year then ended, the statements of changes in net assets for
each of the two years in the period then ended, and the selected per share data
and ratios for each of the five years in the period then ended. These financial
statements and per share data and ratios are the responsibility of the Trust's
management. Our responsibility is to express an opinion on these financial
statements and per share data and ratios based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and per share data
and ratios are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1998 by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and selected per share data and ratios
referred to above present fairly, in all material respects, the financial
position of Anchor Resource and Commodity Trust as of December 31, 1998, the
results of its operations for the year then ended, the changes in its net assets
for each of the two years in the period then ended, and the selected per share
data and ratios for each of the five years in the period then ended, in
conformity with generally accepted accounting principles.
LIVINGSTON & HAYNES, P.C.
Wellesley, Massachusetts,
January 19, 1999.
11
<PAGE>
================================================================================
ANCHOR RESOURCE AND COMMODITY TRUST
================================================================================
OFFICERS AND TRUSTEES
ERNIE BUTLER Trustee
President, I.E. Butler Securities
MAURICE A. DONAHUE Trustee
Director and Professor, Institute for Governmental
Services and Walsh-Saltonstall Professor of
Practical Politics, University of Massachusetts
SPENCER H. LE MENAGER Trustee
President, Equity Inc.
DAVID W.C. PUTNAM Chairman
Chairman, Board of Directors, F.L. Putnam and Trustee
Investment Management Corporation
President and Director, F.L. Putnam Securities
Company Incorporated
J. STEPHEN PUTNAM Vice President and
President, Robert Thomas Securities Treasurer
DAVID Y. WILLIAMS President, Secretary
President and Director, Meeschaert & Co., Inc., and Trustee
President and Director, Anchor Investment
Management Corporation
12
<PAGE>
================================================================================
ANCHOR RESOURCE AND COMMODITY TRUST
================================================================================
INVESTMENT ADVISER, ADMINISTRATOR AND TRANSFER AGENT
Anchor Investment Management Corporation
579 Pleasant St., Suite 4, Paxton, Massachusetts 01612
(508) 831-1171
DISTRIBUTOR
Meeschaert & Co., Inc.
579 Pleasant St., Suite 4, Paxton, Massachusetts 01612
CUSTODIAN
Investors Bank & Trust Company
89 South Street, Boston, Massachusetts 02111
INDEPENDENT PUBLIC ACCOUNTANT
Livingston & Haynes, P.C.
40 Grove St., Wellesley, Massachusetts 02482
LEGAL COUNSEL
Thorp Reed & Armstrong
One Riverfront Center, Pittsburgh, Pennsylvania 15222
This report is not authorized for distribution to prospective investors in the
Trust unless preceded or accompanied by an effective prospectus which includes
information concerning the Trust's record or other pertinent information.
13
<PAGE>
Anchor Resource and Commodity Trust
Anchor Strategic Assets Trust
Introduction to Proposed Merger
December 31, 1998
The accompanying Pro Forma Combining Schedule of Investments, Statement of
Assets and Liabilities and Statement of Operations reflect the accounts of the
Anchor Resource and Commodity Trust and Anchor Strategic Assets Trust at and for
the year ended December 31, 1998, the most recent fiscal year end of both the
Anchor Resource and Commodity Trust and Anchor Strategic Assets Trust. The Pro
Forma financial statements give effect to the proposed transfer of assets from
Anchor Strategic Assets Trust in exchange for shares of Anchor Resource and
Commodity Trust. These statements have been derived from the audited financial
statements for December 31, 1998.
1
<PAGE>
Anchor Resource and Commodity Trust
Anchor Strategic Assets Trust
Pro Forma Combining Schedule of Investments
December 31, 1998
Quantity Value
- -------------------------- --------------------------
Anchor Anchor Anchor
Resource Anchor Resource and Resource Anchor
and Strategic Commodity and Strategic Pro
Commodity Assets Trust Commodity Assets Forma
Trust Trust Pro Forma Trust Trust Combined
- ---------------------------- --------------------------
COMMON STOCKS - 23.20%
Gold/Silver Mining
Stocks
-- 40,000 40,000 Aquiline Resources $ -- $ 1,600 $ 1,600
Corporation
-- 30,000 30,000 Euro-Nevada Mining -- 487,500 487,500
Corporation
-- 18,000 18,000 Franco-Nevada Mining -- 345,960 345,960
Corporation
-- 33,500 33,500 Guyanor Resources, -- 12,060 12,060
Class B
40,000 65,000 105,000 Miramar Mining 36,800 59,800 96,600
Corporation
30,000 47,300 77,300 Northern Orion 5,100 8,041 13,141
Exploration Limited ---------------------------
Total common stocks 41,900 914,961 956,861
--------------------------
FOREIGN TIME DEPOSITS - 76.22%
French Franc, maturing 01/04/99 at 2.875%
4,937,086 12,640,709 17,577,795 882,751 2,260,159 3,142,910
--------------------------
GOLD OPTIONS -- 0.58%
-- 5,000 5,000 Gold Bullion March 1999 -- 15,000 15,000
300 Call
-- 5,000 5,000 Gold Bullion April -- 8,750 8,750
1999 310 Call
-------------------------
Total gold options -- 23,750 23,750
==============================
Total investments $924,651 $3,198,870 $4,123,521
==============================
2
<PAGE>
Anchor Resource and Commodity Trust
Anchor Strategic Assets Trust
Pro Forma Combining Statement of Assets and Liabilities
December 31, 1998
Anchor Anchor Anchor
Resource Strategic Resource
and Assets Pro and Commodity
Commodity Trust Forma Trust
Trust Adjustment Pro Forma
---------- ---------- ---------- ----------
Assets:
Investments at quoted
market value $ 924,651 $3,198,870 -- $4,123,521
Cash 9,040 133,672 -- 142,712
Dividends and interest 992 234 -- 1,226
receivable
Other assets 0 1,224 -- 1,224
Total assets 934,683 3,334,000 -- 4,268,683
---------- ----------- ---------- ----------
Liabilities:
Payable for capital 0 55,744 -- 55,744
shares redeemed
Accrued expenses and 13,148 14,874 -- 28,022
liabilities
---------- ----------- ---------- ----------
Total liabilities 13,148 70,618 -- 83,766
---------- ----------- ---------- ----------
Net Assets:
Capital stock 2,257,922 5,088,681 -- 7,346,603
Accumulated undistributed
net investment income 9,226 (320,023) -- (310,797)
Accumulated realized loss
from security transactions (1,003,620) (1,058,764) -- (2,062,384)
Net unrealized
depreciation in value of (341,993) (446,512) -- (788,505)
investments
---------- ----------- ---------- ----------
Net assets $921,535 $3,263,382 $ -- $4,184,917
========== =========== ========== ==========
Shares outstanding 117,975 839,279 (421,432) (a) 535,822
---------- ----------- ---------- ----------
Net asset value $7.81 $3.89 -- $7.81
---------- ----------- ---------- ----------
Investments in securities
at cost $1,266,644 $ 3,645,382 -- $4,912,026
---------- ----------- ---------- ----------
(a) Adjustment to reflect share balance as a result of the combination, based
on an exchange ratio of 0.49786423823 (See Notes to Pro Forma Financial
Statements)
3
<PAGE>
Anchor Resource and Commodity Trust
Anchor Strategic Assets Trust
Pro Forma Combining Statement of Operations
For the Year Ended December 31, 1998
Anchor Anchor Anchor
Resource Strategic Resource
and Assets Pro and Commodity
Commodity Trust Forma Trust
Trust Adjustment Pro Forma
---------- ---------- ---------- ----------
Income:
Dividends
$ 78,398 $ 9,828 $ -- $ 88,226
Interest 76,305 98,487 -- 174,792
---------- ----------- ---------- ----------
Total Income 154,703 108,315 -- 263,018
---------- ----------- ---------- ----------
Expenses:
Management fees 49,052 69,013 (34,506) (a) 83,559
Pricing & bookkeeping fees 14,500 18,500 (14,500) (b) 18,500
Legal fees 14,000 12,000 (12,000) (c) 14,000
Audit and accounting fees 6,500 6,500 (6,500) (d) 6,500
Transfer fees 6,000 3,500 (3,500) (e) 6,000
Trustees' fees 3,600 1,000 (1,000) (f) 3,600
Custodian fees 1,230 2,994 -- 4,224
Other Miscellaneous 3,500 3,700 (2,000) (g) 5,200
expenses
---------- ----------- ---------- ----------
Total expenses 98,382 117,207 (74,006) 141,583
---------- ----------- ---------- ----------
Net Investment income 56,321 (8,892) 74,006 121,435
(loss)
Realized And Unrealized
Loss On Investments:
Realized loss on (670,858) (210,713) -- (881,571)
investments-net
Increase (decrease) in (1,092,930) 204,111 -- (888,819)
net unrealized
appreciation in
investments
---------- ----------- ---------- ----------
Net loss on investments (1,763,788) (6,602) -- (1,770,390)
---------- ----------- ---------- ----------
Change in net assets ($1,707,467) ($15,494) $74,006 ($1,648,955)
resulting from operations ========== =========== ========== ==========
(a)Anchor Investment Management Corporation (the "investment adviser") receives
an adviser fee of 0.75% and 1.50% per annum of average daily net assets of
the Anchor Resource and Commodity Trust and the Anchor Strategic Assets Trust
respectively. The adjustment reflects the decrease in adviser fees as a
result of the acquisition.
4
<PAGE>
(b)Anchor Investment Management Corp. provides administrative and
accounting services to the Anchor Resource and Commodity Trust and
the Anchor Strategic Assets Trust. The adjustment reflects the fees
that would be charged one Trust.
(c)Pro Forma combined legal fees are adjusted to include legal retainers plus
estimated out of pocket charges for one trust only.
(d)Adjustment to reflect the audit fees as a result of the merger.
(e)Adjustment to reflect the transfer agent fees for one trust as a
result of the merger.
(f)Adjustment to reflect the Trustees fees and expenses for one trust.
(g)Adjustment to reflect the decrease in miscellaneous expenses due
to the merger of the Anchor Resource and Commodity Trust and the
Anchor Strategic Assets Trust
(See Notes to Pro Forma Financial Statements)
5
<PAGE>
Anchor Resource and Commodity Trust
Anchor Strategic Assets Trust
Notes to Pro Forma Financial Statements
For the Year Ended December 31, 1998
1. Basis of Combination
The accompanying Pro Forma Combining Statement of Assets and Liabilities
reflects the Anchor Resource and Commodity Trust and the Anchor Strategic
Assets Trust as of December 31, 1998. These statements have been derived
from the audited financial statements as of December 31, 1998.
The Pro Forma Financial Statements should be read in conjunction with the
historical financial statements of the Anchor Resource and Commodity Trust
and the Anchor Strategic Assets Trust which are incorporated by reference
in their respective Statements of Additional Information. the Anchor
Resource and Commodity Trust and the Anchor Strategic Assets Trust follow
generally accepted accounting principles applicable to management
investment companies which are disclosed in the historical financial
statements of each.
The Pro Forma Financial Statements give effect to the proposed transfer of
the assets of the Anchor Strategic Assets Trust in exchange for shares of
the Anchor Resource and Commodity Trust. Under generally accepted
accounting principles, the Anchor Resource and Commodity Trust will be the
surviving entity for accounting purposes with its historical cost of
investment securities and results of operations being carried forward.
The Pro Forma Financial Statements have been adjusted to reflect the
anticipated advisory and administration fee arrangements for the surviving
entity. Certain other operating costs have also been adjusted to reflect
anticipated expenses of the combined entity. Other costs which may change
as a result of the reorganization are currently undeterminable.
For the year ended December 31, 1998 Anchor Resource and Commodity Trust
paid an investment adviser fee of 0.75% per annum of average daily net
assets.
For the year ended December 31, 1998 Anchor Strategic Assets Trust paid an
investment adviser fee of 1.50% per annum of average daily net assets.
2. Shares of Beneficial Interest.
The Pro Forma net asset value per share assumes the issuance of 417,847
shares of the Resource and Commodity Trust in exchange for 839,279 shares
of the Strategic Assets Trust which would have been issued at December 31,
1998 in connection with the proposed reorganization.
3. Non-Recurring cost of the Reorganization.
The total estimated cost of the proposed reorganization is $30,000. This
cost has not been reflected in the Pro Forma Combining Statement of Operations.
The total cost of the proposed reorganization will be born by the Anchor
Resource and Commodity Trust.
6
<PAGE>
INFORMATION INCORPORATED BY REFERENCE
1. The Statement of Additional Information of Anchor Resource and Commodity
Trust (the "Acquiring Fund") is incorporated by reference to the Acquiring
Fund's Post-Effective Amendment No. 5 to its Registration Statement on Form
N-1A (File No. 33-82998), which was filed with the Securities and Exchange
Commission on April 29, 1999. A copy may be obtained from the Acquiring Fund
at 579 Pleasant Street, Suite 4, Paxton, Massachusetts 01612. Telephone:
(508) 831-1171.
2. The Prospectus and the Statement of Additional Information of Anchor
Strategic Assets Trust (the "Acquired Fund") is incorporated by reference to
the Acquired Fund's Post-Effective Amendment No. 8 to its Registration
Statement on Form N-1A (File No. 33-32262), which was filed with the
Securities and Exchange Commission on April 29, 1999. Copies may be obtained
from the Acquired Fund at 579 Pleasant Street, Suite 4, Paxton,
Massachusetts 01612. Telephone: (508) 831-1171.
3. The audited financial statements of the Acquiring Fund are incorporated by
reference to the Acquiring Fund's Annual Report which was filed with the
Securities and Exchange Commission pursuant to Section 30(b)2 of the Investment
Company Act of 1940, as amended, on February 22, 1999.
4. The audited financial statements of the Acquired Fund are incorporated by
reference to the Acquired Fund's Annual Report which was filed with the
Securities and Exchange Commission pursuant to Section 30(b)2 of the Investment
Company Act of 1940, as amended, on February 22, 1999.
B-3
<PAGE>
ANCHOR STRATEGIC ASSETS TRUST
ANCHOR RESOURCE AND COMMODITY TRUST
NOTES TO PRO FORMA FINANCIAL STATEMENTS (UNAUDITED)
The accompanying unaudited Pro Forma Combining Statement of Assets and
Liabilities reflects the accounts of the Acquiring Fund and the Acquired Fund at
and for the most recent fiscal year-end of such Funds at December 31, 1998. The
accompanying unaudited Pro Forma Combining Statement of Operations has been
derived from the audited financial statements of each Fund as of December 31,
1998.
The Pro Forma Financial Statements should be read in conjunction with the
historical financial statements of the Funds which have been incorporated by
reference in the Statement of Additional Information. The Funds follow generally
accepted accounting principals applicable to management investment companies
which are disclosed in the historical financial statements of each Fund.
The Pro Forma statements give effect to the proposed transfer of assets from the
Acquired Fund in exchange for shares of the Acquiring Fund. Under generally
accepted accounting principles, Anchor Resource and Commodity Trust will be the
surviving entity for accounting purposes.
B-4
<PAGE>
PART C - OTHER INFORMATION
ITEM 15. INDEMNIFICATION
Indemnification is provided to trustees and officers of the Registrant pursuant
to the Registrant's Declaration of Trust, except where such indemnification is
not permitted by law. However, the Declaration of Trust does not protect the
trustees or officers from liability based on willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
their office.
Trustees and officers of the Registrant are insured against certain liabilities,
including liabilities arising under the Securities Act of 1933 (the "Act").
Insofar as indemnification for liabilities arising under the Act may be
permitted to trustees, officers, and controlling persons of the Registrant by
the Registrant pursuant to the Declaration of Trust or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission,
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by such trustees, officers, or controlling persons of the Registrant in
connection with the successful defense of any act, suit, or proceeding) is
asserted by such trustees, officers, or controlling persons in connection with
the shares being registered, the Registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit to a court
of appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
Insofar as indemnification for liabilities may be permitted pursuant to Section
17 of the Investment Company Act of 1940, as amended, for trustees, officers, or
controlling persons of the Registrant by the Registrant pursuant to the
Declaration of Trust or otherwise, the Registrant is aware of the position of
the Securities and Exchange Commission as set forth in Investment Company Act
Release No. 1C-11330. Therefore, the Registrant undertakes that in addition to
complying with the applicable provisions of the Declaration of Trust or
otherwise, in the absence of a final decision on the merits by a court or other
body before which the proceeding was brought, that an indemnification payment
will not be made unless in the absence of such a decision, a reasonable
determination based upon factual review has been made (i) by a majority vote of
a quorum of non-party trustees who are not interested persons of the Registrant
or (ii) by independent legal counsel in a written opinion that the indemnitee
was not liable for an act of willful misfeasance, bad faith, gross negligence,
or reckless disregard of duties. The Registrant further undertakes that
advancement of expenses incurred in the defense of a proceeding (upon
undertaking for repayment unless it is ultimately determined that
indemnification is appropriate) against an officer, trustee, or controlling
person of the Registrant will not be made absent the fulfillment of at least one
of the following conditions: (i) the indemnitee provides security for his
undertaking; (ii) the Registrant is insured against losses arising by reason of
any lawful advances; or (iii) a majority of a quorum of disinterested non-party
trustees or independent legal counsel in a written opinion makes a factual
determination that there is reason to believe the indemnitee will be entitled to
indemnification.
ITEM 16. EXHIBITS
(1) Conformed Copy of Restated Declaration of Trust of the Registrant, as
amended (1)
(2) Copy of By-Laws of the Registrant, as amended. (1)
(3) Not Applicable.
(4) Agreement and Plan of Reorganization, dated as of June 21, 1999, by and
between Anchor Resource and Commodity Trust and Anchor Strategic Assets Trust is
included as Exhibit A to the Prospectus/Proxy Statement forming a part of this
Registration Statement.*
C-1
<PAGE>
(5) The instruments defining the rights of holders of shares are the
Registrant's Declaration of Trust and By-Laws. See Exhibits (1) and (2), above.
(6) Conformed Copy of Investment Advisory Contract of the Registrant (1)
(7) Not Applicable.
(8) Not Applicable.
(9) Conformed Copy of Custodian Agreement of the Registrant. (1)
(10) Conformed Copy of the Distributor's Contract between the Registrant and
Meeschaert & Co., Inc. (1).
(11) Conformed Copy of Opinion and Consent of Counsel as to legality of
shares being registered *
(12) Conformed Copy of Opinion and Consent of Thorp Reed & Armstrong, LLP as
to tax matters.*
(13) Conformed Copy of Transfer Agency and Service Agreement of the
Registrant (1).
(14) Conformed Copy of Consent of Livingston & Haynes, P.C. independent
auditors of Registrant.*
(15) Not Applicable.
(16) Conformed Copy of Power of Attorney.*
(17) Form of Proxy of Anchor Strategic Assets Trust.*
(18) Form of Proxy of Anchor Resource and Commodity Trust*
*Filed electronically herewith.
(1) Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 1 on Form N-1A filed April 20, 1995. (File Nos. 811-8706 and
33-82998).
ITEM 17. UNDERTAKINGS
(1) The undersigned Registrant agrees that prior to any public reoffering of the
securities registered through the use of a prospectus which is part of this
Registration Statement by any person or party who is deemed to be an underwriter
within the meaning of Rule 145(c) of the Securities Act of 1933, as amended, the
reoffering prospectus will contain the information called for by the applicable
registration form for the reofferings by persons who may be deemed underwriters,
in addition to the information called for by the other items of the applicable
form.
(2) The undersigned Registrant agrees that every prospectus that is filed under
paragraph (1) above will be filed as part of an amendment to the Registration
Statement and will not be used until the amendment is effective, and that in
determining any liability under the Securities Act of 1933, as amended, each
post-effective amendment shall be deemed to be a new Registration Statement for
the securities offered therein; and the offering of the securities at that time
shall be deemed to be the initial bona fide offering of them.
C-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant, ANCHOR RESOURCE AND COMMODITY TRUST, and has duly caused this
Amendment to the Registration Statement to be signed on its behalf by the
undersigned, duly authorized, in the City of Paxton and the Commonwealth of
Massachusetts on the 21 day of July, 1999.
ANCHOR RESOURCE AND COMMODITY TRUST
By: /s/ DAVID Y. WILLIAMS
David Y. Williams, President
Pursuant to the Securities Act of 1933, this Amendment to this Registration
Statement has been signed below by the following persons in the capacities and
on the date indicated.
Signature Title Date
/s/DAVID W.C. PUTNAM* Chairman and Trustee June 22, 1999
David W. C. Putnam
/s/J. STEPHEN PUTNAM* Treasurer (Principal June 22, 1999
J. Stephen Putnam Financial Officer)
/s/SPENCER H. LEMENAGER* Trustee June 22, 1999
Spencer H. LeMenager
/s/DAVID Y. WILLIAMS* President, Secretary and June 22, 1999
David Y. Williams Trustee
/s/ ERNIE BUTLER* Trustee June 22, 1999
Ernie Butler
*By: PETER K. BLUME June 22, 1999
/s/ Peter K. Blume
Peter K. Blume
Attorney-in-Fact
<PAGE>
EXHIBIT LIST
11. Conformed Copy of Opinion and Consent of Thorp Reed & Armstrong, LLP as
to legality of shares being issued
12. Conformed Copy of Opinion and Consent of Thorp Reed & Armstrong, LLP as
to tax matters
14 Conformed Copy of Consent of Livingston & Haynes, P.C., independent
auditors
16. Conformed Copy of Power of Attorney
17 Form of Proxy of Anchor Strategic Assets Trust
18. Form of Proxy of Anchor Resource and Commodity Trust
<PAGE>
Exhibit 11
THORP REED & ARMSTRONG, LLP
20 Stanwix Street
One Riverfront Center
Pittsburgh, PA 15222-4895
June 23, 1999
Anchor Strategic Assets Trust
579 Pleasant Street, Suite 4
Paxton, Massachusetts 01614
Anchor Resource and Commodity Trust
579 Pleasant Street, Suite 4
Paxton, Massachusetts 01614
Re: Registration of Shares of Beneficial Interest of Anchor Resource and
Commodity Trust with the Securities and Exchange Commission on Form
N-14; Securities Act of 1933 File No. to be assigned; Investment
Company Act File No. 811-8706
Gentlemen:
In connection with the registration of an indefinite number of shares of common
stock (the "Shares") of Anchor Resource and Commodity Trust (the "Trust") under
the Securities Act of 1933, as amended (the "1933 Act"), the following opinion
is furnished to you to be filed with the Securities and Exchange Commission as
Exhibit 11 to Form N-14 of the Trust (the "N-14 Registration") under said 1933
Act.
Such Shares are being issued in connection with the reorganization (the
"Reorganization") of Strategic Assets Trust, a Massachusetts business trust
("SAT"), pursuant to the Agreement and Plan of Reorganization dated as of June
21, 1999 filed as an exhibit to the Trust's N-14 Registration (the "Agreement"),
under which SAT is transferring its assets and liabilities to the Trust in
exchange for a number of shares of beneficial interest of the Trust having an
aggregate net asset value equal to that of the shares of common stock of SAT
then outstanding. Immediately thereafter, SAT will distribute the Shares to its
shareholders in complete liquidation. Upon completion of the Reorganization,
each shareholder of SAT will be the owner of a number of shares of the Trust,
having a net asset value equal to the net asset value of the shares of SAT held
by the shareholder immediately prior to the Reorganization.
We have examined originals or copies, certified or otherwise identified to our
satisfaction, of such corporate records, certificates and statements of officers
of the Trust and of public officials and such other documents which we have
considered relevant and necessary for the opinion hereinafter set forth,
including, without limitation, the Trust's Declaration of Trust dated October 2,
1989 (the "Declaration of Trust").
Based on the foregoing, we are of the opinion that the Shares which are
currently being registered by the N-14 Registration may be legally and validly
issued in accordance with the provisions of the Agreement and the Declaration of
Trust upon receipt of consideration sufficient to comply with the provisions of
the Declaration of Trust and subject to compliance with the Investment Company
Act of 1940, as amended, and applicable state laws regulating the sale of
securities. Such Shares, when so issued, will be legally issued, fully paid and
non-assessable.
We hereby consent to the use of this opinion as an exhibit to the N-14
Registration and to any application or registration statement filed under the
securities laws of any of the states of the United States.
Very truly yours,
/s/Thorp Reed & Armstrong, LLP
<PAGE>
Exhibit 12
THORP REED & ARMSTRONG, LLP
20 Stanwix Street
One Riverfront Center
Pittsburgh, PA 15222-4895
June 23, 1999
Anchor Strategic Assets Trust
579 Pleasant Street, Suite 4
Paxton, Massachusetts 01614
Anchor Resource and Commodity Trust
579 Pleasant Street, Suite 4
Paxton, Massachusetts 01614
Ladies and Gentlemen:
You have requested our opinion concerning certain federal income tax
consequences of a transaction (the "Reorganization") in which all of the assets
of Anchor Strategic Assets Trust (the "Acquired Fund"), a Massachusetts business
trust, will be acquired by Anchor Resource and Commodity Trust, also a
Massachusetts business trust (the "Acquiring Fund"), in exchange solely for
common shares of the Acquiring Fund (the "Acquiring Fund Shares") which shall
thereafter be distributed to the shareholders of the Acquired Fund (the
"Acquired Fund Shareholders") in liquidation of the Acquired Fund. The terms and
conditions of this transaction are set forth in an Agreement and Plan of
Reorganization dated as of June 21, 1999 between the Acquiring Fund and the
Acquired Fund (the "Agreement"). This opinion is rendered to you pursuant to
paragraph 3(d) of the Agreement. Both the Acquired Fund and Acquiring Fund are
registered open-end management investment companies which qualify as regulated
investment companies described in Section 851(a) of the Internal revenue Code of
1986, as amended (the "Code"). The Acquiring Fund and Acquired Fund are engaged
in the business of investing in professionally managed portfolios generally of
debt and equity securities. We have reviewed and relied upon the Registration
Statement on Form N-14 (the "Registration Statement") filed with the Securities
and Exchange Commission (the "Commission") in connection with the
Reorganization, the certificates provided to us by the Acquired Fund and
Acquiring Fund in connection with the rendering of this opinion, and such other
documents and instruments as we have deemed necessary for the purposes of this
opinion. Based upon and subject to the foregoing, and assuming that the
Reorganization will take place as described in the Agreement, we are of the
opinion that, for federal income tax purposes: (a) The transfer of all of the
Acquired Fund assets in exchange for the Acquiring Fund Shares and the
distribution of the Acquiring Fund Shares to the Acquired Fund Shareholders in
liquidation of the Acquired Fund will constitute a "reorganization" within the
meaning of Section 368(a)(1)(D) of the Code; (b) No gain or loss will be
recognized by the Acquiring Fund upon the receipt of the assets of the Acquired
Fund solely in exchange for the Acquiring Fund Shares; (c) No gain or loss will
be recognized by the Acquired Fund upon the transfer of the Acquired Fund assets
to the Acquiring Fund in exchange for the Acquiring Fund Shares or upon the
distribution (whether actual or constructive) of the Acquiring Fund Shares to
Acquired Fund Shareholders in exchange for their shares of the Acquired Fund;
(d) No gain or loss will be recognized by the Acquired Fund Shareholders upon
the exchange of their Acquired Fund shares for the Acquiring Fund Shares; (e)
The tax basis of the Acquired Fund assets acquired by the Acquiring Fund will be
the same as the tax basis of such assets to the Acquired Fund immediately prior
to the Reorganization; (f) The tax basis of the Acquiring Fund Shares received
by each of the Acquired Fund Shareholders pursuant to the Reorganization will be
the same as the tax basis of the Acquired Fund shares held by such shareholder
immediately prior to the Reorganization; (g) The holding period of the assets of
the Acquired Fund in the hands of the Acquiring Fund will include the period
during which those assets were held by the Acquired Fund; and (h) The holding
<PAGE>
period of the Acquiring Fund Shares received by each Acquired Fund Shareholder
will include the period during which the Acquired Fund shares exchanged therefor
were held by such shareholder (provided the Acquired Fund shares were held as
capital assets on the date of the Reorganization). This opinion is expressed as
of the date hereof and is based upon the Code, Treasury regulations promulgated
thereunder, administrative positions of the Internal Revenue Service (the
"Service"), and judicial decisions, all of which are subject to change either
prospectively or retroactively. There can be no assurance that changes in the
law will not take place which could affect the opinions expressed herein or that
contrary positions may not be taken by the Service. We disclaim any undertaking
to advise you with respect to any event subsequent to the date hereof. The
opinions contained herein are limited to those matters expressly covered; no
opinion is to be implied in respect of any other matter. This opinion is
addressed solely to you and may not be relied upon by any other person without
our prior written consent. We hereby consent to the filing of a copy of this
opinion with the Commission as an exhibit to the Registration Statement, and to
the references to this firm and this opinion in the Prospectus/Proxy Statement
which is contained in the Registration Statement.
Very truly yours,
/s/ Thorp Reed & Armstrong, LLP
Exhibit 14
Livingston & Haynes, P.C. Livingston & Haynes, P.C.
40 Grove Street
Suite 380
Wellesley, MA 02482
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Statement of
Additional Information constituting part of this registration statement on Form
N-14 (the "Registration Statement") of our report dated January 19, 1999
relating to the financial statements and financial highlights appearing in the
December 31, 1998 Annual Report to Shareholders of Anchor Resource and Commodity
Trust and our report dated January 19, 1999 relating to the financial statements
and financial highlights appearing in the December 31, 1998 Annual Report to
Shareholders of Anchor Strategic Assets Trust, which are also incorporated by
reference into the Statement of Additional Information.
We also consent to the reference to us under the heading "Experts" in the
combined Prospectus/Joint Proxy Statement, constituting part of this
Registration Statement.
/s/ LIVINGSTON & HAYNES, P.C.
Livingston & Haynes, P.C.
Wellesley Massachusetts
June 21, 1999
EXHIBIT 16
POWER OF ATTORNEY
We, the undersigned officers and Trustees of Anchor Resource and Commodity
Trust, Hereby severally constitute David W. C. Putnam, David Y. Williams,
Christopher 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 out hands and common seal on the dates set forth below*
Signature Title Date
/s/DAVID W.C. PUTNAM Chairman and Trustee June 21, 1999
David W. C. Putnam
/s/SPENCER H. LEMENAGER Trustee June 21, 1999
Spencer H. LeMenager
/s/ERNEST BUTLER Trustee June 21, 1999
Ernest Butler
/s/DAVID Y. WILLIAMS President, Secretary June 21, 1999
David Y. Williams and Trustee
/s/Joseph C. Williams Vice President and Asst. June 21, 1999
Joseph C. Williams Treasurer
/s/CHRISTOPHER y. WILLIAMS Vice President and Asst. June 21, 1999
Christopher Y. Williams Secretary
*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.
EXHIBIT 17
PROXY
ANCHOR STRATEGIC ASSETS TRUST
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES
Special Meeting of Stockholders - August 4, 1999
The undersigned hereby appoints David W. C. Putnam, Christopher Y. Williams,
and Peter K. Blume, and each of them, the proxies of the undersigned, with
power of substitution to each of them to vote all shares of Anchor Resource and
Commodity Trust which the undersigned is entitled to vote at the Special
Meeting of Stockholders of Anchor Resource and Commodity Trust to be held on
August4, 1999 at 2 p.m., at 579 Pleasant Street, Suite 4, Paxton,
Massachusetts 01612, and at any adjournments thereof.
UNLESS OTHERWISE SPECIFIED IN THE SQUARES AND/OR ON THE LINE PROVIDED, THE
UNDERSIGNED'S VOTE WILL BE CAST FOR THE PROPOSAL.
- -------------------------------------------------------------------------------
Proposal to Approve OR Disapprove
an Agreement and plan of Reorganization
between Anchor Resource and Commodity Trust
and Anchor Strategic Assets Trust FOR [__] AGAINST [__] ABSTAIN [__]
In their discretion on any other business
which may properly come before the meeting
or any adjournments thereof. FOR [__] AGAINST [__] ABSTAIN [__]
Please sign EXACTLY as your name or
names appear at left. When signing as
attorney, executor, administrator,
trustee or guardian, please give your
full title as such.
------------------------------------
(Signature of Stockholder)
------------------------------------
(Signature of joint owner, if any)
Date _________________________, 1999
PLEASE SIGN AND RETURN PROMPLY IN ENCLOSED ENVELOPE
NO POSTAGE IS REQUIRED
<PAGE>
EXHIBIT 18
PROXY
ANCHOR RESOURCE AND COMMODITY TRUST
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES
Special Meeting of Stockholders - August 4, 1999
The undersigned hereby appoints David W. C. Putnam, Christopher Y. Williams,
and Peter K. Blume, and each of them, the proxies of the undersigned, with
power of substitution to each of them to vote all shares of Anchor Resource and
Commodity Trust which the undersigned is entitled to vote at the Special
Meeting of Stockholders of Anchor Resource and Commodity Trust to be held on
August4, 1999 at 2 p.m., at 579 Pleasant Street, Suite 4, Paxton,
Massachusetts 01612, and at any adjournments thereof.
THE NAMED PROXIES WILL VOTE THE SHARES REPRESENTED BY THIS PROXY IN ACCORDANCE
WITH THE CHOICE MADE ON THIS PROXY BY THE SHAREHOLDER.
UNLESS OTHERWISE SPECIFIED IN THE SQUARES AND/OR ON THE LINE PROVIDED, THE
UNDERSIGNED'S VOTE WILL BE CAST FOR THE PROPOSAL.
- ------------------------------------------------------------------------------
Proposal to Approve OR Disapprove FOR [__] AGAINST [__] ABSTAIN [__]
a Proposal To Eliminate a Fundamental
Restriction on the Trust's Investments
in Commodities or Commodity Contracts
In their discretion on any other business FOR [__] AGAINST [__] ABSTAIN [__]
which may properly come before the meeting
or any adjournments thereof.
Please sign EXACTLY as your name or
names appear at left. When signing as
attorney, executor, administrator,
trustee or guardian, please give your
full title as such.
------------------------------------
(Signature of Stockholder)
------------------------------------
(Signature of joint owner, if any)
Date _________________________, 1999
PLEASE SIGN AND RETURN PROMPLY IN ENCLOSED ENVELOPE
NO POSTAGE IS REQUIRED
<PAGE>
