As Filed With The Securities And Exchange Commission On February 27, 1997
Registration No. 2-19659
===============================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 (X)
Pre-Effective Amendment No. ___ ( )
Post-Effective Amendment No. 64 (X)
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 (X)
Amendment No. 39 (X)
ASTRA STRATEGIC INVESTMENT SERIES
(formerly Pilgrim Strategic Investment Series)
-----------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
11400 West Olympic Boulevard, Suite 200, Los Angeles, California 90064
----------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(800) 219-1080
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(Registrant's Telephone Number, Including Area Code)
Palomba Weingarten
Atlas Holdings Group, Inc.
9595 Wilshire Boulevard
Suite 1001
Beverly Hills, California 90212
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(Name and Address of Agent for Service of Process)
Copies to:
James F. Jorden, Esquire
Jorden Burt Berenson & Johnson LLP
1025 Thomas Jefferson Street, N.W.
Suite 400 East
Washington, D.C. 20007
Approximate Date of Proposed Public Offering:
It is proposed that this filing will become effective:
X immediately upon filing pursuant to paragraph (b) of Rule 485
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on (date) pursuant to paragraph (b)(1)(v) of Rule 485
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60 days after filing pursuant to paragraph (a)(1) of Rule 485
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on (date) pursuant to paragraph (a)(1) of Rule 485
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75 days after filing pursuant to paragraph (a)(2) of Rule 485
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on (date) pursuant to paragraph (a)(2) of Rule 485
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If appropriate, check the following box:
__ This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Registrant has elected to maintain an indefinite registration of its shares of
beneficial interest (without par value) of each of its currently existing series
under Rule 24f-2. Pursuant to paragraph (b)(1) of Rule 24f-2. Registrant filed
its Rule 24f-2 Notice for its fiscal year ended October 31, 1996 on December 24,
1996.
This Registration Statement has also been signed by Astra Institutional
Securities Trust.
===============================================================================
<PAGE>
ASTRA STRATEGIC INVESTMENT SERIES
CONTENTS OF REGISTRATION STATEMENT
This post-effective amendment shall not supercede or effect this Registration
Statement as it applies to Astra Adjustable Rate Securities Trusts (formerly
Pilgrim Adjustable Rate Securities Trusts) I, I-A, and IV.
This Registration Statement consists of the following papers and documents:
o Cover Sheet
o Contents of Registration Statement
o Cross Reference Sheet
o Part A -- Astra Adjustable U.S. Government Securities Trust I, I-A,
II and IV prospectus
o Part B -- Astra Adjustable U.S. Government Securities Trust I, I-A, II
and IV Statement of Additional Information
o Part C -- Other Information
o Signature Pages
o Exhibits
<PAGE>
ASTRA STRATEGIC INVESTMENT SERIES
REGISTRATION STATEMENT ON FORM N-1A
CROSS REFERENCE SHEET
N-1A Location in
Item No. Registration Statement
-------- ----------------------
Part A: Information Required In Prospectus
-------------------------------------------
1. Cover Page Cover Page
2. Synopsis Key Features
3. Condensed Financial Information Financial Highlights
4. General Description The Trusts' Investment Objective;
of Registrant The Astra Group; General
Information
5. Management of the Fund The Astra Group; Management Fees;
Administrative Fees; Distribution
Plans
6. Capital Stock and Other General Information
Securities
7. Purchase of Securities How to Buy Shares of the Trusts;
Being Offered Shareholder Services and Privileges
8. Redemption or Repurchase How to Redeem Shares of the Trusts
9. Pending Legal Proceedings Not Applicable
Part B: Information Required In
Statement of Additional Information
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and History General Information and
History
13. Investment Objectives and Policies Investment Objective and Policies;
Investment Restrictions
14. Management of the Registrant Trustees and Officers; Management of
the Trusts and the Portfolio
15. Control Persons and Principal Trustees and Officers; Management of
Holders of Securities the Trusts and Portfolio
<PAGE>
N-1A Location in
Item No. Registration Statement
-------- -----------------------
Part B: Information Required In
Statement of Additional Information
-----------------------------------
16. Investment Advisory and Management of the Trusts and the
Other Services Portfolio; General Information
17. Brokerage Allocation Execution of Portfolio Transactions
18. Capital Stock and Other General Information
Securities
19. Purchase, Redemption and Additional Purchase and Redemption
Pricing of Securities Being Information; Price of the Shares is
Offered Determined Daily; Shareholder Services
and Privileges
20. Tax Status Federal Tax Treatment of
Dividends and Distributions
21. Underwriters General Information
22. Calculation of Performance Data Investment Return Information
23. Financial Statements Not Applicable
Part C: Other Information
--------------------------
24. Financial Statements and Exhibits Financial Statements and Exhibits
25. Persons Controlled by or Under Persons Controlled by or Under
Common Control Common Control
26. Number of Holders of Securities Number of Holders of Securities
27. Indemnification Indemnification
28. Business and Other Connections Business and Other Connections of
of Investment Adviser Investment Adviser
29. Principal Underwriters Principal Underwriters
30. Location of Accounts and Records Location of Accounts and Records
31. Management Services Management Services
32. Undertakings Undertakings
<PAGE>
PART A
<PAGE>
Prospectus
[Logo]
Astra Adjustable U.S. Government Securities Trust I
Astra Adjustable U.S. Government Securities Trust I-A
Astra Adjustable U.S. Government Securities Trust II
Astra Adjustable U.S. Government Securities Trust IV
11400 West Olympic Boulevard, Suite 200,
Los Angeles, California 90064 o 1-800-219-1080
- --------------------------------------------------------------------------------
o How the Trusts Work Page 11
o Shareholder's Guide Page 26
- --------------------------------------------------------------------------------
Astra Adjustable U.S. Government Securities Trust I ("Trust I"), Astra
Adjustable U.S. Government Securities Trust I-A ("Trust I-A"), Astra Adjustable
U.S. Government Securities Trust II ("Trust II") and Astra Adjustable U.S.
Government Securities Trust IV ("Trust IV") (collectively the "Trusts" or
individually a "Trust") are non-diversified series of Astra Strategic Investment
Series ("ASIS"), an open-end management investment company (mutual fund), that
seek high current income consistent with low volatility of principal. Each
Trust, unlike many other investment companies which directly acquire and manage
their own portfolio of securities, seeks to achieve this objective by investing
all of its investable assets in Astra Institutional Adjustable U.S. Government
Securities Portfolio (the "Portfolio"), an open-end management investment
company which is a non-diversified series of Astra Institutional Securities
Trust ("AIST") with the same investment objective as each of the Trusts. As a
result, the investment experience of each Trust will correspond directly with
the investment experience of the Portfolio. Accordingly, investors should
carefully consider the investment approach. For additional information regarding
this concept, see "How the Trusts Work--Special Information Regarding the
Trusts' Structure." The Portfolio seeks to achieve its investment objective,
which is identical to the investment objective of the Trusts, by investing at
least 65% of its assets in adjustable rate mortgage securities which are issued
or guaranteed by the U.S. Government, its agencies or instrumentalities ("U.S.
Government Mortgage Securities"). The Portfolio invests the remainder of its
assets generally in mortgage securities issued or sponsored by commercial banks,
savings and loan associations, mortgage bankers or other financial institutions,
that have no government guarantee and that are senior or subordinated to other
mortgage securities arising out of the same pool of mortgages ("Multi-Class
Residential Mortgage Securities"). The portion of assets invested in
Subordinated Residential Mortgage Securities may entail greater risk than the
portion invested in senior Mortgage Securities or U.S. Government Mortgage
Securities.
The Trusts believe that by investing in the Portfolio which invests primarily in
mortgage securities which have variable rates of interest, they will achieve a
more consistent and less volatile net asset value than is characteristic of
mutual funds that invest primarily in mortgage securities paying a fixed rate of
interest. In addition, by selectively investing a portion of its assets in
Multi-Class Residential Mortgage Securities, the Portfolio will seek to achieve
a higher yield than that of traditional mutual funds which invest primarily or
exclusively in U.S. Government Mortgage Securities. There can, of course, be no
assurance that each Trust's objective will be attained.
Trust I offers shares that may be purchased only through the exchange of shares
of Astra Adjustable Rate Securities Trust I and Astra Short-Term Multi-Market
Income Fund II, the transfer of dividends from other Astra Group Funds or the
reinstatement of Shares of Trust I previously redeemed as outlined below under
"Reinstatement Privilege" at a price equal to their net asset value per share
and imposes a contingent deferred sales charge ("CDSC") which will be assessed
on most redemptions made within four years of purchase. Trust I incurs, subject
to certain limitations, an annual distribution fee of 1.00% of its average daily
net assets.
(Continued on page 2)
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF
THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is February 28, 1997
<PAGE>
(Continued from Cover Page)
Shares of Trust I-A enjoy the benefit of permitting all of the investor's money
to work from the time the investment is made. Trust I-A offers shares that may
be purchased at a price equal to their net asset value per share and imposes a
CDSC which will be assessed on most redemptions made within four years of
purchase. Trust I-A incurs, subject to certain limitations, an annual
distribution fee of 1.00% of its average daily net assets.
Trust II offers shares that may be purchased at a price equal to their net asset
value per share plus a varying sales charge, depending on the amount of
purchase. Trust II incurs, subject to certain limitations, an annual
distribution fee of .25% of its average daily net assets.
Trust IV offers shares that may be purchased at a price equal to their net asset
value per share and imposes a CDSC which will be assessed on most redemptions
made within three months of purchase. Trust IV incurs, subject to certain
limitations, an annual distribution fee of .60% of its average daily net assets.
Each Trust has its own distribution fee, other expenses and sales charges which
will cause each Trust to have its own total operating expense ratio, which may
be higher or lower than that of the other Trusts. In choosing between an
investment in the Trusts an investor should consider which method of purchasing
shares is most beneficial given the length of time the investor expects to hold
the shares. Investors should consider whether during the anticipated life of
their investment the initial sales charge and accumulated distribution fees
imposed on shares of Trust II would be less or greater than the accumulated
continuing distribution fees plus the CDSC imposed on shares of Trusts I, I-A or
IV and to what extent such differential would be offset or increased by the
yield of Trust II shares.
The shares offered by this Prospectus are not deposits or obligations of any
bank, are not endorsed or guaranteed by any bank, and are not insured by the
Federal Deposit Insurance Corporation, the Federal Reserve Board, or any other
governmental agency.
This Prospectus must be delivered to the investor prior to consummation of sale.
This Prospectus sets forth concisely information about the Trusts that
prospective investors should know before investing. It should be retained for
future reference. A Statement of Additional Information relating to the Trusts,
dated February 28, 1997, has been filed with the Securities and Exchange
Commission and is incorporated herein by reference. This Statement is available
without charge upon request to a Trust at the address or telephone number on
page 1.
Table of Contents
=============================
Page
----
Key Features 3
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Special Information Regarding the Trusts' Structure 11
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The Trusts' Investment Objective 12
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Distributions and Taxes 25
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How to Buy Shares of the Trusts 26
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How to Redeem Shares of the Trusts 31
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Shareholder Services and Privileges 33
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Expedited Redemption and Telephone Exchange Information 35
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How the Trusts Value Their Shares 35
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The Astra Group 37
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Portfolio Management 37
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Management Fees 38
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Administrative Fees 38
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Distribution Plans 39
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General Information 42
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New Account Application 45
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Additional Account Privileges 49
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2
<PAGE>
Key Features
=============================
What is the Trusts' Investment Objective?
=================================================================
The investment objective of each Trust is to seek a high level of current income
consistent with low volatility of principal. See "The Trusts' Investment
Objective" for a discussion of current adverse market conditions and the effect
of redemption requests on portfolio yield. Each Trust seeks to achieve its
investment objective by investing all of its investable assets in the Portfolio
which has the same investment objective as that of each Trust. Since the
investment characteristics of each Trust will correspond to those of the
Portfolio, this Prospectus discusses the various investments of and techniques
employed by the Portfolio.
Less Fluctuation in Net Asset Value
=================================================================
At least 65% of the Portfolio's assets are invested in adjustable rate mortgage
securities ("ARMS") representing an interest in mortgages, which are issued or
guaranteed by the U.S. Government, its agencies or instrumentalities ("U.S.
Government Mortgage Securities"). The adjustable rate feature of the underlying
mortgages to these instruments generally will act as a buffer to reduce sharp
changes in the Portfolio's net asset value in response to normal interest rate
fluctuations. The Portfolio expects that the adjustable rate feature of the U.S.
Government Mortgage Securities will help the Portfolio achieve lower volatility
of principal than a long-term bond fund whose portfolio instruments have a fixed
rate of interest. The Portfolio only invests in those mortgage securities with
underlying mortgages representing first liens on the properties securing such
mortgages. See "U.S. Government Mortgage Securities," "Adjustable Rate Mortgage
Securities" and "Illiquid Securities."
The performance of the Trusts have been negatively affected by the interest rate
conditions in the market for ARM securities. As a result of the 1994 interest
rate increases and declining bond prices, combined with negative publicity on
the mortgage securities market and the higher than expected price volatility
experienced with many mortgage-backed securities, mortgage funds industry-wide
continued to experience heavy redemptions. As a result, ARM funds continued to
liquidate subordinated mortgage securities in order to meet redemption requests
in 1995 and 1996. This resulted in an increased supply of subordinated mortgage
securities in the market, bringing about wider spreads over the relevant indices
and reduced prices. Moreover, adverse market conditions have resulted in a
decrease in the value of certain subordinated mortgage securities of the type in
which the Trusts have invested. Further fluctuations in net asset value may
occur as a result of such factors as deteriorating or improving market
conditions and liquidity and credit experience of portfolio securities. See
"Illiquid Securities."
High Current Income
=================================================================
The remainder of the Portfolio's assets are invested in residential mortgage
securities collateralized by pools of single family, multi-family and mobile
home park residential mortgages issued or sponsored by financial institutions
such as commercial banks, savings and loan associations and mortgage bankers,
that have no government guarantee and that are senior or subordinated to other
mortgage securities arising out of the same pool of mortgages ("Multi-Class
Residential Mortgage Securities"). A substantial portion of the Portfolio's
investment in Multi- Class Residential Mortgage Securities is expected to be
Multi-Class Residential Mortgage Securities that are subordinated in some manner
as to the payment of principal and/or interest to the holders of more senior
securities ("Subordinated Residential Mortgage Securities"). By investing in
Subordinated Residential Mortgage Securities, the Portfolio seeks to increase
yield to shareholders. The Portfolio seeks to limit the risks presented by such
instruments by reviewing and analyzing the characteristics of the mortgage
- ---
3
<PAGE>
loans underlying the Subordinated Residential Mortgage Securities that it may
acquire. The Portfolio purchases Subordinated Residential Mortgage Securities
when, in the view of the Portfolio's investment manager, Astra Management
Corporation ("AMC" or the "Manager"), the potential for a higher marginal yield
on such instruments outweighs the additional risk presented by the instruments.
See "Multi-Class Residential Mortgage Securities."
The Trusts have experienced a significant increase in the rate of redemptions.
As a result, the Portfolio has increasingly been managed to provide adequate
cash reserves to satisfy redemption requests, resulting in a decreased ability
to seek high current income with low volatility of principal, which are the
Trusts' fundamental investment objective. Investing a larger percentage of
portfolio assets in cash and short-term instruments results in lower yields than
those typically received on investments in mortgage securities. See "Illiquid
Securities."
How Do I Buy and Sell (Redeem) My Shares of the Trusts?
=================================================================
Shares of Trust I are available through the Exchange Privilege, through the
transfer of dividends or through the reinstatement of shares of Trust I
previously redeemed at the net asset value per share. Shares of Trust I-A or
Trust IV are available through selected broker-dealers and other financial
services firms at the net asset value per share. Shares of Trust II are
available through such financial services firms at the net asset value per share
plus a varying sales charge, depending on the amount of purchase. The minimum
initial investment for Trusts I, I-A or II is $5,000 ($2,000 for IRAs). The
minimum initial investment for Trust IV is $50,000. Shares of Trust II are
redeemable at the net asset value per share on any business day. Shares of Trust
I, I-A or IV are redeemable at the net asset value per share on any business
day, reduced by the amount of any applicable CDSC. Payments to you can be made
either through brokers, directly to you, or to your designated bank. In
addition, for the convenience of shareholders, each Trust provides certain
shareholder services and privileges which may be suited to your particular
investment needs. See "Shareholder's Guide."
When Do I Receive Income?
=================================================================
You may elect to receive monthly dividends from net investment income in cash or
have them reinvested in additional shares at net asset value. See "Choosing a
Distribution Option."
Who Is Astra Group?
=================================================================
AMC, the Portfolio's investment manager and Astra Fund Distributors Corp. (the
"Distributor"), the Trusts' principal underwriter, are part of Atlas Holdings
Group, Inc. ("Atlas Group"), a financial services holding company which provides
financial services to mutual funds. Atlas Group has total combined assets under
management of approximately $110 million. AMC and the Distributor are part of
the umbrella name "Astra Group."
- ---
4
<PAGE>
Fee Table
=================================================================
The following fee table is provided to assist investors in understanding the
various costs and expenses which may be borne directly or indirectly by an
investment in a Trust (including costs and expenses charged by the Trusts and
the Portfolio.) The percentages shown below expressing Annual Trust Operating
Expenses are based on actual amounts incurred by the Trusts for the fiscal year
ended October 31, 1996.
<TABLE>
<CAPTION>
Shareholder Transaction Expenses Trust I Trust I-A Trust II Trust IV
- -------------------------------- ------- --------- -------- --------
<S> <C> <C> <C> <C>
Maximum Sales Charge Imposed on Purchases
(as percentage of offering price) ............. NONE NONE 3% NONE
Maximum Sales Charge Imposed on Reinvested
Dividends (as a percentage of offering price) . NONE NONE NONE NONE
Deferred Sales Charge
1st year ...................................... 4% 4% NONE 0.25%****
2nd year ...................................... 3% 3% NONE NONE
3rd year ...................................... 2% 2% NONE NONE
4th year ...................................... 1% 1% NONE NONE
5th year and thereafter ....................... 0% 0% NONE NONE
Redemption Fees .................................. NONE NONE NONE NONE
Annual Trust Operating Expenses
- -------------------------------
(as a percentage of average net assets)
Management Fees (See Management Fees)* ........... 0.55% 0.55% 0.55% 0.55%
12b-1 Fees (See "Distribution Plan ")** ......... 1.00% 1.00% 0.25% 0.60%
Administration Fees (See "Administration Fees ")* 0.10% 0.10% 0.10% 0.10%
Other Expenses ................................... 1.34% 1.23% 1.96% 2.13%
Total Trust Operating Expenses*** ................ 2.99% 2.88% 2.86% 3.38%
==== ==== ==== ====
</TABLE>
* ASIS' Trustees believe that the aggregate per share operating expenses of
each Trust and the Portfolio will be less than or approximately equal to
the expenses that each Trust would incur if it retained the services of an
investment adviser and its assets were invested directly in the type of
securities held by the Portfolio.
** As a result of 12b-1 fees, a long-term shareholder in the Trusts may pay
more than the economic equivalent of the maximum sales charges permitted by
the Rules of the National Association of Securities Dealers, Inc. The
Distribution Plans for Trusts I or I-A provide for, among other things, the
payment of interest at a specified rate on the balance of unreimbursed
distribution expenses. Please see "Distribution Plans" at page 39.
*** More complete descriptions of the following expenses are set forth on the
following pages: (i) Management Fees--page 38, (ii) 12b-1 Fees--pages 39
thru 42, and (iii) Administration Fees--page 38.
**** A contingent deferred sales charge of 0.25% of the original purchase price
will be imposed on most redemptions within three months of purchase.
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5
<PAGE>
Example
Assuming a hypothetical investment of $1,000, a 5% annual return and redemption
at the end of each time period, an investor in a Trust would have paid
transaction and operating expenses at the end of each year as follows:
1 year 3 years 5 years 10 years
------ ------- ------- --------
Trust I ..... $70 $112 $157 $331
Trust I-A ... $69 $109 $152 $320
Trust II .... $58 $116 $176 $339
Trust IV .... $34 $104 $176 $367
You would pay the following expenses on the same investment assuming no
redemption.
1 year 3 years 5 years 10 years
------ ------- ------- --------
Trust I ..... $30 $92 $157 $331
Trust I-A ... $29 $89 $152 $320
This Example should not be considered as representative of past or future
expenses and actual expenses may be greater or less than those shown. The
foregoing table has not been audited by Tait, Weller & Baker, the Trusts'
independent certified public accountants.
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6
<PAGE>
Astra Adjustable U.S. Government Securities Trust I
Financial Highlights
=================================================================
(For a Share Outstanding Throughout Each Period)
The following financial highlights relating to Trust I have been audited by
Tait, Weller & Baker, independent certified public accountants, whose report
thereon appears in the Trusts' Annual Report to Shareholders for the fiscal year
ended October 31, 1996 and is incorporated by reference in this Prospectus. A
copy of the Trusts' Annual Report to Shareholders may be obtained without charge
by contacting the Trusts' Shareholder Servicing Agent at (800) 441-7267.
<TABLE>
<CAPTION>
February 21, 1991
(commencement
Year Ended October 31, of operations)
------------------------------------------------------------ to
1996 1995 1994 1993 1992 October 31, 1991
------- ------- ------- ------- ------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Per Share Operating
Performance
Net asset value, beginning
of period ..................... $ 5.580 $ 6.370 $ 7.150 $ 7.290 $ 7.370 $ 7.350
------- ------- ------- ------- ------- -------
Income (loss) from investment
operations--
Net investment income ......... 0.246 0.246(c) 0.270 0.364 0.850 0.400
Net realized and
unrealized gain (loss) on
investments .................. (0.077) (0.745)(c) (0.715) (0.055) 0.007 0.030
------- ------- ------- ------- ------- -------
Total from investment
operations ................. 0.169 (0.499) (0.445) 0.309 0.857 0.430
------- ------- ------- ------- ------- -------
Less distributions--
Distributions from net
investment income ............ 0.246 0.254 0.321 0.418 0.850 0.400
Distributions from
paid-in capital .............. 0.013 0.037 0.014 0.031 0.087 0.010
------- ------- ------- ------- ------- -------
Total distributions ......... 0.259 0.291 0.335 0.449 0.937 0.410
------- ------- ------- ------- ------- -------
Net asset value, end of
period ........................ $ 5.490 $ 5.580 $ 6.370 $ 7.150 $ 7.290 $ 7.370
======= ======= ======= ======= ======= =======
Total Return (d) ............... 3.13% (8.28)% (6.43)% 4.34% 6.55% 8.79%(a)
Ratios/Supplemental Data
Net assets, end of period
(in thousands) ................ $48,554 $94,914 $309,385 $675,810 $783,527 $385,195
Ratio to average net assets--
Expenses ...................... 2.05%(b) 1.55%(b) 1.22%(b) 1.29%(b) 1.32%(b) 1.88%(a)
Net investment income ......... 4.68% 4.28% 3.92% 4.91% 6.57% 7.43%(a)
Portfolio turnover rate ........ 7% 3% 3% 3% 8% 107%
</TABLE>
- ----------
(a) Annualized.
(b) Ratio of expenses to average net assets excludes 0.94%, 0.86%, 0.62%, 0.61%
and 0.64%(a), respectively, of expenses of the Portfolio, which reduced
dividends paid to Trust I.
(c) Based upon average shares outstanding throughout the period.
(d) Calculated without the deduction of sales charges.
Further information about Trust I's performance is contained in the Trusts'
Annual Report to Shareholders for the fiscal year ended October 31, 1996.
- ---
7
<PAGE>
Astra Adjustable U.S. Government Securities Trust I-A
Financial Highlights
=================================================================
(For a Share Outstanding Throughout Each Period)
The following financial highlights relating to Trust I-A have been audited by
Tait, Weller & Baker, independent certified public accountants, whose report
thereon appears in the Trusts' Annual Report to Shareholders for the fiscal year
ended October 31, 1996 and is incorporated by reference in this Prospectus. A
copy of the Trusts' Annual Report to Shareholders may be obtained without charge
by contacting the Trusts' Shareholder Servicing Agent at (800) 441-7267.
<TABLE>
<CAPTION>
May 19, 1992
(commencement of
Year ended October 31, operations) to
------------------------------------------------------ October 31,
1996 1995 1994 1993 1992
-------- -------- --------- ---------- -----------------
<S> <C> <C> <C> <C> <C>
Per Share Operating
Performance
Net asset value, beginning
of period .................. $ 5.600 $ 6.380 $ 7.180 $ 7.310 $ 7.340
-------- -------- --------- ---------- ---------
Income (loss) from investment
operations--
Net investment
income .................... 0.255 0.246 (e) 0.256 0.355 0.207
Net realized and
unrealized loss on
investments ............... (0.068) (0.741)(e) (0.726) (0.041) (0.004)
-------- -------- --------- ---------- ---------
Total from investment
operations .............. 0.187 (0.495) (0.470) 0.314 0.203
-------- -------- --------- ---------- ---------
Less distributions--
Distributions from net
investment income ......... 0.255 0.252 0.308 0.410 0.207
Distributions from
paid-in capital ........... 0.012 0.033 0.022 0.034 0.026
-------- -------- --------- ---------- ---------
Total distributions ...... 0.267 0.285 0.330 0.444 0.233
-------- -------- --------- ---------- ---------
Net asset value, end of
period ..................... $ 5.520 $ 5.600 $ 6.380 $ 7.180 $ 7.310
======== ======== ========= ========== =========
Total Return (f) ............ 3.45% (7.79)% (6.77)% 4.53% 6.16%(a)
Ratio/Supplemental Data
Net assets, end of period
(in thousands) ............. $36,054 $65,881 $187,510 $ 378,912 $220,256
Ratio to average net
assets--Expenses ........... 1.94%(b) 1.58%(b) 1.42%(b) 1.21%(b) 1.36%(a)(b)(c)
Net investment
income .................... 4.79% 4.27% 3.68% 4.81% 5.59%(a)(d)
Portfolio turnover rate ..... 7% 3% 3% 1% 0%
</TABLE>
- ----------
(a) Annualized.
(b) Ratio of expenses to average net assets excludes 0.94%, 0.86%, 0.62%, 0.61%
and 0.64%(a), respectively, of expenses of the Portfolio, which reduced
dividends paid to Trust I-A.
(c) Ratio of expenses to average net assets prior to expense waivers was
1.39%(a).
(d) Ratio of net investment income to average net assets prior to expense
waivers was 5.56%(a).
(e) Based upon average shares outstanding throughout the period.
(f) Calculated without the deduction of sales charges.
Further information about Trust I-A's performance is contained in the Trusts'
Annual Report to Shareholders for the fiscal year ended October 31, 1996.
- ---
8
<PAGE>
Astra Adjustable U.S. Government Securities Trust II
Financial Highlights
================================================================
(For a Share Outstanding Throughout Each Period)
The following financial highlights relating to Trust II have been audited by
Tait, Weller & Baker, independent certified public accountants, whose report
thereon appears in the Trusts' Annual Report to Shareholders for the fiscal year
ended October 31, 1996 and is incorporated by reference in this Prospectus. A
copy of the Trusts' Annual Report to Shareholders may be obtained without charge
by contacting the Trusts' Shareholder Servicing Agent at (800) 441-7267.
<TABLE>
<CAPTION>
November 27, 1991
(commencement of
Year Ended October 31, operations) to
------------------------------------------------- October 31,
1996 1995 1994 1993 1992
------- ------- -------- -------- -----------------
<S> <C> <C> <C> <C> <C>
Per Share Operating
Performance
Net asset value, beginning
of period ............... $ 5.670 $ 6.470 $ 7.240 $ 7.320 $ 7.350
------- ------- -------- -------- --------
Income (loss) from
investment operations--
Net investment income ... 0.285 0.251(e) 0.293 0.410 0.505
Net realized and
unrealized loss on
investments ............ (0.100) (0.749)(e) (0.730) (0.044) (0.033)
------- ------- -------- -------- --------
Total from investment
operations ........... 0.185 (0.498) (0.437) 0.366 0.472
------- ------- -------- -------- --------
Less distributions--
Distributions from net
investment income ...... 0.285 0.260 0.303 0.415 0.502
Distributions from
realized gains on
investments ............ -- -- -- 0.003 --
Distributions from
paid-in capital ........ -- 0.042 0.030 0.028 --
------- ------- -------- -------- --------
Total distributions ... 0.285 0.302 0.333 0.446 0.502
------- ------- -------- -------- --------
Net asset value,
end of period ........... $ 5.570 $ 5.670 $ 6.470 $ 7.240 $ 7.320
======= ======= ======== ======== ========
Total Return (f) ......... 3.38% (7.74)% (6.25)% 5.12% 7.13%(a)
Ratio/Supplemental Data
Net assets, end of period
(in thousands) .......... $3,242 $5,134 $12,359 $99,888 $88,901
Ratio to average net
assets--
Expenses ................ 1.92%(b) 1.57%(b) 0.76%(b) 0.51%(b) 0.57%(a)(b)(c)
Net investment income ... 4.80% 4.27% 4.27% 5.57%
7.09%(a)(d)
Portfolio turnover rate .. 10% 7% 12% 79% 97%
</TABLE>
- ----------
(a) Annualized.
(b) Ratio of expenses to average net assets excludes 0.94%, 0.86%, 0.62%, 0.61%
and 0.64%(a), respectively, of expenses of the Portfolio, which reduced
dividends paid to Trust II.
(c) Ratio of expenses to average net assets prior to expense waivers was
0.59%(a).
(d) Ratio of net investment income to average net assets prior to expense
waivers was 7.07%(a).
(e) Based upon average shares outstanding throughout the period.
(f) Calculated without the deduction of sales charges.
Further information about Trust II's performance is contained in the Trusts'
Annual Report to Shareholders for the fiscal year ended October 31, 1996.
- ---
9
<PAGE>
Astra Adjustable U.S. Government Securities Trust IV
Financial Highlights
================================================================
(For a Share Outstanding Throughout Each Period)
The following financial highlights relating to Trust IV have been audited by
Tait, Weller & Baker, independent certified public accountants, whose report
thereon appears in the Trusts' Annual Report to Shareholders for the fiscal year
ended October 31, 1996 and is incorporated by reference in this Prospectus. A
copy of the Trusts' Annual Report to Shareholders may be obtained without charge
by contacting the Trusts' Shareholder Servicing Agent at (800) 441-7267.
<TABLE>
<CAPTION>
May 7, 1993
(commencement of
Year Ended October 31, operations) to
------------------------------------- October 31,
1996 1995 1994 1993
------- ------- -------- -----------------
<S> <C> <C> <C> <C>
Per Share Operating Performance
Net asset value, beginning of period $ 5.640 $ 6.510 $ 7.310 $ 7.350
------- ------- -------- --------
Income (loss) from investment
operations--
Net investment income ............. 0.237 0.211(e) 0.300 0.171
Net realized and unrealized loss
on investments ................... (0.104) (0.776)(e) (0.764) (0.025)
------- ------- -------- --------
Total from investment
operations ..................... 0.133 (0.565) (0.464) 0.146
------- ------- -------- --------
Less distributions--
Distributions from net investment
income ........................... 0.237 0.218 0.302 0.172
Distributions from paid-in capital 0.016 0.087 0.034 0.014
------- ------- -------- --------
Total distributions ............. 0.253 0.305 0.336 0.186
------- ------- -------- --------
Net asset value, end of period ..... $ 5.520 $ 5.640 $ 6.510 $ 7.310
======= ======= ======== ========
Total Return (f) ................... 2.44% (8.75)% (6.57)% 4.11%(a)
Ratio/Supplemental Data
Net assets, end of period
(in thousands) .................... $1,485 $2,871 $12,565 $78,145
Ratio to average net assets--
Expenses .......................... 2.72%(b) 2.19%(b)(c) 0.85%(b)(c) 0.45%(a)(b)(c)
Net investment income ............. 3.98% 3.64% 4.23% 4.71%(a)(d)
Portfolio turnover rate ............ 7% 6% 21% 3%
</TABLE>
- ----------
(a) Annualized.
(b) Ratio of expenses to average net assets excludes 0.94%, 0.86%, 0.62% and
0.61%, respectively, of expenses of the Portfolio, which reduced dividends
paid to Trust IV.
(c) Ratio of expenses to average net assets prior to expense waivers were
2.22%, 1.06% and 0.76%(a), respectively
(d) Ratio of net investment income to average net assets prior to expense
waivers were 3.61%, 4.02% and 4.40%(a).
(e) Based upon average shares outstanding throughout the period.
(f) Calculated without the deduction of sales charges.
Further information about Trust IV's performance is contained in the Trusts'
Annual Report to Shareholders for the fiscal year ended October 31, 1996.
- ---
10
<PAGE>
How the Trusts Work
Special Information Regarding the Trusts' Structure
=============================
The investment objective of each Trust is to seek a high level of current income
consistent with low volatility of principal. Each Trust's Investment objective
is fundamental and may not be changed without shareholder approval. Each Trust
pursues its investment objective by investing all of its investable assets in
the Portfolio, which has the same investment objective as that of each Trust.
Since the investment characteristics of the Portfolio correspond to those of
each Trust, the following includes discussion of the various instruments of, and
technique, employed by the Portfolio. Any Trust may withdraw its investment in
the Portfolio at any time without shareholder approval if the Board of Trustees
of ASIS decides that it is in the best interests of any or all of the Trusts to
do so. Upon any such withdrawal, the Trustees would consider what action might
be taken, including the investment of the assets of any or all of the Trusts in
another registered investment company having the same investment objective as
the Trusts or the retention of an investment adviser to manage any or all of the
Trusts' assets in accordance with its investment objective. The investment
objective of the Trusts and the Portfolio can only be changed with shareholder
approval. Written notice shall be provided to shareholders of a Trust at least
thirty days prior to any changes in a Trust's or the Portfolio's investment
objective. If the objective of the Portfolio changes and the shareholders of a
Trust do not approve a parallel change in the Trust's investment objective, such
Trust would seek an alternative investment vehicle or directly retain its own
investment adviser. There can be, of course, no assurance that the Trusts' and
the Portfolio's objective will be achieved.
Investors should be aware that the Trusts, unlike mutual funds which directly
acquire and manage their own portfolio of securities, seek to achieve their
investment objective by investing all of their investable assets in the
Portfolio, which is a separate investment company, as previously described. The
fundamental and non fundamental investment restrictions of the Trusts are
identical to those of the Portfolio. The Trustees of ASIS believe that by
investing all of its investable assets in the Portfolio, the Trusts may be in a
position to realize directly or indirectly certain economies of scale, in that a
larger investment portfolio may achieve a lower ratio of operating expenses to
net assets. Since the Trusts will invest only in the Portfolio, the Trusts'
shareholders will acquire only an indirect interest in the investments of the
Portfolio.
In addition to selling its interests to the Trusts, the Portfolio may sell its
interests to other affiliated or non- affiliated investment companies and/or
other institutional investors. All institutional investors in the Portfolio will
pay a proportionate share of the Portfolio's expenses and will invest in the
Portfolio on the same terms and conditions. However, if another investment
company invests all of its assets in the Portfolio, it would not be required to
sell its shares at the same public offering price as the Trusts and may charge
different sales commissions. Therefore, investors in the Trusts may experience
different returns from investors in another investment company which invests
exclusively in the Portfolio. As of the date of this Prospectus, there are no
other affiliated or non-affiliated investment companies and/or institutional
investors which invest exclusively in the Portfolio which are not described in
this Prospectus.
Investors in the Trusts should be aware that the Trusts' investment in the
Portfolio may be materially affected by the actions of large investors in the
Portfolio, if any. For example, as with all open-end investment companies, if a
large investor were to redeem its interest in the Portfolio, the Portfolio's
remaining investors could experience higher pro rata operating expenses, thereby
producing lower returns. As a result, the Portfolio's security holdings may
become less diverse, resulting in increased risk. Institutional investors in the
Portfolio that have a greater pro rata ownership interest in the Portfolio than
the Trusts could have effective voting control over the operation of the
Portfolio. Certain changes in the Portfolio's fundamental objectives, policies
and restrictions could require a Trust to redeem its interest in the Portfolio.
Any such redemption could result in a distribution in kind of portfolio
securities (as opposed to a cash distribution) by the Portfolio.
- ---
11
<PAGE>
Should such a distribution occur, the Trusts could incur brokerage fees or other
transaction costs in converting such securities to cash. In addition, a
distribution in kind could result in a less diversified portfolio of investments
for the Trusts and could affect adversely the liquidity of the Trusts.
See "Management Fees", "Administrative Fees" and "Distribution Plans" for a
complete description of the management and other expenses associated with the
Trusts' investment in the Portfolio.
The Trusts' Investment Objective
=============================
The investment objective of each Trust is to seek a high level of current income
consistent with low volatility of principal. Each Trust pursues its investment
objective by investing all of its investable assets in the Portfolio which has
the same investment objective as that of each Trust. The Portfolio invests at
least 65% of its total assets in adjustable rate U.S. Government Mortgage
Securities. The Portfolio invests the remainder of its assets in Multi-Class
Residential Mortgage Securities. Multi-Class Residential Mortgage Securities are
issued or sponsored by commercial banks, savings and loan associations or other
financial institutions, have no governmental guarantee and are senior or
subordinated to other mortgage securities arising out of the same pool of
mortgages. The Portfolio expects that a substantial portion of its investment in
Multi-Class Residential Mortgage Securities will be composed of Subordinated
Residential Mortgage Securities. The mortgage securities in which the Portfolio
invests represent a participation in mortgage loans secured by property
consisting of single family, multi-family and mobile home park residential
property. The Portfolio only invests in those mortgage securities with
underlying mortgages representing first liens on the properties securing such
mortgages. There is, of course, no assurance that the Portfolio's objective will
be achieved.
Due to adverse market conditions for Adjustable Rate Mortgage Securities,
including Subordinated Residential Mortgage Securities, the Portfolio has
experienced a net reduction in the values of the securities it holds. Although
the Manager believes that under normal market conditions the Portfolio's
investment objective can be achieved, there can be no assurance that the adverse
market conditions will not continue. In addition, as the Trusts have experienced
an increase in the rate of redemptions, cash and cash equivalents have been
maintained in order to meet such redemptions, which has had the effect of
reducing yield. The Manager intends to maintain this position until such time as
the market for Adjustable Rate Mortgage Securities normalizes and to meet
redemptions.
Traditionally, the mortgage securities in which most mutual funds invested were
exclusively U.S. Government Mortgage Securities representing interests in pools
of fixed rate mortgages. The Portfolio believes that by investing primarily in
mortgage securities which have variable rates of interest, it will achieve a
more consistent and less volatile net asset value than is characteristic of
mutual funds that invest primarily in mortgage securities paying a fixed rate of
interest. Unlike fixed-rate mortgages which generally decline in value during
periods of rising interest rates, adjustable rate mortgage securities allow the
Portfolio to participate in increases in interest rates through periodic
adjustments in the coupons of the underlying mortgages, resulting in both higher
current yields and lower price fluctuations. Furthermore, if prepayments of
principal are made on the underlying mortgages during periods of rising interest
rates, the Portfolio generally is able to reinvest such amounts in securities
with a higher current rate of return. However, the Portfolio will not benefit
from increases in interest rates to the extent that interest rates rise to the
point where they cause the current coupon of adjustable rate mortgages held as
investments to exceed the maximum allowable annual or lifetime reset limits (or
"cap rates") for a particular mortgage. In this event, the value of the mortgage
securities in the Portfolio would likely decrease. Also, the Portfolio's net
asset value could vary due to market yield changes during interim periods
between coupon reset dates, which typically range from one month to five years.
Furthermore, during periods of declining interest rates, income to the Portfolio
derived from ARMS will decrease in contrast to the income on fixed rate
mortgages which will remain constant. In
- ---
12
<PAGE>
addition, ARMS have less potential for appreciation in value when interest rates
decline than do fixed rate investments which tend to increase in value as
interest rates decline. See "U.S. Government Mortgage Securities,"
"Characteristics of the Adjustable Rate Mortgage Securities in which the
Portfolio Invests" and "Illiquid Securities."
Multi-Class Residential Mortgage Securities may constitute up to 35% of the
Portfolio's assets. Unlike U.S. Government Mortgage Securities, the payment of
principal and interest on Multi-Class Residential Mortgage Securities is not
guaranteed by the U.S. Government or any of its agencies or instrumentalities.
Accordingly, yields on Multi-Class Residential Mortgage Securities have been
historically higher than the yields on U.S. Government Mortgage Securities.
However, the risk of loss due to default on such instruments is higher since
they are not guaranteed by the U.S. Government.
The Portfolio expects that a substantial portion of its assets invested in
Multi-Class Residential Mortgage Securities will be composed of Subordinated
Residential Mortgage Securities. Subordinated Residential Mortgage Securities
are subordinated in some manner as to the payment of principal and/or interest
to the holders of more senior mortgage securities. Accordingly, losses on the
underlying mortgage loans are generally borne by the holders of Subordinated
Residential Mortgage Securities before they are borne by the holders of more
senior mortgage securities arising out of the same pool. The holders of
Subordinated Residential Mortgage Securities are therefore compensated with a
higher stated yield than are the holders of more senior Multi-Class Residential
Mortgage Securities. The return on Subordinated Residential Mortgage Securities
is decreased by any loss incurred pursuant to the terms of the Subordinated
Residential Mortgage Security.
A Multi-Class Residential Mortgage Security that is senior to a Subordinated
Residential Mortgage Security will not bear a loss resulting from the occurrence
of a default on an underlying mortgage until all credit enhancement protecting
such senior holder is exhausted. For example, the senior holder will only suffer
a credit loss after any subordinated interests have been exhausted pursuant to
the terms of the Subordinated Residential Mortgage Security. See "Multi-Class
Residential Mortgage Securities." The primary credit risk to the Portfolio by
investing in Subordinated Residential Mortgage Securities is potential losses
resulting from defaults by the borrowers under the underlying mortgages. The
Portfolio would generally realize such a loss in connection with a Subordinated
Residential Mortgage Security only if the subsequent foreclosure sale of the
property securing a mortgage loan does not produce an amount at least equal to
the sum of the unpaid principal balance of the loan as of the date the borrower
went into default, the interest that was not paid during the foreclosure period
and all foreclosure expenses. The senior Multi-Class Residential Mortgage
Securities in which the Portfolio invests are rated at least "A" by Standard &
Poor's Ratings Group or Moody's Investors Service. The Subordinated Residential
Mortgage Securities in which the Portfolio invests are generally unrated and the
Manager is not in the business of determining credit ratings. However, the
Manager believes that the Subordinated Residential Mortgage Securities in which
the Portfolio invests generally present credit risks similar to that of
corporate debt securities rated "BBB" or "Baa" by Standard and Poor's Ratings
Group or Moody's Investors Service, respectively, although it notes that certain
recently rated "BBB" mortgage securities have a first loss protection somewhat
greater and a yield somewhat lower than the Subordinated Residential Mortgage
Securities in which the Portfolio typically invests.
Debt rated "BBB" by Standard and Poor's Ratings Group is regarded as having
adequate capacity to pay interest and repay principal. Whereas it normally
exhibits adequate protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay interest and
repay principal for debt in this category than for debt in higher-rated
categories. Debt rated "Baa" by Moody's Investors Service is considered a medium
grade obligation; i.e., it is neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain
- ---
13
<PAGE>
protective elements may be lacking or may be characteristically unreliable over
any great length of time. Such debt lacks outstanding investment characteristics
and in fact has speculative characteristics as well.
The Manager seeks to limit the risks presented by Subordinated Residential
Mortgage Securities by reviewing and analyzing the characteristics of the
mortgage loans that underlie the pool of mortgages securing both the senior and
Subordinated Residential Mortgage Securities. The Manager has developed a set of
guidelines to assist in the analysis of the mortgage loans underlying
Subordinated Residential Mortgage Securities. Each pool purchase is reviewed
against the guidelines. The Portfolio seeks opportunities to acquire
Subordinated Residential Mortgage Securities where, in the view of the Manager,
the potential for a higher yield on such instruments outweighs any additional
risk presented by the instruments. The Manager seeks to increase yield to
shareholders by taking advantage of perceived inefficiencies in the market for
Subordinated Residential Mortgage Securities.
Each Trust is registered as a "non-diversified" series of ASIS, an open-end
management investment company and the Portfolio is registered as a
"non-diversified" series of AIST, an open-end management investment company.
Nevertheless, in accordance with requirements of Subchapter M of the Internal
Revenue Code of 1986, as amended, each Trust and the Portfolio may not purchase
the securities of any one issuer if, as a result of such purchase, more than 5%
of a Trust's or the Portfolio's total assets would be invested in the securities
of such issuer at the end of any fiscal quarter, except that with respect to 50%
of any of the Trusts' or the Portfolio's total assets, a Trust or the Portfolio
may invest up to 25% of its total assets in the securities of any one issuer.
Securities of the U.S. Government and securities of other regulated investment
companies are not subject to any investment limitations. Since the Portfolio may
invest a relatively high percentage of its assets in the obligations of a
limited number of issuers, the value of the Portfolio's investments will be more
affected by any single adverse economic, political or regulatory occurrence than
will a diversified investment company.
The Portfolio intends to concentrate its investments in the asset-backed
securities industry. This means that at least 25% of the Portfolio's investments
will be in companies which issue asset-backed securities, such as Multi-Class
Residential Mortgage Securities and residential mortgage loan pools. However,
due to adverse economic conditions or for defensive purposes, the Portfolio may
temporarily have less than 25% of the total value of its assets in that
industry. The Portfolio will follow this policy at all times because it is
fundamental and may not be changed without a majority vote of the Portfolio's
shares. The Portfolio may from time to time borrow money for the purpose of
acquiring additional portfolio investments. Borrowings and the issuance of
indebtedness create an opportunity to be more fully invested and to earn greater
income per share. Any such borrowing or issuance is a speculative technique in
that it will increase the Portfolio's exposure to capital risk. See "Borrowing."
U.S. GOVERNMENT MORTGAGE SECURITIES
The largest issuers or guarantors of mortgage securities today are the
Government National Mortgage Association ("GNMA"), the Federal National Mortgage
Association ("FNMA"), and the Federal Home Loan Mortgage Corporation ("FHLMC").
GNMA creates mortgage securities from pools of U.S. Government-guaranteed or
insured (Federal Housing Authority or Veterans Administration) mortgages
originated by mortgage bankers, commercial banks, and savings and loan
associations. FNMA and FHLMC issue mortgage securities from pools of
conventional and federally-insured and/or guaranteed residential mortgages
obtained from various entities, including savings and loan associations, savings
banks, commercial banks, credit unions, and mortgage bankers.
The mortgage securities either issued or guaranteed by GNMA, FHLMC, or FNMA
("Certificates") are called pass-through Certificates because a pro rata share
of both regular interest and principal payments (less GNMA, FHLMC, or FNMA fees
and any applicable loan servicing fees), as well as unscheduled early
- ---
14
<PAGE>
prepayments on the underlying mortgage pool are passed through monthly to the
holder of the Certificate (i.e., the Portfolio). The principal and interest on
GNMA securities are guaranteed by GNMA and backed by the full faith and credit
of the U.S. Government. FNMA guarantees full and timely payment of all interest
and principal, while FHLMC guarantees timely payment of interest and ultimate
collection of principal. Mortgage securities from FNMA and FHLMC are not backed
by the full faith and credit of the U.S. Government; however, their close
relationship with the U.S. Government makes them high quality securities with
minimal credit risks. The yields provided by these mortgage securities have
historically exceeded the yields on other types of U.S. Government Mortgage
Securities with comparable maturities. The Portfolio intends to invest in U.S.
Government Mortgage Securities which are ARMS (see "Characteristics of the
Adjustable Rate Mortgage Securities in Which the Portfolio Invests").
MULTI-CLASS RESIDENTIAL MORTGAGE SECURITIES
Multi-Class Residential Mortgage Securities are securities representing
interests in pools of mortgage loans to residential home buyers made by lenders
such as commercial banks, savings and loan associations and mortgage bankers.
Unlike U.S. Government Mortgage Securities, such as those issued by GNMA, the
payment of principal and interest on Multi-Class Residential Mortgage Securities
is not guaranteed by the U.S. Government or any of its agencies or
instrumentalities. The yields on Multi-Class Residential Mortgage Securities,
however, have been historically higher than the yields on U.S. Government
Mortgage Securities. The Multi-Class Residential Mortgage Securities in which
the Portfolio invests may be ARMS.
Multi-Class Residential Mortgage Securities are issued with one or more classes
subordinate in a specified manner as to the payment of principal and interest.
As a result, losses on the underlying mortgage loans are borne by the holders of
the Subordinated Residential Mortgage Securities before the holders of more
senior mortgage securities. Accordingly, the stated yield of Subordinated
Residential Mortgage Securities is greater than that of more senior Multi-Class
Residential Mortgage Securities arising out of the same pool. The return on
Subordinated Residential Mortgage Securities is, in turn, decreased by any
realized losses incurred pursuant to the terms of the Subordinated Residential
Mortgage Security. While the Portfolio invests in both senior Multi-Class
Residential Mortgage Securities and Subordinated Residential Mortgage
Securities, the Portfolio expects that at least a substantial portion of its
investment in Multi-Class Residential Mortgage Securities will be composed of
Subordinated Residential Mortgage Securities.
Multi-Class Residential Mortgage Securities represent a beneficial interest in a
pool of mortgage loans typically held by a trust. The beneficial interests are
evidenced by certificates issued pursuant to a pooling and servicing agreement.
The certificates are usually issued in multiple classes with the specific rights
of each class set forth in the pooling and servicing agreement and the offering
documents for the security. The pooling and servicing agreement is entered into
by a trustee and a party who is responsible for pooling and conveying the
mortgage assets to the trust, sometimes referred to as the depositor. Various
administrative services related to the underlying mortgage loans, such as
collection and remittance of principal and interest payments, administration of
mortgage escrow accounts and collection of insurance claims are provided by
servicers. A master servicer, who may be the depositor or an affiliate of the
depositor, is generally responsible for supervising and enforcing the
performance by the servicers of their duties and maintaining the insurance
coverages required by the terms of the certificates. In some cases, the master
servicer acts as a servicer of all or a portion of the mortgage loans. (See the
Statement of Additional Information for further discussion of these matters.)
A type of Subordinated Residential Mortgage Security is sometimes called a
"Special Hazard Certificate." With these securities, a holder bears some or all
losses resulting from special hazard losses to the property securing the
mortgages underlying the other class or classes of Multi-Class Residential
Mortgage Securities arising out of the same pool of mortgages. Special hazard
risks may include damage to mortgage properties caused by earthquakes,
landslides, vandalism, or other risks not covered by other requisite insurance
policies.
- ---
15
<PAGE>
The Portfolio seeks to limit the risks presented by Subordinated Residential
Mortgage Securities by reviewing and analyzing the characteristics of the
mortgage loans underlying the Subordinated Residential Mortgage Securities that
it acquires. The Portfolio invests in Subordinated Residential Mortgage
Securities when, in the judgment of the Manager, the difference in stated yield
on Subordinated Residential Mortgage Securities over that of the Senior Mortgage
Securities exceeds the marginal risk assumed by the holders of the Subordinated
Residential Mortgage Securities. See "Risks of Subordinated Residential Mortgage
Securities."
The Portfolio seeks to purchase Multi-Class Residential Mortgage Securities with
underlying mortgage loans secured by property located in geographic regions that
present favorable economic conditions. In this regard, the Manager considers and
analyzes residential housing trends, employment information, demographic data
and other information it deems relevant in evaluating a geographic region. The
Manager also considers principal prepayment histories of borrowers of mortgages
secured by residential property located in the region.
The Portfolio may invest in Multi-Class Residential Mortgage Securities that
represent an interest in mortgage pass-through securities.
CHARACTERISTICS OF THE ADJUSTABLE RATE
MORTGAGE SECURITIES IN WHICH THE PORTFOLIO INVESTS
General. ARMS are pass-through mortgage securities which are collateralized by
mortgages with adjustable rather than fixed interest rates. Mortgages which
collateralize ARMS have become an increasingly important form of residential
financing. Generally, ARMS are collateralized by mortgages that have a specified
maturity date and which amortize principal much in the fashion of a fixed rate
mortgage. As a result, in periods of declining interest rates there is a
reasonable likelihood that ARMS will behave like fixed rate mortgages in that
current levels of prepayments of principal on the underlying mortgages could
accelerate. Furthermore, during periods of declining interest rates, income to
the Portfolio derived from ARMS will decrease in contrast to the income on fixed
rate mortgages which will remain constant. In addition, ARMS also have less
potential for appreciation in value when interest rates decline than do fixed
rate investments which tend to increase in value as interest rates decline.
However, one difference between mortgages which collateralize ARMS and fixed
rate mortgages is that for certain types of ARMS, the rate of amortization of
principal, as well as interest payments, can and does change in accordance with
movements in a particular, prespecified, published interest rate index. The
amount of interest due to an ARMS' security holder is calculated by adding a
specified additional amount, the "margin," to the index, subject to limitations
or "caps" on the maximum and minimum interest rate that is charged to the
mortgagor during the life of the mortgage or to maximum and minimum changes to
that interest rate during a given period. It is these special characteristics
which are unique to adjustable rate mortgages that the Portfolio's Manager
believes make them attractive investments in seeking to accomplish the
Portfolio's objective.
The market value of ARMS, like other U.S. Government securities, will generally
vary inversely with changes in market interest rates, declining when interest
rates rise and rising when interest rates decline. However, ARMS, while having
less risk of a decline during periods of rapidly rising rates, may also have
less potential for capital appreciation than other investments of comparable
maturities due to the likelihood of increased prepayments of mortgages as
interest rates decline. In addition, to the extent ARMS are purchased at a
premium, mortgage foreclosures and unscheduled principal prepayments may result
in some loss of the holders' principal investment to the extent of the premium
paid. On the other hand, if ARMS are purchased at a discount, both a scheduled
payment of principal and an unscheduled prepayment of principal will increase
current and total returns and will accelerate the recognition of income which
when distributed to shareholders will be taxable as ordinary income.
The adjustable interest rate feature of the underlying mortgages generally will
act as a buffer to reduce sharp changes in the Portfolio's net asset value in
response to normal interest rate fluctuations. As the interest rates
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16
<PAGE>
on the mortgages underlying the Portfolio's investments are reset periodically,
yields of portfolio securities will gradually align themselves to reflect
changes in market rates and should cause the net asset value of the Portfolio to
fluctuate less dramatically than it would if the Portfolio invested in more
traditional long-term, fixed-rate debt securities. However, during periods of
rising interest rates, changes in the coupon rate lag behind changes in the
market rate possibly resulting in a slightly lower net asset value until the
coupon resets to market rates, which could take as long as one month to five
years. Thus, investors could suffer some principal loss if they sold their
shares of a Trust before the interest rates on the underlying mortgages held by
the Portfolio are adjusted to reflect current market rates. During periods of
extreme fluctuations in interest rates, the Portfolio's net asset value will
fluctuate as well. Since most mortgage securities in the Portfolio's portfolio
will generally have annual reset caps of 100 to 200 basis points, fluctuation in
interest rates above these levels could cause such mortgage securities to "cap
out" and to behave more like long-term fixed-rate debt securities and
consequently to decrease in value.
Historically, ARMS have had a higher default rate than fixed rate mortgages.
Recently, however, most ARMS originators have changed their underwriting
procedures to ensure that applicants qualify for their mortgage amounts based on
the "fully indexed" interest rate of the mortgage. In the past, many originators
would qualify applicants based on the initial interest rate of the mortgage
(commonly called a "teaser rate") which in most instances was substantially
lower than the "fully indexed" interest rate. This procedure resulted in higher
default and delinquency rates for ARMS than for fixed rate mortgages once the
mortgages adjusted up to the "fully indexed" interest rate. The Manager believes
that the curtailment of this practice by most originators will, over time, lead
to a substantial narrowing in the default rates between fixed and adjustable
rate mortgages.
Caps and Floors. The underlying mortgages which collateralize the ARMS in which
the Portfolio invests will frequently have caps and floors which limit the
maximum amount by which the loan rate to the residential borrower may change up
or down (1) per reset or adjustment interval and (2) over the life of the loan.
Some residential mortgage loans restrict periodic adjustments by limiting
changes in the borrower's monthly principal and interest payments rather than
limiting interest rate changes. These payment caps may result in negative
amortization. Negative amortization occurs when a loan payment does not keep
pace with interest rates and is less than the interest due for the time period
covered by such payment. The result is that the amount of the deficiency is
added to the unpaid principal balance on the loan, increasing the outstanding
amount of the loan notwithstanding the fact that the amount due has been paid.
Resets. The interest rates paid on the ARMS in which the Portfolio invests
generally are readjusted at intervals of one year or less to an increment over
some predetermined interest rate index. There are two main categories of
indices: those based on U.S. Treasury securities and those derived from a
calculated measure such as a cost of funds index. Commonly utilized indices
include the one-year, three-year and five-year constant maturity Treasury rates,
the three-month Treasury Bill rate, the 180-day Treasury Bill rate, rates on
longer-term Treasury securities, the 11th District Federal Home Loan Bank Cost
of Funds, the National Median Cost of Funds, the one-month, three-month,
six-month or one-year London Interbank Offered Rate (LIBOR), the prime rate of a
specific bank, or commercial paper rates. Some indices such as the one-year
constant maturity Treasury rate, closely mirror changes in market interest rate
levels. Others, such as the 11th District Home Loan Bank Cost of Funds index,
tend to lag behind changes in market rate levels and tend to be somewhat less
volatile.
COLLATERALIZED MORTGAGE OBLIGATIONS
The Portfolio may invest in collateralized mortgage obligations ("CMOs").
Collateralized mortgage obligations are debt obligations collateralized either
by mortgage loans or mortgage pass-through securities (such collateral
collectively being called "Mortgage Assets.") Payments of principal and interest
on the
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Mortgage Assets and any reinvestment income thereon provide the funds to pay
debt service on the CMOs. CMOs may be issued by the U.S. Government, its
agencies or instrumentalities or by private originators of or investors in
mortgage loans, including savings and loan associations, mortgage bankers,
commercial banks, investment bankers and special purpose subsidiaries of such
entities. Typically, CMOs are collateralized by GNMA certificates or other
government mortgage-backed securities, but they may also be collateralized by
whole loans or private mortgage pass-through securities. CMOs purchased by the
Portfolio will be, at the time of purchase, rated at least A by either Standard
& Poor's Corporation or Moody's Investors Service, or, if unrated, such
instruments will be, in the opinion of the Manager, of comparable quality to
such securities.
In a CMO, a series of bonds or certificates is issued in multiple classes. Each
class of CMOs, also referred to as a "tranche," is issued at a specific fixed or
floating coupon rate and has a stated maturity or final distribution date.
Principal prepayments on the Mortgage Assets may cause the CMOs to be retired
substantially earlier than their stated maturities or final distribution dates.
Interest is paid or accrues on all classes of the CMOs (other than any
"principal-only" class) on a monthly, quarterly or semi-annual basis. The
principal and interest on the Mortgage Assets may be allocated among the several
classes of a CMO in many ways. In a common structure, payments of principal
(including any prepayments) on the Mortgage Assets are applied to the classes of
the series of a CMO in the order of their respective stated maturities or final
distribution dates, so that no payment of principal will be made on any class of
CMO until all other classes having an earlier stated maturity or final
distribution date have been paid in full.
STRIPPED MORTGAGE-BACKED SECURITIES
The Portfolio may invest in stripped mortgage-backed securities ("SMBS").
Stripped mortgage-backed securities are derivative multi-class mortgage
securities and may be issued by agencies or instrumentalities of the U.S.
Government or by private originators of or investors in mortgage loans,
including savings and loan associations, mortgage bankers, commercial banks,
investment bankers and special purpose subsidiaries of the foregoing.
SMBS are usually structured with two classes that receive different proportions
of the interest and/or principal distributions on a pool of Mortgage Assets. A
common type of SMBS will have one class receiving some of the interest and most
of the principal from the Mortgage Assets, while the other class will receive
most of the interest and the remainder of the principal. In the most extreme
case, one class will receive all of the interest (the interest-only or "IO"
class), while the other class will receive all of the principal (the principal-
only or "PO" class). The yields to maturity on both PO and IO classes are
extremely sensitive to the rate of principal payments (including prepayments) on
the related underlying Mortgage Assets. If the underlying Mortgage Assets of an
IO class of SMBS experience greater than anticipated prepayments of principal,
an investor may fail to recoup fully its initial investment in these securities
even if the securities are rated in the highest rating category. SMBS experience
greater volatility in market value than mortgage securities in general. SMBS
purchased by the Portfolio will be, at the time of purchase, rated at least A by
either Standard & Poor's Ratings Group or Moody's Investors Service, or, if
unrated, such instruments will be, in the opinion of the Manager, of comparable
quality to such securities.
The staff of the Securities and Exchange Commission (the "SEC") (the "Staff")
takes the position that SMBS issued by the U.S. Government or its agencies or
instrumentalities which are backed by fixed-rate mortgages may be considered
liquid securities as determined under guidelines and standards established by
the Board of Trustees. The Staff considers SMBS not issued by the U.S.
Government or its agencies or instrumentalities and SMBS not backed by fixed
rate mortgages as illiquid securities. The Portfolio will treat these
instruments as illiquid when testing its portfolio for compliance with the 15%
limitation on illiquid investments. See "Illiquid Securities".
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RISKS OF MORTGAGE SECURITIES
The yield characteristics of the mortgage securities differ from those of
traditional debt securities. Among the major differences are that interest and
principal payments are made more frequently on mortgage securities, usually
monthly, and that principal may be prepaid at any time because the underlying
mortgage loans or other assets generally may be prepaid at any time. As a
result, if the Portfolio purchases these securities at a premium, a prepayment
rate that is faster than expected will reduce yield to maturity, while a
prepayment rate that is slower than expected will have the opposite effect of
increasing yield to maturity. Conversely, if the Portfolio purchases these
securities at a discount, faster than expected prepayments will increase, while
slower than expected prepayments will reduce, yield to maturity. Amounts
available for reinvestment are likely to be greater during a period of declining
interest rates and, as a result, are likely to be reinvested at lower interest
rates than during a period of rising interest rates. Accelerated prepayments on
securities purchased by the Portfolio at a premium also impose a risk of loss of
principal because the premium may not have been fully amortized at the time the
principal is repaid in full.
The mortgage securities in which the Portfolio invests differ from conventional
bonds in that principal is paid back over the life of the mortgage securities
rather than at maturity. As a result, the holder of the mortgage securities
(i.e., the Portfolio) receives monthly scheduled payments of principal and
interest, and may receive unscheduled principal payments representing
prepayments on the underlying mortgages. When the holder reinvests the payments
and any unscheduled prepayments of principal it receives, it may receive a rate
of interest which is lower than the rate on the existing mortgage securities.
For this reason, mortgage securities are less effective than other types of U.S.
Government securities as a means of "locking in" long-term interest rates. See
"Illiquid Securities."
RISKS OF SUBORDINATED RESIDENTIAL MORTGAGE SECURITIES
Subordinated Residential Mortgage Securities generally are likely to be more
sensitive to changes in prepayment and interest rates and the market for such
securities may be less liquid than is the case for traditional debt securities
and mortgage securities. In addition, while Subordinated Residential Mortgage
Securities have a higher stated yield than traditional mortgage securities,
holders of Subordinated Residential Mortgage Securities bear a greater risk of
loss than do holders of senior or more traditional mortgage obligations. Such
holders bear all or a portion of losses arising from the mortgage pool prior to
senior holders bearing any such losses. The primary credit risk arising from a
holder's subordination is the potential loss caused by a default on the part of
the borrower of the mortgages securing the instrument. This risk is usually
greater during a period of declining or stagnant real estate values. There may
be certain costs and delays associated with foreclosure. There is no assurance
that the subsequent sale of the property will produce an amount equal to the sum
of the unpaid principal balance of the loan as of the date the borrower went
into default, the interest that was not paid during the foreclosure period and
all foreclosure expenses, in which case the Portfolio may, depending on the
nature of its subordination, suffer a loss equal to the difference between this
amount and the liquidation proceeds. A Subordinated Residential Mortgage
Security may provide that a holder bears a portion or all of the risk of such
losses resulting from (i) the decrease in value of the property caused by
special hazard risks and/or (ii) all other losses resulting from the default by
a borrower. Accordingly, distributions on Subordinated Residential Mortgage
Securities may be reduced by realized losses.
The Portfolio, however, seeks to limit the risks presented by such instruments
by reviewing and analyzing the characteristics of the mortgage loans underlying
the Subordinated Residential Mortgage Securities that it acquires and evaluating
the likelihood of losses occurring. The Portfolio seeks opportunities to acquire
Subordinated Residential Mortgage Securities where in the view of the Manager,
the potential for a higher marginal yield on such instruments outweighs the
additional risk presented by such instrument. In addition,
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the Manager seeks to increase yield to shareholders by taking advantage of
perceived inefficiencies in the market for Subordinated Residential Mortgage
Securities. See "Illiquid Securities."
OTHER INVESTMENT POLICIES
Interest Rate Swaps and Hedging Transactions. The Portfolio may enter into
various hedging transactions, such as engaging in interest rate swaps and
interest rate futures transactions and purchasing and selling interest rate
collars, caps and floors to protect against and potentially benefit from
fluctuations in interest rates and to preserve a return or spread on a
particular investment or portion of its portfolio. Hedging transactions may also
be used to attempt to protect against possible declines in the market value of
the Portfolio's assets resulting from downward trends in the debt securities
markets (generally due to a rise in interest rates), to protect the Portfolio's
unrealized gains in the value of its portfolio securities, to facilitate the
sale of such securities or to establish a position in the securities markets as
a temporary substitute for purchasing particular securities. Any or all of these
techniques may be used at any time. There is no particular strategy that
requires use of one technique rather than another. Use of any hedging
transaction is a function of market conditions. Further hedging transactions may
be used by the Portfolio in the future as they are developed or deemed by the
Board of Trustees of AIST to be appropriate, and to be in the best interest of
investors in the Portfolio. The Portfolio intends to use these transactions as a
hedge against interest rate fluctuations and not as speculative investments. The
Portfolio reserves the right, but has no current intention, to engage in options
and futures transactions other than futures transactions on interest rates.
Interest rate swaps involve the exchange with another party of commitments to
pay or receive interest, e.g., an exchange of fixed rate payments for variable
rate payments. The purchase of an interest rate cap entitles the purchaser, to
the extent that a specified index exceeds a predetermined interest rate, to
receive payments of interest on a notional principal amount from the party
selling such interest rate cap. The purchase of an interest rate floor entitles
the purchaser, to the extent that a specified index falls below a predetermined
interest rate, to receive payments of interest on a notional principal amount
from the party selling such interest rate floor. An interest rate collar
combines the elements of purchasing a cap and selling a floor. The collar
protects against an interest rate rise above the maximum amount but gives up the
benefits of an interest rate decline below the minimum amount. The Portfolio
will not enter into swaps, caps, collars or floors if, on a net basis, the
aggregate notional principal amount with respect to such agreements exceeds the
net assets of the Portfolio.
An interest rate futures contract provides for the future sale and purchase of a
specified amount of a certain debt security at a stated date, place and price.
The Portfolio may enter into interest rate futures contracts to protect against
fluctuations in interest rates effecting the value of debt securities that the
Portfolio either holds or intends to acquire. The Portfolio will only enter into
futures transactions on a national exchange. The Portfolio's use of such
instruments will in all cases be consistent with the applicable regulatory
requirements and, in particular, the rules and regulations of the Commodity
Futures Trading Commission with which the Portfolio must comply in order to
avoid registration as a commodity pool operator under the Commodity Exchange Act
and any applicable state law.
Inasmuch as these hedging transactions are entered into for good-faith risk
management purposes, AMC and the Portfolio believe such obligations do not
constitute senior securities. The Staff of the SEC is presently considering its
position with respect to swaps, caps, collars and floors as senior securities.
Pending a determination by the Staff, the Portfolio will either treat caps,
collars and floors as being subject to its senior securities restrictions or
will refrain from engaging in caps, collars and floors. Once the Staff has
expressed a position with respect to swaps, caps, collars and floors, the
Portfolio intends to engage in swaps, caps, collars and floors, if at all, in a
manner consistent with such position. The Portfolio will not treat swaps covered
in accordance with applicable regulatory requirements as senior securities. The
Portfolio will usually enter into
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interest rate swaps on a net basis, i.e., where the two parties make net
payments with the Portfolio receiving or paying, as the case may be, only the
net amount of the two payments. The net amount of the excess, if any, of the
Portfolio's obligations over its entitlement with respect to each interest rate
swap will be accrued and an amount of cash, U.S. Government Securities or other
liquid debt obligations having an aggregate net asset value at least equal to
the accrued excess will be maintained by the Portfolio's custodian in a
segregated account. If the Portfolio enters into a swap on other than a net
basis, the Portfolio will maintain in the segregated account the full amount of
the Portfolio's obligations under each such swap. The Portfolio may enter into
swaps, caps, collars and floors with member banks of the Federal Reserve System,
members of the New York Stock Exchange or other entities determined by AMC,
pursuant to procedures adopted and reviewed on an ongoing basis by the Board of
Trustees, to be credit worthy. If a default occurs by the other party to such
transaction, the Portfolio will have contractual remedies pursuant to the
agreements related to the transaction but such remedies may be subject to
bankruptcy and insolvency laws which could affect the Portfolio's rights as a
creditor.
The swap market has grown substantially in recent years with a large number of
banks and financial services firms acting both as principals and as agents
utilizing standardized swap documentation. As a result, the swap market has
become relatively liquid. Caps, collars and floors are more recent innovations
and they are less liquid than swaps. There can be no assurance, however, that
the Portfolio will be able to enter into interest rate swaps or to purchase
interest rate caps, collars or floors at prices or on terms AMC believes are
advantageous to the Portfolio. In addition, although the terms of interest rate
swaps, caps, collars and floors may provide for termination, there can be no
assurance that the Portfolio will be able to terminate an interest rate swap or
to sell or offset interest rate caps, collars or floors that it has purchased.
Interest rate swaps, caps, collars and floors are considered by the Staff to be
illiquid securities and, therefore, the Portfolio may not invest more than 15%
of its assets in such instruments. See "llliquid Securities."
The successful utilization of hedging and risk management transactions requires
skills different from those needed in the selection of the Portfolio's portfolio
securities and depends on AMC's ability to predict correctly the direction and
degree of movements in interest rates. Although the Portfolio believes that use
of the hedging and risk management techniques described above will benefit the
Portfolio, if AMC's judgment about the direction or extent of the movement in
interest rates is incorrect, the Portfolio's overall performance would be worse
than if it had not entered into any such transactions. For example, if the
Portfolio had purchased an interest rate swap or an interest rate floor to hedge
against its expectation that interest rates would decline but instead interest
rates rose, the Portfolio would lose part or all of the benefit of the increased
payments it would receive as a result of the rising interest rates because it
would have to pay amounts to its counterparts under the swap agreement or would
have paid the purchase price of the interest rate floor. The Portfolio believes
that AMC possesses the skills necessary for the successful utilization of
hedging and risk management transactions.
Other risks associated with the use of futures contracts are: (i) imperfect
correlation between the change in the market value of the underlying commodity
and the prices of futures contracts and options with the result that futures and
options may fail as hedging techniques in cases where the price movements of the
securities underlying the futures and options do not follow the price movements
of the Portfolio's portfolio securities subject to a hedge; and (ii) possible
lack of a liquid secondary market for a futures position when liquidation of
that position is desired with the result that the Portfolio will likely be
unable to control losses by closing its position where a liquid secondary market
does not exist. In addition, because of the margin deposits normally required in
futures trading, a high degree of leverage is typical of a futures trading
account. As a result, a relatively small price movement in a futures contract
may result in substantial losses to the trader (i.e., the Portfolio).
Furthermore, many futures exchanges and boards of trade limit the amount of
fluctuations permitted in futures contract prices during a single trading day.
Futures contract prices could move to the limit
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for several consecutive trading days with little or no trading, thereby
preventing prompt liquidation of futures positions and potentially subjecting
the Portfolio to substantial losses.
New financial products continue to be developed and the Portfolio may invest in
any such products to the extent consistent with its investment objective and the
regulatory and federal tax requirements applicable to investment companies.
When-Issued and Forward Commitment Securities. The Portfolio may purchase
securities on a when- issued basis and may purchase or sell securities on a
forward commitment basis in order to hedge against anticipated changes in
interest rates and prices and/or secure a favorable rate of return. When such
transactions are negotiated, the price is fixed at the time the commitment is
made, but delivery and payment for the securities take place at a later date
which may be a month or more after the date of the transaction. At the time the
Portfolio makes the commitment to purchase securities on a when-issued or
forward commitment basis, it will record the transaction and thereafter reflect
the value of such securities in determining its net asset value. At the time the
Portfolio enters into a transaction on a when-issued or forward commitment
basis, a segregated account consisting of cash, U.S. Government securities or
other liquid debt obligations equal to the value of the when-issued or forward
commitment securities will be established and maintained with the custodian and
will be marked to market daily. When-issued securities and forward commitments
may be sold prior to the settlement date. If the Portfolio disposes of the right
to acquire a when-issued security prior to its acquisition or disposes of its
right to deliver or receive against a forward commitment, it may experience a
gain or loss due to market fluctuation. On the delivery date, the Portfolio will
meet its obligations from securities that are then maturing or sales of the
securities held in the segregated asset account and/or from then available cash
flow. There is always a risk that the securities may not be delivered and that
the Portfolio may incur a loss or will have lost the opportunity to otherwise
invest the amount set aside for such transaction in the segregated asset
account. Settlements in the ordinary course of business, which may take
substantially more than five business days for mortgage-related securities, are
not treated by the Portfolio as when-issued or forward commitment transactions
and accordingly are not subject to the foregoing limitations even though some of
the risks described above may be present in such transactions. Securities
purchased on a when-issued, delayed delivery or forward commitment basis do not
generally earn interest until their scheduled delivery date. The Portfolio is
not subject to any percentage limit on the amount of its assets which may be
invested in when-issued purchase obligations.
Borrowing. The Portfolio may from time to time borrow money for the purpose of
acquiring additional portfolio investments when it believes that the interest
payments and other costs with respect to such borrowings or indebtedness will be
exceeded by the anticipated total return (a combination of income and
appreciation) on such investments. The amount of any such borrowing or issuance
will depend upon market or economic conditions existing at that time. The
Portfolio may also borrow in order to assure that it remains fully invested by
using borrowed cash to purchase portfolio investments with the intent of
repaying the borrowings from the proceeds of expected sales of Portfolio shares.
The Portfolio may borrow money from banks on a secured or unsecured basis at
variable or fixed rates. However, as prescribed by the Investment Company Act of
1940, as amended (the "1940 Act") the Portfolio will be required to maintain
specified asset coverage of at least 300% with respect to any such bank
borrowing immediately following any such borrowing or issuance. If at any time
asset coverage falls below 300%, the Portfolio must, within three days (not
including Sundays and holidays) reduce the amount of its borrowings until it has
300% coverage. The Portfolio may be required to dispose of portfolio investments
on unfavorable terms if market fluctuations or other factors reduce the required
asset coverage to less than the prescribed amount.
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In addition, the Portfolio may on a temporary basis issue a note or other
evidence of indebtedness representing up to 5% of its assets at the time the
loan is made. Such a borrowing must be privately arranged and not intended to be
publicly distributed and is presumed to be for temporary purposes if it is
repaid within 60 days.
While, as stated above, the Portfolio will borrow money for the purpose of
acquiring additional portfolio investments only when it believes that such
borrowing will produce additional income to the Portfolio, the interest cost on
the capital raised through leverage may exceed the interest on the assets
purchased. The Portfolio may also be required to maintain minimum average
balances in connection with borrowings or to pay a commitment or other fee to
maintain a line of credit; either of these requirements will increase the cost
of borrowing over the stated interest rate. Borrowings and the issuance of
indebtedness create an opportunity to be more fully invested and to earn greater
income per share. However, any such borrowing or issuance is a speculative
technique in that it will increase the Portfolio's exposure to capital risk.
Such risks may be mitigated through the use of borrowings and issuances of
indebtedness that have floating rates of interest. Unless the income and
appreciation, if any, on assets acquired with borrowed funds or offering
proceeds exceeds the cost of borrowing or issuing debt, the use of leverage will
diminish the investment performance of the Portfolio compared with what it would
have been without leverage.
The Portfolio will not always borrow money or issue debt to finance additional
investments. The Portfolio's willingness to borrow money and issue debt for
investment purposes, and the amount it will borrow, will depend on many factors,
the most important of which are the investment outlook, market conditions and
interest rates. To the extent that the Portfolio invests borrowed money in
short-term fixed-rate debt obligations, successful use of a leveraging strategy
depends on AMC's ability to correctly predict interest rates and market
movements over these short-term periods. There is no assurance that a leveraging
strategy will be successful during any period in which it is employed.
Loans of Portfolio Securities. The Portfolio may make loans of its portfolio
securities under certain circumstances. With the approval of the Trustees of
AIST and subject to various conditions which may be imposed from time to time
under various securities regulations, the Portfolio may lend its portfolio
securities to qualified broker/dealers or other institutional investors provided
that such loans do not exceed 10% of the value of the Portfolio's total assets
at the time of the most recent loan, that the borrower deposits and maintains
with the Portfolio at least 102% cash collateral and provided the portfolio
securities loaned are "marked to market" daily. There are risks of delay in
recovery and loss of rights and collateral should the borrower fail financially.
The lending of securities is a common practice in the securities industry. The
Portfolio will engage in security loan arrangements with the primary objective
of increasing its income through investment of the cash collateral in short-term
interest bearing obligations, but will do so only to the extent consistent with
its tax status as a regulated investment company. The Portfolio will continue to
be entitled to all interest on any loaned securities.
Illiquid Securities. The Portfolio may purchase securities that are not
registered ("restricted securities") under the Securities Act of 1933, as
amended ("1933 Act"), but can be offered and sold to "qualified institutional
buyers" under Rule 144A under the 1933 Act. The Portfolio expects that the
Subordinated Residential Mortgage Securities in which it invests generally will
be restricted securities.
The Portfolio will not invest more than 15% of its assets in illiquid
investments. The Portfolio will adhere to a more restrictive limitation on its
investment in illiquid securities as required by the securities laws of those
jurisdictions where shares of the Trusts are registered for sale. Illiquid
securities include securities that are not readily marketable and restricted
securities, unless the Trustees of AIST determine, based upon a continuing
review of the trading markets for the specific restricted security, that such
restricted securities are liquid. The Trustees of AIST may adopt guidelines and
delegate to the Manager the daily function of determining and monitoring
liquidity of restricted securities. The Trustees of AIST, however, retain
oversight and will be ultimately responsible for the determinations. Since it is
not possible to predict with assurance exactly how
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this market for restricted securities sold and offered under Rule 144A will
develop, the Trustees of AIST will carefully monitor the Portfolio's investments
in these securities, focusing on such important factors, among others, as
valuation, liquidity and availability of information. This investment practice
could have the effect of increasing the level of illiquidity in the Portfolio to
the extent that qualified institutional buyers become for a time uninterested in
purchasing these restricted securities. In such event, the Trustees will
consider appropriate remedies to maximize the Portfolio's liquidity and its
ability to meet redemption requests within seven days.
The Trusts have experienced a high rate of redemptions. As a result, the
Portfolio has increasingly been managed to provide adequate cash reserves to
satisfy redemption requests, resulting in decreased ability to seek high current
income with low volatility of principal, which is the Trusts' fundamental
investment objective. Investing a larger percentage of portfolio assets in cash
and short-term instruments results in lower yields than those typically received
on investments in mortgage securities. Moreover, adverse market conditions have
resulted in a decrease in the value of subordinated adjustable rate mortgage
(ARM) securities of the type in which the Trusts have invested.
Significant increases in interest rates in 1994 resulted in a general decline in
bond prices. In an environment of rapidly rising interest rates, while the
interest rates on the underlying ARMs continue to reset, the value of ARM
securities decline, because interest rates rise faster than resets occur.
Typically it takes 45-60 days before interest rate resets are reflected in the
Portfolio. In addition, the mortgages underlying the Portfolio's securities
typically reset once a year, so it may be a full year before certain of the
Portfolio's mortgages reset to reflect any increases in the interest rates.
In 1996 U.S. short- and long-term interest rates generally increased. However,
performance of the Portfolio was negatively affected by the lingering effects of
the recessionary environment in California, which proved to be much deeper and
more prolonged than originally anticipated. In particular, real estate values
fell or remained at depressed levels, which led to increased credit risk and, in
turn, resulted in increased default losses on a number of the subordinated
mortgage securities backed by Southern California real estate held by the
Portfolio.
The performance of the Portfolio has been negatively affected by the interest
rate conditions in the ARM securities market. As a result of the 1994 interest
rate increases and declining bond prices, combined with negative publicity on
the mortgage securities market and the higher than expected price volatility
experienced with many mortgage-backed securities, mortgage funds industry-wide
continued to experience heavy redemptions in 1996. As a result, ARM funds
continued to liquidate subordinated mortgage securities to meet redemption
requests. This resulted in an increased supply of subordinated mortgage
securities in the market, bringing wider spreads over the relevant indices and
reduced prices.
The increase in redemptions along with adverse interest rate conditions in 1994
and deteriorating credit risks have caused the market for subordinated mortgage
securities to be less liquid. Over the long term, AMC believes that the market
will value portfolio securities based primarily upon fundamental considerations
of credit quality, prepayment rates and other such factors, with less emphasis
on market conditions. Yet there can be no assurance that such will be the case.
Further fluctuations in net asset value may occur as a result of such factors as
deteriorating or improving market conditions and liquidity and credit experience
of portfolio securities.
The Staff has taken the position that special hazard certificates, interest rate
swaps, caps, collars and floors and SMBS not issued by the U.S. Government or
its agencies, or instrumentalities and SMBS not backed by fixed-rate mortgages
should be deemed illiquid. Accordingly, the Portfolio currently treats these
instruments as illiquid when testing its portfolio for compliance with the 15%
limitation on illiquid investments.
The purchase price and subsequent valuation of restricted securities normally
reflect a discount from the price at which such securities trade when they are
not restricted, since the restriction makes them less liquid. The
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amount of the discount from the prevailing market price is expected to vary
depending upon the type of security, the character of the issuer, the party who
bears the expenses of registering the restricted securities and prevailing
supply and demand conditions.
Portfolio Turnover. The Portfolio's portfolio turnover rate may vary from year
to year, as well as within a year. The annual rate of the Portfolio's portfolio
turnover for the fiscal years ended October 31, 1995 and 1996 was 108% and 297%,
respectively. A higher portfolio turnover rate may result in higher brokerage
commissions and other transactional expenses which must be borne, directly or
indirectly, by the Portfolio and ultimately by a Trust's shareholders. See
"Execution of Portfolio Transactions" in the Statement of Additional
Information. The portfolio turnover rate for the Trusts as set forth in
"Financial Highlights" reflects the purchase and redemption by the Trusts of
shares of the Portfolio.
Temporary Defensive Positions. When maintaining a temporary defensive position,
the Portfolio may invest its assets without limit in short-term U.S. Government
and U.S. Government agency securities including, among others, FNMA and FHLMC
short-term agency discount notes.
Distributions and Taxes
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DISTRIBUTIONS
Income dividends will be declared and paid monthly. Each Trust intends to
declare or distribute sufficient dividends from its net investment income and/or
net capital gain income in order to avoid the imposition of a 4% excise tax.
CHOOSING A DISTRIBUTION OPTION
When you buy shares of a Trust you may choose from the following distribution
options:
(1) The Share Option reinvests your income dividends and/or capital gains
distributions, if any, in additional shares. If no option is selected, income
dividends (and capital gains, if any) will be reinvested in additional shares of
the Trust. Income dividends and/or capital gains will be reinvested at the net
asset value as of the reinvestment date for the distribution.
(2) With the Cash Option, you may receive income dividends and/or capital gains
distributions in cash.
(3) If you are also a shareholder in any of the other Astra Funds distributed by
the Distributor, the Transfer Option permits you to have income dividends and/or
capital gains distributions of the Trust automatically invested in shares of any
of those Astra Funds of which you are a shareholder at the applicable net asset
value. If you select this option, the minimum investment requirements for
additions to an existing account will be waived.
Once again, you must specify which option you desire when you place your order
or submit your application. The tax consequences of distributions (described
below) are the same whether you choose to receive them in cash or to reinvest
them in additional shares of a Trust or another Astra Fund.
If for any fiscal year of a Trust, the amount of distributions paid or deemed
paid for such year exceeds its investment company taxable income plus net
realized capital gains for such year, the amount of such excess would be treated
as a return of capital to all those shareholders who held shares of a Trust
during the year. In such case, each distribution paid or deemed paid for that
year would be treated, in the same proportion, in part as a distribution of
taxable income and in part as a return of capital. Shareholders would incur no
current Federal income tax on the portion of such distributions which are
treated as a return of capital, but each shareholder's basis in his Trust shares
would be reduced by that amount. This reduction of basis would operate to
increase the shareholder's capital gain (or decrease their capital loss) upon
subsequent redemption of his shares.
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<PAGE>
TAXES
Taxation of the Trusts. Each Trust is treated as a separate entity for federal
income tax purposes. Each Trust intends to elect to be treated as a regulated
investment company under Subchapter M of the Internal Revenue Code of 1986, as
amended (the "Code"). By distributing all of its net investment income and net
realized short-term and long-term capital gains for a fiscal year in accordance
with the timing requirements imposed by the Code and by meeting certain other
requirements relating to the sources of its income and diversification of its
assets, each Trust should not be liable for Federal income or excise taxes.
Taxation of Shareholders. For Federal income tax purposes, any income dividends
which you receive from a Trust, as well as any distributions derived from the
excess of net short-term capital gain over net long-term capital loss, are
treated as ordinary income whether you have elected to receive them in cash or
in additional shares. Distributions derived from the excess of net long-term
capital gain over net short-term capital loss are treated as long-term capital
gain regardless of the length of time you have owned your Trust shares and
regardless of whether you receive such distributions in cash or in additional
shares. Pursuant to the Code, certain distributions which are declared in
October, November or December but which, for operational reasons, may not be
paid to the shareholder until the following January, will be treated for tax
purposes as if received by the shareholder on December 31 of the calendar year
in which they are declared.
Redemptions and exchanges of Trust shares are taxable events on which a
shareholder may realize a gain or loss. All or a portion of a loss realized upon
a redemption of shares will be disallowed to the extent other shares of the same
Trust are purchased (through reinvestment of dividends or otherwise) within 30
days before or after such redemption. Any loss realized upon the redemption of
shares within six months from the date of their purchase will be treated as a
long-term capital loss to the extent of amounts treated as distributions of net
long-term capital gain during such six-month period.
The Trusts may be required to report to the Internal Revenue Service any taxable
dividend or other reportable payment (including share redemption proceeds) and
withhold 31% of any such payments made to individuals and other non-exempt
shareholders who have not provided a correct taxpayer identification number and
made certain required certifications that appear in the shareholder application
form. A shareholder may also be subject to backup withholding if the IRS or a
broker notifies a Trust that the number furnished by the shareholder is
incorrect or that the shareholder is subject to backup withholding for previous
underreporting of interest or dividend income.
The foregoing general discussion of U.S. Federal income tax consequences is
based upon the Trusts' understanding of current U.S. Federal income tax law and
is not intended as tax advice. Shareholders may be subject to U.S. Federal gift
and estate taxes and additional state, local, foreign and other taxes depending
on each shareholder's particular situation. Shareholders should consult their
tax advisors with respect to the applicability of state and local income taxes
to distributions and redemption proceeds received from a Trust. Distributions by
the Trusts to shareholders who are nonresident aliens or foreign corporations
may be subject to U.S. withholding taxes. Such shareholders should consult with
their financial or tax advisors regarding the applicability of U.S. withholding
taxes to distributions received by them from a Trust.
Shareholder's Guide
How to Buy Shares of the Trusts
=============================
Shares of Trust I may be purchased only through the exchange of shares of Astra
Adjustable Rate Securities Trust I and Astra Short-Term Multi-Market Income Fund
II, the transfer of dividends from other Funds distributed by the Distributor or
the reinstatement of shares of the Trust previously redeemed. Shares of Trusts
I-A, II and IV are made available through selected financial service firms such
as broker-dealer firms and banks ("Firms") who have signed agreements with the
Distributor, the Trusts' principal underwriter. Shares of Trust I-A, II and IV
may also be purchased by check or wire directly to the Trusts' Transfer Agent.
The minimum
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<PAGE>
initial investment by a shareholder in Trust I-A or II is $5,000 ($2,000 for
IRAs). The minimum subsequent investment for Trust I-A or II is $250. The
minimum initial investment by a shareholder in Trust IV is $50,000 and the
minimum subsequent investment is $1,000. The minimum initial and subsequent
investment requirements may be changed or waived at any time at management's
discretion. Any order for the purchase of shares may be rejected in whole or in
part. Trust I-A or IV's offering price is the net asset value next determined
after an order is received. Trust II's offering price is the net asset value
next determined after an order is received, plus a varying sales charge,
depending upon the amount invested.
The sales charge applicable to shares of Trust II is determined as follows:
Sales Charge
------------------------
As % of As % of Dealer
Public Net Reallowance
Offering Amount As % of
On Purchases of: Price Invested Offering Price
---------------- --------- -------- --------------
$ 5,000-$ 99,999 ............ 3.00% 3.09% 3.00%
$100,000-$249,999 ........... 2.50% 2.56% 2.50%
$250,000-$499,999 ........... 2.00% 2.04% 2.00%
$500,000-$749,999 ........... 1.50% 1.52% 1.50%
$750,000-$999,999 ........... 1.00% 1.01% 1.00%
$1,000,000 and over* ........ None None *
* On purchase of $1,000,000 and over, shares are acquired at net asset value
with no sales charges, but the Distributor, from its own assets, will pay
the selling firm .25% of the offering price.
The sales charge assessed upon the purchase of shares of Trust II is not an
expense of Trust II and has no effect on the net asset value of shares of Trust
II. The Distributor allows the selling firm to retain 100% of the sales charge.
This may result in the selling firm being considered an underwriter under the
1933 Act.
In connection with sales of shares of Trust I or I-A, the Distributor
compensates the Firms at a rate of 3.0% of purchase payments for shares subject
to a CDSC. The Distributor, at its expense, may also provide additional
promotional incentives to dealers in connection with sales of shares of the
Trusts and other Astra Funds.
You will receive a confirmation of each new transaction in your account, which
will also show you the number of Trust shares you own and the number of shares
being held in safekeeping by the Trust's Transfer Agent for your account. You
may rely on these confirmations in lieu of certificates as evidence of your
ownership. Certificates representing shares of a Trust will not be issued unless
you request them in writing.
PURCHASES BY WIRE (Trust I-A, II or IV Only)
Purchases by wire transfer should be directed to "Investors Fiduciary Trust Co.
ABA 101003621 for credit to Astra Adjustable U.S. Government Securities Trust
I-A, II or IV (as applicable) A/C 890752-443-9 for further credit to shareholder
A/C #__________, Shareholder Name:________________." For initial purchase by
Federal funds wire, you must first obtain an account number by telephoning the
Trusts' Shareholder Servicing Agent at 800-441-7267. You may then instruct your
bank to wire funds as described above. After you have received an account number
and have wired funds, you must complete the application form that accompanies
this Prospectus and send it to:
DST Systems, Inc.
P.O. Box 419174
Kansas City, MO 64141
Attn: Order Department
This procedure is for the protection of shareholders. A Trust will not honor
orders for redemptions until it receives the proper authorizations. See the
Application included in this Prospectus.
For subsequent investments by wire, first telephone either Trust I-A, II or IV,
at 800-441-7267, to obtain a wire reference number prior to transmission. This
helps the Trusts to ensure the proper credit to your account.
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<PAGE>
Shares purchased by Federal funds wire will be purchased at the close of
business on the day on which the Federal funds wire is received and, if the wire
is received before 11:00 A.M. New York time, the shares will be entitled to
dividends on that business day. Shares purchased by Federal funds wire received
after 11:00 A.M. New York time will be entitled to dividends on the next
business day.
PURCHASES THROUGH DEALER (Trust I-A, II or IV Only)
Orders for purchase of shares placed through dealers will receive the net asset
value next computed following receipt of the order provided the dealer receives
the order prior to the close of the New York Stock Exchange and transmits it to
the Distributor prior to its close of business that same day (normally 3:00 p.m.
Pacific time). In order to establish an Individual Retirement Account whereby
Investors Fiduciary Trust Company acts as Custodian, dealers must provide the
Trusts' Transfer Agent with a completed IRA application signed by the investor
prior to settlement of such purchase orders. (Trust I-A and II Only)
Dealers are required to provide payment within three business days after placing
an order. Dealers making payment for confirmed purchases via Federal funds wire
must reference the confirmation number to ensure timely credit.
PURCHASES BY CHECK (Trust I-A, II or IV Only)
An initial investment made by check must be accompanied by an Application,
completed in its entirety. Additional shares of a Trust may also be purchased by
sending a check payable to the appropriate Trust,along with information
regarding your account, including the account number, to the Transfer Agent. All
checks should be drawn only on U.S. banks in U.S. funds, in order to avoid fees
and delays. A charge may be imposed if any check submitted for investment does
not clear. Third party checks, except those payable to an existing shareholder
who is a natural person (as opposed to a corporation or partnership), credit
cards, and cash will not be accepted. When purchases are made by check or
periodic automatic investment, redemptions will not be allowed until the
investment being redeemed has been in the account for 15 business days.
PRE-AUTHORIZED INVESTMENT PLAN (Trust I-A, II or IV Only)
For your convenience, a pre-authorized investment plan (see "Pre-Authorized
Investment Plan" on the Additional Account Privileges Form) may be established
whereby your personal bank account is automa- tically debited and your Trust
Account is automatically credited with additional full and fractional shares
($250 subsequent minimum investment for Trusts I-A or II and $100 subsequent
minimum investment for Trust IV). For further information on pre-authorized
investment plans, please contact the Shareholder Servicing Agent.
The minimum investment requirements may be waived by a Trust for purchases made
pursuant to certain programs such as payroll deduction plans and retirement
plans.
LETTER OF INTENT AND RIGHTS OF ACCUMULATION (Trust II Only)
An investor may immediately qualify for a reduced sales charge on a purchase of
shares of any Astra Fund which imposes an initial sales charge by completing the
Letter of Intent section of the Shareholder Application (the "Letter of Intent"
or "Letter"). By completing the Letter, the investor expresses an intention to
invest during the next 13 months a specified amount which if made at one time
would qualify for a reduced sales charge. At any time within 90 days after the
first investment which the investor wants to qualify for the reduced sales
charge, a signed Shareholder Application, with the Letter of Intent section
completed, may be filed with Trust II. After the Letter of Intent is filed, each
additional investment made will be entitled to the sales charge applicable to
the level of investment indicated on the Letter of Intent as described above.
Sales charge reductions based upon purchases in more than one investment in the
Astra Funds will be effective only after notification to the Distributor that
the investment qualifies for a discount. The shareholder's holdings in the
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<PAGE>
Astra Funds acquired within 90 days before the Letter of Intent is filed will be
counted towards completion of the Letter of Intent but will not be entitled to a
retroactive downward adjustment of sales charge until the Letter of Intent is
fulfilled. Any redemptions made by the shareholder during the 13-month period
will be subtracted from the amount of the purchases for purposes of determining
whether the terms of the Letter of Intent have been completed. If the Letter of
Intent is not completed within the 13-month period, there will be an upward
adjustment of the sales charge as specified below, depending upon the amount
actually purchased (less redemptions) during the period.
An investor acknowledges and agrees to the following provisions by completing
the Letter of Intent section of the Shareholder Application: A minimum initial
investment equal to 25% of the intended total investment is required. Five
percent (5%) of the amount of the total intended purchase will be held in escrow
(the "Escrow Shares"), in the form of shares, in the investor's name to assure
that the full applicable sales charge will be paid if the intended purchase is
not completed. The Escrow Shares will be included in the total shares owned as
reflected on the monthly statement; income and capital gain distributions on the
Escrow Shares will be paid as directed by the investor. The Escrow Shares will
not be available for redemption by the investor until the Letter of Intent has
been completed, or the higher sales charge paid. If the total purchases, less
redemptions, equal the amount specified under the Letter, the Escrow Shares will
be released. If the total purchases, less redemptions, exceed the amount
specified under the Letter and is an amount which would qualify for a further
quantity discount, a retroactive price adjustment will be made by the
Distributor and the dealer with whom purchases were made pursuant to the Letter
of Intent to reflect such further quantity discount on purchases made within 90
days before, and on those made after filing the Letter. The resulting difference
in offering price will be applied to the purchase of additional shares at the
applicable offering price. If the total purchases, less redemptions, are less
than the amount specified under the Letter, the investor will remit to the
Distributor an amount equal to the difference in dollar amount of sales charge
actually paid and the amount of sales charge which would have applied to the
aggregate purchases if the total of such purchases had been made at a single
time. Upon such remittance the Escrow Shares held for the investor's account
will be released to the account in the name of the investor or to the investor's
order. If within 20 days after written request such difference in sales charge
is not paid, the redemption of an appropriate number of Escrow Shares to realize
such difference will be made. In the event of a total redemption of the account
prior to fulfillment of the Letter of Intent, the additional sales charge due
will be deducted from the proceeds of the redemption and the balance will be
forwarded to the investor. By completing the Letter of Intent section of the
Shareholder Application, an Investor grants to the Distributor a security
interest in the Escrow Shares and agrees to irrevocably appoint the Distributor
as his attorney-in-fact with full power of substitution to surrender for
redemption any or all shares for the purpose of paying any additional sales
charge due. The investor or the securities dealer must inform DST or the
Distributor that this Letter is in effect each time a purchase is made.
The value of all shares of Trust II plus shares of the other funds distributed
by the Distributor can be combined with a current purchase to determine the
reduced sales charge and applicable offering price of the current purchase. The
reduced sales charges apply to quantity purchases made at one time or on a
cumulative basis over any period of time by (i) an investor, (ii) the investor's
spouse and children under the age of majority, (iii) the investor's custodian
accounts for the benefit of a child under the Uniform Gift to Minors Act, (iv) a
trustee or other fiduciary of a single trust estate or a single fiduciary
account (including pension, profit-sharing and/or other employee benefit plans
qualified under Section 401 of the Code), by trust companies' registered
investment advisors, banks and bank trust departments for accounts which they
exercise exclusive investment discretionary authority and which are held in a
fiduciary, agency, advisory, custodial or similar capacity. The reduced sales
charges also apply, on a non-cumulative basis, to purchases made at one time by
the customers of a single dealer, in excess of $1 million.
Shares of Trust II and any other Astra Fund purchased and owned of record or
beneficially by a corporation, including employees of a single employer (or
affiliates thereof) including shares held by its employees, under
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<PAGE>
one or more retirement plans, can be combined with a current purchase to
determine the reduced sales charge and applicable offering price of the current
purchase, provided such transactions are not prohibited by one or more
provisions of the Employee Retirement Income Security Act or the Internal
Revenue Code. Individuals and employees should consult with their tax advisors
concerning the tax rules applicable to retirement plans before investing.
For purposes of Rights of Accumulation and the Letter of Intent privilege,
shares held by investors in any Astra Fund which imposes a CDSC, may be combined
with shares of Trust II for a reduced sales charge but will not affect any CDSC
which may be imposed on the redemption of shares of a fund which imposes a CDSC.
The Letter of Intent option may be modified or discontinued at any time.
COMBINED PURCHASE PRIVILEGE (Trust I-A or IV Only)
The Combined Purchase Privilege is intended to allow qualifying investors a
reduced sales charge only in an Astra Fund which imposes an initial sales charge
and will not affect any CDSC which may be imposed on the redemption of Trust I-A
or IV shares or the compensation to selling Firms on the sale of Trust I-A or IV
shares. Investors may qualify for the Combined Purchase Privilege by combining
purchases of Trust I-A or IV shares with shares of any Astra Fund, which imposes
an initial sales charge. Shares of Trust I-A or IV may also be combined with
shares of such other Astra Funds for purposes of completing a Letter of Intent.
SPECIAL PURCHASES AT NET ASSET VALUE (Trust II Only)
Shares of Trust II may be purchased at net asset value by persons who have,
within the previous 30 days, redeemed their shares of any Astra Fund which
imposes a sales charge. The amount which may be purchased at net asset value is
limited to an amount up to, but not exceeding, the net amount of redemption
proceeds. Such purchases may also be handled by a securities dealer, who may
charge the shareholder a fee for this service. Shares of Trust II may be
purchased at net asset value where the amount invested is documented to the
Trust to be proceeds from the redemption (within 60 days of the purchase of
Trust II shares) of shares of unrelated investment companies and where the
investor paid an initial sales charge.
Shares of Trust II may also be purchased at net asset value by any charitable
organization, state, county or city, or any instrumentality, department,
authority or agency thereof which has determined that Trust II is a legally
permissible investment and which is prohibited by applicable investment law from
paying a sales charge or commission in connection with the purchase of shares of
any registered management company ("an eligible governmental authority"). If an
investment by an eligible governmental authority at net asset value is made
through a dealer who has executed a selling group agreement with respect to the
Astra Funds, the Distributor may pay such dealer .25% of the offering price.
Officers, directors and bona fide full-time employees of the Trusts and with
certain exceptions most officers, directors and full-time employees of AMC, the
Distributor, the Trusts' service agents, or affiliated corporations thereof or
any trust, pension, profit-sharing or other benefit plan for such persons,
broker-dealers, for their own accounts or for members of their families (defined
as current spouse, children, parents, grandparents, uncles, aunts, siblings,
nephews, nieces, step-relations, relations-in-law, and cousins) employees of
such broker-dealers (including their immediate families) and discretionary
advisory accounts of AMC, may purchase shares of the Trusts at net value without
a sales charge. Such a purchaser is required to sign a letter stating that the
purchase is for his own investment purposes only and that the securities will
not be resold except to a Trust. Relative to certain fee based Registered
Investment Advisors, Management may, under certain circumstances, allow such
Advisors to make investments on behalf of their clients at net asset value,
without any commission or concessions.
Additional terms concerning the offering of Trust II's shares are included in
the Statement of Additional Information.
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<PAGE>
How to Redeem Shares of the Trusts
=============================
Trust I, I-A or IV. Shares of Trust I, I-A or IV are redeemed at the net asset
value next determined after receipt of a redemption request in good form on any
day the New York Stock Exchange is open for business, reduced by the amount of
any applicable CDSC described below and the amount of any Federal income tax
required to be withheld.
If a shareholder holds Trust I or I-A shares for more than four years after
their purchase, such shareholder will not have to pay any charge when redeeming
those shares. Shares of Trust I or I-A redeemed within the first four years of
their purchase (except shares acquired through the reinvestment of
distributions) will be subject to a CDSC. If a shareholder holds Trust IV shares
for more than three months after their purchase, such shareholder will not have
to pay any charge when redeeming those shares. Shares of Trust IV redeemed
within the first three months of their purchase (except shares acquired through
the reinvestment of distributions) will be subject to a CDSC of .25%. A CDSC is
not imposed on (a) shares of Trust I or I-A in the account which were purchased
more than four years prior to the redemption, or shares of Trust IV in the
account which were purchased more than three months prior to the redemption, (b)
all shares of Trust I, I-A or IV in the account acquired through reinvestment of
monthly distributions and capital gains distributions, and (c) the increase, if
any, of value of all other shares of Trust I, I-A or IV in the account (namely
those Trust I or I-A shares purchased within the four years preceding the
redemption or those Trust IV shares purchased within three months preceeding the
redemption) over the purchase price of such shares. Redemptions are processed in
a manner to maximize the amount of redemption which will not be subject to a
CDSC; i.e., each redemption will be assumed to have been made first from the
exempt amounts referred to in clauses (a), (b) and (c) above, and second through
liquidation of those shares in the account referred to in clause (c) on a
first-in-first-out basis. Any CDSC which is required to be imposed on share
redemptions for shares of Trust I or I-A will be made in accordance with the
following schedule:
Contingent
Year of Redemption Deferred Sales
After Purchase of Trust I or I-A Shares Charge
--------------------------------------- -------
First .......................................... 4%
Second ......................................... 3%
Third .......................................... 2%
Fourth ......................................... 1%
Fifth and following ............................ 0%
The CDSC will be paid to the Distributor and may affect the amount of (i)
Uncovered Distribution Charges calculated under Trust I or I-A's Distribution
Plan, (ii) the advisory fee payable to AMC and (iii) the daily compensation
payable to the Distributor under Trust I or I-A's Distribution Plan (See
"Distribution Plan").
No CDSC will be payable in connection with the redemption of shares of Trust I,
I-A or IV purchased by officers, directors and bona fide full-time employees of
ASIS, and with certain exceptions, officers, directors and full-time employees
and sales representatives of AMC, the Distributor or affiliated companies
thereof (or any trust, pension, profit-sharing or other benefit of such
persons), broker-dealers having sales agreements with the Distributor, all for
their own accounts or for their spouse and children, and employees of such
broker-dealer firms (for their own accounts only), and discretionary advisory
accounts of AMC (if such purchasers state in writing that the purchases are for
their own investment purposes only and the purchaser represents that the shares
will not be resold except to Trust I, I-A or IV, as applicable).
No CDSC will be payable in connection with the redemption of shares of Trust I,
I-A or IV which were acquired via certain exchange transactions as fully
described in the Exchange Privilege Section of this prospectus.
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<PAGE>
The CDSC will be waived for certain redemptions of shares of Trust I, I-A or IV
(i) upon the death or permanent disability of a shareholder, or (ii) in
connection with mandatory distributions from an IRA or other qualified
retirement plan. The CDSC will be waived in the case of a redemption of shares
of Trust I, I-A or IV following the death or permanent disability of a
shareholder if the redemption is made within one year of death or initial
determination of permanent disability. The waiver is available for total or
partial redemptions of shares of Trust I, I-A or IV owned by an individual or an
individual in joint tenancy (with rights of survivorship), but only for
redemptions of shares held at the time of death or initial determination of
permanent disability. The CDSC will also be waived in the case of a total or
partial redemption of shares of Trust I or I-A in connection with any mandatory
distribution from a tax-deferred retirement plan or an IRA. The waiver does not
apply in the case of a tax-free rollover or transfer of assets, other than one
following a separation from services. The shareholder must notify the Trusts'
Transfer Agent either directly or through the Distributor, at the time of
redemption, that the shareholder is entitled to a waiver of the CDSC. The
relevant information as requested in the Contingent Deferred Sales Charge Waiver
Form, included in this Prospectus on page 53, must be provided to the Trusts'
Transfer Agent at the time of the redemption request. The waiver will be granted
subject to confirmation of the Investor's entitlement.
Trust II. Shares of Trust II are redeemed at the net asset value next determined
after receipt of a redemption request in good form on any day the New York Stock
Exchange is open for business. The shares of Trust II are not subject to a
contingent deferred sales charge.
Types of Redemptions
REDEMPTIONS BY MAIL
A written request for redemption (or an endorsed share certificate, if issued)
must be received by the Transfer Agent to constitute a valid tender for
redemption. It will also be necessary for corporate investors and other
associations to have an appropriate certification authorizing redemptions by the
corporation or the association included with a redemption request to be
considered in proper form. A signature guarantee by an eligible guarantor may be
required as stipulated in Rule 17Ad-15(a)(2) under the Securities Exchange Act
of 1934. To determine whether a signature guarantee or other documentation is
required, shareholders may call the Trusts' Shareholder Servicing Agent at (800)
441-7267.
REDEMPTION OF SHARES BY SECURITIES DEALERS
Brokers, dealers or other sales agents may communicate redemption orders by wire
or telephone. These firms may charge for their services in connection with your
redemption but neither the Trusts nor the Distributor impose any such charges
other than the CDSC described above in connection with the redemption of shares
of Trust I, I-A or IV.
EXPEDITED TELEPHONE REDEMPTIONS
You may have the payment of redemption requests (of $5,000 or more) wired or
mailed directly to a domestic commercial bank account that you have previously
designated. Normally, such payments will be transmitted on the second business
day following receipt of the request (provided redemptions may be made). If no
share certificates have been issued, you may request a wire redemption by
telephone or write to the Transfer Agent. For telephone redemptions, call the
Transfer Agent at (800) 441-7267. You must complete the "Expedited Redemptions"
section of the Additional Account Privileges Form for Trust I or the Application
for Trust I-A, II or IV for this privilege to be applicable to you.
SYSTEMATIC WITHDRAWAL PLAN
A shareholder may elect to have regular monthly or quarterly payments in any
fixed amount in excess of $100 made to him or her, or to anyone else properly
designated as long as the account has a value (i.e., net asset
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<PAGE>
value before any CDSC with respect to shares of Trust I, I-A or IV) of at least
$10,000. During the withdrawal period, you may purchase additional shares for
deposit to your account if the additional purchases are equal to at least one
year's scheduled withdrawals, or $1,200, whichever is greater.
There are no separate charges to you under this Plan, however, all shares of
Trust I, I-A or IV may be subject to the applicable CDSC. A number of full and
fractional shares equal in value, after taking into account any applicable CDSC,
to the amount of the requested payment will be redeemed. Such redemptions are
normally processed on the fifth business day prior to the end of the month or
quarter. Checks are then mailed on or about the first of the following month.
Shareholders who elect to have a Systematic Withdrawal Plan must have all
dividends and capital gains reinvested. To establish systematic cash
withdrawals, please complete the Systematic Withdrawal Plan section on the
Additional Account Privileges Form.
You may change the amount, frequency, and payee, or terminate this plan by
giving written notice to the Trusts' Transfer Agent. As shares of a Trust are
redeemed under the plan, you may realize a capital gain or loss to be reported
for income tax purposes. A Systematic Withdrawal Plan may be terminated or
modified at any time upon written notice by you or a Trust.
GENERAL
Payment to shareholders for shares redeemed or repurchased will be made within
seven days after receipt by the Transfer Agent. A Trust may delay the mailing of
a redemption check until the check used to purchase the shares being redeemed
has cleared, which may take up to 15 days or longer. To reduce such delay, the
Trusts recommend that all purchases be made by bank wire Federal funds. A Trust
may suspend the right of redemption under certain extraordinary circumstances in
accordance with the Rules of the SEC. Due to the relatively high cost of
handling small investments, the Trusts reserve the right upon 30-days' written
notice to redeem, at net asset value, the shares of any shareholder in Trust I,
I-A or II whose account (except for IRAs) has a value of less than $5,000 or the
shares of any shareholder in Trust IV whose account has a value of less than
$50,000 other than as a result of a decline in the net asset value per share.
Shareholder Services and Privileges
=============================
EXCHANGE PRIVILEGE
Trust I. Shares of Trust I which have been held for a minimum of 30 days may be
exchanged for shares of Astra Adjustable Rate Securities Trust I and Astra
Short-Term Multi-Market Income Fund II at the then current net asset values of
the respective funds. Such exchanged shares will not be reduced by the otherwise
applicable CDSC at the time of such exchange. Shares of Astra Adjustable Rate
Securities Trust I and Astra Short-Term Multi-Market Income Fund II which have
been held for a minimum of 30 days may be exchanged for shares of the Trust at
the then current net asset values of the respective funds. Such exchanged shares
will not be reduced by the otherwise applicable CDSC at the time of such
exchange. Shares acquired as a result of such exchange and subsequently redeemed
will be subject to the then applicable CDSC. For purposes of computing the
holding period for the CDSC on the acquired shares, the holding period of the
exchanged shares and the acquired shares will be "tracked" and will be deemed to
commence as of the date the exchanged shares were purchased.
Shares of Trust I held for at least 4 years (or, if exchanged, with a combined
holding period of 4 years) may be exchanged into any other Astra fund which
offers an exchange privilege, at then current net asset values and will not be
subject to a CDSC. The value of shares being exchanged must meet the minimum
investment requirement of the fund into which they are being exchanged.
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Trust I-A. Shares of Trust I-A which have been held for a minimum of 30 days may
be exchanged for shares of any other Astra Fund which imposes a comparable CDSC
and offers an exchange privilege at the then current net asset values of the
respective funds. The net asset value of such exchanged shares will not be
reduced by the otherwise applicable CDSC at the time of such exchange. However,
shares acquired as a result of such exchange and subsequently redeemed will be
subject to the then applicable CDSC if such shares were held less than four
years since the purchase of Trust I-A's shares.
Shares of Trust I-A held for at least four years may be exchanged into any other
Astra Fund distributed by the Distributor which offers an exchange privilege at
the then current net asset value provided that the total value of shares being
exchanged meets the minimum investment requirement of the fund into which they
are being exchanged. If such shares are subsequently redeemed they will not be
subject to a CDSC.
Shares of the other funds which impose an initial sales charge and offer an
exchange privilege may be exchanged for shares of the Fund on the basis of
relative net asset values if the required holding period is satisfied as
provided for in the Exchange Privilege section of the respective funds'
prospectuses. If such shares are subsequently redeemed they will not be subject
to the CDSC.
Trust II. Shares of Trust II may be exchanged for shares of any Astra Fund which
does not have the same investment objective and which offer such privilege at
the relative net asset values per share at the time of the exchange, provided
Trust II's shares have been held for a minimum of 30 days. The total value of
shares being exchanged must at least equal the minimum investment requirement of
the fund into which they are being exchanged.
Shares of the other funds distributed by the Distributor which do not have the
same investment objective and offer an exchange privilege may be exchanged for
shares of Trust II on the basis of relative net asset values if the required
holding period is satisfied as provided for in the Exchange Privilege section of
the respective funds' prospectuses.
Trust IV. Shares of Trust IV held for at least six months may be exchanged into
any other Astra fund distributed by the Distributor which does not have the same
investment objective, offers an exchange privilege and imposes an initial sales
charge at the then current net asset value provided that the total value of
shares being exchanged meets the minimum investment requirement of the fund into
which they are being exchanged. Shares of Trust IV may be exchanged into any
Astra fund which imposes a comparable CDSC at any time. If such shares are
subsequently redeemed, they will not be subject to a CDSC if they have been held
for six months from date of initial purchase.
Shares of the other funds which impose a comparable CDSC and offer an exchange
privilege may be exchanged for shares of Trust IV on the basis of relative net
asset values as provided for in the Exchange Privilege section of the respective
funds' prospectuses. If such shares are subsequently redeemed, they will not be
subject to a CDSC if they have been held for six months from date of initial
purchase.
General. The prospectuses of the other funds should be reviewed before effecting
any exchange. With respect to all of the Trusts you should note that any
exchange may only be made in states where shares of the other funds are
qualified for sale and may create a gain or loss to be recognized for Federal
income tax purposes. Exchanges may be authorized by telephone. You will
automatically be assigned this privilege unless you check the box on the
Application (for Trust I-A, II or IV) or the Additional Account Privileges Form
(for Trust I) which indicates that you do not wish to have the privilege (see
"Telephone Exchange Privilege" section of Application (for Trust I-A, II or IV)
or the Additional Account Privileges Form (for Trust I)). In addition, if you
exchange by mail, the exchange will be effected, upon receipt of written
instructions signed by all account owners and accompanied by any outstanding
share certificates properly endorsed, into an
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identically registered account. The exchange privilege may be modified at any
time or discontinued upon 60 days' written notice to Shareholders.
REINSTATEMENT PRIVILEGE
Trust I, I-A or IV If you have redeemed your shares of Trust I, I-A or IV, you
may reinvest up to the full amount of the proceeds of such redemption, at net
asset value at the time of reinvestment. The amount of any CDSC on the shares of
Trust I, I-A or IV will also be reinvested. Such reinvested shares of Trust I,
I-A or IV will retain their original cost and purchase date only for purposes of
the CDSC.
In order to exercise this privilege, a written order for the purchase of shares
must be received by the Trust's Transfer Agent, or be postmarked, within 30 days
after the date of redemption. This privilege can be used only once per calendar
year. If you incur a loss on the redemption and use the reinstatement privilege,
some or all of the loss may be allowed as a tax deduction. See Statement of
Additional Information for further discussion.
RETIREMENT PLANS (Trust I, I-A or II Only)
Trusts I, I-A or II have available prototype qualified retirement plans for both
corporations and self-employed individuals. Trusts I, I-A or II also have
available prototype Individual Retirement Account ("IRA") plans (for both
individuals and employers) and Simplified Employee Pension ("SEP") plans.
Investors Fiduciary Trust Company acts as the custodian under the plans. For
information, including the custodian's fees and forms necessary to adopt the
plans, see the Statement of Additional Information and call or write the
Distributor.
Expedited Redemption and Telephone Exchange Information
=============================
The Trusts and their Transfer Agent will not be responsible for the authenticity
of phone instructions or losses, if any, resulting from unauthorized shareholder
transactions if the Trusts or their Transfer Agent reasonably believe that such
instructions were genuine. The Trusts and their Transfer Agent have established
procedures that the Trusts believe are reasonably appropriate to confirm that
instructions communicated by telephone are genuine. These procedures include:
(i) recording telephone instructions for exchanges and expedited redemptions;
(ii) requiring the caller to give certain specific identifying information; and
(iii) providing written confirmations to shareholders of record not later than
five days following any such telephone transactions. If the Trusts and their
Transfer Agent do not employ these procedures, they may be liable for any losses
due to unauthorized or fraudulent telephone instructions.
How the Trusts Value Their Shares
=============================
The net asset value and offering price of shares of each Trust are determined
once daily as of the close of trading on the New York Stock Exchange during a
Trust's "business day," which is any day on which the Exchange is open for
business. The net asset value of a Trust serves as the basis for the purchase
and redemption price of Trust shares. The net asset value is also used in
calculating the fee paid to the Manager.
CALCULATION OF NET ASSET VALUE
Net asset value is calculated by dividing the value of a Trust's portfolio
securities, plus any cash or other assets less all liabilities, by the number of
shares outstanding. Since each Trust will invest in the Portfolio, the value of
each Trust's portfolio securities will be equal to the value of its beneficial
interests in the portfolio. If the securities owned by the Portfolio increase in
value, the value of the Trust shares which the shareholder owns will increase.
If the securities owned by the Portfolio decrease in value, the value of the
shareholder's shares
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<PAGE>
will also decline. In this way, shareholders participate in any change in the
value of the securities owned by the Portfolio. The securities held in the
Portfolio's portfolio will be valued by using market quotations, or independent
pricing services which use prices provided by market-makers or estimates of
market values obtained from yield data relating to instruments or securities
with similar characteristics. Securities for which reliable quotations or
pricing services are not readily available and all other assets will be valued
at their respective fair value as determined in good faith by, or under
procedures established by, the Trustees of AIST, which procedures may include
the delegation of certain responsibilities regarding valuation to the officers
of AIST. The officers of AIST report, as necessary, to the Trustees of AIST
regarding portfolio valuation determination.
Short-term securities with less than sixty days remaining to maturity when
acquired by the Portfolio will be valued on an amortized cost basis by the
Portfolio when the Trustees of AIST have determined that amortized cost is fair
value. If the Portfolio acquires such securities with more than sixty days
remaining to maturity, they will be valued at current market value (using the
mean of the bid and the asked prices) until the 60th day prior to maturity, and
will then be valued on an amortized cost basis based upon the value on such date
unless the Trustees of AIST determine during such 60-day period that this
amortized cost basis does not represent fair value.
PERFORMANCE
Advertisements, sales literature and communications to shareholders may contain
various measures of a Trust's performance including current yield, various
expressions of total return and current distribution rate. These may
occasionally cite statistics to reflect its volatility or risk.
Each Trust may furnish average annual total return and total return quotations
calculated at net asset value and at maximum offering price for various periods.
Average annual total return figures as prescribed by the SEC represent the
average annual percentage change in value of $1,000 invested at the maximum
offering price for one, five and ten-year periods, or portion thereof, to the
extent applicable, through the end of the most recent calendar quarter, assuming
reinvestment of all distributions and deduction of any applicable CDSC. For such
purposes, total return equals the total of all income and capital gain
distributions paid to shareholders, assuming reinvestment of all distributions,
plus (or minus) the change in the value of the original investment, expressed as
a percentage of the purchase price.
Current yield reflects the income per share earned by a Trust's portfolio
investments. It is calculated by dividing the Trust's net investment income per
share during a recent 30-day period by the maximum offering price on the last
day of that period and annualizing the result.
Yield which is calculated according to a formula prescribed by the SEC (see the
Statement of Additional Information) is not indicative of the dividends or
distributions which were or will be paid to a Trust's shareholders. Dividends or
distributions paid to shareholders are reflected in the current distribution
rate which may be quoted to shareholders. The current distribution rate is
computed by dividing the annualized amount of dividends per share paid by a
Trust during the past 30 days by the current offering price. The current
distribution rate differs from the current yield computation because it may
include distributions to shareholders from sources other than dividends and
interest and short term capital gain and is calculated over a different period
of time.
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Advertisements and communications may compare a Trust's performance with (i)
that of other mutual funds (except money market funds), as reported by Lipper
Analytical Services, Inc. or similar independent services or financial
publications, or (ii) the rates of return on certificates of deposit. From time
to time, advertisements and other Trust materials and communications may cite
statistics to reflect a Trust's performance over time, utilizing comparisons to
indexes including those based on U.S. Treasury securities and those derived from
a calculated measure such as a cost of funds index or a moving average of
mortgage rates. Commonly used indexes include the one, three, five, ten and
thirty-year constant maturity Treasury rates, the three-month and 180-day
Treasury bill rate, rates on longer-term Treasury certificates, the 11th
District Federal Home Loan Bank Cost of Funds, the National Median Cost of
Funds, the one-month, three-month, six-month or one-year London Interbank
Offered Rate (LIBOR), the prime lending rate of one or several banks, or
commercial paper rates. Some indexes, such as the one-year constant maturity
Treasury rate, closely mirror changes in market interest rate levels. Others,
such as the 11th District Federal Home Loan Bank Cost of Funds Index, tend to
lag behind changes in the market rate levels and tend to be somewhat less
volatile.
In addition, advertisements and other communications may cite current and
compounded yield and distributions rates. Quotations of historical total
returns, yields and distribution rates are not indicative of future dividend
income or total return, but are indicative of the return to shareholders only
for the limited historical period used. A Trust's yield, total return or
distribution rate will depend on the particular investments in its portfolio,
its total operating expenses and other conditions. For further information,
including the formulas and discussions of the yield and total return
calculations, see the Statement of Additional Information.
In each case, performance figures are based upon past performance, reflect all
recurring charges against Trust income and, as appropriate, may or may not
assume the payment of the applicable maximum sales load or CDSC on the purchase
or redemption of shares. The investment results of a Trust, like all others,
will fluctuate over time; thus, performance figures should not be considered to
represent what an investment may earn in the future or what a Trust's yield,
distribution rate or total return may be in any future period.
The Astra Group
=============================
Atlas Holdings Group, Inc. ("Atlas Group") is a financial services holding
company and has its principal business address at 9595 Wilshire Boulevard, Suite
1001, Beverly Hills, California 90212. It comprises several affiliated
companies, including AMC and the Distributor (whose principal business address
is 11400 West Olympic Boulevard, Suite 200, Los Angeles, California 90064) which
provide advisory, distribution and administrative services to the Trusts. Atlas
Group is a Delaware corporation of which Palomba Weingarten, Chairman of the
Board of Trustees of ASIS and AIST, is the sole stockholder and Chief Executive
Officer.
AMC provides a number of mutual funds, and may provide other personal and
institutional accounts, with portfolio management services. It maintains a staff
of experienced investment personnel and support facilities. Current assets under
management are approximately $110 million.
The Distributor distributes shares for all of Astra Group's mutual funds. AMC
and the Distributor are wholly-owned subsidiaries of Atlas Holdings Group, Inc.
These companies are part of the umbrella name "Astra Group."
Portfolio Management
=============================
Investment management decisions made by AMC are made by a committee with no one
person being solely responsible for making recommendations to the committee.
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Management Fees
=============================
The Trustees of AIST establish the Portfolio's investment policies and supervise
and review the operations and management of the Portfolio. See "Trustees and
Officers" in the Statement of Additional Information for a complete description
of the Trustees of the Trusts and the Portfolio. For furnishing the Portfolio
with investment advice and investment management and administrative services
with respect to the Portfolio's assets, including making specific
recommendations as to the purchase and sale of portfolio securities, furnishing
requisite office space and personnel, and in general supervising and managing
the Portfolio's investments subject to the ultimate supervision and direction of
AIST's Trustees, AMC is paid monthly a fee equal to 0.55% per annum of the
average daily net assets of the Portfolio on the first $500 million of assets.
The annual rate is reduced to 0.50% on net assets from $500 million to $1
billion; and to 0.45% on net assets over $1 billion. AMC will reduce its
aggregate fees for any fiscal year, or reimburse the Portfolio or Trusts to the
extent required so that aggregate expenses do not exceed the expense limitations
applicable under the securities laws or regulations of those states or
jurisdictions in which the Trust's shares are registered or qualified for sale.
AMC has also agreed to reduce its management and/or administrative fees to the
extent necessary to ensure that the total operating expenses of Trust I and the
Portfolio are not higher than what Trust I's total operating expenses would have
been under the terms of AMC's prior management agreement with Trust I. For the
fiscal year ended October 31, 1996, the total expenses paid by Trust I, Trust
I-A, Trust II and Trust IV, respectively, were approximately 2.05%, 1.94%, 1.92%
and 2.72% which excludes 0.94% expenses of the Portfolio which reduced dividends
paid to the Trusts of their average daily net assets.
Administrative Fees
=============================
ASIS has retained the services of Atlas Group as administrator for the Trusts,
but has not retained the services of an investment adviser since each Trust
seeks to achieve its investment objective by investing in the Portfolio.
Pursuant to an administration agreement ("Administration Agreement") Atlas Group
supervises the overall administration of each Trust. These administrative
services include supervising the preparation and filing of all documents
required for compliance by each Trust with applicable laws and regulations,
supervising the maintenance of books and records and other general and
administrative responsibilities. For providing these services, Atlas Group
receives a fee from each Trust of 0.10% per annum of its average daily net
assets.
Under a sub-administration agreement between Atlas Group and PFPC Inc. ("PFPC"),
PFPC provides certain administrative services to the Trusts, subject to the
supervision of the Board of Trustees of ASIS. Such services include regulatory
compliance, assistance in the preparation and filing of post-effective
amendments to ASIS' registration statement with the SEC, preparation of annual,
semi-annual and other reports to shareholders and the SEC, filing of federal and
state income tax returns, preparation of financial and management reports,
preparation of board meeting materials, preparation and filing of blue sky
registrations and monitoring compliance with the amounts and conditions of each
state qualification. In consideration of the services provided under the
sub-administration agreement, Atlas Group (not the Trusts) has agreed to pay
PFPC a monthly fee at the annual rate of .07% of the average net assets of each
Trust subject to certain minimums, exclusive of out-of-pocket expenses.
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Distribution Plans
=============================
The Trusts finance activities which are primarily intended to result in the sale
of Trust shares and have each adopted a Distribution Plan pursuant to Rule 12b-1
under the 1940 Act (each, a "Plan"). Rule 12b-1 permits mutual funds, such as
the Trusts, to finance distribution activities and bear expenses associated with
the distribution of its shares provided that any payments made by the fund are
made pursuant to a written plan adopted in accordance with the Rule.
Trust I or I-A. Each Plan provides for two categories of payments. First, each
Plan provides daily compensation to the principal underwriter for its
distribution services and facilities ("daily compensation"). Pursuant to each
Plan, but subject to the .75% limitation described below, Trust I or I-A will
pay the principal underwriter daily compensation in the form of (i) sales
commissions equal to 4% of the amount received by Trust I for each share sold
and 5% of the amount received by Trust I-A for each share sold (excluding
reinvestment of dividends and distributions) ("Underwriter's Sales Commissions")
and (ii) an interest fee calculated by applying the rate of 1% over the prime
rate then reported in The Wall Street Journal to the outstanding balance of
Uncovered Distribution Charges of the principal underwriter (as described
below). The principal underwriter currently expects to pay sales commissions to
dealers at the time of sale of up to 3% of the purchase price of the shares sold
by such dealer. See "How to Buy Shares of the Trusts." The principal underwriter
will use its own funds or funds facilitated by the principal underwriter (which
may be borrowed or otherwise financed) to pay such sales commissions. In
addition to the daily compensation to the principal underwriter, each Plan also
provides for the payment to the principal underwriter of a trail or maintenance
fee, accrued daily and paid monthly, in an amount equal to an annual rate of
0.25% of Trust I or I-A's daily net assets, which may be paid to dealers at an
annual rate not to exceed 0.25% of Trust I or I-A's daily net assets owned by
clients of the dealers.
Because the payment of the Underwriter's Sales Commissions and interest fees to
the principal underwriter in the form of daily compensation is subject to the
.75% limitation in each Plan, it will take the principal underwriter a number of
years to recoup the sales commissions paid to dealers and its other sales
expenses from the daily compensation payments received by it from Trust I or I-A
pursuant to each respective Plan. Such daily compensation will be accrued daily
(at the rate of 1/365 of .75% of Trust I or I-A's net assets) and paid monthly,
but will be automatically discontinued during any period in which there are no
outstanding Uncovered Distribution Charges under the respective Plan.
Notwithstanding the discontinuation of Uncovered Distribution Charges, Trust I
or I-A may continue to pay the .25% trail or maintenance fee. Uncovered
Distribution Charges are calculated daily. A brief definition of Uncovered
Distribution Charges is that they are equivalent on any given day to all unpaid
Underwriter's Sales Commissions (Underwriter's Sales Commissions previously due
less amounts received pursuant to each respective Plan) and the interest fee to
which the principal underwriter is entitled under each respective Plan less all
CDSCs previously paid to the principal underwriter. The Astra organization may
be considered to have realized a profit under either Plan if at any point in
time the aggregate amounts of all daily compensation and CDSC payments
previously made to the principal underwriter have exceeded the total expenses
incurred by the Astra organization in distributing shares of Trust I or I-A.
Total expenses for this purpose will include an allocable portion of the
overhead costs of such organization.
The amount of daily compensation payable to the principal underwriter with
respect to each day will be accrued on such day as a liability of Trust I or I-A
and will accordingly reduce Trust I or I-A's net assets upon such accrual.
However, in accordance with generally accepted accounting principles, neither
Trust I nor I-A accrues future daily compensation as a liability of Trust I or
I-A or reduces Trust I or I-A's current net assets in respect of daily
compensation which may become payable under each Plan in the future because the
standards for accrual of a liability under such accounting principles have not
been satisfied. As of October 31,
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1996, Trust I had total net assets of $48,553,813 and Uncovered Distribution
Charges aggregated $11,621,801. As of October 31, 1996, Trust I-A had total net
assets of $36,054,377 and Uncovered Distribution Charges aggregated $9,681,679.
Notwithstanding the existence of such Uncovered Distribution Charges, the amount
of daily compensation payable on each day is limited to 1/365 of .75% of Trust I
or I-A's net assets on such day. The level of Trust I or I-A's net assets
changes each day and depends upon the amount of sales and redemptions of Trust I
or I-A shares, the changes in the value of Trust I or I-A's portfolio
investments, the expenses of Trust I or I-A accrued on such day, income on
portfolio investments accrued on such day, and dividends and distributions
declared by Trust I or I-A.
Each Plan provides that Trust I or I-A will make no daily compensation payments
to the principal underwriter during any period in which there are no outstanding
Uncovered Distribution Charges of the principal underwriter. Such daily
compensation will be paid to the principal underwriter whenever there exist
Uncovered Distribution Charges under each Plan. Each Plan provides that it shall
continue in effect from year to year provided that a majority of the Trustees of
ASIS, including a majority of the Trustees who are not "interested persons" of
ASIS (as defined in the 1940 Act) and who have no direct or indirect financial
interest in the operation of each Plan or any agreement related to each Plan
(the "Rule 12b-1 Trustees"), vote annually to continue each Plan. Each Plan may
be terminated at any time by vote of a majority of the Rule 12b-1 Trustees or of
a majority of the outstanding shares of Trust I or I-A.
Trust I-A's Plan provides that Trust I-A, on termination of its Plan, will
continue to make daily compensation payments to the Distributor (but only with
respect to sales that occurred prior to the termination of Trust I-A's Plan)
until the earlier of (a) four years after the date of such termination or (b)
such time as there exist no Uncovered Distribution Charges under Trust I-A's
Plan. The amounts and purposes of expenditures under the Plan must be reported
to the 12b-1 Trustees quarterly. Furthermore, any continuance of daily
compensation payments after termination of Trust I-A's Plan is subject to the
continuance in effect by the Rule 12b-1 Trustees of the Underwriting Agreement,
and such payments would cease upon termination of the Underwriting Agreement
(unless such payments were made in accordance with another underwriting
agreement entered into by the parties). Trust I-A's Plan may be terminated by
vote of a majority of the Rule 12b-1 Trustees, but in deciding whether to
purchase shares of Trust I-A, investors should consider that daily compensation
payments could continue until such time as there are no Uncovered Distribution
Charges under Trust I-A's Plan.
Periods with a high level of sales of Trust I or I-A shares accompanied by a low
level of redemptions of Trust I or I-A shares resulting in the imposition of
CDSCs will tend to increase the time during which there will exist Uncovered
Distribution Charges of the principal underwriter. Conversely, periods with a
low level of sales of Trust I or I-A shares accompanied by a high level of early
redemptions of Trust I or I-A shares resulting in the imposition of CDSCs will
tend to reduce the time during which there will exist Uncovered Distribution
Charges of the principal underwriter.
Because of the .75% limitation on the amount of daily compensation paid to the
principal underwriter during any fiscal year, a high level of sales of Trust I
or I-A shares during the first few years of Trust I or I-A's operations would
cause a large portion of the daily compensation attributable to a sale of Trust
I or I-A shares to be accrued and paid by Trust I or I-A to the principal
underwriter in fiscal years subsequent to the years in which such shares were
sold. This spreading of Underwriter's Sales Commissions payments under each Plan
over an extended period would result in the incurrence and payment of increased
interest fees under each Plan.
Each Plan authorizes payments which may be equivalent, on an aggregate basis
during any fiscal year of Trust I or I-A, of up to 1% of Trust I or I-A's
average daily net assets for such year. Trust I and I-A believe that the rate of
these payments may be higher than the rate of payments made under distribution
plans adopted by many other investment companies pursuant to Rule 12b-1. It is
anticipated that the Astra organization will benefit
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by reason of the operation of the Plan through increases in Trust I or I-A's
assets (thereby increasing the advisory fees paid to AMC) resulting from sale of
Trust I or I-A shares and through daily compensation and CDSCs paid to the
principal underwriter. The Astra organization may be considered to have realized
a profit under either Plan if at any point in time the aggregate amount of all
daily compensation and CDSC payments previously made to the principal
underwriter have exceeded the total expenses previously incurred by such
organization in distributing shares of Trust I or I-A. It is anticipated that
Trust I or I-A will benefit by having the continuous cash flow resulting from
the sale of new shares which will be used to meet shareholder redemptions and to
take advantage of buying opportunities without having to make unwarranted
liquidations of portfolio securities.
Trust I has limited the offering of its shares. Trust I may, in its absolute
discretion, continue unrestricted sales or suspend, discontinue or further limit
the offering of its shares at any time. Trust I-A may, in its absolute
discretion, suspend, discontinue or limit the offering of its shares at any
time. In determining whether any such action should be taken, ASIS' management
intends to consider all relevant factors, including, without limitation, the
size of Trust I or I-A, the investment climate and market conditions, the volume
of sales and redemptions of Trust I or I-A shares, and the amount of Uncovered
Distribution Charges of the principal underwriter. Each Plan may continue in
effect and payments may be made under each Plan following any such suspension,
discontinuance or limitation of the offering of Trust I or I-A shares. However,
neither Trust I nor I-A is contractually obligated to continue each Plan for any
particular period of time. Suspension of the offering of Trust I or I-A shares
would not, of course, affect a shareholder's ability to redeem his shares.
Trust II or IV. Trust II's Plan provides that it will pay up to a maximum of
0.25% per annum of Trust II's daily net assets for expenses incurred in the
distribution of Trust II's shares. Trust IV's Plan provides that it will pay up
to a maximum of 0.60% per annum of Trust IV's daily net assets for expenses
incurred in the distribution of Trust IV's shares.
Each Plan provides that it shall continue in effect for as long as such
continuance is approved at least annually by the vote of a majority of the
Trustees of ASIS and a majority of the Trustees of ASIS who are not interested
persons of ASIS and who have no direct or indirect financial interest in the
operation of each Plan or any agreements related to each Plan (the "Rule 12b-1
Trustees"). Each Plan may be terminated at any time by a vote of a majority of
the Rule 12b-1 Trustees, or by a vote of a majority of the outstanding voting
securities of Trust II or Trust IV, as appropriate.
Each Plan will only make payments for expenses actually incurred by the
Distributor. Each Plan provides that unreimbursed expenses may be carried over
from year to year, provided however, that in accordance with a policy adopted by
ASIS' Board of Trustees, such expenses may not be carried over for more than
three years from the date when they were incurred and that the Distributor has
not yet been reimbursed for such expenses. The Distributor may include as an
expense a portion of its overhead, including out of pocket costs. In the event a
Plan is terminated in accordance with its terms, the obligation of Trust II or
IV to make payments to the Distributor pursuant to its Plan will cease and Trust
II or IV will not be required to make any payments for expenses incurred after
the date such Plan terminates.
Pursuant to Trust II's Plan, the Distributor will be entitled to reimbursement
(up to the maximum of 0.25% per annum of Trust II's assets) for its actual
expenses incurred in the distribution and promotion of Trust II shares,
including the printing of prospectuses and reports used for sales purposes,
expenses for preparation and printing of sales literature and other related
expenses, including any distribution or service fees paid to securities dealers
or institutions who have executed a distribution or service agreement with the
Distributor.
Pursuant to Trust IV's Plan, the Distributor will be entitled to reimbursement
(up to the maximum of 0.60% per annum of Trust IV's assets) for its actual
expenses incurred in the distribution and promotion of Trust IV's shares,
including the printing of prospectuses and reports used for sales purposes,
expenses for preparation
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and printing of sales literature, and related expenses, including any
commissions, and maintenance, distribution or service fees paid to securities
dealers or institutions who have executed a distribution or service agreement
with the Distributor.
With regard to Trust IV, the Distributor currently expects to pay, (i) sales
commissions to dealers of up to .45% of the purchase price of the shares sold by
such dealers; and (ii) a trial or maintenance fee, which will be prorated and
paid quarterly after the first full year of investment, in an amount equal to
.50% of Trust IV's daily net assets owned by clients of such dealer.
Trust II or IV may, in their absolute discretion, suspend, discontinue or limit
the offering of its shares at any time. In determining whether any such action
should be taken, Trust II or IV's management intends to consider all relevant
factors, including, without limitation, the size of the Trust II or IV, the
investment climate and market conditions and the volume of sales and redemptions
of Trust II or IV shares. Each Plan may continue in effect and payments may be
made under each Plan following any such suspension, discontinuance or limitation
of the offering of Trust II or IV shares. However, neither Trust II nor IV is
contractually obligated to continue its Plan for any particular period of time.
Suspension of the offering of Trust II or IV shares would not, of course, affect
a shareholder's ability to redeem his shares.
For the fiscal year ended October 31, 1996, Trust II reimbursed the Distributor
$10,033 for distribution expenses incurred. Distribution expenses incurred by
the Distributor included disbursements of $1,084 for costs of personnel involved
with this promotion and distribution of Trust II's shares. At October 31, 1996,
the Distributor had incurred approximately $1,199,658 of distribution expenses
in excess of amounts currently reimbursable by Trust II. For the fiscal year
ended October 31, 1996, Trust IV reimbursed the Distributor $12,924 for
distribution expenses incurred. Distribution expenses incurred by the
Distributor included disbursements of $581 for costs of personnel involved with
the promotion and distribution of Trust IV's shares. At October 31, 1996, the
Distributor had incurred approximately $673,700 of distribution expenses in
excess of amounts currently reimbursable by Trust IV.
See the Statement of Additional Information for a further description of the
Distribution Plans.
General Information
=============================
Each Trust is a series of ASIS which was organized as a Massachusetts business
trust on July 19, 1989. Each Trust consists of an unlimited number of shares of
beneficial interest without par value.
All shares of each Trust have equal voting rights. In the event of dissolution
or liquidation, holders of a Trust's shares will receive pro rata, subject to
the rights of creditors, proceeds of the sale of the assets held. There are no
preemptive or conversion rights applicable to any of the shares. ASIS shares do
not have cumulative voting rights and, as such, holders of at least 50% of the
shares voting for Trustees can elect all Trustees and the remaining shareholders
would not be able to elect any Trustees. The shares, when issued, will be fully
paid and non-assessable. The Board of Trustees of ASIS may create additional
series (or classes of series) of ASIS shares without shareholder approval. Any
series of shares may be terminated by a vote of shareholders of such series
entitled to vote or by the Trustees of ASIS by written notice to shareholders of
such series.
Generally, there will not be annual meetings of shareholders. Shareholders may
remove trustees from office by votes cast at a meeting of shareholders or by
written consent. If requested by shareholders of at least 10% of the outstanding
shares of ASIS, ASIS will call a meeting of shareholders for the purpose of
voting upon the question of removal of a trustee or trustees and will assist in
communications with other shareholders as required by Section 16(c) of the 1940
Act.
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42
<PAGE>
As used in this Prospectus, the term "Majority Vote" means the affirmative vote
of (a) more than 50% of the outstanding shares of a Trust or ASIS, as
appropriate, or (b) 67% or more of the shares present at a meeting if more than
50% of the outstanding shares of a Trust or ASIS, as appropriate, are
represented at the meeting in person or by proxy, whichever is less.
Whenever the Trusts are requested to vote on any proposal of the Portfolio, the
Trusts will hold a meeting of their shareholders and will cast their votes as
instructed by their shareholders. As is true for all investment companies, a
majority of the outstanding voting securities can control the results of any
shareholder vote. Because Portfolio investors' votes are proportionate to their
percentage interests in the Portfolio, one or more other Portfolio investors
could, in certain instances, approve an action which a majority of the
outstanding voting securities of a Trust had voted against. This could result in
a Trust redeeming its investment in the Portfolio, which could result in
increased expenses for such Trust. Whenever the shareholders of the Trusts are
called to vote on matters relating to the Portfolio, the Trustees of ASIS shall
vote shares for which they receive no voting instructions in the same proportion
as the shares for which they do receive voting instructions.
Under Massachusetts law, shareholders could, under certain circumstances, be
held liable for the obligations of ASIS. However, the Declaration of Trust
disclaims shareholder liability for acts or obligations of ASIS and requires the
notice of such disclaimer be given to all parties in each agreement, obligation
or instrument entered into or executed by ASIS or the Trustees. The Declaration
of Trust provides for indemnification out of the property of ASIS for all loss
and expense of any shareholder of ASIS held liable on account of being or having
been a shareholder. Thus, the risk of a shareholder incurring financial loss on
account of shareholder liability is limited to circumstances in which ASIS would
be unable to meet its obligations wherein the complaining party was held not to
be bound by the disclaimer.
The Declaration of Trust further provides that the Trustees of ASIS will not be
liable for errors of judgment or mistakes of fact or law. However, nothing in
the Declaration of Trust protects a Trustee against any liability to which the
Trustee would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence, or reckless disregard of the duties involving the conduct of
his office. The Declaration of Trust provides for indemnification by ASIS of the
Trustees and officers of ASIS except with respect to any matter as to which such
person did not act in good faith in the reasonable belief that his action was in
or not opposed to the best interests of ASIS. Such person may not be indemnified
against any liability to ASIS or its shareholders to which he would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties involved in the conduct of his office. The
Declaration of Trust also authorizes the purchase of liability insurance on
behalf of Trustees and officers.
Any conflict of interest arising between ASIS and AIST will be resolved by the
Trustees of ASIS and AIST in accordance with their fiduciary responsibilities
imposed by the 1940 Act and Massachusetts law. Absent the adoption of procedures
reasonably appropriate to deal with conflicts of interest, state securities
regulations generally do not permit the Trustees of the Portfolio to be the same
individuals as the Trustees of ASIS. The Trustees of ASIS and AIST, including a
majority of the disinterested Trustees (as that term is defined in the 1940,
Act), have adopted procedures that they believe are reasonably appropriate to
deal with any potential conflicts of interest up to and including creating a
separate Board of Trustees.
OTHER INFORMATION
Certain class action lawsuits, the first of which was filed on December 19, 1994
(entitled Lisa Liottali, on behalf of herself and all others similarly situated
v. Pilgrim Adjustable Rate Securities Trust I-A, Pilgrim Institutional
Securities Trust, Pilgrim Management Corporation, Pilgrim Group, Inc. and
Palomba Weingarten), are pending in the United States District Court for the
Central District of California in which Pilgrim Group, Inc., Pilgrim Management
Corporation, Pilgrim Distributors Corp., Pilgrim Institutional Securities Trust,
Pilgrim Strategic Investment Series ("PSIS") (and certain series funds of PSIS)
(predecessors to "Astra") and certain Trustees and Officers of the Trust are
defendants. These actions, which were consolidated
- ---
43
<PAGE>
on March 31, 1995, in an action entitled In Re: Pilgrim Securities Litigation,
principally allege violations of the 1933 Act and the 1940 Act and relate
primarily to disclosure concerning pricing and liquidity of portfolio
securities. Management believes the Complaints are without merit and intends to
vigorously defend these actions. On December 18, 1996 the Court granted
preliminary approval of a tentative class action settlement which would result
in a dismissal of the class actions with prejudice. The tentative settlement
would not have a material adverse effect upon the financial condition of the
Trusts or the Portfolio. The tentative settlement, however, is subject to final
court approval, among other things, and the defendants have the option of
terminating the settlement under certain conditions.
Investors in each Trust will be informed of its progress through periodic
reports. Financial statements certified by independent public accountants will
be submitted to shareholders at least annually. A copy of a current list of
investments comprising the Portfolio's portfolio at the close of business on the
last day of each month may be obtained by written request to the Trusts,
together with a stamped, self-addressed envelope.
This Prospectus is not an offering of the securities herein described in any
state in which such offering may not lawfully be made. No salesman, dealer or
other person is authorized to give any information or make any representation
other than those contained in this Prospectus.
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<PAGE>
[Logo] Astra Adjustable U.S. Government Securities Trusts I-A, II and IV
ASTRA NEW ACCOUNT APPLICATION
================================================================================
INITIAL INVESTMENT Please check the box next to the Trust
Please mail the completed in which you are investing. If no
Application to: selection is made, your investment may
DST Systems, Inc. be delayed.
P.O. Box 419174
Kansas City, MO 64141 |_|(201) Astra Adjustable U.S. Government
Securities Trust I-A*
For accounts established
via Federal Funds wire, |_|(76) Astra Adjustable U.S. Government
please mail the completed Securities Trust II
application to:
DST Systems, Inc. |_|(__) Astra Adjustable U.S. Government
P.O. Box 419174 Securities Trust IV*
Kansas City, MO 64141
Attn: Order Dept. |_| Establish the account specified below with
the enclosed check for $_____ payable tothe
Trust selected above. Minimum initial
investment is $5,000 for Trusts I-A or II and
$50,000 for Trust IV. (Third party checks,
except those payable to an existing
shareholder who is a natural person, credit
cards and cash will not be accepted).
|_| Payment has been made by Dealer purchase on
____________, $__________
(Date) (Amount)
__________________________
(Order Number)
|_| Payment has been made by Fed. funds wire
#____________ on __________
(Reference No.) (Date)
_____________, $__________
(Account No.) (Amount)
- --------------------------------------------------------------------------------
ACCOUNT Full Name/Corporate Name
REGISTRATION
_________________________________________________
Joint Tenancy will be Co-owner (if applicable)
assumed unless
otherwise noted. **Social Security or Taxpayer I.D. #
_________________________________________________
|_| Check this box if Awaiting TIN
_________________________________________________
Street Address
_________________________________________________
City, State, Zip
_________________________________________________
Check the Appropriate box below:
|_| I am a United States Citizen
|_| I am a Resident Alien (Please complete a W-9
and 1078)
|_| I am a Non-Resident Alien (Please complete a
W-8)
Indicate what country a tax resident of
_____________________.
Special Note: If Joint Account Registration
each Non-Resident Alien must fill out a W-8.
- --------------------------------------------------------------------------------
* Shares may be subject to a contingent deferred sales charge.
** The Trust reserves the right to reject any Application that does not
furnish a certified TIN, or does not indicate that a TIN has been applied
for by checking the "Awaiting TIN" box on the Application.
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45
<PAGE>
- --------------------------------------------------------------------------------
DISTRIBUTION If no box is checked, all distributions will be
INSTRUCTIONS reinvested in additional shares of the Trust.
If you wish cash
distributions INCOME DIVIDENDS: (elect one)
electronically credited
to your bank account, |_| Reinvest dividends |_| Pay dividends in cash
please attach a voided
check for this account. |_| Use Dividend Transfer Option
CAPITAL GAINS DISTRIBUTION: (elect one)
|_| Reinvest capital gains
|_| Pay capital gains in cash
If you wish to utilize the Dividend Transfer
Option, please designate the Astra Fund account
you wish to have your dividends reinvested in:
_____________________ _________________________
Fund Name Existing Acct. No.
|_| Check this box if you wish your cash
distributions to be sent to a payee or
address other than that listed in the
"ACCOUNT REGISTRATION" section above and
indicate the payee and address below:
_________________________________________________
Payee
_________________________________________________
Street Address
_________________________________________________
Account Number If Applicable
_________________________________________________
CIty, State and Zip Code
- --------------------------------------------------------------------------------
SPECIAL SERVICES: I (we) authorized the Trust's Transfer Agent to
EXPEDITED act upon telephone or wire instructions from any
REDEMPTIONS person to have amounts redeemed from my (our)
Please indicate a commer- account in the Trust and:
cial bank and attach a
voided check for this |_| WIRED to the bank account designated below.
account. "FOR DEALER ($5,000 minimum)
ONLY" section must be Name of Bank Branch
completed.
_________________________________________________
Bank Address
__________________________________________________
__________________________________________________
Name of Account Account Number
__________________________________________________
TELEPHONE EXCHANGE You will automatically be assigned this privilege
PRIVILEGE--Telephone unless you instruct the Trust otherwise by
exchanges may be made by checking the box below. Shares may only be
calling DST Systems, exchanged between accounts with identical
Inc. at (800) 441-7267 registrations. Any certificates for shares must be
before the close of the NYSE deposited prior to any exchange of such shares.
on any business day the NYSE Certain Restrictions apply to this privilege.
is open. Please read the Prospectus carefully.
|_| I do not wish to have Telephone Exchange
Privilege.
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46
<PAGE>
OTHER SERVICES |_| RIGHTS OF ACCUMULATION (Trust II Only)
Read the Prospectus for
further details on Rights I apply for reduced sales charges, subject to the
of Accumulation and Transfer Agent's confirmation of the following
Letters of Intent, or eligible holdings:
call (800) 441-7267.
Fund Shareholder Registration Account No.
---- ------------------------ -----------
_________ __________________________ ____________
_________ __________________________ ____________
Five percent of the dollar |_| LETTER OF INTENT (Trust II Only)
amount of the Letter of
Intent will be held in I intend to invest over a 13-month period
escrow until the intended beginning _______________________________
purchase has been
completed. |_| $100,000 |_| $250,000 |_| $500,000
|_| $750,000 |_| $1,000,000 or more
Existing account information:
Fund Shareholder Registration Account No.
---- ------------------------ -----------
_________ __________________________ ____________
_________ __________________________ ____________
CERTIFICATION AND The account owners or their representatives
SIGNATURE certify that they have the power and authority to
establish this account and select the privileges
requested, subject to the terms outlined in the
Prospectus. Atlas Holdings Group, Inc. or any
subsidiary, affiliate or agent or their officers,
directors or employees will not be liable for any
loss, expense or cost for acting upon any
instructions or inquiries believed genuine. The
account owners certify that the current Prospectus
for the Trust has been received and read and that
the authorizations hereon shall continue until the
Trust receives written notice of a modification
signed by all appropriate parties or a termination
signed by any party. This account is subject to
the terms of the Trust's Prospectus, as amended
from time to time, and the terms herein set forth,
and subject to acceptance by the Trust and to the
laws of California. All terms shall be binding
upon the representatives, successors, andassigns
of the account owners.
Cross out (2) if it is not Under penalties of perjury, the undersigned hereby
correct. certify (1) that the Social Security or Tax- payer
I.D. Number above is correct and (2) that the
account owner is not subject to backupwithholding
because (a) the undersigned is exempt from backup
withholding, (b) the undersigned have not been
notified of being subject to backup withholding as
a result of a failure to report all interest or
dividends, or (c) the I.R.S. has provided
notification that the account owner is no longer
subject to backup withholding.
Corporations, trusts, and partnerships hereby
certify that each of the persons listed below have
been duly elected, and are now legally holding the
offices set forth opposite his/her name and have
the authority to make this authorization. Please
print titles with signatures if signing on behalf
of a business or trust to establish this account.
All persons signing as representatives warrant as
individuals that each person signing is an
authorized representative of the account owner,
that the account and privileges selected have been
duly authorized, that all signatures hereon are
genuine and that the persons indicated hereon are
authorized to sign. It is understood that the
Trust, Astra Fund Distributors Corp. and the
Transfer Agent may rely on these authorizations
until revoked or amended by written notice
delivered by registered mail to the Trust.
The Internal Revenue Service does not require your
consent to any provision of this document other
than the certifications required to avoid backup
withholding.
All Co-owners Authorized Signature Title
must sign if the
account is _________________________________________________
held by
Co-owners. Authorized Signature Title
_________________________________________________
Authorized Signature Title
_________________________________________________
Date
_____________________
Telephone Number:
Home: ( )
Other: ( )
- --------------------------------------------------------------------------------
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47
<PAGE>
- --------------------------------------------------------------------------------
FOR DEALER ONLY: The undersigned ("Dealer") agrees to all
(Please Print) applicable provisions in this Application and the
Dealer Agreement, guarantees the signature of and
representations by the Shareholder, agrees to
notify Astra Fund Distributors Corp. of any
purchases made under a Letter of Intent or Rights
of Accumulation, and represents that this
Application is properly executed by a signer
authorized to guarantee signatures for the Dealer.
Dealer's name __________________________________________________
Main office address __________________________________________________
Authorized signature
of dealer X ________________________________________________
Branch street address __________________________________________________
City _____________________State______________Zip_______
Representative No. and
last name ______________________Telephone No.________________
- --------------------------------------------------------------------------------
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<PAGE>
Astra Adjustable U.S. Government Securities Trust I
ADDITIONAL ACCOUNT PRIVILEGES
=====================================================================
[Logo] Please mail the Existing Account No:_________
ASTRA completed Form to:
DST Systems, Inc. Existing Account registration:_______________
P.O. Box 419174 _____________________________________________
Kansas City, MO 64141 _____________________________________________
- --------------------------------------------------------------------------------
DISTRIBUTION If no box is checked, all distributions will be
INSTRUCTIONS reinvested in additional shares of the Trust.
INCOME DIVIDENDS: (elect one)
|_| Reinvest dividends |_| Pay dividends in cash
|_| Use Dividend Transfer Option
CAPITAL GAINS DISTRIBUTION: (elect one)
|_| Reinvest capital gains
If you wish your cash |_| Pay capital gains in cash
distributions electronically
credited to your bank If you wish to utilize the Dividend Transfer
account, please attach a Option, please designate the Astra Fund account
voided check for this you wish to have your dividends reinvested in:
account.
____________________ __________________________
Fund Name Existing Acct. No.
|_| Check this box if you wish your cash
distributions to be sent to a payee or
address other than that listed in the
"ACCOUNT REGISTRATION" section above and
indicate the payee and address below:
_________________________________________________
Payee
_________________________________________________
Street Address
_________________________________________________
Account Number If Applicable
_________________________________________________
City, State and Zip Code
- --------------------------------------------------------------------------------
SPECIAL SERVICES: I (we) authorize the Trust's Transfer Agent to act
EXPEDITED upon telephone or wire instructions from any
REDEMPTIONS person to have amounts redeemed from my (our)
account in the Trust and
Please indicate a commer-
cial bank and attach a |_| WIRED to the bank account designated below.
voided check for this ($5,000 minimum)
account. "FOR DEALER
ONLY" section must be Name of Bank Branch
completed.
_________________________________________________
Bank Address
_________________________________________________
_________________________________________________
Name of Account Account Number
TELEPHONE EXCHANGE __________________________________________________
PRIVILEGE--Telephone
exchanges may be made You will automatically be assigned this privilege
by calling DST Systems, unless you instruct the Trust otherwise by
Inc., at (800) 441-7267 checking the box below. Shares may only be
before the close of the exchanged between accounts with identical
NYSE on any business day registrations. Any certificates for shares must be
the NYSE is open. deposited prior to any exchange of such shares.
Certain Restrictions apply to this privilege.
Please read the Prospectus carefully.
|_| I do not wish to have the Telephone Exchange
Privilege.
- --------------------------------------------------------------------------------
SYSTEMATIC I (we) authorize the Trust's Transfer Agent, to
WITHDRAWAL liquidate shares in and withdraw cash from my
PLAN account 5 business days prior to the beginning of
_______ (month) to provide
|_| Monthly or |_| Quarterly Systematic Withdrawal
Plan payments ("SWP") in the amount of$_______
($100 minimum) to the registered shareholder or to
the followingdesignated payee
If you wish your SWP _________________________________________________
payment electronically Full Name/Corporate Name
credited to your bank
account, please attach a _________________________________________________
voided check. Name of Payee or Payee Bank
_________________________________________________
Bank Account Number (if any)
_________________________________________________
Street Address
_________________________________________________
City, State, Zip
_________________________________________________
Authorized Signature(s)
- --------------------------------------------------------------------------------
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49
<PAGE>
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50
<PAGE>
Astra Adjustable U.S. Government Securities Trusts I-A, II and IV
Additional Account Privileges
[Logo] =================================================
ASTRA
I (we) authorize the Trust's Transfer Agent, to
SYSTEMATIC liquidate shares in and withdraw cash from my
WITHDRAWAL account 5 business days prior to the beginning
PLAN _______ of (month) to provide |_| Monthly or |_|
Quarterly Systematic Withdrawal Plan payments
PLEASE MAIL THE ("SWP") in the amount of $________ ($100 minimum)
COMPLETED FORM TO: to the registered shareholder or to the following
DST Systems, Inc. designated payee:
P.O. Box 419174 Full Name/Corporate Name
Kansas City, MO 64141 _________________________________________________
If you wish your SWP
payments to be Name of Payee or Payee Bank
electronically credited _________________________________________________
to your bank account,
please attach a Bank Account Number (if any)
voided check. _________________________________________________
Street Address
_________________________________________________
City, State, Zip
_________________________________________________
Authorized Signature(s)
- --------------------------------------------------------------------------------
PRE-AUTHORIZED I (we) authorize the Trust's Transfer Agent, to
INVESTMENT PLAN draw checks on the bank account provided below,
beginning on the |_| 5th and/or |_| 20th of
Please attach a voided _______ (month) and on the same day each month
check for this account thereafter in the amount of $__________ ($250
minimum) to purchase additional shares of the
Mail the completed Trust:
form to the above Full Name/Corporate Name
address _________________________________________________
Name of Bank Branch
_________________________________________________
Address
_________________________________________________
City, State, Zip
_________________________________________________
Authorized Signature(s)
- --------------------------------------------------------------------------------
DETACH HERE AND RETURN THIS TO YOUR BANK IF YOU ARE
ESTABLISHING A PRE-AUTHORIZED INVESTMENT PLAN
(Authorization to honor checks drawn by DST Systems, Inc.,
on behalf of Astra Adjustable U.S. Government Securities
Trust I-A, II and IV for Automatic Purchase Plan)
- --------------------------------------------------------------------------------
Please PRINT As a convenience, I (we) hereby request
and authorize you to pay and charge to
Name of my (our) account checks drawn on my
Depositor (our) account by DST Systems, Inc., the
(as shown on _____________________ Trust's Agent and payable to the order
bank records) of the Trust provided there are
sufficient collected funds in said
Bank account to pay the same upon
Account presentation. I (we) agree that your
Number _____________________ rights with respect to each such check
shall be the same as if it were a check
drawn on you and signed personally by me
(us). This authority is to remain in
effect until revoked in writing and
until you actually receive such notice I
(we) agree that you shall be fully
protected in honoring any such checks.
I (we) further agree that if any such
check be dishonored, whether with or
without cause and whether intentionally
or inadvertently, you shall be under no
liability whatsoever.
Signature(s) of Depositor(s) (signed
exactly as shown on bank records)
Name
of Bank _____________________ x_______________________________________
Address
of Bank _____________________ x_______________________________________
City, State and
Zip Code
of Bank _____________________ _______________________________19_______
Date Signed
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51
<PAGE>
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52
<PAGE>
ASTRA ADJUSTABLE U.S. GOVERNMENT SECURITIES TRUST I, I-A or IV
CONTINGENT DEFERRED SALES CHARGE WAIVER FORM
(To be completed ONLY if the undersigned believes that he is entitled
to a waiver of the Contingent Deferred Sales Charge.)
If you believe you are entitled to a waiver of the Contingent Deferred
Sales Charge in accordance with the terms set forth on page 32 of the
Prospectus, you must complete this Contingent Deferred Sales Charge Waiver Form
and send it to the Trust's Transfer Agent at its address given below. The waiver
will only be granted upon confirmation of your entitlement.
Check the item below which the undersigned is relying upon for a waiver of
the Contingent Deferred Sales Charge and send any required documents specified
therein:
|_| Redemption is made upon the death or permanent disability of shareholder.
(Enclose either a certified death certificate or certification of permanent
disability (see below), whichever is appropriate).
|_| Redemption is made in connection with mandatory distributions from an IRA
or other qualified retirement plan. (Enclose a certified birth certificate
for IRA or other qualified retirement plan accounts. Where IFTC acts as
custodian, please contact the Trust for a Distribution Request Form which
must accompany this Contingent Deferred Sales Charge Waiver Form).
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
________________________________________________________________________________
Signature_______________________________________________________________________
(Exactly as on Account Registration)
DATE____________________________________________________________________________
Name(s)_________________________________________________________________________
________________________________________________________________________________
(Please Print)
Mail the completed Waiver Form to:
DST Systems, Inc., P.O. Box 419174, Kansas City, MO 64141
DEFINITION OF DISABILITY
An individual will be considered disabled if he meets the definition
thereof in Section 72(m)(7) of the Internal Revenue Code, which in pertinent
part defines a person as disabled if such person is unable to engage in any
substantial gainful activity by reason of any medically determinable physical or
mental impairment which can be expected to result in death or to be of long
continued and indefinite duration.
CERTIFICATION OF DISABILITY
I __________________________________ certify that ____________________________
Physician Name Investor/Patient
is under the regular care of _____________________________________ and is unable
Licensed Physician
to perform the material duties of his or her regular occupation or employment;
or is unable to engage in any substantial gainful activity by reason of a
physical or mental impairment which may result in death or be of continued and
indefinite duration. Date of Determination of Disability _______________________
Physician Signature ____________________________________ Date__________________
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54
<PAGE>
Important Information Regarding Completion of the Substitute Form W-9
=============================
The Fund, and other payers, must, according to IRS regulations, withhold
20% of reportable dividends (whether paid or accrued) and redemption payments if
a shareholder fails to provide a taxpayer identification number, and a
certification that he is not subject to backup withholding in the Substitute
Form W-9 included as a part of this Letter of Transmittal.
(Section references are to the Internal Revenue Code, as amended).
Backup Withholding
You are subject to backup withholding if:
(1) You fail to furnish your taxpayer identification number to the Fund in
the manner required, OR
(2) The Internal Revenue Service notifies the Fund that you furnished an
incorrect taxpayer identification number, OR
(3) You are notified that you are subject to backup withholding under
section 3406(a)(1)(C), OR
(4) For an interest or dividend account opened after December 31, 1983, you
fail to certify to the payer that you are not subject to backup withholding
under (3) above, or fail to certify your taxpayer identification number.
For payments other than interest or dividends, you are subject to backup
withholding only if (1) or (2) above applies.
Obtaining a Number
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, application for a Social Security Number Card, or Form
SS-4, application for Employer Identification Number, at the local office of the
Social Security Administration or the Internal Revenue Service and apply for a
number. Write "applied for" in the space provided for a taxpayer identification
number on the application.
What Number to Give
Give the social security number or employer identification number of the record
owner of the account. If the account belongs to you as an individual, give your
social security number. If the account is in more than one name or is not in the
name of the actual owner, see the chart below for guidelines on which number to
report in completing the account registration section:
1 List first and circle the name of the person whose number you furnish.
2 Circle the minor's name and furnish the minor's social security number.
3 Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
4 Show the name of the owner.
5 List first and circle the name of the legal trust, estate, or pension
trust.
Note: If no name is circled when there is more than one name, the number will be
considered to be that of the first name listed. Penalties
(1) Penalty for Failure to Furnish Taxpayer Identification Number.--If you fail
to furnish your taxpayer identification number to a payer, you are subject to a
penalty of $50 for each such failure unless your failure is due to reasonable
cause and not to willful neglect.
(2) Failure to Report Certain Dividend and Interest Payments.--If you fail to
include any portion of an includible payment for interest, dividends, or
patronage dividends in gross income, such failure will be treated as being due
to negligence and will be subject to a penalty of 5% on any portion of an
underpayment attributable to that failure unless there is clear and convincing
evidence to the contrary.
(3) Civil Penalty for False Information With Respect to Withholding.--If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(4) Criminal Penalty for Falsifying Information.--Falsifying certifications or
affirmations may subject you to criminal penalties including fines and/or
imprisonment.
Payees Exempt from Backup Withholding
Certain payees are specifically exempted from backup withholding on ALL
payments. Write "exempt payee" after paragraph (2) of the Certification and
Signature section if your account falls into one of the following categories.
We will still need your taxpayer identification number.
o A corporation
o A financial institution.
o An organization exempt from tax under section 501(a), or an individual
retirement plan.
o A registered dealer in securities or commodities registered in the U.S. or
a possession of the U.S.
o A real estate investment trust.
o A common trust fund operated by a bank under section 584(a).
o An exempt charitable remainder trust, or a non-exempt trust described in
section 4947(a)(1).
o An entity registered at all times under the Investment Company Act of 1940.
Payments of dividends not generally subject to backup withholding include
the following:
o Payments to nonresident aliens subject to withholding under section 1441.
o Payments to partnerships not engaged in a trade or business in the U.S. and
which have at least one nonresident partner.
Privacy Act Notice.--Section 6109 requires most recipients of dividend,
interest, or other payments to give taxpayer identification numbers to payers
who must report the payments to the IRS. IRS uses the numbers for identification
purposes. Payers must be given the numbers whether or not recipients are
required to file tax returns. Beginning January 1, 1984, payers must generally
withhold 31% of taxable interest, dividend, and certain other payments to a
payee who does not furnish a taxpayer identification number to a payer. Certain
penalties may also apply.
================================================================================
Guidelines for determining
proper number
for this type of account:
- --------------------------------------------------------------------------------
1. An individual's account
2. Two or more individuals (joint account)
3. Husband and wife (joint account)
4. Custodian account to a minor (Uniform Gift to Minors Act)
5. Adult and minor
6. Account in the name of guardian or committee for a designated ward, minor
or incompetent person
7. a. The usual revocable savings trust account (grantor is also trustee)
b. So-called trust account that is not a legal or valid trust under state
law
8. Sole proprietorship account
- --------------------------------------------------------------------------------
================================================================================
Give the
SOCIAL SECURITY
number of--
- --------------------------------------------------------------------------------
The individual
The actual owner of the account or, if combined funds any one of the
individuals(1)
The actual owner of the account or, if joint funds, either person1
The minor(2)
The adult or if the minor is the only contributor, the minor(1)
The ward, minor, or incompetent person(3)
The grantor-trustee(5)
The actual owner(1)
The owner(4)
- --------------------------------------------------------------------------------
================================================================================
For this type of account:
- --------------------------------------------------------------------------------
9. A valid trust, estate or pension trust
10. Corporate account
11. Religious, charitable, or educational organization account
12. Partnership account held in the name of the business
13. Association, club or other tax-exempt organization
14. A broker or registered nominee
15. Account with the Department of Agriculture in the name of a public entity
(such as a State or local government, school district, or prison) that
receives agricultural program payments
- --------------------------------------------------------------------------------
================================================================================
Give the EMPLOYER
IDENTIFICATION
number of--
- --------------------------------------------------------------------------------
Legal entity (Do not furnish the identifying number of the personal
representative or trustee unless the legal entity itself is not designated in
the account title.)5 The corporation The organization
The partnership
The organization
The broker or nominee
The public entity
- ---
55
- --------------------------------------------------------------------------------
<PAGE>
[LOGO]
===================================== =========================================
11400 West Olympic Boulevard ASTRA
Suite 200 ADJUSTABLE
Los Angeles, California 90064 U.S. GOVERNMENT
SECURITIES TRUSTS I, I-A, II AND IV
- ------------------------------------- -----------------------------------------
ASTRA ADJUSTABLE U.S. GOVERNMENT PROSPECTUS
SECURITIES TRUSTS I, I-A, II AND IV FEBRUARY 28, 1997
Investment Manager
Astra Management Corporation
11400 West Olympic Boulevard
Suite 200
Los Angeles, California 90064 [ARTWORK - EAGLE WITH FLAG]
(310) 445-8850
Principal Underwriter
Astra Fund Distributors Corp.
11400 West Olympic Boulevard
Suite 200
Los Angeles, California 90064
(310) 445-8850
Shareholder Servicing Agent
DST Systems, Inc.
P.O. Box 419174
Kansas City, Missouri 64141
Transfer Agent
Investors Fiduciary Trust Company
c/o DST Systems, Inc.
P.O. Box 419174
Kansas City, Missouri 64141
Custodian
PNC Bank, National Association
Airport Business Center
200 Stevens Drive
Lester, Pennsylvania 19113
Legal Counsel
Jorden Burt Berenson & Johnson LLP
1025 Thomas Jefferson Street, N.W.
Suite 400 East
Washington, D.C. 20007
Auditors
Tait, Weller & Baker
Two Penn Center Plaza
Philadelphia, Pennsylvania 19102
USG I-A 297 8 AST 702050
<PAGE>
PART B
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
FEBRUARY 28, 1997
ASTRA ADJUSTABLE U.S. GOVERNMENT SECURITIES TRUST I
ASTRA ADJUSTABLE U.S. GOVERNMENT SECURITIES TRUST I-A
ASTRA ADJUSTABLE U.S. GOVERNMENT SECURITIES TRUST II
ASTRA ADJUSTABLE U.S. GOVERNMENT SECURITIES TRUST IV
11400 West Olympic Boulevard
Suite 200
Los Angeles, California 90064
(800) 219-1080
Astra Adjustable U.S. Government Securities Trust I ("Trust I"), Astra
Adjustable U.S. Government Securities Trust I-A ("Trust I-A"), Astra Adjustable
U.S. Government Securities Trust II ("Trust II") and Astra Adjustable U.S.
Government Securities Trust IV ("Trust IV") (individually the "Trust" or
collectively, the "Trusts") are non-diversified series of Astra Strategic
Investment Series ("ASIS"), an open-end management investment company. The
investment objective of each of the Trusts is to seek high current income
consistent with low volatility of principal. Each Trust seeks to achieve its
objective by investing all of its investable assets in the Astra Institutional
Adjustable U.S. Government Securities Portfolio (the "Portfolio"), a
non-diversified open-end series of Astra Institutional Securities Trust
("AIST"), which has the same investment objective as those of the Trusts.
The Portfolio seeks to achieve its investment objective by investing at least
65% of its assets in mortgage securities, issued or guaranteed by the U.S.
Government, its agencies or instrumentalities ("U.S. Government Mortgage
Securities"). The Portfolio will invest the remainder of its assets generally in
adjustable rate mortgage securities which are issued or sponsored by commercial
banks, savings and loan associations, mortgage bankers or other financial
institutions, that have no government guarantee and that are senior or
subordinated to other mortgage securities arising out of the same pool of
mortgages ("Multi-Class Residential Mortgage Securities").
The combined prospectus for Trust I, Trust I-A, Trust II and Trust IV, dated
February 28, 1997 (the "Prospectus"), which provides the basic information you
should know before investing in any of the Trusts, may be obtained without
charge from ASIS at the address listed above. This Statement of Additional
Information is not a prospectus. It contains information in addition to and more
detailed than set forth in the Prospectus. It is intended to provide you
additional information regarding the activities and operations of the Trusts and
ASIS, and should be read in conjunction with the Prospectus.
<PAGE>
TABLE OF CONTENTS
GENERAL INFORMATION AND HISTORY............................................. 3
INVESTMENT OBJECTIVE AND POLICIES........................................... 3
INVESTMENT RESTRICTIONS..................................................... 6
TRUSTEES AND OFFICERS....................................................... 8
MANAGEMENT OF THE TRUSTS AND THE PORTFOLIO..................................10
EXECUTION OF PORTFOLIO TRANSACTIONS.........................................11
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION..............................12
PRICE OF THE SHARES IS DETERMINED DAILY.....................................14
SHAREHOLDER SERVICES AND PRIVILEGES.........................................15
FEDERAL TAX TREATMENT OF DIVIDENDS AND DISTRIBUTIONS........................16
INVESTMENT RETURN INFORMATION...............................................20
GENERAL INFORMATION.........................................................23
FINANCIAL STATEMENTS........................................................30
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<PAGE>
GENERAL INFORMATION AND HISTORY
On August 18, 1989, the shareholders of PSIS approved a proposal to reorganize
PSIS from a New York common law trust to Pilgrim Strategic Investment Series, a
Massachusetts business trust, with one series, Pilgrim High Yield Trust. The
Declaration of Trust dated July 19, 1989, was filed with the Commonwealth of
Massachusetts on July 21, 1989. Pursuant to an amendment of the Declaration of
Trust dated January 16, 1990, Pilgrim High Yield Trust changed its name to
Pilgrim Strategic Investment Series. The reorganization had no ramifications
with respect to the investment objective and policies, investment restrictions
or general operations of PSIS. On November 12, 1990, the Trustees approved the
creation of a second series, the Pilgrim Adjustable U.S. Government Securities
Trust. On September 4, 1991, the Trustees of PSIS approved the creation of five
additional series of PSIS: Trust II, Trust III, Pilgrim Adjustable Rate
Securities Trust I, Pilgrim Adjustable Rate Securities Trust II and Pilgrim
Adjustable Rate Securities Trust III. On November 22, 1991, the shareholders of
PSIS approved a proposal to change the fundamental policies of the Pilgrim
Adjustable U.S. Government Securities Trust and its name was changed to Pilgrim
Adjustable U.S. Government Securities Trust I. On February 13, 1992 the Trustees
of PSIS approved the creation of two additional series of PSIS: Pilgrim
Adjustable U.S. Government Securities Trust IV and Pilgrim Adjustable Rate
Securities Trust IV, whose names were subsequently changed to Pilgrim Adjustable
U.S. Government Securities Trust I-A and Pilgrim Adjustable Rate Securities
Trust I-A. On April 30, 1993, the Trustees of PSIS approved the creation of two
additional series of PSIS: Pilgrim Adjustable U.S. Government Securities Trust
IV and Pilgrim Adjustable Rate Securities Trust IV. On May 12, 1994, the
Trustees of PSIS approved an amendment to PSIS' Declaration of Trust to permit
PSIS to issue additional classes of shares under a multiclass distribution
system. On March 17, 1995, the Trustees approved an amendment to PSIS'
Declaration of Trust changing the name of PSIS to Astra Strategic Investment
Series ("ASIS"). Effective as of April 10, 1995, the Pilgrim Adjustable U.S.
Government Securities Trusts changed their name to Astra Adjustable U.S.
Government Securities Trusts, all series of ASIS.
INVESTMENT OBJECTIVE AND POLICIES
The following discussion pertaining to investments by the Portfolio supplements
the discussion of the investment objective of the Portfolio set forth in the
Prospectus under the heading "How The Trust Works."
MULTI-CLASS RESIDENTIAL MORTGAGE SECURITIES
The following discussion is intended to be a general discussion of certain
features of Multi-Class Residential Mortgage Securities and is not intended as a
discussion of all of the possible terms pursuant to which these types of
securities could be issued. Multi-Class Residential Mortgage Securities are a
type of multi-class pass through security. Such a security represents a
beneficial interest in a pool of mortgage loans or a pool of mortgage pass
through securities, often collectively referred to as "mortgage assets." The
mortgage assets are typically held by a trust (a "Mortgage Trust"), the
beneficial interests in which are evidenced by certificates issued pursuant to a
pooling and servicing agreement. The pooling and servicing agreement is entered
into by a trustee whose main responsibility is to act in the interests of the
certificate holders by enforcing the provisions of the pooling and servicing
agreement, and a party who is responsible for pooling and conveying the
mortgage's assets to the trust, sometimes referred to as a depositor. In some
cases, the depositor also acts as a master servicer for the underlying mortgage
loans. Payments of principal and interest made on the
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<PAGE>
mortgage assets provide the funds to permit the trust to make scheduled
distributions to certificate holders. See "The Mortgage Loans," discussed below.
The Certificates. In general, a series of certificates is issued in multiple
classes with a stated maturity or final distribution date. One or more classes
of each series may be entitled to receive distributions allocable only to
principal, principal prepayments, interest or any combination thereof prior to
one or more other classes, or only after the occurrence of certain events, and
may be subordinated in the right to receive such distributions on such
certificates to one or more senior classes of certificates. The rights
associated with each class of certificates are set forth in the applicable
pooling and servicing agreement, form of certificate and offering documents for
the certificates.
The subordination terms are usually designed to decrease the likelihood that the
holders of senior certificates will experience losses or delays in the receipt
of their distributions and to increase the likelihood that the senior
certificate holders will receive aggregate distributions of principal and
interest in the amounts anticipated. Generally, pursuant to such subordination
terms, distributions arising out of scheduled principal, principal prepayments,
interest or any combination thereof that otherwise would be payable to one or
more other classes of certificates of such series (i.e., the subordinated
certificates) are paid instead to holders of the senior certificates. Delays in
receipt of scheduled payments on mortgage loans and losses on defaulted mortgage
loans are typically borne first by the various classes of subordinated
certificates and then by the holders of senior certificates.
In some cases, the aggregate losses in respect of defaulted mortgage loans which
must be borne by the subordinated certificates and the amount of the
distributions otherwise distributable on the subordinated certificates that
would, under certain circumstances, be distributable to senior certificate
holders may be limited to a specified amount. All or any portion of
distributions otherwise payable to holders of subordinated certificates may, in
certain circumstances, be deposited into one or more reserve accounts for the
benefit of the senior certificate holders. Since a greater risk of loss is borne
by the subordinated certificate holders, such certificates generally have a
higher stated yield than the senior certificates.
Interest on the certificates generally accrues on the aggregate principal
balance of each class of certificates entitled to interest at an applicable
rate. The certificate interest rate may be a fixed rate, a variable rate based
on current values of an objective interest index or a variable rate based on a
weighted average of the interest rate on the mortgage loans underlying or
constituting the mortgage assets. In addition, the underlying mortgage loans may
have variable interest rates.
Generally, to the extent funds are available, interest accrued during each
interest accrual period on each class of certificates entitled to interest is
distributable on certain distribution dates until the aggregate principal
balance of the certificates of such class has been distributed in full.
The amount of interest that accrues during any interest accrual period and over
the life of the certificates depends primarily on the aggregate principal
balance of the class of certificates which, unless otherwise specified, depends
primarily on the principal balance of the mortgage assets for each such period
and the rate of payment (including prepayments) of principal of the underlying
mortgage loans over the life of the trust.
A series of certificates may consist of one or more classes as to which
distributions allocable to principal will be allocated. The method by which the
amount of principal to be distributed on the certificates on each distribution
date is calculated and the manner in which such amount could be allocated among
classes varies and could be effected pursuant to a fixed schedule, in relation
to the occurrence of certain events or otherwise. Special distributions are also
possible if distributions are received with respect to the mortgage assets, such
as is the case when underlying mortgage loans are prepaid.
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<PAGE>
Special Hazard Certificates. Special hazard certificates are typically offered
in conjunction with other classes of mortgage pass through certificates and
constitute a subordinated class. To the extent that losses incurred on the
underlying mortgage loans constitute special hazard losses, the rights of the
special hazard certificate holders to receive distributions of principal and
interest are subordinated to those of the certificate holders of the more senior
classes of the series. A special hazard loss is a loss relating to a defaulting
mortgage loan as to which all recoverable liquidation and insurance proceeds
have been received. Depending on the particular terms of the certificates,
special hazard losses are allocated first to the special hazard certificate
holders and then to the regular certificate holders.
Credit Enhancement. Credit enhancement for the senior certificates comprising a
series is provided by the holders of the subordinated certificates to the extent
of the specific terms of the subordination and, in some cases, by the
establishment of reserve funds. Depending on the terms of a particular pooling
and servicing agreement, additional or alternative credit enhancement may be
provided by a pool insurance policy and/or other insurance policies, third party
limited guaranties, letters of credit, or similar arrangements. Letters of
credit may be available to be drawn upon with respect to losses due to mortgagor
bankruptcy and with respect to losses due to the failure of a master servicer to
comply with its obligations, under a pooling and servicing agreement, if any, to
repurchase a mortgage loan as to which there was fraud or negligence on the part
of the mortgagor or originator and subsequent denial of coverage under a pool
insurance policy, if any. A master servicer may also be required to obtain a
pool insurance policy to cover losses in an amount up to a certain percentage of
the aggregate principal balance of the mortgage loans in the pool to the extent
not covered by a primary mortgage insurance policy by reason of default in
payments on mortgage loans.
Optional Termination of a Mortgage Trust. A pooling and servicing agreement may
provide that the depositor and master servicer could effect early termination of
a Mortgage Trust, after a certain specified date or the date on which the
aggregate outstanding principal balance of the underlying mortgage loans is less
than a specific percentage of the original aggregate principal balance of the
underlying mortgage loans by purchasing all of such mortgage loans at a price,
unless otherwise specified, equal to the greater of a specified percentage of
the unpaid principal balance of such mortgage loans, plus accrued interest
thereon at the applicable certificate interest rate, or the fair market value of
such mortgage assets. Generally, the proceeds of such repurchase would be
applied to the distribution of the specified percentage of the principal balance
of each outstanding certificate of such series, plus accrued interest, thereby
retiring such certificates. Notice of such optional termination would be given
by the trustee prior to such distribution date.
Yield and Prepayment Considerations. The rate of principal payments on the
certificates, the aggregate amount of each interest payment and the yield to
maturity on the certificates are related to the rate of principal payments on
the underlying mortgage loans. Such principal payments may be in the form of
scheduled principal payments, prepayments by mortgagors, liquidations due to
default, casualty, condemnation and certain events usually set forth in the
related pooling and servicing agreement. The rate of prepayment may be
influenced by a variety of economic, geographic, social and other factors. In
general, however, if interest rates on comparable obligations were to fall below
the mortgage rates on the underlying mortgage loans, which may be different from
prevailing interest rates, the rate of prepayment would be expected to increase.
Conversely, if prevailing rates on comparable obligations were to rise above the
mortgage rates on the underlying mortgage loans, the mortgage loans would be
expected to prepay at lower rates than if prevailing rates on comparable
obligations were to remain at or below the mortgage rates on the underlying
mortgage loans.
Underlying Mortgage Loans. The underlying trust assets are a mortgage pool
generally consisting of mortgage loans on single, multi-family and mobile home
park residential properties. The mortgage loans are originated by savings and
loan associations, savings banks, commercial banks or similar institutions and
mortgage banking companies.
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<PAGE>
Various services provide certain customary servicing functions with respect to
the mortgage loans pursuant to servicing agreements entered into between each
servicer and the master servicer. A servicer's duties generally include
collection and remittance of principal and interest payments, administration of
mortgage escrow accounts, collection of insurance claims, foreclosure
procedures, and, if necessary, the advance of funds to the extent certain
payments are not made by the mortgagors and are recoverable under applicable
insurance policies or from proceeds of liquidation of the mortgage loans.
The mortgage pool is administered by a master servicer who (a) establishes
requirements for each servicer, (b) administers, supervises and enforces the
performance by the services of their duties and responsibilities under the
servicing agreements, and (c) maintains any primary insurance, standard hazard
insurance, special hazard insurance and any pool insurance required by the terms
of the certificates. The master servicer may be an affiliate of the depositor
and also may be the servicer with respect to all or a portion of the mortgage
loans contained in a trust fund for a series of certificates.
PURCHASE OF MORTGAGE SECURITIES
The Portfolio intends to comply with the provisions of Section 12(d) of the
Investment Company Act of 1940, as amended (the "1940 Act") in connection with
purchasing mortgage securities.
LENDING OF PORTFOLIO SECURITIES
As noted in the Prospectus, the Portfolio may lend its portfolio securities in
order to generate additional income. The Portfolio may pay reasonable
administration and custodial fees in connection with a loan and may pay a
negotiated portion of the income earned on the cash to the borrower or placing
broker. Loans are subject to termination at the option of the Portfolio or the
borrower at any time, including when termination is necessary to enable the
Portfolio to be the record owner for each dividend paid by the issuer thereof.
The Portfolio does not have the right to vote securities on loan, but would
terminate the loan and regain the right to vote if that were considered
important with respect to the investment.
INVESTMENT RESTRICTIONS
The following investment restrictions which have been adopted by each Trust are
fundamental and cannot be changed without approval by the vote of a majority of
the outstanding voting securities of each Trust, as defined in the 1940 Act.
(All policies not specifically identified in this Statement of Additional
Information or the Prospectus as fundamental may be changed without a vote of
the shareholders.)
The Trusts may not:
1. Borrow money, except if after each borrowing there is asset coverage
of at least 300% as defined in the Act. For purposes of this
investment restriction, short sales, the entry into currency
transactions, options, futures contracts, including those relating
to indexes, options on futures contracts or indexes and forward
commitment transactions shall not constitute borrowing.
2. Invest more than 25% of the value of its total assets in the securities
of one or more issuers conducting their principal business activities
in the same industry, except that each of the Trusts will invest more
than 25% of the value of its total assets in securities of issuers in
the asset-backed securities industry. However, in some future period or
periods, due to adverse economic conditions or for defensive purposes,
a Trust may temporarily have less than 25% of the total value of its
assets invested in that industry. This limitation does not apply to
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<PAGE>
investments or obligations of the U.S. Government or any of its
agencies or instrumentalities. In addition, this limitation does not
prevent a Trust from investing all or substantially all of its
assets in another registered investment company having the same
investment objective as that of such Trust.
3. Pledge, mortgage or hypothecate its assets, except to the extent
necessary to secure permitted borrowings and to the extent related to
the deposit of assets in escrow in connection with (a) the writing of
covered put and call options, (b) the purchase of securities on a
forward commitment or delayed-delivery basis and (c) collateral and
initial or variation margin arrangements with respect to currency
transactions, options, futures contracts, including those relating to
indexes, and options on futures contracts or indexes.
4. Purchase securities on margin, except for such short-term credits as
are necessary for the clearance of transactions, but the Trusts and the
Portfolio may make margin deposits in connection with transactions in
currencies, options, futures and options on futures.
5. Make short sales of securities, except short sales against-the-box, or
maintain a short position.
6. Underwrite any issue of securities issued by others, except to the
extent that the sale of portfolio securities by a Trust may be deemed
to be underwriting, except that, a Trust may invest all or
substantially all of its assets in another registered investment
company with the same investment objective as that of such Trust.
7. Purchase, hold or deal in real estate or oil and gas interests,
although a Trust may purchase and sell securities that are secured by
real estate or interests therein and may purchase mortgage-related
securities and may hold and sell real estate acquired for such Trust as
a result of the ownership of securities.
8. Invest in commodities except that each Trust may purchase and sell
futures contracts, including those relating to securities, currencies,
indexes, and options on futures contracts or indexes and currencies
underlying or related to any such futures contracts, and purchase and
sell currencies (and options thereon) or securities on a forward
commitment or delayed-delivery basis.
9. Lend any funds or other assets except through the purchase of all or a
portion of an issue of securities or obligations of the type in which
it may invest; however, each Trust may lend portfolio securities in an
amount not to exceed 10% of the value of a Trust's total assets. Any
loans of portfolio securities will be made according to guidelines
established by the SEC and the Board of Trustees.
10. Issue any senior security (as such term is defined in Section 18(f) of
the 1940 Act), except as permitted herein and in Investment Restriction
Nos. 1, 3, 4 and 8. Obligations under interest rate swaps will not be
treated as senior securities for purposes of this restriction so long
as they are covered in accordance with applicable regulatory
requirements. Obligations under interest rate collars, caps, and floors
will be treated as senior securities unless and until such time as the
Portfolio receives regulatory relief from staff of the Securities and
Exchange Commission or until such time as the staff no longer deems
such instruments to be senior securities. Other good faith hedging
transactions and similar investment strategies will also not be treated
as senior securities for purposes of this restriction so long as they
are covered in accordance with applicable regulatory requirements and
are structured consistent with current staff interpretation.
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<PAGE>
In addition, the Trusts will abide by the following additional investment
restrictions, although they are not fundamental investment policies.
Each Trust will not:
1. Invest in oil, gas and other mineral leases or real estate limited
partnerships.
2. Purchase securities of unseasoned issuers, including their predecessors
or sponsors, which have been in operation for less than three years,
and equity securities of issuers which are not readily marketable if by
reason thereof the value of its aggregate investment in such classes of
securities will exceed 5% of its total assets.
3. Purchase puts, calls, straddles, spreads, and any combination thereof
if by reason thereof the value of its aggregate investment in such
classes of securities will exceed 5% of its total assets.
4. Invest any part of its total assets in real estate or interests
therein, excluding readily marketable securities and securities for
which there does not exist a readily available market, i.e., illiquid.
5. Invest any part of its total assets in commodities or commodity futures
contracts.
6. Invest in warrants, valued at the lower of cost or market, in excess of
5% of the value of its net assets. Included within that amount, but not
to exceed 2% of the value of its net assets, may be warrants which are
not listed on the New York or American Stock Exchange. Warrants
acquired by a Trust in units or attached to securities may be deemed to
be without value.
TRUSTEES AND OFFICERS
Responsibility for management of ASIS and AIST vested in a Board of Trustees.
The Trustees in turn appoint officers of ASIS and AIST to supervise actively the
day-to-day operations of ASIS and AIST. The shareholders of ASIS and AIST may
elect Trustees at any meeting of shareholders called by the Trustees for that
purpose. Each Trustee serves during the continued lifetime of ASIS and AIST
until he dies, resigns or is removed, or if sooner, until the next meeting of
shareholders called for the purpose of electing Trustees.
The affiliations and principal occupations during the past five years of the
Trustees and principal officers are:
PALOMBA WEINGARTEN, CHAIRMAN OF THE BOARD AND TRUSTEE+ (54)
9595 Wilshire Boulevard, Beverly Hills, California 90212. Chairman of the
Board, Director and Chief Executive Officer of Atlas Holdings Group, Inc.,
the parent of Astra Fund Distributors Corp., and Astra Management Corp.,
("AMC") the Trusts' distributor and investment manager, respectively.
Chairman of the Board and Trustee of Astra Global Investment Series, Astra
Institutional Securities Trust and Astra Institutional Trust.
AL BURTON, TRUSTEE (68)
2300 Coldwater Canyon, Los Angeles, California 90210. President of Al
Burton Productions from 1992 to present; Executive Producer for First Run
Syndication for Castle Rock Entertainment Inc. from 1992 to 1995;
Executive Producer-Consultant for Universal Television from 1982 to 1992;
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<PAGE>
Trustee of Astra Global Investment Series, Astra Institutional Securities
Trust, Astra Institutional Trust and Pilgrim Prime Rate Trust. Director of
Pilgrim America MagnaCap Fund, Inc., Pilgrim Regional BankShares, Inc. and
Pilgrim America Government Securities Fund.
FELICE R. CUTLER, TRUSTEE (59)
10601 Wilshire Boulevard, 19th Floor, Los Angeles, California 90024.
Partner in the law firm of Cutler & Cutler, Los Angeles, California since
1991 and for more than five years prior to 1990 and in the law firm of
Dilworth, Paxson, Kalish & Kauffman from 1990 to 1991. Trustee of Astra
Institutional Trust, and Astra Institutional Securities Trust.
GARRY D. PEARSON, TRUSTEE (48)
150 North Myers Street, Los Angeles, California 90033. Senior Vice
President of George Rice & Sons, a printing company located in Los
Angeles, California, since July 1994. Formerly Vice President and Partner
in Anderson Lithograph, a printing company located in Los Angeles,
California, from 1983 to 1994. Trustee of Astra Global Investment Series,
Astra Institutional Trust and Astra Institutional Securities Trust.
ROBERT R. WOMACK, JR., PRESIDENT+ (33)
11400 West Olympic Boulevard, Suite 200, Los Angeles, California 90064.
President of AMC, Astra Fund Distributors Corp., Astra Institutional
Securities Trust, Astra Institutional Trust and Astra Global Investment
Series. From July 1995 to the present, Portfolio Manager with the Astra
Funds. From April to June 1995, Portfolio Manager for Pilgim America
Group. From June 1993 to April 1995, Portfolio Manager for Pilgrim
Management Corp. From March 1989 to June 1993, Portfolio Manager for World
Savings and Loan Association in Oakland, California.
JOHN R. ELERDING, SENIOR VICE PRESIDENT, SECRETARY, TREASURER AND CHIEF
FINANCIAL OFFICER+ (45)
11400 West Olympic Boulevard, Suite 200, Los Angeles, California 90064.
Senior Vice President, Secretary, Treasurer and Chief Financial Officer of
AMC and Astra Fund Distributors Corp. Senior Vice President, Secretary,
Treasurer and Chief Financial Officer of Astra Global Investment Series,
Astra Institutional Securities Trust and Astra Institutional Trust. From
January 1994 to September 1994, Chief Financial Officer at the investment
banking firm of Investment Securities Corp. in San Francisco, California.
From 1991 to August 1993, investment manager and assistant to the Chief
Operating Officer at Robertson Stephens & Company in San Francisco,
California.
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+ Interested person of ASIS as defined in the 1940 Act.
The officers and Trustees of ASIS and AIST, as a group, owned of record and
beneficially less than 1% of the outstanding shares of the Trusts as of October
31, 1996. The Trustees of ASIS and AIST who are not affiliated with or
interested persons of AMC may receive fees for attendance at Trustees' meetings
(during the fiscal year ended October 31, 1996, $33,171 was paid in such fees),
while officers of ASIS and AIST receive no compensation directly from AMC for
performing the duties of their offices. However, those officers and Trustees of
ASIS and AIST who are affiliated with AMC may be considered to have received
remuneration indirectly because AMC receives management fees from AIST.
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MANAGEMENT OF THE TRUSTS AND THE PORTFOLIO
MANAGEMENT AGREEMENT
Investment management services are provided to the Portfolio by Astra Management
Corp. ("AMC") (formerly Pilgrim Management Corporation) pursuant to an
Investment Management Agreement (the "Management Agreement") dated September 30,
1991. As compensation for its services with respect to the Portfolio, AMC is
paid monthly a fee equal to 0.55% per annum of the average daily net assets of
the Portfolio on the first $500 million of assets. The annual rate is reduced to
0.50% on net assets from $500 million to $1 billion; and to 0.45% on net assets
over $1 billion. As of October 31, 1996, the total net assets of the Portfolio
were approximately $89 million. For the fiscal years ended October 31, 1994,
1995 and 1996 AMC received compensation under its management agreement with the
Portfolio in the amounts of $4,739,543, $1,550,152 and $680,424 respectively.
The Portfolio pays its own operating expenses which are not assumed by AMC, such
as expenses incurred in connection with the issuance, registration and transfer
of its shares; fees and costs of its custodian, transfer and shareholder
servicing agents; costs of pricing and calculating its daily net asset value and
of maintaining its books of account required by the 1940 Act; expenditures in
connection with meetings of each Trust's shareholders; salaries of officers and
fees and expenses of Trustees who are not members of or affiliated with AMC;
insurance premiums on property or personnel of AIST which inure to each Trust's
benefit; salaries of personnel of AIST who are involved in maintaining
registration of its shares under state securities laws; the cost of preparing
and printing reports and proxy statements of each Trust for distribution to its
shareholders; preparing and sending prospectuses and statements of additional
information to existing shareholders; trade association dues; legal and
accounting fees; and fees and expenses of registering and maintaining
registration of its shares for sale under Federal and applicable state
securities laws.
AMC will reduce its aggregate fees for any fiscal year, or reimburse the Trusts
or the Portfolio, to the extent required so that aggregate expenses do not
exceed the most restrictive expense limitations applicable under the securities
laws or regulations of those states or jurisdictions in which the Trusts' shares
are registered or qualified for sale.
The Management Agreement for the Portfolio is currently in effect until August
28, 1997, and will be continued in effect from year to year thereafter so long
as such continuation is approved at least annually (1) by the Trustees of AIST
or the vote of a majority of the outstanding voting securities of AIST, and (2)
by a majority of the Trustees who are not interested persons of any party to the
Management Agreement cast in person at a meeting called for the purpose of
voting on such approval. The Management Agreement may be terminated at any time
without penalty, by either AIST or AMC upon 60 days' written notice, and is
automatically terminated in the event of its assignment as defined in the 1940
Act.
ADMINISTRATIVE AGREEMENT
Administrative services are provided to each Trust by Atlas Holdings Group, Inc.
(formerly Pilgrim Group, Inc.), ("Atlas Group") pursuant to an administration
agreement dated September 4, 1991 (the "Administration Agreement"). As
compensation for its services thereunder, Atlas Group is paid a fee equivalent
to 0.10% per annum of each Trust's average daily net assets. For the fiscal
years ended October 31, 1994, 1995 and 1996, Trust I paid $492,250, $160,705 and
$67,601 to Atlas Group pursuant to the Administration Agreement. For the fiscal
years ended October 31, 1994, 1995 and 1996, Trust I-A paid $294,794, $100,620
and $48,893 to Atlas Group pursuant to the Administration Agreement. For the
fiscal years ended October 31, 1994, 1995 and 1996, Trust II paid $36,679,
$7,500 and $4,013 to Atlas Group pursuant to the Administration Agreement. For
the fiscal years ended October 31, 1994, 1995 and 1996, Trust IV paid $42,172,
$5,429 and $2,154 to Atlas Group pursuant to the Administration Agreement.
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Each Trust pays its own operating expenses which are not assumed by Atlas Group,
such as expenses incurred in connection with the costs of pricing and
calculating its daily net asset value and of maintaining its books of account
required by the 1940 Act; salaries of officers and fees and expenses of Trustees
who are not members of or affiliated with Atlas Group; insurance premiums on
property or personnel of ASIS which inure to each Trust's benefit; trade
association dues; and legal and accounting fees.
Under a sub-administration agreement between Atlas Group and PFPC Inc. ("PFPC"),
PFPC provides certain administrative services to each Trust, subject to the
supervision of the Board of Trustees of ASIS. Such services include regulatory
compliance, assistance in the preparation and filing of post-effective
amendments to ASIS' registration statement with the Securities and Exchange
Commission (the "SEC"), preparation of annual, semi-annual and other reports to
shareholders and the Commission, filing of federal and state income tax returns,
preparation of financial and management reports, preparation of board meeting
materials, preparation and filing of blue sky registrations and monitoring
compliance with the amounts and conditions of each state qualification. In
consideration of the services provided under the sub-administration agreement,
Atlas Group (not the Trusts) has agreed to pay PFPC a monthly fee at the annual
rate of .07% of the average net assets of each Trust subject to certain
minimums, exclusive of out-of-pocket expenses.
THE ATLAS GROUP
AMC is a wholly-owned subsidiary of Atlas Group, a Delaware corporation of which
Mrs. Weingarten is the sole stockholder and Chief Executive Officer. AMC also
acts as the investment manager to Astra Institutional Adjustable U.S. Government
Securities Portfolio and Astra Institutional Adjustable Rate Securities
Portfolio (series of Astra Institutional Securities Trust), Astra Short-Term
Multi-Market Income Fund and Astra Short-Term Multi-Market Income Fund II
(series of Astra Global Investment Series) and Astra All-Americas Government
Income Trust (a series of Astra Institutional Trust), all of which are open-end
investment companies. As of the date of this Statement, total assets under
management of AMC were approximately $110 million.
EXECUTION OF PORTFOLIO TRANSACTIONS
In all purchases and sales of securities for the portfolio of the Portfolio, the
primary consideration is to obtain the most favorable price and execution
available. Pursuant to the Management Agreement, AMC determines, subject to the
instructions of and review by the Trustees of AIST, which securities are to be
purchased and sold by the Portfolio and which brokers are to be eligible to
execute portfolio transactions of the Portfolio. Purchases and sales of
securities in the over-the-counter market will generally be executed directly
with a "market-maker," unless in the opinion of AMC, a better price and
execution can otherwise be obtained by using a broker for the transaction.
In placing portfolio transactions, AMC will use its best efforts to choose a
broker capable of providing the brokerage services necessary to obtain the most
favorable price and execution available. The full range and quality of brokerage
services available will be considered in making these determinations, such as
the size of the order, the difficulty of execution, the operations facilities of
the firm involved, the firm's risk in positioning a block of securities, and
other factors. In those instances where it is reasonably determined that more
than one broker can offer the brokerage services needed to obtain the most
favorable price and execution available, consideration may be given to those
brokers which supply research and statistical information to the Portfolio
and/or AMC, and provide other services in addition to execution services. AMC
considers such information, which is in addition to and not in lieu of the
services required to be performed by AMC under its agreement with AIST, to be
useful in varying degrees, but of indeterminable value. The placement of
portfolio brokerage with broker-dealers who have sold shares of the Portfolio is
subject to rules adopted by the National Association of Securities Dealers, Inc.
Provided officers of AIST are satisfied that the Portfolio is receiving the most
favorable price and execution available, the Portfolio may also consider the
sale of its shares as a factor in the selection of broker-dealers to execute its
portfolio transactions.
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While it will continue to be AIST's general policy to seek first to obtain the
most favorable price and execution available, in selecting a broker to execute
portfolio transactions for the Portfolio, AIST may also give weight to the
ability of a broker to furnish brokerage and research services to the Portfolio
or AMC, even if the specific services were not imputed just to the Portfolio and
were useful to AMC in advising other clients. In negotiating commissions with a
broker, the Portfolio may therefore pay a higher commission than would be the
case if no weight were given to the furnishing of these supplemental services,
provided that the amount of such commission has been determined in good faith by
AIST and AMC to be reasonable in relation to the value of the brokerage and
research services provided by such broker, which services either produce a
direct benefit to the Portfolio or assist AMC in carrying out its
responsibilities to the Portfolio. The standard of reasonableness is to be
measured in light of AMC's overall responsibilities to AIST.
For the fiscal years ended October 31, 1994, 1995 and 1996 total brokerage
commissions paid by the Portfolio amounted to approximately $109,000, $79,000
and $0, respectively. The Portfolio does not intend to effect any brokerage
transaction in its portfolio securities with any broker-dealer affiliated
directly or indirectly with AMC, except for any sales of portfolio securities
pursuant to a tender offer, in which event AMC will offset against the
management fee a part of any tender fees which legally may be received by such
affiliated broker-dealer.
Although investment decisions for the Portfolio are made independently from
those of the other Astra funds it is possible that at times identical securities
will be selected for purchase or sale by more than one of such funds. However,
the position of each fund in the same issuer may vary and the length of time
that each fund may choose to hold its investment in the same issuer may likewise
vary. To the extent any of these funds seeks to acquire the same security at the
same time, one or more of the funds may not be able to acquire as large a
portion of such security as it desires, or it may have to pay a higher price for
such security. Similarly, any of the funds may not be able to obtain as high a
price for, or as large an execution of, an order to sell any particular security
if any of the other funds desires to sell the same security at the same time. If
more than one of such funds simultaneously purchases or sells the same security,
each day's transaction in such security will be averaged as to price and
allocated between such funds in accordance with the total amount of such
security being purchased or sold by each of such funds. It is recognized that in
some cases this system could have a detrimental effect on the price or value of
the security insofar as AIST is concerned.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
RIGHTS OF ACCUMULATION (TRUST II ONLY)
Under the rights of accumulation privilege, if a shareholder had previously
purchased and still owned shares having a value at the current offering price of
$80,000, and then made another purchase of $20,000, the sales charge for the
latter purchase would be 2.5% of the offering price (2.56% of the net amount
invested).
LETTER OF INTENT (TRUST II ONLY)
As stated in the Prospectus, a shareholder may establish a Letter of Intent to
invest in a certain dollar amount of Trust II shares during a 13-month period.
Purchases by more than one person may not be grouped to obtain a reduced sales
price under the Letter of Intent except to the extent provided in Rule 22d-1(b)
under the 1940 Act and the regulations promulgated thereunder. At the time of
each purchase the shareholder or the dealer must inform Astra Fund Distributors
Corp. (the "Distributor") that the Letter of Intent is in effect, in order to
ensure that the reduced sales price will be received. Shares of Trust II and
other Astra Funds distributed by the Distributor purchased within 90 days prior
to entering into the Letter of Intent may be included for the quantity discount;
however, any adjustment to such quantity discount will not be made until the
terms of the Letter of Intent have been satisfied. In addition, shares acquired
(and still owned) on a cumulative basis over any period of time in any Astra
Fund offering the Letter of Intent option may be included for purposes of
determining whether the Letter of Intent is met.
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REINSTATEMENT PRIVILEGE (TRUST I, I-A, OR IV ONLY)
Shares of Trust I, I-A or IV may be sold at net asset value, with credit for any
contingent deferred sales charges paid on the redeemed Trust I, I-A or IV
shares, to persons who have redeemed their shares of Trust I, I-A or IV within
the previous 30 days. The amount of any contingent deferred sales charge related
to the prior redemption of Trust I, I-A or IV shares will be credited to the
shareholder's account and also reinvested.
The reinstatement privilege may be used only once per calendar year. In order to
exercise this privilege, a written order for the purchase of shares must be
received by the Transfer Agent, or be postmarked, within 30 days after the date
of redemption. If the shareholder has realized a gain on the redemption, the
transaction is taxable and any reinstatement will not alter any applicable
Federal capital gains tax. If there has been a loss on the redemption and a
subsequent reinstatement pursuant to this privilege, some or all of the loss may
not be allowed as a tax deduction depending upon the amount reinstated, although
such disallowance is added to the tax basis of the shares acquired upon the
reinstatement.
REDEMPTIONS
Payment to shareholders for shares redeemed or repurchased will be made within
seven days after receipt by the Transfer Agent of the written request in proper
form, except that a Trust may suspend the right of redemption or postpone the
date of payment during any period when (a) trading on the New York Stock
Exchange is restricted as determined by the SEC or such Exchange is closed for
reasons other than weekends and holidays; (b) an emergency exists as determined
by the SEC making disposal of portfolio securities or valuation of net assets of
a Trust not reasonably practicable; or (c) for such other period as the SEC may
permit for the protection of a Trust's shareholders. At various times a Trust
may be requested to redeem its shares for which it has not yet received good
payment. Accordingly, a Trust may delay the mailing of a redemption check until
such time as it determines that it has received good funds for the purchase of
the shares being redeemed, which may take up to 15 days or longer.
Due to the relatively high cost of handling small investments, each Trust
reserves the right to redeem, at net asset value, the shares of any shareholder
whose account (except for IRAs), as a result of voluntary redemption of shares
and not of investment performance of a Trust or deduction of sales charges, has
a value of less than $5,000 for Trusts I, I-A or II and $50,000 for Trust IV.
Before a Trust redeems such shares and sends the proceeds to the shareholder, it
will notify the shareholder that the value of the shares in his account is less
than the minimum amount and allow him 30 days to make an additional investment
in an amount which will increase the value of his account to at least $5,000 for
Trusts I, I-A or II and $50,000 for Trust IV before the redemption is processed.
This policy will not be implemented where a Trust has previously waived the
minimum investment requirements.
The value of shares on redemption or repurchase may be more or less than the
investor's cost, depending upon the market value of the portfolio securities at
the time of redemption or repurchase.
CONTINGENT DEFERRED SALES CHARGE (TRUST I, I-A OR IV ONLY)
A contingent deferred sales charge will be imposed on any redemption or
repurchase of shares of Trust I, I-A, or IV which reduces the current value of
the investor's shares of Trust I, I-A or IV to an amount which is lower than the
dollar amount of all payments by the investor for the purchase of Trust I or
I-A's shares during the preceding four years or for the purchase of Trust IV
shares during the preceding three months. However, no such charge will be
imposed to the extent that the net asset value of the shares redeemed does not
exceed (a) the current net asset value of shares purchased more than four years
prior to the redemption or repurchase for Trust I or I-A or the current net
asset value of shares purchased more than three months prior to the redemption
or repurchase for Trust IV, plus (b) the current net asset value of assets
purchased through reinvestment of dividends or distributions, plus (c) increases
in the net asset value of the investor's
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shares above the total amount of payments for the purchase of Trust I or I-A's
shares made during the preceding four years or for the purchase of Trust IV's
shares made during the preceding three months. Accordingly, investors may
redeem, without incurring any contingent deferred sales charge, amounts equal to
any net increase in the value of their shares above the amount of their purchase
payments made within the past four years, and amounts equal to the current value
of shares purchased through reinvestment of dividends or distributions. The
contingent deferred sales charge will be imposed, in accordance with the table
set forth in the Prospectus, on any redemptions within four years of purchase
which are in excess of these amounts. The amount of any contingent deferred
sales charge will be paid to and retained by the Distributor.
WAIVER OF CONTINGENT DEFERRED SALES CHARGE (TRUST I, I-A OR IV ONLY)
No contingent deferred sales charge will be payable in connection with the
redemption of shares of Trust I, I-A or IV purchased by officers, directors and
bona fide full-time employees of Trust I, I-A or IV, its service agents, and
with certain exceptions, officers, directors and full-time employees and sales
representatives of AMC, the Distributor or affiliated companies thereof (or any
trust, pension, profit-sharing or other benefit plan for such persons),
broker-dealers having sales agreements with the Distributor, all for their own
accounts or for their spouse and children, and employees of such broker-dealer
firms (for their own accounts only), and discretionary advisory accounts of AMC
(if such purchasers state in writing that the purchases are for their own
investment purposes only and the purchaser represents that the shares will not
be resold except to Trust I, I-A or IV, as applicable.
The contingent deferred sales charge is waived for certain redemptions of shares
of Trust I, I-A or IV (i) upon the death or permanent disability of a
shareholder, or (ii) in connection with mandatory distributions from an IRA or
other qualified retirement plan (Trust I or I-A only). The contingent deferred
sales charge will be waived in the case of a redemption of shares of Trust I,
I-A or IV following the death or permanent disability of a shareholder if the
redemption is made within one year of death or initial determination of
permanent disability. The waiver is available for total or partial redemptions
of shares of Trust I, I-A or IV owned by an individual or an individual in joint
tenancy (with rights of survivorship), but only for redemptions of shares of
Trust I, I-A or IV held at the time of death or initial determination of
permanent disability. The contingent deferred sales charge will also be waived
in the case of a total or partial redemption in connection with any mandatory
distribution from a tax-deferred retirement plan or an IRA (Trust I or I-A
only). The waiver does not apply in the case of a tax-free rollover or transfer
of assets, other than one following a separation from services. The shareholder
must notify the Transfer Agent either directly or through the Distributor, at
the time of redemption, that the shareholder is entitled to waiver of the
contingent deferred sales charge. The waiver will be granted subject to
confirmation of the investor's entitlement.
WAIVER OF SALES CHARGES (TRUST II ONLY)
Officers, Trustees and bona fide full-time employees of ASIS and with certain
exceptions most officers, Trustees and full-time employees of AMC, the
Distributor or affiliated corporations thereof or any trust, pension, profit
sharing or other benefit plan for such persons and broker-dealers, for their own
accounts or for their spouse and children may purchase shares of a Trust at net
asset value without a sales charge. Such a purchaser is required to sign a
letter stating that the purchase is for his own investment purposes only and
that the securities will not be resold except to such Trust.
PRICE OF THE SHARES IS DETERMINED DAILY
Since each Trust will invest in the Portfolio, if the securities owned by the
Portfolio increase in value, the value of the Trust shares which the shareholder
owns will increase. If the securities owned by the Portfolio decrease in value,
the value of the shareholder's shares will also decline. As noted in the
Prospectus, the net asset value and offering price of shares of the Portfolio
will be determined once daily as of the close of trading on the New York Stock
Exchange (currently 4:00 p.m., New York Time) on the "business day," which is
any day
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on which the Exchange is open for business. It is expected that the Exchange
will be closed on Saturdays and Sundays and on New Year's Day, Presidents' Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day and on the preceding Friday or subsequent Monday when one of these
holidays falls on Saturday or Sunday, respectively.
Portfolio securities, listed or traded on a national securities exchange will be
valued at the last sale price on such exchange on the valuation day. Securities
traded on an exchange for which there has been no sale that day and securities
traded in the over-the-counter market, will be valued at the last reported bid
price or the mean between the bid and the asked prices, as determined by the
Board of Trustees of AIST. Short-term obligations maturing in less than 60 days
will generally be valued at original cost plus accrued daily interest.
Securities for which quotations are not readily available and all other assets
will be valued at their fair value as determined in good faith by, or under
procedures established by, the Board of Trustees of AIST.
All liabilities incurred or accrued (including written call options) are
deducted from the total assets. The resulting net assets are divided by the
number of shares of the Portfolio outstanding at the time of the valuation and
the result (adjusted to the nearest cent) is the net asset value per share.
Orders received by dealers prior to the close of trading on the New York Stock
Exchange will be confirmed at the offering price computed as of the close of
trading on such Exchange provided the order is received by the Distributor for
Trust I-A or II, or by the Transfer Agent for Trust I or IV prior to 3:00 P.M.
(Pacific time) on that day. With regard to Trust I-A or II, it is the
responsibility of the dealer to ensure that all orders are transmitted timely to
the Portfolio; orders received by dealers after the close of trading on such
Exchange will be confirmed at the next computed offering price.
SHAREHOLDER SERVICES AND PRIVILEGES
For investors purchasing shares of Trust I-A or II under a tax-qualified
individual retirement or pension plan or under a group plan through a person
designated for the collection and remittance of monies to be invested in shares
of Trust I-A or II on a periodic basis, Trust I-A or II may, in lieu of
furnishing confirmations following each purchase of its shares, send statements
not less than quarterly pursuant to the provisions of the Securities Exchange
Act of 1934, as amended, and the rules thereunder. Such quarterly statements,
which will be sent to the investor or to the person designated by the group for
distribution to its members, will be made within five business days after the
end of each quarterly period and shall reflect all transactions in the
investor's account during the preceding quarter.
A Trust's shareholders have the privilege of reinvesting both income dividends
and capital gains distributions, if any, in additional full or fractional shares
of the Trust at the net asset value (without sales charge) in effect at the
reinvestment date. The management of ASIS has made arrangements with its
Transfer Agent to have all income dividends and capital gains distributions
which are declared by a Trust automatically reinvested for the account of each
shareholder unless a shareholder elects in writing to such Trust or the Transfer
Agent to have such dividends or distribution paid to him in cash. In the absence
of such an election, each purchase of shares of a Trust is made upon the
condition and understanding that the Transfer Agent is automatically appointed
to received the dividends and distributions upon all shares in the shareholder's
account and to reinvest them in full and fractional shares of such Trust at the
applicable net asset value in effect at the close of business on the
reinvestment date. A shareholder may still at any time after a purchase of a
Trust's shares request that future dividends and/or capital gains distributions
be paid to him in cash.
Every shareholder will receive a confirmation of each new transaction in his
account, which will also show the total number of Trust shares owned by the
shareholder and the number of shares being held in safekeeping by the Transfer
Agent for the account of the shareholders and a cumulative record of his account
for the entire year. Shareholders may rely on these statements in lieu of
certificates. Certificates representing shares of the Trust will not be issued
unless the shareholder requests them in writing.
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SELF-EMPLOYED AND CORPORATE RETIREMENT PLANS (TRUST I, I-A OR II ONLY)
For self-employed individuals and corporate investors who wish to purchase
shares of Trust I, Trust I-A or Trust II, there is available through ASIS a
Prototype Plan and Custody Agreement. The Custody Agreement provides that
Investors Fiduciary Trust Company, Kansas City, Missouri, will act as custodian
under the plan, and will furnish custodial services for which it will charge the
investor various service fees for such annual maintenance. (These fees are in
addition to the normal custodial charges paid by each Trust.) For further
details, including the right to appoint a successor Custodian, see the Plan and
Custody Agreement as provided by ASIS. Employers who wish to use shares of a
Trust under a custodianship with another bank or trust company must make
individual arrangements with such institutions.
INDIVIDUAL RETIREMENT ACCOUNTS (TRUST I, I-A OR II ONLY)
Investors having earned income are eligible to purchase shares of Trust I, Trust
I-A or Trust II, under an Individual Retirement Account ("IRA") pursuant to
Section 408(a) of the Internal Revenue Code. An individual who creates an IRA
may contribute annually certain dollar amounts of earned income, and an
additional amount if there is a non-working spouse. Copies of a model Custodial
Account Agreement are available from the Distributor. Investors Fiduciary Trust
Company, Kansas City, Missouri, will act as the Custodian under this model
agreement, for which it will charge the investor various services fees for
maintaining the Account (which fees are in addition to the normal custodial
charges paid by a Trust). Full details on the IRA are contained in an Internal
Revenue Service required disclosure statement, and the Custodian generally will
not open an IRA until seven days after the investor has received such statement
from the Trust. An IRA using shares of a Trust may also be used by employers who
have adopted a Simplified Employee Pension Plan.
FEDERAL TAX TREATMENT OF DIVIDENDS AND DISTRIBUTIONS
The following is only a summary of certain additional tax considerations
generally affecting the Trusts and its shareholders that are not described in
the Prospectus. No attempt is made to present a detailed explanation of the tax
treatment of a Trust or its shareholders, and the discussion here and in the
Prospectus are not intended as a substitute for careful tax planning.
QUALIFICATION AS A REGULATED INVESTMENT COMPANY
Each Trust intends to elect to be taxed as a regulated investment company under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). As a
regulated investment company, a Trust is not subject to Federal income tax on
the portion of its net investment income (i.e., its taxable interest, dividends
and other taxable ordinary income, net of expenses) and net realized capital
gain (i.e., the excess of capital gains over capital losses) that it distributes
to shareholders, provided that it distributes at least 90% of its investment
company taxable income (i.e., net investment income and the excess of net
short-term capital gain over net long-term capital loss) and at least 90% of its
tax-exempt income (net of expenses allocable thereto) for the taxable year (the
"Distribution Requirement"), and satisfies certain other requirements of the
Code that are described below. A Trust will be subject to tax at regular
corporate rates on any income or gains that it does not distribute.
Distributions by a Trust made during the taxable year or, under specified
circumstances, within one month after the close of the taxable year, will be
considered distributions of income and gains of the taxable year and can
therefore satisfy the Distribution Requirement.
In addition to satisfying the Distribution Requirement, the Trust must (1)
derive at least 90% of its gross income from dividends, interest, certain
payments with respect to securities loans, gains from the sale or other
disposition of stock or securities or foreign currencies (to the extent such
currency gains are ancillary to the Trust's principal business of investing in
stock or securities) and other income (including but not limited to
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gains from options, futures or forward contracts) derived with respect to its
business of investing in such stock, securities or currencies (the "Income
Requirement"); and (2) derive less than 30% of its gross income (exclusive of
certain gains on designated hedging transactions that are offset by realized or
unrealized losses on offsetting positions) from the sale or other disposition of
stock, securities or foreign currencies (or options, futures or forward
contracts thereon) held for less than three months (the "Short-Short Gain
Test"). However, foreign currency gains, including those derived from options,
futures and forwards, will not be characterized as Short-Short Gain if they are
directly related to the Trust's investment in stock or securities (or options or
futures thereon). Because of the Short-Short Gain Test, the Trust may have to
limit the sale of appreciated securities it has held for less than three months.
However, the Short-Short Gain Test will not prevent the Trust from disposing of
investments at a loss, since the recognition of a loss before the expiration of
the three-month holding period is disregarded. Interest (including original
issue discount) received by the Trust at maturity or upon the disposition of a
security held for less than three months will not be treated as gross income
derived from the sale or other disposition of such security within the meaning
of the Short-Short Gain Test. However, income that is attributable to realized
market appreciation will be treated as gross income from the sale or other
disposition of securities for this purpose.
In general, for purposes of determining whether capital gain or loss recognized
by a Trust on the disposition of an asset is long-term or short-term, the
holding period of the asset may be affected if (i) the asset is used to close a
"short sale" (which includes for certain purposes the acquisition of a put
option) or is substantially identical to another asset so used, (ii) the asset
is otherwise held by such Trust as part of a "straddle" or (iii) the asset is
stock and such Trust grants certain call options with respect thereto. However,
for purposes of the Short-Short Gain Test, the holding period of the asset
disposed of may be reduced only in the case of clause (i) above.
Certain debt securities purchased by a Trust (such as zero-coupon bonds) may be
treated for Federal income tax purposes as having original issue discount.
Original issue discount, generally defined as the excess of the stated
redemption price at maturity over the issue price, is treated as interest for
Federal income tax purposes. Whether or not a Trust actually receives cash, it
is deemed to have earned original issue discount income that is subject to the
distribution requirements of the Code. Generally, the amount of original issue
discount included in the income of a Trust each year is determined on the basis
of a constant yield to maturity that takes into account the compounding of
accrued interest.
A Trust may purchase debt securities at a discount that exceeds any original
issue discount that remained on the securities at the time a Trust purchased the
securities. This additional discount represents market discount for income tax
purposes. For a debt security purchased after April 30, 1993, which had an
original maturity date of more than one year from the date of issue and having
market discount, the gain realized on disposition will be treated as interest to
the extent it does not exceed the accrued market discount on the security
(unless a Trust elects for all its debt securities having a fixed maturity date
of more than one year from the date of issue to include market discount in
income in taxable years to which it is attributable). Generally, market discount
accrues on a daily basis. A Trust may be required to capitalize, rather than
deduct currently, part or all of any net direct interest expense on indebtedness
incurred or continued to purchase or carry any debt security having market
discount (unless a Trust makes the election to include market discount in income
as it accrues).
At the close of each quarter of its taxable year, at least 50% of the value of a
Trust's assets must consist of cash and cash items, U.S. Government securities,
securities of other regulated investment companies, and securities of other
issuers (as to which such Trust has not invested more than 5% of the value of
its total assets in securities of such issuer and such Trust does not hold more
than 10% of the outstanding voting securities of such issuer), and no more than
25% of the value of its total assets may be invested in the securities of any
one issuer (other than U.S. Government securities and securities of other
regulated investment companies), or in two or more issuers which such Trust
controls and which are engaged in the same or similar trades or businesses (the
"Asset Diversification Test").
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If for any taxable year a Trust does not qualify as a regulated investment
company, all of its taxable income (including its net capital gain) will be
subject to tax at regular corporate rates without any deduction for
distributions to shareholders, and such distributions will be taxable as
ordinary dividends to the extent of the current and accumulated earnings and
profits of such Trust. In such event, such distributions generally will be
eligible for the dividends-received deduction in the case of corporate
shareholders.
EXCISE TAX ON REGULATED INVESTMENT COMPANIES
A 4% non-deductible excise tax is imposed on regulated investment companies that
fail to distribute in each calendar year an amount equal to 98% of ordinary
taxable income for the calendar year and 98% of capital gain net income for the
one-year period ended on October 31 of such calendar year. The balance of such
income must be distributed during the next calendar year. For the foregoing
purposes, a regulated investment company is treated as having distributed any
amount on which it is subject to income tax for any taxable year ending in such
calendar year.
Treasury regulations may permit a regulated investment company in determining
its investment company taxable income and undistributed net capital gain for any
taxable year to treat any capital loss incurred after October 31 as if it had
been incurred in the succeeding year. For purposes of the excise tax, a
regulated investment company may (1) reduce its capital gain net income by the
amount of any net ordinary loss for any calendar year and (2) exclude foreign
currency gains and losses incurred after October 31 of any year in determining
the amount of ordinary taxable income for the current calendar year (and,
instead, include such gains and losses in determining ordinary taxable income
for the succeeding calendar year).
Each Trust intends to make sufficient distributions or deemed distributions of
its ordinary taxable income and capital gain net income prior to the end of each
calendar year to avoid liability for the excise tax. However, investors should
note that a Trust may in certain circumstances be required to liquidate
portfolio investments to make sufficient distributions to avoid excise tax
liability.
TRUST DISTRIBUTIONS
Each Trust anticipates distributing substantially all of its investment company
taxable income for each taxable year. Such distributions will be taxable to
shareholders as ordinary income and treated as dividends for federal income tax
purposes, but they will generally not qualify for the 70% dividends-received
deduction for corporations.
Distributions of net capital gains, if any, which are designated by each Trust
as capital gain dividends are taxable to shareholders as long-term capital
gains, regardless of how long the shareholder has held the Trust's shares, and
are not eligible for a dividends-received deduction. The Portfolio generally
intends to distribute any net capital gains.
If a Trust should retain net capital gains, it will be subject to a tax of 35%
of the amount retained. Each Trust expects to designate amounts retained, if
any, as undistributed capital gains in a notice to its shareholders who, if
subject to U.S. Federal Income taxation on long-term capital gains, (i) would be
required to include in income for U.S. Federal Income tax purposes, as long-term
capital gains, their proportionate shares of the undistributed amount, and (ii)
would be entitled to credit against their U.S. Federal Income tax liabilities
for their proportionate shares of the tax paid by the Trust on the undistributed
amount and to claim refunds to the extent that their credits exceed their
liabilities. For U.S. Federal Income tax purposes, the adjusted basis of each
Trust's shares owned by a shareholder of a Trust would be increased by an amount
equal to 65% of the amount of undistributed capital gains included in the
shareholder's income.
Investors should be careful to consider the tax implications of purchasing
shares just prior to the next dividend date of any ordinary income dividend or
capital gain dividend. Those purchasing just prior to an ordinary
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income dividend or capital gain dividend will be taxable on the entire amount of
the dividend received, even though the net asset value per share on the date of
such purchase reflected the amount of such dividend.
Distributions by a Trust that do not constitute ordinary income dividends or
capital gain dividends will be treated as a return of capital to the extent of
(and in the reduction of) the shareholder's tax basis in his shares; any excess
will be treated as gain from the sale of his shares, as discussed below.
Distributions by a Trust will be treated in the manner described above
regardless of whether such distributions are paid in cash or reinvested in
additional shares of such Trust. Shareholders receiving a distribution in the
form of additional shares will be treated as receiving a distribution in an
amount equal to the fair market value of the shares received, determined as of
the reinvestment date. Ordinarily, shareholders are required to take
distributions by a Trust into account in the year in which the distributions are
made. However, distributions declared in October, November or December of any
year and payable to shareholders of record on a specified date in such a month
will be deemed to have been received by the shareholders (and made by such
Trust) on December 31 of such calendar year if such distributions are actually
made in January of the following year. Shareholders will be advised annually as
to the U.S. Federal income tax consequences of distributions made (or deemed
made) during the year.
Backup Withholding. Each Trust may be required to withhold U.S. Federal Income
tax at the rate of 31% of all taxable distributions payable to shareholders who
fail to provide a Trust with their correct taxpayer identification number or to
make required certifications, or where a Trust or the shareholder has been
notified by the Internal Revenue Service that the shareholder is subject to
backup withholding. Corporate shareholders and certain other shareholders
specified in the Code generally are exempt from such backup withholding. Backup
withholding is not an additional tax. Any amounts withheld may be credited
against the shareholder's U.S. Federal Income tax liability.
Sale of Shares. In general, upon the sale or other disposition of shares of a
Trust, a shareholder will realize a capital gain or loss which will be long-term
or short-term, depending upon the shareholder's holding period for the shares.
However, if the shareholder sells his Trust shares to a Trust, proceeds received
by the shareholder may, in some cases, be characterized for tax purposes as
dividends. Any loss realized on a sale or exchange will be disallowed to the
extent the shares disposed of are replaced within a period of 61 days beginning
30 days before and ending 30 days after disposition of the shares. In such a
case, the basis of the shares acquired will be adjusted to reflect the
disallowed loss. Any loss realized by a shareholder on a disposition of a
Trust's shares held by the shareholder for six months or less will be treated as
a long-term capital loss to the extent of any distributions of capital gain
dividends received by the shareholder with respect to such shares.
FOREIGN SHAREHOLDERS
Taxation of a shareholder who, as to the United States, is a nonresident alien
individual, foreign trust or estate, foreign corporation, or foreign partnership
("foreign shareholder"), depends on whether the income from a Trust is
"effectively connected" with a U.S. trade or business carried on by such
shareholder.
If the income from a Trust is not effectively connected with a U.S. trade or
business carried on by the foreign shareholder, ordinary income dividends will
be subject to U.S. withholding tax at the rate of 30% (or lower treaty rate, if
applicable) upon the gross amount of the dividend. Such foreign shareholders
would generally be exempt from U.S. Federal income tax on gains realized on the
sale of shares of such Trust and on capital gain dividends and amounts retained
by such Trust that are designated as undistributed capital gains.
If the income from a Trust is effectively connected with a U.S. trade or
business carried on by a foreign shareholder, then ordinary income dividends,
capital gain dividends and any gains realized upon the sale of
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shares of such Trust will be subject to U.S. Federal income tax at the
respective rates applicable to U.S. citizens and residents or domestic
corporations.
In the case of foreign noncorporate shareholders, a Trust may be required to
withhold U.S. Federal income tax on distributions that are otherwise exempt from
withholding tax (or taxable at a reduced treaty rate) unless such shareholders
furnish such Trust with proper notification of their foreign status.
The tax consequences to a foreign shareholder entitled to claim the benefits of
an applicable tax treaty may be different from those described herein. Foreign
shareholders are urged to consult their own tax advisers with respect to the
particular tax consequences to them of an investment in a Trust, including the
applicability of foreign taxes.
EFFECT OF FUTURE LEGISLATION; LOCAL TAX CONSIDERATIONS
The foregoing general discussion of U.S. Federal income tax consequences is
based on the Code and the regulations issued thereunder as in effect on the date
of this Statement of Additional Information. Future legislative or
administrative changes or court decisions may significantly change the
conclusions expressed herein, and any such changes or decisions may have a
retroactive effect with respect to the transactions contemplated herein.
Rules of state and local taxation of ordinary income dividends and capital gain
dividends from regulated investment companies often differ from the rules for
U.S. Federal income taxation described above. Shareholders are urged to consult
their tax advisers as to the consequences of these and other state and local tax
rules affecting investment in a Trust.
INVESTMENT RETURN INFORMATION
For purposes of quoting and comparing the performance of a Trust to that of
other mutual funds and to other relevant market indices in advertisements or in
reports to shareholders, performance may be stated in terms of total return and
yield. Under the rules of the SEC ("SEC Rules"), funds advertising performance
must include total return quotes calculated according to the following formula:
P(1 + T) SUP{N}=ERV
Where: P = a hypothetical initial payment of $1,000.
T = average annual total return.
n = number of years (1, 5 or 10).
ERV = ending redeemable value of a hypothetical $1,000
payment made at the beginning of the 1, 5 or 10
year periods at the end of the 1, 5 or 10 year
periods (or fractional portion thereof).
Under the foregoing formula, the time periods used in advertising will be based
on rolling calendar quarters, updated to the last day of the most recent quarter
prior to submission of the advertising for publication, and will cover 1, 5 and
10 year periods or a shorter period dating from the effectiveness of a Trust's
Registration Statement. In calculating the ending redeemable value, the maximum
sales load, if any, is deducted from the initial $1,000 payment and all
dividends and distributions by a Trust are assumed to have been reinvested at
net asset value as described in the Prospectus on the reinvestment dates during
the period. Total return, or
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"T" in the formula above, is computed by finding the average annual compounded
rates of return over the 1, 5 and 10 year periods (or fractional portion
thereof) that would equate the initial amount invested to the ending redeemable
value, including any applicable contingent deferred sales charge. Any recurring
account charges that might in the future be imposed by such Trust would be
included at that time.
Each Trust may also from time to time include in such advertising a total return
figure that is not calculated according to the formula set forth above in order
to compare more accurately the performance of a Trust with other measures of
investment return. For example, in comparing a Trust's total return with data
published by Lipper Analytical Services, Inc., or with the performance of the
Standard & Poor's 500 Stock Index of the Dow Jones Industrial Average, a Trust
calculates its aggregate total return for the specified periods of time by
assuming the investment of $10,000 in Trust shares and assuming the reinvestment
of each dividend or other distribution at net asset value on the reinvestment
date. Percentage increases are determined by subtracting the initial value of
the investment from the ending value and by dividing the remainder by the
beginning value. The Trusts do not, for these purposes, deduct any amount
representing contingent deferred sales charges. As appropriate, a Trust will,
however, disclose the maximum contingent deferred sales charge and will also
disclose that the performance data does not reflect contingent deferred sales
charges and that inclusion of contingent deferred sales charges would reduce the
performance quoted. Such alternative total return information will be given no
greater prominence in such advertising than the information prescribed under SEC
Rules.
The average annual compounded rate of return for the fiscal year ended October
31, 1996, the five year period ended October 31, 1996 and for the period
February 21, 1991 (Trust I's commencement of operations) to October 31, 1996 for
Trust I was -0.81%, -0.24% and 0.82%, respectively. The average annual
compounded rate of return for the fiscal year ended October 31, 1996 and for the
period May 22, 1992 (Trust I-A's commencement of operations) to October 31, 1996
for Trust I-A was -0.49% and -1.04%, respectively. The average annual compounded
rate of return for the fiscal year ended October 31, 1996 and for the period
November 27, 1991 (Trust II's commencement of operations) to October 31, 1996
for Trust II was 0.20% and -0.57%, respectively. The average annual compounded
rate of return for the fiscal year ended October 31, 1996 and for the period May
7, 1993 (Trust IV's commencement of operations) to October 31, 1996 for Trust IV
was 2.44% and -3.26%, respectively.
In addition to the total return quotations discussed above, a Trust may
advertise its yield based on a 30-day (or one month) period ended on the date of
the most recent balance sheet included in its Registration Statement, computed
by dividing the net investment income per share earned during the period by the
maximum offering price per share on the last day of the period, according to the
following formula:
YIELD = 2[({a-b} OVER {cd} + 1) SUP 6 -1]
Where:
a = dividends and interest earned during the period.
b = expenses accrued for the period (net of reimbursements).
c = the average daily number of shares outstanding during the period
that were entitled to receive dividends.
d = the maximum offering price per share on the last day of the period.
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Under this formula, interest earned on debt obligations for purposes of "a"
above, is calculated by (1) computing the yield to maturity of each obligation
held by a Trust based on the market value of the obligation (including actual
accrued interest) at the close of business on the last day of each month, or,
with respect to obligations purchased during the month, the purchase price (plus
actual accrued interest), (2) dividing that figure by 360 and multiplying the
quotient by the market value of the obligation (including actual accrued
interest as referred to above) to determine the interest income on the
obligation that is in a Trust's portfolio (assuming a month of 30 days) and (3)
computing the total of the interest earned on all debt obligations and all
dividends accrued on all equity securities during the 30-day or one month
period. In computing dividends accrued, dividend income is recognized by
accruing 1/360 of the stated dividend rate of a security each day that the
security is in such Trust's portfolio. For purposes of "b" above, Rule 12b-1
Plan expenses, as applicable, are included among the expenses accrued for the
period. Any amounts representing sales charges will not be included among these
expenses; however, each Trust will disclose the maximum sales charge as well as
any amount or specific rate of any nonrecurring account charges. Undeclared
earned income, computed in accordance with generally accepted accounting
principles, may be subtracted from the maximum offering price calculation
required pursuant to "d" above.
A Trust may also from time to time advertise its yield based on a 30-day period
ending on a date other than the most recent balance sheet included in its
Registration Statement, computed in accordance with the yield formula described
above, as adjusted to conform with the differing period for which the yield
computation is based.
Any quotation of performance stated in terms of yield (whether based on a 30-day
or one month period) will be given no greater prominence than the information
prescribed under SEC Rules. In addition, all advertisements containing
performance data of any kind will include a legend disclosing that such
performance data represents past performance and that the investment return and
principal value of an investment will fluctuate so that an investor's shares,
when redeemed, may be worth more or less than their original cost.
The yields as of October 31, 1996, based on a 30-day base period for Trusts I,
I-A, II and IV were 4.07%, 4.30%, 3.99% and 2.84% respectively.
GENERAL INFORMATION
UNDERWRITING AGREEMENT
The underwriting agreement (the "Underwriting Agreement") between ASIS and Astra
Fund Distributors Corp. (the "Distributor") with respect to the distribution of
shares of the Trusts is in effect until August 30, 1997, and thereafter
continues from year to year if approved at least annually (i) by the Trustees of
ASIS or by the vote of a majority of the outstanding voting securities of each
Trust and (ii) by a majority of the Trustees of ASIS who are not parties to the
Underwriting Agreement or interested persons of any such party, cast in person
at a meeting called for the purpose of voting on such approval. Each
Underwriting Agreement may be terminated without penalty by either party on
sixty days' written notice and shall be automatically terminated in the event of
its assignment as defined in the 1940 Act. The Distributor is a wholly-owned
subsidiary of Atlas Holdings Group, Inc.
The sales charge retained by the Distributor and the commissions allowed to
selling dealers are not expenses of the Trusts and have no effect on the net
asset value of any of the Trusts.
During the fiscal years ended October 31, 1994, 1995 and 1996, the Distributor
received commissions, after allowance to dealers on the sale of Trust II's
shares of $ 0, $ 0 and $0, in the aggregate. Approximately 100% of the
aggregate concessions of $219, 100% of the aggregate concessions of $0 and 100%
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of the aggregate concessions of $0 were also retained by the Distributor as a
retail dealer in Trust II's shares during Trust II's fiscal years ended October
31, 1994, 1995 and 1996, respectively.
DISTRIBUTION EXPENSES
The distribution plans (the "Plans") for Trusts I, I-A, II and IV are described
in the Prospectus and are designed to meet the requirements of Rule 12b-1 under
the 1940 Act. The purpose of the Plans is to permit Trusts I, I-A, II and IV to
finance distribution activities and bear expenses associated with the
distribution of their shares. The Plans provide for daily compensation to the
principal underwriter for its distribution services and facilities.
TRUST I OR I-A
Each Plan provides for two categories of payments. First, each Plan provides
daily compensation to the principal underwriter for its distribution services
and facilities. Pursuant to the Plan but subject to the .75% limitation
described below Trust I or I-A will pay the principal underwriter (i) sales
commissions equal to 4% of the amount received by Trust I for each Trust I share
sold or 5% of the amount received by Trust I-A for each share of Trust I-A sold
("Underwriter's Sales Commissions") and (ii) interest fees in essence calculated
by applying the rate of 1% over the prevailing prime rate to the outstanding
balance of Uncovered Distribution Charges of the principal underwriter.
The principal underwriter currently expects to pay sales commission to a dealer
at the time of the sale of up to 3% of the purchase price of the shares sold by
such dealer. The principal underwriter will use its own funds or funds
facilitated by the principal underwriter (which may be borrowed or otherwise
financed) to pay such amounts. Because the payment of the Underwriter's Sales
Commissions and interest fees to the principal underwriter in the form of daily
compensation is subject to the .75% limitation described below and will
therefore be spread over a period of a number of years, it will take the
principal underwriter a number of years to recoup the sales commissions paid to
dealers and its other sales expenses from the daily compensation payments
received by it from Trust I or I-A pursuant to its Plan. In addition to the
daily compensation to the principal underwriter at an annual rate of 0.75% of
Trust I or I-A's daily net assets, each Plan also provides for the payment to
the principal underwriter of a trail or maintenance fee, accrued daily and paid
monthly, in an amount equal to an annual rate not to exceed 0.25% of Trust I or
I-A's daily net assets, which may be paid to dealers at an annual rate not to
exceed 0.25% of Trust I or I-A's daily net assets owned by clients of the
dealer.
Payment of the Underwriter's Sales Commission and interest fees will be spread
over a period of time, and each Plan requires that the aggregate amount of all
such payments, including payments of trail or maintenance fees, during any
fiscal year shall not exceed 1% of Trust I or I-A's average daily net assets for
such year. Accordingly, Trust I or I -A will pay the principal underwriter daily
compensation payable monthly at the rate of .75% per annum of Trust I or I-A's
daily net assets. Such daily compensation will automatically be discontinued
during any period in which there are no outstanding Uncovered Distribution
Charges of the principal underwriter. The amount of Uncovered Distribution
Charges will be calculated daily. For the purposes of this calculation,
Distribution Charges will include the aggregate amount of the Underwriter's
Sales Commissions and interest fees which the principal underwriter is entitled
to be paid under each Plan since its inception. Payments of daily compensation
previously paid and payable under each Plan by Trust I or I-A to the principal
underwriter and contingent deferred sales charges previously paid and payable to
the principal underwriter will be subtracted from such Distribution Charges. If
the result of such subtraction is positive, an interest fee (computed at 1% over
the prime rate than reported in The Wall Street Journal) will be computed on
such amount and added thereto, with the resulting sum constituting the amount of
Uncovered Distribution Charges with respect to such day. The amount of
outstanding Uncovered Distribution Charges of the principal underwriter
calculated on any day does not constitute a liability recorded on the financial
statements of Trust I or I-A. It is anticipated that the Astra organization will
profit by reason of the operation
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of each Plan through an increase in Trust I or I-A's assets (thereby increasing
the advisory fee payable to AMC) resulting from sale of Trust I or I-A shares
and through daily compensation and contingent deferred sales charges paid to the
principal underwriter. The Astra organization may be considered to have realized
a profit under each Plan if at any point in time the aggregate amount of all
daily compensation and contingent deferred sales charge payments previously made
to the principal underwriter have exceeded the total expenses previously
incurred by such organization in distributing shares of Trust I or I-A. Total
expenses for this purpose will include an allocable portion of the overhead
costs of such organization and its branch offices, which costs will include
without limitation leasing expenses, utilities, communication and postage
expense, compensation and benefits of personnel, travel and promotional expense,
stationery and supplies, literature and sales aids, interest expense, data
processing fees, consulting and temporary help costs, insurance, taxes other
than income taxes, legal and auditing expense and other miscellaneous overhead
items. Overhead is calculated and allocated for such purpose by the Astra
organization in a manner deemed equitable to Trust I or I-A.
The amount of daily compensation payable to the principal underwriter with
respect to each day will be accrued on such day as a liability of Trust I or I-A
and will accordingly reduce the Trust I or I-A's net assets upon such accrual.
However, in accordance with generally accepted accounting principles, Trust I or
I-A does not accrue future daily compensation as a liability of Trust I or I-A
or reduce Trust I or I-A's current net assets in respect of daily compensation
which may become payable under each Plan in the future because the standards for
accrual of a liability under such accounting principles have not been satisfied.
The amount of daily compensation payable on each day is limited to 1/365 of .75%
of Trust I or I-A's net assets on such day. The level of Trust I or I-A's net
assets changes each day and depends upon the amount of sales and redemptions of
Trust I or I-A shares, the changes in the value of Trust I or I-A's portfolio
investments, the expenses of Trust I or I-A accrued on such day, income on
portfolio investments accrued on such day, and dividends and distributions
declared by Trust I or I-A.
The amount of Uncovered Distribution Charges of the principal underwriter is
computed daily to determine whether daily compensation is accrued on such day.
Each Plan provides that any contingent deferred sales charges received when no
Uncovered Distribution Charges exist will be retained by the principal
underwriter and any investment advisory fee otherwise payable to AMC shall be
reduced in an amount equal to the contingent deferred sales charges received. If
the contingent deferred sales charges available to reduce the investment
advisory fee exceeds the amount of the investment advisory fee, then the
contingent deferred sales charges shall be used to reduce any daily compensation
which may otherwise be payable to the principal underwriter in the future. The
amount of Uncovered Distribution Charges of the principal underwriter at any
particular time depends upon various changing factors, including the level and
timing of sales of Trust I or I-A shares, the level and timing of redemptions of
Trust I or I-A shares upon which a contingent deferred sales charge will be
imposed, the level and timing of redemptions of Trust I or I-A shares upon which
no contingent deferred sales charge will be imposed, changes in the level of the
net assets of Trust I or I-A, and changes in the interest rate used in the
calculation of the interest fee under each Plan.
Periods with a high level of sales of Trust I or I-A shares accompanied by a low
level of redemptions of Trust I or I-A shares resulting in the imposition of
contingent deferred sales charges will tend to increase the time during which
there will exist Uncovered Distribution Charges of the principal underwriter.
Conversely, periods with a low level of sales of Trust I or I-A shares
accompanied by a high level of early redemptions of Trust I or I-A shares
resulting in the imposition of contingent deferred sales charges will tend to
reduce the time during which there will exist Uncovered Distribution Charges of
the principal underwriter.
Because of the .75% limitation on the amount of daily compensation paid to the
principal underwriter during any fiscal year, a high level of sales of Trust I
or I-A shares during the first few years of Trust I or I-A's operations will
cause a large portion of the Underwriter's Sales Commissions attributable to a
sale of Trust I or I-A shares to be accrued and paid by Trust I or I-A to the
principal underwriter in fiscal years subsequent to the year in which such
shares were sold. This spreading of Underwriter's Sales Commissions payments
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under each Plan over an extended period will result in the incurrence and
payment of increased interest fees under each Plan.
Pursuant to Rule 12b-1, each Plan has been approved by Trust I or I-A's initial
shareholder and by the Trustees of ASIS, including a majority of the Trustees
who are not interested persons of ASIS and who have no direct or indirect
financial interest in the operation of each Plan or any agreements related to
each plan. Under each Plan the President or a Vice President of ASIS shall
provide to the Trustees for their review, and the Trustees shall review at least
quarterly, a written report of the amount expended under each Plan and the
purposes for which such expenditures were made. Each Plan may not be amended to
increase materially the payments described therein without approval of the
shareholders of Trust I or I-A, and all material amendments of each Plan must
also be approved by the Trustees in the manner described above.
Trust I's Plan was adopted on September 4, 1991 and Trust I-A's Plan was adopted
on February 13, 1993. Each Plan provides that it shall continue in effect for so
long as such continuance is approved at least annually by the vote of a majority
of the Trustees and a majority of the Trustees of ASIS who are not interested
persons of ASIS and who have no direct or indirect financial interest in the
operation of each Plan or any agreements related to each Plan (the "Rule 12b-1
Trustees"). Trust I-A's Plan and Underwriting Agreement provide that Trust I-A,
on termination of its Plan, will continue to make daily compensation payments to
the principal underwriter (but only with respect to sales of Trust I-A shares
which occurred prior to the termination of Trust I-A's Plan) until the earlier
of (a) four years after the date of such termination or (b) such time as there
exist no outstanding uncovered distribution charges of the principal underwriter
under Trust I-A's Plan. Any continuance of such daily compensation payments
after termination of Trust I-A's Plan is subject to the continuance in effect by
the Rule 12b-1 Trustees of the Underwriting Agreement, and such payments would
cease upon termination of the Underwriting Agreement (unless such payments were
made in accordance with another underwriting agreement entered into by the
parties). Whether or not Trust I-A's Plan or Underwriting Agreement are still in
effect, the principal underwriter shall be entitled to receive all contingent
deferred sales charges paid or payable with respect to shares purchased prior to
the termination of Trust I-A's Plan. Trust I-A's Plan and Underwriting Agreement
may be terminated by vote of a majority of the Rule 12b-1 Trustees, but in
deciding whether to purchase shares of Trust I-A investors should consider that
daily compensation payments could continue until such time as there are no
outstanding uncovered distribution charges of the principal underwriter under
Trust I-A's Plan.
Each Plan is expected by the Trustees to be a significant factor in the growth
of each Trust's assets, resulting in increased investment flexibility and
advantages which will benefit each Trust and its shareholders. Daily
compensation payments made to the principal underwriter under each Plan will
compensate the principal underwriter for its present and future services and
expenses in distributing shares of Trust I or I-A. Based on the foregoing and
other relevant factors, the Trustees have determined that in their judgment
there is a reasonable likelihood that the Plan will benefit each Trust and its
shareholders. So long as each Plan is in effect, the selection and nomination of
Trustees who are not interested persons of Trust I or I-A shall be committed to
the discretion of the Trustees who are not such interested persons.
For the fiscal years ended October 31, 1994, 1995 and 1996, the Distributor
received $3,691,878, $1,205,284 and $507,005, respectively, in daily
compensation payments under Trust I's Plan. In addition, for the fiscal years
ended October 31, 1994, 1995 and 1996, the Distributor received $1,230,626,
$401,762 and $169,001 respectively, in maintenance fees under Trust I's Plan and
$4,926,091, $2,058,160 and $98,152 respectively, from contingent deferred sales
charges paid by the Trust I's shareholders. During the same time periods, the
Distributor paid $0, $0, and $0 respectively, to dealers, in commissions on
the sale of Trust I shares. As of October 31, 1996, Trust I had total net assets
of $48,553,813 and Uncovered Distribution Charges aggregated $11,621,801.
For the fiscal years ended October 31, 1994, 1995 and 1996, the Distributor
received $2,210,953, $754,652 and $366,694 in daily compensation payments under
Trust I-A's Plan. In addition, the Distributor received
-25-
<PAGE>
$736,984, $251,551 and $122,231 in maintenance fees under Trust I-A's Plan and
$3,265,143, $2,725,445 and $331,976 from contingent deferred sales charges paid
by Trust I-A's shareholders. During the same time period, the Distributor paid
$455,496, $205,231 and $0 to dealers in commissions on the sale of Trust I-A
shares. As of October 31, 1996, Trust I-A had total net assets of $36,054,377
and Uncovered Distribution Charges aggregated $9,681,679.
Notwithstanding the existence of such Uncovered Distribution Charges, the amount
of daily compensation payable on each day is limited to 1/365 of .75% of Trust I
or I-A's net assets on such day.
The following chart describes all commissions and other compensation
received by the principal underwriter for Trusts I and I-A for the fiscal year
ended October 31, 1996.
<TABLE>
<CAPTION>
(1) (2) (3) (4) (5)
Name of Principal Net Underwriting Compensation on Brokerage Other
Trust Underwriter Discounts and Redemptions and Commissions Compensation
Commissions Repurchases
- ----- ----------------- ---------------- --------------- ----------- ------------
<S> <C> <C> <C> <C> <C>
Trust I Astra Fund $507,005 $ 98,152 $ 0 $169,001
Distributors Corp.
Trust I-A Astra Fund $366,694 $331,976 $ 0 $122,231
Distributors Corp.
</TABLE>
TRUST II OR IV
Trust II's Plan provides that it will pay up to a maximum of 0.25% per annum of
its average daily net assets for expenses incurred in the distribution of its
shares. Trust IV's Plan provides that it will pay up to a maximum of 0.60% per
annum of its average daily net assets for expenses incurred in the distribution
of its shares. Each Plan may carry over expenses from year to year, provided
however, that in accordance with a policy adopted by ASIS' Board of Trustees,
such expenses may not be carried over for more than three years from the date
when they were incurred and that the Distributor has not yet been reimbursed for
such expenses. The Distributor may include as an expense a portion of its
overhead, including out-of-pocket costs. In the event a Plan is terminated in
accordance with its terms, the obligations of Trust II or Trust IV to make
payments to the Distributor pursuant to each Plan will cease and neither Trust
II nor Trust IV will be required to make any payments for expenses incurred
after the date each Plan terminates.
Pursuant to each Plan, the Distributor will be entitled to reimbursement each
month (up to the maximum of 0.25% per annum of average net assets of Trust II
and up to the maximum of 0.60% per annum of average net assets of Trust IV) for
its expenses incurred in the distribution and promotion of each Trust's shares,
including but not limited to the printing of Prospectuses, Statements of
Additional Information and reports use for sales purposes, advertisements,
expenses of preparation and printing of sales literature, and other distribution
related expenses, including any distribution or service fees paid to securities
dealers or other firms who have executed a distribution or service agreement
with the Distributor. The maximum amount which may be paid to such dealers or
firms by the Distributor (which will be determined according to the services
provided in assisting investors with their accounts and/or shares sold) is 0.25%
(on an annual basis) of Trust II's average net assets owned by clients of that
dealer or firm or .60% (on an annual basis) of Trust IV's average net assets
owned by clients of that dealer or firm. The maximum annual operating expenses
of Trust II or IV, including their distribution expense, are limited by the
expense reimbursement provisions in the Agreement with AMC (see "Management of
the Trusts and the Portfolio"). The expenses of distribution of Trust II in
excess of 0.25% per annum and not carried over as stated above will be borne by
the Distributor without any reimbursement or payment by Trust II. The expenses
of distribution of Trust IV in excess of 0.60% per annum
-26-
<PAGE>
and not carried over as stated above will be borne by the Distributor without
any reimbursement or payment by Trust IV.
The Distributor is required to report in writing to the Board of Trustees of
ASIS at least quarterly on the monies reimbursed to it under each Plan, as well
as to furnish the Board with such other information as may reasonably be
requested in connecting with the payments made under each Plan in order to
enable the Board to make an informed determination of whether each Plan should
be continued.
For the fiscal year ended October 31, 1996, Trust II reimbursed the Distributor
approximately $10,033 pursuant to its Plan, which amount was attributable to the
total amount spent by the Distributor (approximately $10,199) in the
distribution of Trust II's shares, including expenses for salaries and
commissions - $1,084 ; advertising - $0; printing, postage and handling - $150;
brokers' servicing fees - $8,946; and miscellaneous and other promotional
activities - $19. Of the amount incurred by the Distributor during the last
year, approximately $1,084 was for the costs of personnel of the Distributor and
its affiliates involved in the promotion and distribution of Trust II's shares.
For the period ending October 31, 1996, Trust IV reimbursed the Distributor
approximately $12,924 pursuant to its Plan, which amount was attributable to the
total amount spent by the Distributor (approximately $9,223) in the distribution
of Trust IV's shares, including expenses for: salaries and commissions - $581;
advertising - $0; printing, postage and handling - $508; and miscellaneous and
other promotionalf activities - $10. Of the amount incurred by the Distributor
during this period, approximately $581 was for the cost of personnel of the
Distributor and its affiliates involved in the promotion and distribution of
Trust IV's shares.
The Board of Trustees of ASIS has determined that a consistent cash flow
resulting from the sale of new shares is necessary and appropriate to meet
redemptions and to take advantage of buying opportunities without having to make
unwarranted liquidations of portfolio securities. The Board therefore felt that
it will likely benefit Trust II and Trust IV to have monies available for the
direct distribution activities of the Distributor in promoting the sale of Trust
II's and Trust IV's shares. The Board of Trustees, including the non-interested
trustees, concluded that in the exercise of their reasonable business judgment
and in light of their fiduciary duties, there is a reasonable likelihood that
each Plan will benefit Trust II or Trust IV and its respective shareholders.
Each Plan has been approved by ASIS' Board of Trustees, including all of the
trustees who are non-interested persons as defined in the 1940 Act, and by Trust
II's and Trust IV's respective initial shareholder. Each Plan must be renewed
annually by ASIS' Board of Trustees, including a majority of the trustees who
are non-interested persons of ASIS and who have no direct or indirect financial
interest in the operation of each Plan, cast in person at a meeting called for
that purpose. It is also required that the selection and nomination of such
trustees be done by the non-interested trustees. Each Plan and any distribution
or service agreement may be terminated at any time, without any penalty, by such
trustees or by a vote of a majority of a Trust's outstanding shares on 60 days'
written notice. The Distributor or any dealer or other firm may also terminate
its respective distribution or service agreement at any time upon written
notice.
Each Plan and any distribution or service agreement may not be amended to
increase materially the amount spent for distribution expenses or in any other
material way without approval by a majority of a Trust's outstanding shares, and
all material amendments to each Plan or any distribution or service agreement
shall be approved by the non-interested trustees, cast in person at a meeting
called for the purpose of voting on any such amendment.
-27-
<PAGE>
PORTFOLIO TURNOVER
As noted in the Prospectus, the Portfolio's portfolio turnover rate was 108% and
297% for the fiscal years ended October 31, 1995 and 1996 respectively. A higher
portfolio turnover rate may result in higher brokerage commissions and other
transactional expenses which must be borne, directly or indirectly, by the
Portfolio and ultimately by a Trust's shareholders.
MISCELLANEOUS
The Amended and Restated Declaration of Trust dated November 4, 1994 which was
subsequently amended on April 10, 1995 (the "Declaration of Trust"), a copy of
which is on file in the office of the Secretary of The Commonwealth of
Massachusetts, authorizes the issuance of shares of beneficial interest in ASIS
without par value. Each share of the Trust has one vote and shares equally in
dividends and distributions when and if declared by the Trustees of ASIS and in
each Trust's net assets upon liquidation. All shares, when issued, are fully
paid and non-assessable. There are no preemptive, conversion or exchange rights.
Shares of ASIS do not have cumulative voting rights and, as such, holders of at
least 50% of the shares voting for Trustees can elect all Trustees and the
remaining shareholders would not be able to elect any Trustees. As used in the
Prospectus, the term "majority vote" means the affirmative vote of (a) more than
50% of the outstanding shares of a Trust or ASIS (as appropriate) or (b) 67% or
more of the shares present at a meeting if more than 50% of the outstanding
shares of a Trust or ASIS (as appropriate) are represented at the meeting in
person or by proxy, whichever is less.
The Board of Trustees may classify or reclassify any unissued shares of ASIS
into shares of any series by setting or changing in any one or more respects,
from time to time, prior to the issuance of such shares, the preferences,
conversion or other rights, voting powers, restrictions, limitations as to
dividends, or qualifications, of such shares. Any such classification or
reclassification will comply with the provisions of the 1940 Act.
The overall management of the business of ASIS is vested with the Trustees. The
Trustees approve all significant agreements between ASIS and persons or
companies furnishing services to ASIS. The day-to-day operations of the Trusts
are delegated to officers of ASIS subject to the investment objective and
policies of ASIS, the general supervision of Trustees and the applicable laws of
The Commonwealth of Massachusetts.
Generally, there will not be annual meetings of shareholders. Shareholders may
remove trustees from office by votes cast at a meeting of shareholders or by
written consent.
Under Massachusetts law, shareholders could, under certain circumstances, be
held liable for the obligations of ASIS. However, the Declaration of Trust
disclaims shareholder liability for acts or obligations of ASIS and requires
that notice of such disclaimer be given in each agreement, obligation or
instrument entered into or executed by the Trustee or the Trustees. The
Declaration of Trust provides for indemnification out of ASIS's property for all
loss and expense of any shareholder of ASIS held liable on account of being or
having been a shareholder. Thus, the risk of a shareholder incurring financial
loss on account of shareholder liability is limited to circumstances in which
ASIS would be unable to meet its obligations wherein the complaining party was
held out to be bound by the disclaimer.
The Declaration of Trust further provides that the Trustees will not be liable
for errors of judgment or mistakes of fact or law. However, nothing in the
Declaration of Trust protects a Trustee against any liability to which the
Trustee would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence, or reckless disregard of the duties involving the conduct of
his office. The Declaration of Trust provides for indemnification by ASIS of the
Trustees and officers of ASIS except with respect to any matter as to which any
such person did not act in good faith in the reasonable belief that his action
was in or not opposed to the
-28-
<PAGE>
best interests of ASIS. Such person may not be indemnified against any liability
to ASIS or the Trust's shareholders to which he would otherwise be subjected by
reason of willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of his office. The Declaration of Trust
also authorizes the purchase of liability insurance on behalf of Trustees and
officers.
CUSTODIAN AND TRANSFER AGENT--The cash and securities owned by ASIS are held by
PNC Bank, National Association, Lester, Pennsylvania, as custodian, which takes
no part in the decisions relating to the purchase or sale of any of the Trusts'
portfolio securities. DST Systems Inc. acts as ASIS' transfer agent and dividend
disbursing agent.
INDEPENDENT ACCOUNTANTS--The Trusts' independent public accountant is Tait,
Weller & Baker, Two Penn Center Plaza, Philadelphia, Pennsylvania 19102.
LEGAL COUNSEL--Certain legal matters for ASIS are passed upon by Jorden Burt
Berenson & Johnson LLP, 1025 Thomas Jefferson Street, N.W., Suite 400 East,
Washington, D.C. 20007.
OTHER INFORMATION--ASIS is registered with the SEC as a management investment
company. Such registration does not involve supervision of the management or
policies of ASIS. The Prospectus and this Statement of Additional Information,
omit certain of the information contained in the Registration Statement filed
with the SEC, and copies of such information may be obtained from the SEC upon
payment of the prescribed fee or examined at the SEC in Washington, D.C. without
charge.
As of February 11, 1997, to the knowledge of the Trusts, there were no
shareholders of Trusts I or I-A who beneficially owned more than 5% of the
outstanding shares of Trusts I or I-A. As of the same date, the only shareholder
who beneficially owned more than 5% of the outstanding shares of Trust II was
Paul R. Biriles Inc., 1700 W. 132nd Street, Gardena, California 90249-2008
(32.86%). As of the same date, there were six shareholders who beneficially
owned more than 5% of the outstanding shares of Trust IV. They were: 1) First
American Savings Bank, c/o Rebecca Hittner, 3540 S. 84th Street, Omaha, Nebraska
68124-4064 (5.73%); 2) Robert E. Miller Trust, Attention Tommy Beard, Vice
President, 11414 Highway 71 South, Fort Smith, Arkansas, 72918-9159 (10.04%);
3) Paine Webber, Ellen Gittelsohn, 14924 Green Leaf, Sherman Oaks, California
91403-4003 (5.80%); 4) Paul and Madonna Kinol, 1439 Wildhorse Parkway,
Chesterfield, Missouri 63006-4241; 5) Samuel C. Astley Trust, 7565 Terrace
Beach, Indianapolis, Indiana 46240-3169 (6.62%) and 6) C. Brian Carlin Trust,
Virginia H. Simmons Family Trust, 4405 East West Highway, Suite 602, Bethesda,
Maryland 20814-4537 (11.56%).
Certain class action lawsuits, the first of which was filed on December 19, 1994
(entitled Lisa Liottali, on behalf of herself and all others similarly situated
v. Pilgrim Adjustable Rate Securities Trust I-A, Pilgrim Institutional
Securities Trust, Pilgrim Management Corporation, Pilgrim Group, Inc. and
Palomba Weingarten), are pending in the United States District Court for the
Central District of California in which Pilgrim Group, Inc., Pilgrim Management
Corporation, Pilgrim Distributors Corp., Pilgrim Institutional Securities Trust
("PIST"), Pilgrim Strategic Investment Series ("PSIS") (and certain series funds
of PSIS) (predecessors to the Atlas Group, AMC, the Distributor, AIST and ASIS)
and certain past and present Trustees and officers of AIST and ASIS are
defendants. These actions, which were consolidated in March 31, 1995, in an
action entitled In Re: Pilgrim Securities Litigation, principally allege
violations of the Securities Act of 1933 and the 1940 Act and relate primarily
to disclosure in certain of PSIS' funds concerning pricing and liquidity of
portfolio securities. Management believes the Complaints are without merit and
intends to vigorously defend these actions. On December 18, 1996 the Court
granted preliminary approval of a tentative class action settlement which would
result in a dismissal of the class actions with prejudice. The tentative
settlement would not have a material adverse effect upon the financial condition
of the Trusts or the Portfolio. The tentative settlement, however, is subject to
final court approval, among other things, and the defendants have the option of
terminating the settlement under certain conditions.
Investors in a Trust will be kept informed of its progress through periodic
reports showing diversification of its portfolio, statistical data and any other
significant data. Financial statements certified by independent public accounts
will be submitted to shareholders at least annually. A copy of a current list of
investments
-29-
<PAGE>
comprising the Portfolio's portfolio as of the close of business on
the last day of each month, may be obtained by written request to a Trust,
together with a stamped, self-addressed envelope.
Shareholder inquiries should be directed to the Shareholder Servicing Agent, DST
Systems, Inc. (800-441-7267).
The Prospectus is not an offering of the securities herein described in any
state in which the offering is unauthorized. No salesman, dealer or other person
is authorized to give any information or make any representations other than
those contained in the Prospectus.
FINANCIAL STATEMENTS
The audited Financial Statements of the Trusts and the Portfolio and the notes
thereto in the Trusts' Annual Report to Shareholders for the fiscal year ended
October 31, 1996 are incorporated in this Statement of Additional Information by
reference. No other parts of the 1996 Annual Report are incorporated by
reference herein. The Financial Statements included in the 1996 Annual Report
have been audited by the Trusts' independent certified public accountants, Tait,
Weller & Baker, whose reports thereon are incorporated by reference. Such
Financial Statements have been incorporated herein in reliance upon such reports
given upon their authority as experts in accounting and auditing. Copies of the
Trusts' Annual Report may be obtained without charge by contacting the Trusts'
Shareholder Servicing Agent at (800) 441-7267.
-30-
<PAGE>
PART C
<PAGE>
PART C. OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
List all financial statements and exhibits filed as part of the Registration
Statement.
(a) Financial Statements:
In Part A: Financial Highlights for Astra Adjustable U.S. Government
Securities Trusts I, I-A, II and IV.
In Part B: Audited Financial Statements of Astra Adjustable U.S.
Government Securities Trusts I, I-A, II and IV, (formerly
Pilgrim Adjustable U.S. Government Securities Trusts I, I-A,
II, and IV), including notes thereto, and the Report of
Tait, Weller & Baker, independent certified public
accountants for the Registrant, thereon, for the fiscal year
ended October 31, 1996 and Audited Financial Statements of
Astra Institutional Adjustable U.S. Government Portfolio
(formerly Pilgrim Institutional Adjustable U.S. Government
Portfolio), including notes thereto, and the Report of Tait,
Weller & Baker, independent certified public accountants for
the Registrant, thereon, for the fiscal year ended October
31, 1996 are incorporated herein by reference to
Registrant's Annual Report to Shareholders dated October 31,
1996, which was filed with, and accepted by, the U.S.
Securities and Exchange Commission via EDGAR on Form Type
N-30D (with an accession number: 0000950115-97-000023) on
January 7, 1997.
In Part C: None.
(b) Exhibits
Exhibits filed under Registration Statement on Form N-1 and Amendments thereto
filed on Forms N-1 and N-1A are hereby incorporated by reference into this
post-effective amendment.
(1)(a) Amended and Restated Agreement and Declaration of Trust.(6)
(1)(b) Amendment to Amended and Restated Agreement and Declaration of
Trust(7)
(2)(a) Amended and Revised By-laws of Pilgrim Strategic Investment
Series.(1)
(2)(b) Amendment to Amended and Revised By-laws(7)
(3) Not applicable.
(4) Specimen share certificates.(2)
(5) Amendment to Investment Management Agreement.(2)
(6)(a) Form of Underwriting Agreement between PSIS and Pilgrim
Distributors Corp.(3)
(6)(b) Amendment to Underwriting Agreement.(7)
(7) Not applicable.
(8) Custody Agreement.(7)
(9)(a) Form of Transfer Agency Agreement.(2)
(9)(b) Form of Administration Agreement between PSIS and Pilgrim Group,
Inc.(3)
(9)(c) Amendment to Administration Agreement.(7)
(9)(d) Sub-Administration Agreement.(7)
(9)(d) Accounting Services Agreement.(7)
(10) Consent of Jorden Burt Berenson & Johnson LLP(8)
(11) Consent of Independent Certified Public Accountants.(8)
(12) Not applicable.
(13) Not applicable.
(14) Not applicable.
- ----------
(1) Incorporated herein by reference to Post-Effective Amendment No. 39 to
this Registration Statement, filed November 21, 1990.
(2) Incorporated herein by reference to Post-Effective Amendment No. 40 to
this Registration Statement, filed January 1, 1991.
(3) Incorporated herein by reference to Post-Effective Amendment No. 42 to
this Registration Statement, filed September 9, 1991.
(4) Incorporated herein by reference to Post-Effective Amendment No. 52 to
this Registration Statement, filed March 1, 1993.
(5) Incorporated herein by reference to Post-Effective Amendment #55 to the
Registration Statement, filed November 3, 1993.
(6) Incorporated herein by reference to Post-Effective Amendment #61 to the
Registration Statement, filed May 2, 1995.
(7) Incorporated herein by reference to Post-Effective Amendment #62 to the
Registration Statement, filed February 28, 1996.
(8) Filed herewith.
C-1
<PAGE>
(b) Exhibits (Continued)
(15)(a) Distribution Plan for Astra Adjustable U.S. Government Securities
Trust I.(2)/
(15)(b) Distribution Plans for Astra Adjustable U.S. Government Securities
Trust II and Astra Adjustable Rate Securities Trusts I and II.(3)
(15)(c) Distribution Plans for Astra Adjustable U.S. Government Securities
Trust IV and Astra Adjustable Rate Securities Trust IV.(5)
(15)(d) Amendment to Distribution Plans.(7)
(16) Schedule of Performance Quotations.(4)
(17)(a) Financial Data Schedule for Astra Adjustable U.S. Government
Securities Trust I.(8)
(17)(b) Financial Data Schedule for Astra Adjustable U.S. Government
Securities Trust I-A.(8)
(17)(c) Financial Data Schedule for Astra Adjustable U.S. Government
Securities Trust II.(8)
(17)(d) Financial Data Schedule for Astra Adjustable U.S. Government
Securities Trust IV.(8)
(17)(e) Financial Data Schedule for Astra Institutional Adjustable U.S.
Government Securities Portfolio.(8)
(18) Not Applicable.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON
CONTROL WITH REGISTRANT
None.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
The following information is given as of the date indicated:
Number of Record Holders
Title of Class as of January 31, 1997
-------------------------------- --------------------------
Astra Adjustable U.S.
Government Securities
Trust I Series - Shares
of Beneficial Interest
(no Par Value) 3,870
Astra Adjustable U.S.
Government Securities
Trust I-A Series - Shares
of Beneficial Interest
(no Par Value) 2,617
- ----------
(1) Incorporated herein by reference to Post-Effective Amendment No. 39 to
this Registration Statement, filed November 21, 1990.
(2) Incorporated herein by reference to Post-Effective Amendment No. 40 to
this Registration Statement, filed January 1, 1991.
(3) Incorporated herein by reference to Post-Effective Amendment No. 42 to
this Registration Statement, filed September 9, 1991.
(4) Incorporated herein by reference to Post-Effective Amendment No. 52 to
this Registration Statement, filed March 1, 1993.
(5) Incorporated herein by reference to Post-Effective Amendment #55 to the
Registration Statement, filed November 3, 1993.
(6) Incorporated herein by reference to Post-Effective Amendment #61 to the
Registration Statement, filed May 2, 1995.
(7) Incorporated herein by reference to Post-Effective Amendment #62 to the
Registration Statement, filed February 28, 1996.
(8) Filed herewith.
C-2
<PAGE>
ITEM 26. NUMBER OF HOLDERS OF SECURITIES (Continued)
Number of Record Holders
Title of Class as of January 31, 1997
-------------------------------- --------------------------
Astra Adjustable U.S.
Government Securities
Trust II Series - Shares
of Beneficial Interest
(no Par Value) 273
Astra Adjustable U.S.
Government Securities
Trust IV Series - Shares
of Beneficial Interest
(no Par Value) 98
Astra Adjustable Rate
Securities Trust I Series -
Shares of Beneficial
Interest (no Par Value) 275
Astra Adjustable Rate
Securities Trust I-A Series -
Shares of Beneficial
Interest (no Par Value) 798
Astra Adjustable Rate
Securities Trust IV Series -
Shares of Beneficial
Interest (no Par Value) 111
ITEM 27. INDEMNIFICATION
Incorporated by reference to Post-Effective Amendment No. 40 to this
Registration Statement, filed January 22, 1991.
C-3
<PAGE>
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
Certain of the officers and directors of the Registrant's investment adviser
also serve as officers and/or directors for other Astra investment companies and
with Atlas Holdings Group, Inc. and subsidiaries. For additional information,
please see Parts A and B.
ITEM 29. PRINCIPAL UNDERWRITERS
(a) Astra Fund Distributors Corp., the Registrant's principal underwriter, also
serves as principal underwriter for Astra Global Investment Series and Astra
Institutional Trust.
(b) The following information is furnished with respect to the officers and
directors of Astra Fund Distributors Corp., the Registrant's principal
underwriter:
<TABLE>
<CAPTION>
Name and Principal
Positions and Office Positions and Offices
Business Address* with Principal Underwriter with Registrant
- ----------------- -------------------------- ---------------
<S> <C> <C>
John R. Elerding Senior Vice President, Treasurer, Senior Vice President, Treasurer
Secretary and Chief Financial Officer Secretary and Chief Financial Officer
Robert R. Womack, Jr. President President
</TABLE>
(c) Not Applicable. The Registrant's principal underwriter is an affiliated
person of the Registrant.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
The accounts, books or other documents required to be maintained by Section
31(a) of the Investment Company Act of 1940 will be kept by the Registrant, its
Investment Manager or its Shareholder Servicing Agent.
ITEM 31. MANAGEMENT SERVICES
There are no management-related service contracts not discussed in Parts A and
B.
ITEM 32. UNDERTAKINGS
Registrant hereby undertakes to furnish each person to whom a prospectus is
delivered with a copy of the Registrant's latest annual report to shareholders
upon request and without charge.
* The principal business address for each of the persons listed is: 750 B
Street, Suite 2350, San Diego, California 92101
C-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this post-effective amendment to its
Registration Statement pursuant to Rule 485 (b) under the Securities Act of 1933
and has duly caused this Amendment to its Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of Beverly
Hills and the State of California, on the 26th day of February, 1997.
ASTRA STRATEGIC INVESTMENT SERIES
/s/ PALOMBA WEINGARTEN
-----------------------------
Palomba Weingarten, Chairman
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to its Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signatures Title Date
---------- ----- ----
/s/ PALOMBA WEINGARTEN Chairman of the Board February 26, 1997
- -------------------------- and Trustee
Palomba Weingarten
/s/ ROBERT R. WOMACK, JR. President February 26, 1997
- --------------------------
Robert R. Womack, Jr.
/s/ JOHN R. ELERDING Principal Financial and February 26, 1997
- -------------------------- Accounting Officer
John R. Elerding
/s/ AL BURTON Trustee February 26, 1997
- --------------------------
Al Burton
/s/ FELICE R. CUTLER Trustee February 26, 1997
- --------------------------
Felice R. Cutler
/s/ GARRY D. PEARSON Trustee February 26, 1997
- --------------------------
Garry D. Pearson
S-1
<PAGE>
SIGNATURES
Astra Institutional Securities Trust has duly caused this Amendment to the
Registration Statement of Astra Strategic Investment Series to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Beverly
Hills and the State of California, on the 26th day of February, 1997.
ASTRA INSTITUTIONAL SECURITIES TRUST
/s/ PALOMBA WEINGARTEN
-------------------------------
Palomba Weingarten, Chairman
This Amendment to the Registration Statement on Form N-1A of Astra
Strategic Investment Series has been signed below by the following persons in
the capacities and on the dates indicated.
Signatures Title Date
---------- ----- ----
/s/ PALOMBA WEINGARTEN Chairman of the Board February 26, 1997
- --------------------------- and Trustee
Palomba Weingarten
/s/ ROBERT R. WOMACK, JR. President February 26, 1997
- --------------------------
Robert R. Womack, Jr.
/s/ JOHN R. ELERDING Principal Financial and February 26, 1997
- --------------------------- Accounting Officer
John R. Elerding
/s/ AL BURTON Trustee February 26, 1997
- ---------------------------
Al Burton
/s/ FELICE R. CUTLER Trustee February 26, 1997
- ---------------------------
Felice R. Cutler
/s/ GARRY D. PEARSON Trustee February 26, 1997
- ---------------------------
Garry D. Pearson
S-2
<PAGE>
EXHIBIT INDEX
A complete list of exhibits is included is included in Part C, Item 24(b) of the
Registration Statement. The following exhibits are filed herewith:
Exhibits
(10) Consent of Counsel
(11) Consent of Independent Certified Public Accountants
(17)(a) Financial Data Schedule for Astra Adjustable U.S. Government
Securities Trust I
(17)(b) Financial Data Schedule for Astra Adjustable U.S. Government
Securities Trust I-A
(17)(c) Financial Data Schedule for Astra Adjustable U.S. Government
Securities Trust II
(17)(d) Financial Data Schedule for Astra Adjustable U.S. Government
Securities Trust IV
(17)(e) Financial Data Schedule for Astra Institutional Adjustable U.S.
Government Securities Portfolio
EXHIBIT 10
CONSENT OF COUNSEL
JORDEN BURT BERENSON & JOHNSON LLP
Suite 400 East
1025 Thomas Jefferson Street, N.W.
Washington, D.C. 20007-0805
(202) 965-8100
Telecopier (202) 965-8104
February 28, 1997
Astra Strategic Investment Series
750 B Street
Suite 2350
San Diego, California 92101
Re: Astra Strategic Investment Series
Ladies and Gentlemen:
We hereby consent to the reference to our name under the caption "Legal
Counsel" in the Statement of Additional Information of Astra Adjustable U.S.
Government Securities Trusts I, I-A, II and IV, all series of Astra Strategic
Investment Series, contained in Post-Effective Amendment No. 64 to the
Registration Statement on Form N-1A (File No. 2-19659) filed by Astra Strategic
Investment Series with the Securities and Exchange Commission under the
Securities Act of 1933 and the Investment Company Act of 1940.
Very truly yours,
/s/ JORDEN BURT BERENSON & JOHNSON LLP
----------------------------------------
Jorden Burt Berenson & Johnson, LLP
EXHIBIT 11
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have issued our report dated November 19, 1996 (except for the third
paragraph of Note 7 as to which the date is December 18, 1996) accompanying the
October 31, 1996 financial statements of Astra Adjustable U.S. Government
Securities Trust I, I-A, II and IV (each a series of shares of beneficial
interest of Astra Strategic Investment Series) and our report dated November 19,
1996 (except for the third paragraph of Note 5 as to which the date is December
18, 1996) accompanying the October 31, 1996 financial statements of Astra
Institutional Adjustable U.S. Government Securities Portfolio (a series of
shares of Astra Institutional Securities Trust) which are incorporated by
reference in Part B of Post-Effective Amendment No. 64 to this Registration
Statement and Prospectus. We consent to the use of the aforementioned reports in
the Registration Statement and Prospectus.
/s/ TAIT, WELLER & BAKER
--------------------------
Tait, Weller & Baker
Philadelphia, Pennsylvania
February 24, 1997
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WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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