As Filed With The Securities And Exchange Commission On April 29, 1996
Registration No. 33-1474
ICA No. 811-4468
U.S. 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. 17 (X)
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 (X)
Amendment No. 18 (X)
ASTRA GLOBAL INVESTMENT SERIES
--------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
750 B Street, Suite 2350, San Diego, California 92101
-----------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(619) 238-7100
----------------------------------------------------
(Registrant's Telephone Number, Including Area Code)
Palomba Weingarten
Atlas Holdings Group, Inc.
9595 Wilshire Boulevard
Suite 1001
Beverly Hills, California 90212
--------------------------------------------------
(Name and Address of Agent for Service of Process)
Copies to:
Carl Frischling, Esq.
Kramer, Levin, Naftalis, Nessen, Kamin & Frankel
919 Third Avenue
New York, NY 10022
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
- --
__ on (date) pursuant to paragraph (b)(1)(v) of Rule 485
__ 60 days after filing pursuant to paragraph (a)(1) of Rule 485
__ on (date) pursuant to paragraph (a)(1) of Rule 485
__ 75 days after filing pursuant to paragraph (a)(2) of Rule 485
__ on (date) pursuant to paragraph (a)(2) of Rule 485
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 December 31, 1995 on February
16, 1996.
<PAGE>
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
UNDER THE SECURITIES ACT OF 1933
Proposed Proposed
Amount Maximum Maximum Amount of
Title of Securities Being Offering Price Aggregate Registration
Being Registered Registered (1) Per Unit (2) Offering Price (3) Fee
------------------- ------------- -------------- ------------------ -------------
<S> <C> <C> <C> <C>
Short-Term Multi-
Market Fund I 765,518 $6.90 $145,000 $ 50.00
Short-Term Multi-
Market Fund II 432,308 $7.27 $145,000 $ 50.00
--------- -------- -------
Total 1,197,826 $290,000 $100.00
========= ======== =======
</TABLE>
(1) Registrant has registered an indefinite number of its shares under the
Securities Act of 1933 pursuant to Rule 24f-2 under the Investment Company
Act of 1940. Registrant's Rule 24f-2 Notice for its fiscal year ended
December 31, 1995, was filed on February 16, 1996.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 24e-2 under the Investment Company Act of 1940 and Rule
457(d) under the Securities Act of 1933, based on offering prices of each
Fund's shares on April 22, 1996.
(3) The maximum aggregate offering price for Registrant's shares with respect
to Short-Term Multi-Market Fund I & II is calculated pursuant to rule 24e-2
under the 1940 Act. During the year ended December 31, 1995, Registrant
redeemed 1,332,515 shares, of which Registrant used 175,648 shares for
reductions pursuant to paragraph (c) of Rule 24f-2 in Registrant's Rule
24f-2 Notice dated February 16, 1996 for the year ended December 31, 1995,
and none of the redeemed shares were used for reductions pursuant to Rule
24e-2 in previous post-effective amendments filed during the current fiscal
year. As a result, Registrant is using 1,156,867 shares to reduce, pursuant
to paragraph (a) of Rule 24e-2, the number of shares for which the
registration fee is payable with respect to this Post-Effective Amendment.
<PAGE>
ASTRA GLOBAL INVESTMENT SERIES
ASTRA SHORT-TERM MULTI-MARKET INCOME FUND I SERIES
Registration Statement on Form N-1A
CROSS-REFERENCE SHEET
Form N-1A
Item Number
- -----------
Prospectus
Part A Prospectus Caption Page Number
- ------ ------------------ -----------
1. Cover Page Cover Page
2. Key Features 2
3. *
4. The Fund's Investment Objectives and
Policies; The Astra Group;
General Information 6;25;29
5. (a) General Information 25
(b) The Astra Group; Management Fees;
Distribution Plan 25;25;26
(c) Management Fees; Distribution Plan 25;26
(d) Back Cover
Transfer and Shareholder
Servicing Agent Back Cover
(e) Management Fees; Distribution Plan 25;26
(f) Management Fees; Distribution Plan 25;26
6. (a) General Information 29
(b) The Astra Group; Management
Fees; Distribution Plan 25;25;26
(c) General Information 29
(d) *
(e) Cover Page Cover Page
(f) Distributions and Taxes 13
(g) Distributions and Taxes 13
7. (a) How to Buy Shares of the Funds 15
(b) How the Funds Value Their Shares 24
(c) *
(d) How to Buy Shares of the Funds 15
(e) Management Fees; Distribution Plan 25;26
8. How to Redeem Shares of the Fund 20
9. *
(i)
<PAGE>
ASTRA SHORT-TERM MULTI-MARKET INCOME FUND I SERIES
Statement of
Additional
Statement of Additional Information
Part B Information Caption Page Number
- ------ ----------------------- ------------
10. Cover Page Cover Page
11. Table of Contents Cover Page
12. *
13. Investment Objectives and Policies;
Investment Restrictions 2;11
14. Trustees and Officers 12
15. *
16. (a) Investment Management 12
(b) Investment Management 12
(c) Distribution Plan 16
(d) *
(e) *
(f) Distribution Plan 16
(g) *
(h) Accountants 28
(i) *
17. (a) Execution of Portfolio Transactions 14
(b) *
(c) Execution of Portfolio Transactions 14
(d) *
(e) *
18. *
19. (a) See Part A - How to Buy Shares of the Funds
(b) The Price of the Shares is Determined Daily 18
(c) *
20. (a) Tax Matters 19
21. Principal Underwriter 16
22. Investment Return Information 25
23. *
(ii)
<PAGE>
ASTRA SHORT-TERM MULTI-MARKET INCOME FUND II SERIES
Prospectus
Part A Prospectus Caption Page Number
- ------ ------------------ ----------
1. Cover Page Cover Page
2. Key Features 2
3. *
4. The Fund's Investment Objectives and
Policies; The Astra Group;
General Information 6;25;29
5. (a) General Information 25
(b) The Astra Group; Management Fees;
Distribution Plan 25;25;26
(c) Management Fees; Distribution Plan 25
(d) Back Cover
Transfer and Shareholder
Servicing Agent Back Cover
(e) Management Fees; Distribution Plan 25;26
(f) Management Fees; Distribution Plan 25;26
6. (a) General Information 29
(b) The Astra Group; Management
Fees; Distribution Plan 25;25;26
(c) General Information 29
(d) *
(e) Cover Page Cover Page
(f) Distributions and Taxes 13
(g) Distributions and Taxes 13
7. (a) How to Buy Shares of the Funds 15
(b) How the Funds Value Their Shares 24
(c) *
(d) How to Buy Shares of the Funds 15
(e) Management Fees; Distribution Plan 25
8. How to Redeem Shares of the Fund 20
9. *
(iii)
<PAGE>
ASTRA SHORT-TERM MULTI-MARKET INCOME FUND II SERIES
Statement of
Additional
Statement of Additional Information
Part B Information Caption Page Number
- ------- ----------------------- ------------
10. Cover Page Cover Page
11. Table of Contents Cover Page
12. *
13. Investment Objectives and Policies;
Investment Restrictions 2;11
14. Trustees and Officers 12
15. *
16. (a) Investment Management 13
(b) Investment Management 13
(c) Distribution Plan 16
(d) *
(e) *
(f) Distribution Plan 16
(g) *
(h) Accountants 32
(i) *
17. (a) Execution of Portfolio Transactions 15
(b) *
(c) Execution of Portfolio Transactions 15
(d) *
(e) *
18. *
19. (a) See Part A - How to Buy Shares of the Funds
(b) The Price of the Shares is Determined Daily 21
(c) *
20. (a) Tax Matters 21
21. Principal Underwriter 16
22. Investment Return Information 28
23. *
Part C Information required to be included in
Part C is set forth under the appropriate
Item, so numbered, in Part C to this
Registration
- ----------
* Not Applicable
(iv)
<PAGE>
Prospectus
[ASTRA Astra Short-Term Multi-Market Income Fund I
LOGO] Astra Short-Term Multi-Market Income Fund II
750 B STREET, SUITE 2350, SAN DIEGO, CALIFORNIA 92101 1-800-219-1080
- -------------------------------------------------------------------------------
o HOW THE FUNDS WORK PAGE 6
O SHAREHOLDER'S GUIDE PAGE 15
- -------------------------------------------------------------------------------
Astra Short-Term Multi-Market Income Fund I and Astra Short-Term Multi-Market
Income Fund II (collectively, the "Funds" or individually, a "Fund") are
non-diversified, open-end management investment companies, and are each a series
of Astra Global Investment Series ("AGIS"). The primary investment objective of
the Funds is to provide investors with high current income with capital
preservation as a secondary objective.
To achieve the primary objective the Funds will invest in non-diversified
portfolios of high quality debt instruments having remaining maturities of not
more than 3 years denominated in the U.S. Dollar and a range of foreign
currencies and by writing call options on the currencies and securities in which
the Funds are invested. In addition, the Funds may hedge their currency exposure
through the use of forward selling, futures contracts, options on futures
contracts and options on foreign currencies.
The Funds are designed for the investor who seeks higher yield than a money
market fund and less fluctuation in net asset value than a longer-term bond
fund. There can be no assurance that the Funds' investment objectives will be
attained.
Shares of Fund II enjoy the benefit of permitting all of the investor's money to
work from the time the investment is made. The higher distribution fee paid by
Fund II, however, will cause Fund II to have a higher expense ratio than shares
of Fund I. In choosing between an investment in Fund I or Fund II an investor
should consider which method of purchasing shares is the 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 Fund I would
be less or greater than the accumulated continuing distribution fees plus the
contingent deferred sales charges imposed on shares of Fund II and to what
extent such differential would be offset or increased by the higher yield of
Fund I shares.
Fund I 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. Fund II offers shares that may be purchased at a price equal to their
net asset value per share and imposes a contingent deferred sales charge which
will be assessed on most redemptions made within four years of purchase. Fund I
incurs an annual distribution fee of up to .30% of its daily net assets. Fund II
incurs, subject to certain limitations, an annual distribution fee of .75% and a
shareholder maintenance fee of .25% of its average daily net assets.
This combined Prospectus sets forth concisely information about the Funds that
prospective investors should know before investing. Please read this Prospectus
carefully and retain it for future reference. Each Fund's Statement of
Additional Information, dated April 29, 1996, has been filed with the Securities
and Exchange Commission and is incorporated herein by reference. It is available
upon request to the Fund without charge to the investor at the address above.
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 COMMIS-
SION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS APRIL 29, 1996.
<PAGE>
TABLE OF CONTENTS
- -----------------
PAGE
----
Key Features 2
- --------------------------------------------------------------------------------
The Funds' Investment Objectives and Policies 6
- --------------------------------------------------------------------------------
Distributions and Taxes 13
- --------------------------------------------------------------------------------
How to Buy Shares of the Funds 15
- --------------------------------------------------------------------------------
How to Redeem Shares of the Funds 20
- --------------------------------------------------------------------------------
Shareholder Options/Privileges 23
- --------------------------------------------------------------------------------
Expedited Redemption and Telephone Exchange Information 24
- --------------------------------------------------------------------------------
How the Funds Value Their Shares 24
- --------------------------------------------------------------------------------
The Astra Organization 25
- --------------------------------------------------------------------------------
Management and Distribution Fees 25
- --------------------------------------------------------------------------------
General Information 29
- --------------------------------------------------------------------------------
New Account Application 31
- --------------------------------------------------------------------------------
Additional Account Privileges 35
- --------------------------------------------------------------------------------
KEY FEATURES
- -----------------
WHAT IS THE FUND'S INVESTMENT OBJECTIVE?
---------------------------------------------------------------------------
Astra Short-Term Multi-Market Income Fund I and Astra Short-Term Multi-Market
Income Fund II are non-diversified, open-end management investment companies.
The Funds are each a series of Astra Global Investment Series which was
organized as a Massachusetts business trust on November 21, 1985 under the name
Pilgrim Preferred Fund. The Funds, renamed on April 7, 1995, were formerly known
as Pilgrim Short-Term Multi-Market Income Fund and Pilgrim Short-Term
Multi-Market Income Fund II. The Trust, also renamed on April 7, 1995, was
formerly known as Pilgrim Global Investment Series. The primary investment
objective of each Fund is to provide investors with high current income with
capital preservation as a secondary objective. To achieve the primary objective
the Funds will invest in non-diversified portfolios of high quality debt
instruments having remaining maturities of not more than 3 years denominated in
the U.S. Dollar and a range of foreign currencies and by writing call options on
the currencies and securities in which the Funds are invested. In addition, the
Funds may hedge their currency exposure through the use of forward selling,
futures contracts, options on futures contracts and options on foreign
currencies.
HIGH CURRENT INCOME WITH LESS FLUCTUATION IN NET ASSET VALUE
---------------------------------------------------------------------------
By investing in high quality debt instruments having remaining maturities of not
more than 3 years denominated in the U.S. Dollar and a range of foreign
currencies and writing call options on the currencies and securities in which
the Funds invest, the Funds seek to provide investors with a higher yield than a
money market fund and less fluctuation in net asset value than a longer-term
bond fund. However, the Funds are not money market funds and their net asset
values will fluctuate.
FOREIGN AND DOMESTIC INVESTMENT OPPORTUNITIES
---------------------------------------------------------------------------
The Funds will seek investment opportunities in foreign as well as domestic
securities markets. The Funds intend to maintain, in normal circumstances, a
substantial portion of their assets in high quality debt securities denominated
in a range of foreign currencies.
- -----
2
<PAGE>
HOW DO I BUY AND SELL (REDEEM) MY SHARES OF THE FUNDS?
---------------------------------------------------------------------------
Shares of Fund I are available through selected broker-dealers and other
financial services firms or by check or wire sent directly to the Funds'
Transfer Agent at the net asset value per share plus a varying sales charge,
depending on the amount of purchase. Shares of Fund II are available through
such financial services firms at the net asset value per share. The minimum
initial investment is $5,000 ($2,000 for IRAs), $250 for subsequent investments,
however, this may be changed from time to time at management's discretion.
Shares of Fund I are redeemable at the net asset value per share on any business
day. Shares of Fund II are redeemable at the net asset value per share on any
business day, reduced by the amount of any contingent deferred sales charge.
Payments to you can be made through brokers, directly to you, or to your
designated bank. In addition, for the convenience of shareholders, each Fund
provides certain shareholder services and privileges which may be suited to your
particular investment needs. See "Shareholder's Guide."
WHEN DO I RECEIVE INCOME?
---------------------------------------------------------------------------
The Funds pay dividends on a monthly basis. Dividends are paid in cash or
reinvested in additional shares at no charge. See "Choosing a Distribution
Option."
WHO IS ASTRA GROUP?
---------------------------------------------------------------------------
Astra Management Corporation ("AMC"), the Funds' investment manager, and Astra
Fund Distributors Corp. ("AFDC"), the Funds' principal underwriter, are part of
Atlas Holdings Group, Inc. ("Atlas Group"), a financial services holding company
that provides services to mutual funds. Atlas Group has total combined assets
under management of approximately $175 million. AMC and AFDC are part of the
umbrella name "Astra Group."
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 Fund. The rules of the Securities and Exchange Commission
require that Fund I's maximum sales charge be reflected in the fee table.
However, certain investors may qualify for reduced sales charges as described
under "How to Buy Shares of the Funds." The percentages shown below expressing
Annual Fund Operating Expenses are based on actual amounts incurred by the Funds
for the calendar year ended December 31, 1995.
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES FUND I FUND II
- -------------------------------- ------ -------
<S> <C> <C>
Maximum Sales Charge Imposed on Purchases (as a percentage of offering price) .. 3% NONE
Maximum Sales Charge Imposed on Reinvested Dividends
(as a percentage of offering price) .......................................... NONE NONE
Deferred Sales Charge
1st year ..................................................................... NONE 4%
2nd year ..................................................................... NONE 3%
3rd year ..................................................................... NONE 2%
4th year ..................................................................... NONE 1%
5th year and thereafter ...................................................... NONE 0%
Redemption Fees ................................................................ NONE NONE
ANNUAL FUND OPERATING EXPENSES
- ------------------------------
(As a Percentage of Average Net Assets)
Management Fees (See "Management and Distribution Fees") ....................... .63% .63%
12b-1 Fees (See "Management and Distribution Fees")* ........................... .30% .75%
Shareholder Maintenance Fees (See "Management and Distribution Fees") .......... .00% .25%
Other Expenses (After Expense Reimbursements)*** ............................... 1.52% 1.86%
Total Fund Operating Expenses** ................................................ 2.45% 3.49%
</TABLE>
* As a result of 12b-1 fees, a long-term shareholder in the Funds may pay more
than the economic equivalent of the maximum sales charges permitted by the
Rules of the National Association of Securities Dealers, Inc.
** More complete descriptions of the following expenses are set forth on the
following pages: (i) Management Fees--page 26, (ii) 12b-1 Fees--pages 26-29
and (iii) Adminisrtative Fees--page 26.
*** Ratio of expenses to average net assets prior to expense waiver and
reimbursement from AMC for Fund II in 1995 was 3.78%.
- -----
3
<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 the Fund would have paid
transaction and operating expenses at the end of each year as follows:
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
Fund I .......... $54 $104 $157 $300
Fund II ......... $75 $127 $181 $376
You would pay the following expenses on the same investment assuming no
redemption.
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
Fund II ......... $35 $107 $181 $376
This Example should not be considered as representative of past or future
expenses and actual expenses may be greater or lesser than those shown. The
foregoing table has not been audited by Tait, Weller & Baker, the Funds'
independent certified public accountants.
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
The following financial highlights relating to the Funds have been audited by
Tait, Weller & Baker, independent certified public accountants, whose reports
thereon for each of the five years in the period ended December 31, 1995 for
Fund I and for each of the four years in the period ended December 31, 1995 and
for the period October 1, 1991 to December 31, 1991 for Fund II appear in the
Funds' Annual Report to Shareholders for the year ended December 31, 1995, and
are incorporated by reference in this Prospectus. A copy of the Funds' Annual
Report to Shareholders may be obtained without charge by contacting the Funds'
Shareholder Servicing Agent at (800) 441-7267.
FUND I
------
<TABLE>
<CAPTION>
JANUARY 21,
YEAR ENDED DECEMBER 31, 1986(a) to
---------------------------------------------------------------------------------- DECEMBER 31,
1995 1994 1993 1992 1991 1990* 1989 1988 1987 1986
------ ------ ------ ------ ------ ------ ------ ------ ------ ------
PER SHARE OPERATING
PERFORMANCE
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of
period ........................ $6.73 $6.89 $7.27 $9.31 $10.17 $14.00 $19.32 $20.24 $25.09 $25.00
----- ----- ----- ----- ------ ------ ------ ------ ------ ------
Income (loss) from investment
operations--
Net investment income ......... 0.25 0.08 0.45 0.86 1.04 1.14 2.35 2.82 2.97 2.39
Net realized and unrealized
gain (loss) on investments
and foreign currency
transactions ................. 0.13 0.12 (0.35) (2.16) (0.88) (3.11) (4.79) (0.74) (5.08) (0.17)
----- ----- ----- ----- ------ ------ ------ ------ ------ ------
Total from investment
operations .................. 0.38 0.20 0.10 (1.30) 0.16 (1.97) (2.44) 2.08 (2.11) 2.22
----- ----- ----- ----- ------ ------ ------ ------ ------ ------
Less distributions--
Distributions from net
investment income ............ 0.25 0.08 -- 0.74 1.02 1.14 2.66 3.00 2.74 2.13
Distributions from paid-in
capital ...................... 0.10 0.28 0.48 -- -- 0.72 0.22 -- -- --
----- ----- ----- ----- ------ ------ ------ ------ ------ ------
Total distributions .......... 0.35 0.36 0.48 0.74 1.02 1.86 2.88 3.00 2.74 2.13
----- ----- ----- ----- ------ ------ ------ ------ ------ ------
Net asset value, end of period.. $6.76 $6.73 $6.89 $7.27 $9.31 $10.17 $14.00 $19.32 $20.24 $25.09
===== ===== ===== ===== ===== ====== ====== ====== ====== ======
TOTAL RETURN(e) ................ 5.77% 2.96% 1.54% (15.08%) 1.39% (14.95%) (14.71%) 10.26% (9.53%) 9.68%(b)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period
(in thousands) ................ $10,601 $15,566 $27,630 $59,283 $170,377 $139,643 $49,442 $139,186 $126,581 $123,314
Ratio to average net assets--
Expenses ...................... 2.45% 1.68% 1.85% 1.31% 1.47% 1.65% 1.34% 1.14%(c) 1.12 1.14%(b)
Net investment income ......... 3.98% 3.42% 6.41% 9.46% 10.14% 10.02% 13.30% 12.64%(d) 12.65% 9.21%(b)
Portfolio turnover rate ........ 382% 337% 151% 167% 193% 247% 147% 77% 81% 55%(b)
</TABLE>
- -----
4
<PAGE>
FUND II
-------
<TABLE>
<CAPTION>
OCTOBER 1,
YEAR ENDED DECEMBER 31, 1991(f) to
------------------------------------------- DECEMBER 31,
1995 1994 1993** 1992 1991
------ ------ ------ ------ ------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period ............... $7.39 $7.71 $8.10 $9.73 $10.00
----- ----- ----- ----- -----
Income (loss) from investment operations--
Net investment income ............................. 0.21 0.04 0.34 0.73 0.11
Net realized and unrealized gain (loss) on
investments and foreign currency transactions .... 0.08 0.01 (0.21) (1.61) (0.33)
----- ----- ----- ----- -----
Total from investment operations ................. 0.29 0.05 0.13 (0.88) (0.22)
----- ----- ----- ----- -----
Less distributions--
Distributions from net investment income .......... 0.21 0.04 -- 0.75 0.05
Distributions from paid-in capital ................ 0.10 0.33 0.52 -- --
----- ----- ----- ----- -----
Total distributions .............................. 0.31 0.37 0.52 0.75 0.05
----- ----- ----- ----- -----
Net asset value, end of period ..................... $7.37 $7.39 $7.71 $8.10 $9.73
===== ===== ===== ===== =====
TOTAL RETURN(e) .................................... 3.96% 0.69% 1.63% (9.80%) (8.48%)(b)
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (in thousands) ........... $3,436 $6,488 $8,127 $14,909 $13,040
Ratio to average net assets--
Expenses .......................................... 3.49%(g) 2.66% 3.10% 1.87%(g) 0.16%(b)(g)
Net investment income ............................. 2.80%(h) 2.37% 4.32% 7.85%(h) 7.59%(b)(h)
Portfolio turnover rate ............................ 414% 301% 153% 216% 0%
---------------
* On July 2, 1990 the Fund's shareholders approved a change in the Fund's
investment objective to provide investors with high current income
generated by a non-diversified portfolio of high quality debt instruments
having remaining maturities of two years or less denominated in the U.S.
dollar and a range of foreign currencies. For periods prior to July 2,
1990 the Fund's investment objective was to produce high after-tax income
generated by a diversified portfolio of high-yield preferred stocks.
** Calculation based on average shares outstanding.
(a) Effective date of the Fund's initial registration under the Securities Act
of 1933, as amended.
(b) Annualized.
(c) Ratio of expenses to average net assets prior to reimbursement from
Manager was 1.17%.
(d) Ratio of net investment income to average net assets prior to
reimbursement from Manager was 12.62%.
(e) Calculated without the deduction of sales charges.
(f) Commencement of operations.
(g) Ratio of expenses to average net assets prior to expense waiver and
reimbursement from Manager was 3.78%, 2.64% and 2.58%(b) in 1995, 1992 and
1991, respectively.
(h) Ratio of net investment income to average net assets prior to expense
waiver and reimbursement from Manager was 2.51%, 7.08% and 5.17%(b) in
1995, 1992 and 1991, respectively.
</TABLE>
- -----
5
<PAGE>
HOW THE FUNDS WORK
THE FUNDS' INVESTMENT OBJECTIVES AND POLICIES
- -----------------
The primary investment objective of each Fund is to provide investors with high
current income with capital preservation as a secondary objective. These
investment objectives are fundamental policies and may not be changed except by
a majority vote of shareholders.
To achieve its objective, each Fund will invest in a non-diversified portfolio
of high quality debt instruments having remaining maturities of not more than 3
years denominated in the U.S. Dollar and a range of foreign currencies and by
writing call options on the currencies and securities in which each Fund is
invested. Each Fund also may invest in repurchase agreements, cash or cash
equivalents or such other high quality debt instruments as is consistent with
its objectives. In addition, each Fund may hedge its currency exposure through
the use of forward selling, futures contracts, options on futures contracts and
options on foreign currencies.
On June 30, 1995, Warburg Investment Management International Ltd. ceased acting
as the Funds' sub-investment adviser. Effective July 1, 1995, Astra Management
Corporation ("AMC"), the Funds' investment manager, commenced providing the
day-to-day investment advice and investment management services for the Funds.
Each Fund seeks to provide the highest level of current income, consistent with
what the Funds' investment adviser, AMC, considers to be prudent investment
risk, that is available from a portfolio of high-quality debt securities having
remaining maturities of not more than three years. Each Fund seeks high current
yields by investing in a portfolio of debt securities denominated in the U.S.
Dollar and a range of foreign currencies. Accordingly, each Fund will seek
investment opportunities in foreign, as well as domestic, securities markets.
While each Fund normally will maintain a substantial portion of its assets in
debt securities denominated in foreign currencies, each Fund may invest a
portion of its total assets in U.S. Dollar denominated securities. It is
anticipated that, in normal circumstances, each Fund's assets will include
securities in at least three countries, including the United States. Each Fund
is designed for the investor who seeks a higher yield than a money market fund
and less fluctuation in net asset value than a longer-term bond fund. There can
be no assurance that the Funds' yield will at all times exceed that of a money
market fund. To the extent domestic short-term interest rates are higher than
domestic long-term or foreign short or long-term interest rates, and the Funds
are not substantially invested in U.S. Dollar denominated money market
instruments, the Funds' yield may not be higher than that of a money market
fund.
In pursuing its investment objectives, the Funds seek to minimize credit risk
and fluctuations in net asset value by investing only in shorter-term debt
securities. AMC actively manages the Funds' portfolio in accordance with a
multi-market investment strategy, allocating the Funds' investments among
securities denominated in the U.S. Dollar and the currencies of a number of
foreign countries and, within each such country, among different types of debt
securities. AMC adjusts the Funds' exposure to each currency based on its
perception of the most favorable markets and issuers. In this regard, the
percentage of assets invested in securities of a particular country or
denominated in a particular currency will vary in accordance with AMC's
assessment of the relative yield and appreciation potential of such securities
and the relationship of a country's currency to the U.S. Dollar. Fundamental
economic strength, credit quality and interest rate trends are the principal
factors considered by AMC in determining whether to increase or decrease the
emphasis placed upon a particular type of security or industry sector within the
Funds' investment portfolio. Each Fund will not invest more than 25% of its
total assets in debt securities denominated in a single currency other than the
U.S. Dollar.
The attractive returns currently available from short-term foreign currency
denominated debt instruments can be adversely affected by changes in exchange
rates. AMC believes that the use of foreign currency hedging techniques,
including "cross-hedges" (see "Investment Practices--Forward Foreign Currency
Exchange
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Contract," below), can help protect against declines in the U.S. Dollar value of
income available for distribution to shareholders and declines in the net asset
value of the Funds' shares resulting from adverse changes in currency exchange
rates. For example, the return available from securities denominated in a
particular foreign currency would diminish in the event the value of the U.S.
Dollar increased against such currency. Such a decline could be partially or
completely offset by an increase in value of a cross-hedge involving a forward
currency, where such contract is available on terms more advantageous to the
Funds than a contract to sell the currency in which the position being hedged is
denominated. It is AMC's belief that cross-hedges can therefore provide
significant protection of net asset value in the event of a general rise in the
U.S. Dollar against foreign currencies. However, a cross-hedge cannot protect
against exchange rate risks perfectly, and if AMC is incorrect in its judgment
of future exchange rate relationships, the Funds could be in a less advantageous
position than if such a hedge had not been established.
In addition to the U.S. Dollar, such currencies include, among others, the
Australian Dollar, Austrian Schilling, British Pound Sterling, Canadian Dollar,
Dutch Guilder, European Currency Unit ("ECU"), French Franc, Japanese Yen, New
Zealand Dollar, Spanish Peseta, Swedish Krona, Swiss Franc, German Mark,
Portuguese Escudo, and the Finnish Markka. An issuer of debt securities
purchased by the Funds may be domiciled in a country other than the country in
whose currency the instrument is denominated.
Each Fund seeks to minimize investment risk by limiting its portfolio
investments to debt securities of high quality. Accordingly, the Funds'
portfolio consists only of: (i) debt securities issued or guaranteed by the U.S.
Government, its agencies or instrumentalities ("U.S. Government Securities");
(ii) obligations issued or guaranteed by a foreign government or any of its
political subdivisions, authorities, agencies, or instrumentalities, or by
supranational entities, all of which are rated AAA or AA by Standard & Poor's
Corporation ("S&P") or Aaa or Aa by Moody's Investors Services, Inc. ("Moody's")
("High Quality Ratings") or, if unrated, determined by AMC to be of equivalent
quality; (iii) corporate debt securities having at least one High Quality Rating
or, if unrated, determined by AMC to be of equivalent quality; (iv) certificates
of deposit and banker's acceptances issued or guaranteed by, or time deposits
maintained at, banks (including foreign branches of U.S. banks or U.S. or
foreign branches of foreign banks) having total assets of more than $500 million
and determined by AMC to be of high quality; (v) Short-Term debt securities,
including commercial paper, rated A(-)1 or A-2 by S&P, Prime(-)1 or Prime-2 by
Moody's, Fitch-1 or Fitch-2 by Fitch Investors Service, Inc., Duff 1 or Duff 2
by Duff & Phelps Inc. or, issued by U.S. or foreign companies having outstanding
debt securities rated AAA, AA, A or A- by S&P, or Aaa, or Aa, A or A- by Moody's
and determined by AMC to be of acceptable quality, and loan participation
interests having a remaining term not exceeding one year in loans extended to
such companies by commercial banks or other lending institutions whose credit
quality is comparable to the ratings described in this section and as determined
by AMC to be of high quality; and (vi) futures contracts, options on futures
contracts, options on foreign currencies, options on portfolio securities, and
forward foreign currency exchange contracts.
Each Fund may invest without limitation in commercial paper which is indexed to
certain specific foreign currency rates. The terms of such commercial paper
provide that its principal amount is adjusted upwards or downwards (but not
below zero) at maturity to reflect changes in the exchange rate between two
currencies while the obligation is outstanding. Each Fund will purchase such
commercial paper with the currency in which it is denominated and, at maturity,
will receive interest and principal payments thereon in that currency, but the
amount of principal payable by the issuer at maturity will change in proportion
to the change (if any) in the exchange rate between the two specified currencies
between the date the instrument is issued and the date the instrument matures.
While such commercial paper entails the risk of loss of principal, the potential
for realizing gains as a result of changes in foreign currency exchange rates
enables each Fund to hedge (or cross-hedge) against a decline in the U.S. Dollar
value of investments denominated in foreign currencies while providing an
attractive money market rate of return. Each Fund will purchase such commercial
paper for hedging purposes only, not for speculation. The staff of the
Securities and Exchange
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Commission is currently considering whether the purchase of this type of
commercial paper would result in the issuance of a "senior security" within the
meaning of the Investment Company Act of 1940 (the "1940 Act"). AMC believes
that such investments do not involve the creation of such a senior security, but
nevertheless has undertaken, pending the resolution of this issue by the staff,
to establish a segregated account with respect to the Funds' investments in this
type of commercial paper and to maintain in such account cash not available for
investment or U.S. Government Securities or other liquid high quality debt
securities having a value equal to the aggregate principal amount of outstanding
commercial paper of this type held by the Funds.
Each Fund may invest in debt securities issued by supranational organizations
such as: the World Bank, which was chartered to finance development projects in
developing member countries; the European Community, which is a twelve-nation
organization engaged in cooperative economic activities; the European Coal and
Steel Community, which is an economic union of various European nations' steel
and coal industries; and the Asian Development Bank, which is an international
development bank established to lend funds, promote investment and provide
technical assistance to member nations in the Asian and Pacific regions. The
World Bank, Asian Development Bank and other such supranational organizations
are not considered by the Funds or AMC as "banks" for purposes of computing
investment restrictions regarding non-diversification or concentration policies
and, as a result, the debt securities issued by such supranational organizations
will not be included as banks for determination of compliance with the
percentage limitations of such investment policies.
Each Fund may invest in debt securities denominated in the ECU, which is a
"basket" consisting of specified amounts of certain currencies of the twelve
member European Community States. The specific amounts of currencies comprising
the ECU may be adjusted by the Council of Ministers of the European Community to
reflect changes in relative values of the underlying currencies. AMC does not
believe that such adjustments will adversely affect holders of ECU-denominated
obligations or the marketability of such securities. European supranationals, in
particular, issue ECU-denominated obligations.
SPECIAL CONSIDERATIONS AND RISKS
Foreign Securities. Investing in securities issued by foreign governments and
corporations involves considerations and possible risks not typically associated
with investing in obligations issued by the U.S. Government and domestic
corporations. The values of foreign investments are affected by changes in
currency rates or exchange control regulations, application of foreign tax laws,
including withholding taxes, changes in governmental administration or economic
or monetary policy (in this country or abroad) or changed circumstances in
dealings between nations. Costs are incurred in connection with conversions
between various currencies. In addition, foreign brokerage commissions are
generally higher than in the United States, and foreign securities markets may
be less liquid, more volatile and less subject to governmental supervision than
in the United States. Investments in foreign countries could be affected by
other factors not present in the United States, including expropriation,
confiscatory taxation, lack of uniform accounting and auditing standards and
potential difficulties in enforcing contractual obligations, and could be
subject to extended settlement periods.
Illiquid Securities. Each Fund will not invest in illiquid securities if
immediately after such investment more than 10% of either Fund's total assets
(taken at market value) would be invested in such securities. For this purpose,
illiquid securities include (a) direct placements or other securities which are
subject to legal or contractual restrictions on resale or for which there is no
readily available market (e.g., trading in the security is suspended or, in the
case of unlisted securities, market makers do not exist or will not entertain
bids or offers), (b) participation interests in loans that are not subject to
puts, (c) covered call options on portfolio securities written by the Fund
over-the-counter and the cover for such options, and (d) repurchase agreements
not terminable within seven days.
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Interest Rate Fluctuations. The net asset value of each Fund's shares will
change as the general levels of interest rates fluctuate. When interest rates
decline, the value of a portfolio primarily invested in debt securities can be
expected to rise. Conversely, when interest rates rise, the value of a portfolio
primarily invested in debt securities can be expected to decline. However, a
shorter average maturity is generally associated with a lower level of market
value volatility and, accordingly, it is expected that the net asset value of
the Funds' shares normally will fluctuate less than that of a longer-term bond
fund.
Non-diversification. Each Fund is a "non-diversified" investment company, which
means that each Fund is not limited in the proportion of its assets that may be
invested in the securities of a single issuer. However, each Fund intends to
conduct its operations so as to qualify as a "regulated investment company" for
purposes of the Internal Revenue Code of 1986, as amended (the "Code"), which
will relieve each Fund of any liability for Federal income tax to the extent its
earnings are distributed to shareholders. See "Distributions and Taxes". To so
qualify, among other requirements, each Fund will limit its investments so that,
at the close of each quarter of the taxable year, (i) not more than 25% of the
market value of each Fund's total assets will be invested in the securities of a
single issuer, and (ii) with respect to 50% of the market value of its total
assets, not more than 5% of the market value of its total assets will be
invested in the securities of a single issuer and each Fund will not own more
than 10% of the outstanding voting securities of a single issuer. For purposes
of the Funds' requirements to maintain diversification for tax purposes, the
issuer of a loan participation will be the underlying borrower. In cases where
the Funds do not have recourse directly against the borrower, both the borrower
and each agent bank and co-lender interposed between a Fund and the borrower
will be deemed issuers of the loan participation for tax diversification
purposes. The Funds' investments in U.S. Government Securities are not subject
to these limitations. Because the Funds, as nondiversified investment companies
may invest in a smaller number of individual issuers than a diversified
investment company, an investment in the Funds may, under certain circumstances,
present greater risk to an investor than an investment in a diversified company.
INVESTMENT PRACTICES
Futures Contracts and Options on Futures Contracts. The Funds may enter into
contracts for the purchase or sale for future delivery of fixed-income
securities or foreign currencies, or contracts based on financial indices
including any index of U.S. Government Securities, foreign government securities
or corporate debt securities ("futures contracts") and may purchase and write
put and call options to buy or sell futures contracts ("options on futures
contracts"). A "sale" of a futures contract means the acquisition of a
contractual obligation to deliver the securities or foreign currencies called
for by the contract at a specified price on a specified date. A "purchase" of a
futures contract means the incurring of a contractual obligation to acquire the
securities or foreign currencies called for by the contract at a specified price
on a specified date. The purchaser of a futures contract on an index agrees to
take or make delivery of an amount of cash equal to the difference between a
specified dollar multiple of the value of the index on the expiration date of
the contract ("current contract value") and the price at which the contract was
originally struck. No physical delivery of the fixed-income securities
underlying the index is made. Options on futures contracts to be written or
purchased by the Funds will be traded on U.S. or foreign exchanges or
over-the-counter. These investment techniques will be used only to hedge against
anticipated future changes in interest or exchange rates which otherwise might
either adversely affect the value of the Funds' portfolio securities or
adversely affect the price of securities which a Fund intends to purchase at a
later date. See the Funds' Statement of Additional Information for further
discussion of the use, risks and costs of futures contracts and options on
futures contracts.
Each Fund will not (i) enter into any futures contracts or options on futures
contracts if immediately thereafter the aggregate of margin deposits on all the
outstanding futures contracts of the Fund and premiums paid on outstanding
options on futures contracts would exceed 5% of the market value of the total
assets of the Fund, or (ii) enter into any futures contracts or options on
futures contracts if the aggregate of the market value of the
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outstanding futures contracts of the Fund and the market value of the currencies
and futures contracts subject to outstanding options written by the Fund would
exceed 50% of the market value of the total assets of the Fund.
Options on Foreign Currencies. Each Fund may purchase and write put and call
options on foreign currencies to increase the Funds' gross income and for the
purpose of protecting against declines in the U.S. Dollar value of foreign
currency denominated portfolio securities and against increases in the U.S.
Dollar cost of such securities to be acquired. As in the case of other kinds of
options, however, the writing of an option on a foreign currency constitutes
only a partial hedge, up to the amount of the premium received, and the Funds
could be required to purchase or sell foreign currencies at disadvantageous
exchange rates thereby incurring losses. The purchase of an option on a foreign
currency may constitute an effective hedge against fluctuations in exchange
rates. Although, in the event of rate movements adverse to the Funds' position,
it may forfeit the entire amount of the premium plus related transaction costs.
Options on foreign currencies to be written or purchased by the Funds are traded
on U.S. and foreign exchanges or over-the-counter. There is no specific
percentage limitation on the Funds' investments in options on foreign
currencies. See the Funds' Statement of Additional Information for further
discussion of the use, risks and costs of options on foreign currencies.
Options on Portfolio Securities. The Funds, in seeking their primary objective
of high current income, may write covered call options on certain of their
portfolio securities at such time and from time to time as AMC shall determine
to be appropriate and consistent with the investment objectives of the Funds. A
covered call option means that a Fund owns the security on which the option is
written. Generally, the Funds expect that options written by them will be
conducted on recognized securities exchanges. In certain instances, however, the
Funds may purchase and sell options in the over-the-counter market ("OTC
Options"). The Funds' ability to close option positions established in the
over-the-counter market may be more limited than in the case of exchange-traded
options and may also involve the risk that securities dealers participating in
such transactions would fail to meet their obligations to the Funds. In
addition, the staff of the SEC has taken the position that OTC Options and the
assets used as "cover" should be treated as illiquid securities. There is no
fixed limit on the percentage of the Funds' assets upon which options may be
written.
Each Fund will receive a premium (less any commissions) from the writing of such
contracts, and it is believed that the total return to the Funds can be
increased through such premiums consistent with the Funds' investment
objectives. The writing of option contracts is a highly specialized activity
which involves investment techniques and risks different from those ordinarily
associated with investment companies, although the Funds believe that the
writing of covered call options listed on an exchange or traded in the
over-the-counter market, where the Funds own the underlying security, tends to
reduce such risks. The writer forgoes the opportunity to profit from an increase
in market price of the underlying security above the exercise price so long as
the option remains open. (See the Statement of Additional Information for more
information.)
Forward Foreign Currency Exchange Contracts. Each Fund may purchase or sell
forward foreign currency exchange contracts ("forward contracts") to attempt to
minimize the risk to the Funds from adverse changes in the relationship between
the U.S. Dollar and foreign currencies. A forward contract is an obligation to
purchase or sell a specific currency for an agreed price at a future date which
is individually negotiated and privately traded by currency traders and their
customers. The Funds may enter into a forward contract, for example, when it
enters into a contract for the purchase or sale of a security denominated in a
foreign currency in order to "lock in" the U.S. Dollar price of the security
("transaction hedge"). Additionally, for example, when the Funds believe that a
foreign currency may suffer a substantial decline against the U.S. Dollar, they
may enter into a forward sale contract to sell an amount of that foreign
currency approximating the value of some or all of the Funds' portfolio
securities denominated in such foreign currency, or when the Funds believe that
the U.S. Dollar may suffer a substantial decline against foreign currency, it
may enter into a forward purchase contract to buy that foreign currency for a
fixed dollar amount ("position hedge"). In this situation the Funds may, in the
alternative, enter into a forward contract to sell a different foreign currency
for a fixed
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U.S. Dollar amount where the Funds believe that the U.S. Dollar value of the
currency to be sold pursuant to the forward contract will fall whenever there is
a decline in the U.S. Dollar value of the currency in which portfolio securities
of the Funds are denominated ("cross-hedge"). The Funds' Custodian will place
cash not available for investment or U.S. Government Securities or other
high-quality debt securities in a separate account of the Fund having a value
equal to the aggregate amount of the Funds' commitments under forward contracts
entered into with respect to position hedges and cross-hedges. If the value of
the securities placed in a separate account declines, additional cash or
securities will be placed in the account on a daily basis so that the value of
the account will equal the amount of the Funds' commitments with respect to such
contracts. As an alternative to maintaining all or part of the separate account,
the Funds may purchase a call option permitting the Funds to purchase the amount
of foreign currency being hedged by a forward sale contract at a price no higher
than the forward contract price or the Fund may purchase a put option permitting
the Fund to sell the amount of foreign currency subject to a forward purchase
contract at a price as high or higher than the forward contract price.
Unanticipated changes in currency prices may result in poorer overall
performance for the Fund than if it had not entered into such contracts.
The successful use of the foregoing investment practices depends on AMC's
ability to forecast interest rate and currency exchange rate movements
correctly. Should interest or exchange rates move in an unexpected manner, the
Funds may not achieve the anticipated benefits of futures contracts, options or
forward contracts or may realize losses and thus be in a worse position than if
such strategies had not been used. Unlike many exchange-traded futures contracts
and options on futures contracts, there are no daily price fluctuation limits
with respect to options on currencies and forward contracts, and adverse market
movements could therefore continue to an unlimited extent over a period of time.
In addition, the correlation between movements in the prices of such instruments
and movements in the price of the securities and currencies hedged or used for
cover will not be perfect and could produce unanticipated losses. The Funds'
ability to dispose of their positions in futures contracts, options and forward
contracts will depend on the availability of liquid markets in such instruments.
Markets in options and futures with respect to a number of fixed-income
securities and currencies are relatively new and still developing. It is
impossible to predict the amount of trading interest that may exist in various
types of futures contracts, options and forward contracts. If a secondary market
does not exist with respect to an option purchased or written by a Fund over
over-the-counter, it might not be possible to effect a closing transaction in
the option (i.e., dispose of the option) with the result that (i) an option
purchased by a Fund would have to be exercised in order for a Fund to realize
any profit and (ii) a Fund may not be able to sell currencies or portfolio
securities covering an option written by a Fund until the option expires or it
delivers the underlying futures contract or currency upon exercise. Therefore no
assurance can be given that the Funds will be able to utilize these instruments
effectively for the purposes set forth above. Furthermore, the Funds' ability to
engage in options and futures transactions may be limited by tax considerations.
See "Distributions and Taxes."
Repurchase Agreements. Each Fund may enter into repurchase agreements. Under a
repurchase agreement, a Fund acquires a debt instrument for a relatively short
period (usually not more than one week) subject to the obligation of the seller
to repurchase and the Funds to resell such debt instrument at a fixed price. The
resale price is in excess of the purchase price in that it reflects an
agreed-upon market interest rate effective for the period of time during which
the Funds' money is invested. The Funds' risk is limited to the ability of the
seller to pay the agreed-upon sum upon the delivery date. When a Fund enters
into a repurchase agreement, it obtains collateral having a value at least equal
to the amount of the purchase price. Repurchase agreements can be considered
loans as defined by the 1940 Act, collateralized by the underlying securities.
The return on the collateral may be more or less than that from the repurchase
agreement. The securities underlying a repurchase agreement will be marked to
market every business day so that the value of the collateral is at least equal
to the value of the loan, including the accrued interest earned. In evaluating
whether to enter into a repurchase agreement, AMC will carefully consider the
creditworthiness of the seller. If the
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financial institution that is the party to the repurchase agreement petitions
for bankruptcy or otherwise becomes subject to the U.S. Bankruptcy Code, the law
regarding the rights of the Funds is unsettled. As a result, under these extreme
circumstances, there may be restrictions on the Funds' ability to sell the
collateral and the Funds may suffer a loss.
Lending of Portfolio Securities. In order to generate additional income, a Fund
may lend its portfolio securities in an amount up to 33 1/3% of total Fund
assets to broker-dealers, major banks, or other recognized domestic
institutional borrowers of securities, not affiliated with AMC. The borrower at
all times during the loan must maintain cash or cash equivalent collateral or
provide to the Fund an irrevocable letter of credit equal in value to at least
100% of the value of the securities loaned. During the time portfolio securities
are on loan, the borrower pays the Fund any dividends or interest paid on such
securities, and the Fund may invest the cash collateral and earn additional
income, or it may receive an agreed-upon amount of interest income from the
borrower who has delivered equivalent collateral or a letter of credit.
Temporary Defensive Positions. From time to time the Adviser may determine that
market or economic conditions are not advantageous to the Funds and may
establish a defensive position to preserve capital by temporarily investing all
or part of its assets in short-term money market instruments, cash or cash
equivalents (including receivables on securities transactions) in U.S. dollars
or foreign currencies.
PORTFOLIO TURNOVER
The portfolio turnover rate may vary from year to year, as well as within a
year. The annual rate of Fund I's portfolio turnover for the fiscal years ended
December 31, 1994 and 1995 was 337% and 382%, respectively.
The annual rate of Fund II's portfolio turnover for the fiscal years ended
December 31, 1994 and 1995 was 301% and 414%, respectively.
Each Fund may engage in active short-term trading to benefit from yield
disparities among different issues of securities, to seek short-term profits
during periods of fluctuating interest rates, or for other reasons. Such trading
will increase the Funds' rate of turnover and the incidence of short-term
capital gain taxable as ordinary income. AMC anticipates that the annual
turnover in each Fund will not be in excess of 500%. An annual turnover rate of
500% occurs, for example, when the dollar equivalent of all of the securities in
the Fund's portfolio are replaced five times in a period of one year. A high
rate of portfolio turnover involves correspondingly greater expenses than a
lower rate, which expenses must be borne by the Funds and their shareholders.
High portfolio turnover rate also may result in the realization of substantial
net short-term capital gains. In order to continue to qualify as a regulated
investment company for Federal tax purposes, less than 30% of the annual gross
income of each Fund must be derived from the sale of securities held by each
Fund for less than three months. See "Distributions and Taxes."
CERTAIN FUNDAMENTAL INVESTMENT POLICIES
To maintain a range of portfolio securities and reduce investment risk, as a
matter of fundamental policy, each Fund may not: (i) invest 25% or more of its
total assets in securities of companies engaged principally in any one industry,
except that this restriction does not apply to U.S. Government Securities; (ii)
borrow money except from banks for temporary or emergency purposes, including
the meeting of redemption requests which might require the untimely disposition
of securities; borrowing in the aggregate may not exceed 15%, and borrowing for
purposes other than meeting redemptions may not exceed 5% of the value of each
Fund's assets (including the amount borrowed) less liabilities (not including
the amount borrowed) at the time the borrowing is made; securities will not be
purchased while borrowings in excess of 5% of the value of the Fund's total
assets are outstanding; or (iii) pledge, hypothecate, mortgage or otherwise
encumber its assets, except to secure permitted borrowings.
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DISTRIBUTIONS AND TAXES
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DIVIDENDS AND CAPITAL GAINS
Each Fund intends to declare and pay dividends on a monthly basis. Net capital
gains, if any, are normally distributed annually.
CHOOSING A DISTRIBUTION OPTION
When you buy shares of a Fund you can choose from three distribution options:
1) The Share Option reinvests your ordinary income dividends and/or capital gain
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 Fund. 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 receive ordinary income dividends and/or capital
gain distributions in cash.
3) If you are also a shareholder in any of the other Astra Group Funds
distributed by AFDC, the Transfer Option permits you to have income dividends
and/or capital gain distributions of the Fund automatically invested in shares
of any Astra Group Funds of which you are a shareholder at the applicable net
asset value. If you select this option, the minimum subsequent 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 Fund or another Astra Fund.
If for any fiscal year of each Fund, the amount of distributions paid or deemed
paid for such year exceeds the Funds' 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 the Funds
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 Fund 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.
INVESTMENT RETURN INFORMATION
Advertisements, sales literature and communications with shareholders and others
may cite the Funds' performance calculated on a total return basis as well as
the Funds' current yield over any period of time. Each Fund will compute its
yield by dividing its net investment income per share during a 30-day base
period by the maximum offering price on the last day of the base period. This
30-day yield is then compounded over 6 monthly periods and multiplied by 2 to
provide an annualized yield. Total return will be computed by determining the
average annual compounded rate of return that would equate the initial amount
invested to the ending redeemable value of the investment. Total return will be
calculated for one, five and 10-year periods or, if such periods have not
elapsed, for the life of the Funds.
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The Funds may also publish a distribution rate in investor communications
preceded or accompanied by a copy of the current Prospectus. The current
distribution rate for each Fund will be calculated by dividing the maximum
offering price per share into the annualization of the total distributions made
by each Fund during the same thirty-day period. The current distribution rate
may differ from current yield because the distribution rate may contain items of
capital gain and other items of income, while yield reflects only earned
interest and dividend items of income. In each case, the yield, distribution
rates and total return figures will reflect all recurring charges against Fund
income and will assume the payment of the maximum sales load.
Advertisements and communications may compare each Fund's performance with that
of other mutual funds, as reported by Lipper Analytical Services, Inc. or
similar independent services or financial publications. From time to time, each
Fund's performance may be compared to various investment indexes including rates
on: certificates of deposit, Treasury bills, money market funds and corporate
bonds, the Consumer Price Index or other economic benchmark indicators, as well
as insurance company products. The Funds may also quote or display interest or
currency rates from foreign countries in its advertising or promotional
materials, including, but not limited to, the Eurocurrency deposit rates,
foreign savings rates, yields on debt securities, prevailing currency rates,
interest rates offered by foreign banks, foreign CD rates, foreign corporate
security rates or LIBOR rates.
Advertisements and other communications may cite current and compounded yield
and distribution rates. Quotations of historical total returns, yields and
distribution rates are not indicative of future dividend income or total return,
but are an indication of the return to shareholders only for the limited
historical period used. The Funds' yield, total return or distribution rate will
depend on the particular investments in their portfolios, their total operating
expenses and other conditions. For further information, including the formulas
and examples of the yield and total return calculations, see the Statement of
Additional Information.
TAXES
Each Fund intends to qualify as a regulated investment company by satisfying the
requirements under Subchapter M of the Internal Revenue Code of 1986, as amended
(the "Code"), including requirements with respect to diversification of assets,
distribution of income and sources of income. It is the Funds' policy to
distribute to shareholders all of their investment income (net of expenses) and
capital gains (net of capital losses) in accordance with timing requirements
imposed by the Code so that each Fund will satisfy the distribution requirement
of Subchapter M and not be subject to federal income taxes, or the 4% excise
tax.
Distributions by each Fund of its net investment income (including foreign
currency gains and losses) and the excess, if any, of its net short-term capital
gain over its net long-term capital loss are taxable to shareholders as ordinary
income. These distributions are treated as dividends for federal income tax
purposes, but will not qualify for the 70% dividends-received deduction for
corporate shareholders. Distributions by each Fund of the excess, if any, of its
net long-term capital gain over its net short-term capital loss are designated
as capital gain distributions and are taxable to shareholders as long-term
capital gains, regardless of the length of time the shareholder has held his
shares. The Funds have capital loss carryforwards which may be used, subject to
various restrictions and limitations, to offset future recognized capital gains.
See the Statement of Additional Information under "Tax Matters" regarding the
availability of the capital loss carryforwards.
Portions of the Funds' investment income may be subject to foreign income taxes
withheld at the source. The Funds may elect to "pass-through" to their
shareholders these foreign taxes, in which event each shareholder will be
required to include his pro rata portion of such foreign taxes in gross income,
but will be able to deduct or (subject to various limitations) claim a foreign
tax credit for such amount. As stated above, each Fund
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<PAGE>
intends to distribute all of its net investment income, as calculated for
federal income tax purposes, so that the Funds will not be subject to federal
income taxes.
Distributions to shareholders will be treated in the same manner for federal
income tax purposes whether received in cash or reinvested in additional shares
of one of the Funds. In general, distributions by the Funds are taken into
account by the shareholders in the year in which they are made. However, certain
distributions made during January will be treated as having been paid by the
Funds and received by the shareholders on December 31 of the preceding year. A
statement setting forth the federal income tax status of all distributions made
or deemed made during the year, including any amount of foreign taxes
"passed-through," will be sent to shareholders promptly after the end of each
year.
Shareholders must furnish a certified taxpayer identification number ("TIN").
Pursuant to IRS regulations, each Fund is required to withhold 31% from
reportable payments including ordinary income dividends, capital gain dividends
and redemptions and exchanges occurring in accounts where the shareholder has
failed to furnish a certified TIN and has not certified that withholding does
not apply.
The Funds reserve the right to close all accounts without a certified TIN by
redeeming all shares in the accounts at their current net asset value.
If a Fund receives notice from the IRS that a previously certified TIN is
incorrect, the Fund will immediately impose back-up withholding and such account
may be involuntarily redeemed as mentioned above.
The Funds also reserve 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.
If a TIN has been applied for and the "Awaiting TIN" box is checked on the
application, the Fund will begin back-up withholding on dividends and other
reportable payments immediately and will continue such withholding for at least
60 days. If, at the end of the 60-day period, a TIN has not been received and
certified on the IRS Form W-9, the Fund reserves the right to redeem all shares
in the account at their current net asset value.
SHAREHOLDER'S GUIDE
HOW TO BUY SHARES OF THE FUNDS
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Shares of the Funds are made available through selected financial service firms
such as broker-dealer firms and banks ("Firms") who have signed agreements with
AFDC, the Funds' principal underwriter. Shares may also be purchased by check or
wire directly to the Funds' Transfer Agent. The minimum initial investment by a
shareholder in a Fund is $5,000 ($2,000 for IRAs). The minimum subsequent
investment is $250, but these 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. Fund I'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. Fund II's offering price is the net asset value next
determined after an order is received.
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<PAGE>
The sales charge applicable to shares of Fund I is determined as follows:
Dealer
AS & OF REALLOWANCE
AS % OF NET AS % OF
OFFERING AMOUNT OFFERING
ON PURCHASES OF: PRICE INVESTED PRICE
--------------- -------- -------- ----------
$5,000 but less than $100,000 ........... 3.00% 3.09% 3.00%
$100,000 but less than $500,000 ......... 2.50% 2.56% 2.50%
$500,000 but less than $1,000,000 ....... 2.00% 2.04% 2.00%
$1,000,000 but less than $2,500,000 ..... 1.50% 1.52% 1.50%
$2,500,000 but less than $5,000,000 ..... 1.00% 1.01% 1.00%
$5,000,000 and over ..................... None None *
- ----------
* On purchases of $5,000,000 and over, shares are acquired at net asset value
with no sales charge or dealer concession charged to the investor, however,
AFDC from its own assets will pay the selling firm .40% of the offering
price. The amount of reimbursement that AFDC may be entitled to receive
under the Fund's Distribution Plan remains unchanged.
The sales charge assessed upon the shares of Fund I is not an expense of Fund I
and has no effect on the net asset value of shares of Fund I. AFDC allows the
selling Firms to retain 100% of the sales charge. This may result in the selling
Firm being considered an underwriter under the Securities Act of 1933, as
amended. AFDC, at its expense, may also provide additional promotional
incentives to dealers in connection with sales of shares of the Fund and other
funds in the Astra Group.
In connection with sales of shares of Fund II, AFDC compensates the selling
Firms at a rate of 3.0% of purchase payments for shares subject to a contingent
deferred sales charge. AFDC, at its expense, may also provide additional
promotional incentives to dealers in connection with sales of shares of the
Funds and other Funds in the Astra Group.
You will receive a confirmation of each new transaction in your account that
will also indicate the total number of Fund shares you own and the number of
shares being held in safekeeping by the Fund'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 THE FUND WILL NOT BE ISSUED
UNLESS YOU REQUEST THEM IN WRITING.
PURCHASE BY WIRE
For Fund I, purchases by wire transfer should be directed to "Investors
Fiduciary Trust Co. ABA 101003621 for credit to Astra Short-Term Multi-Market
Income Fund I A/C 752-443-9 for further credit to shareholder A/C #____________,
Shareholder Name:______________________________."
For Fund II, purchases by wire transfer should be directed to "Investors
Fiduciary Trust Co. ABA 101003621 for credit to Astra Short-Term Multi-Market
Income Fund II A/C 752-443-9 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 Funds at 800-441-7267 (select option 4). You may then
instruct your bank to wire funds as described above. After
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<PAGE>
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 Fund 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 Fund I or Fund II at
800-441-7267 to obtain a wire reference number prior to transmission. This helps
the Funds to ensure proper credit to your account.
PURCHASE THROUGH DEALERS
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
AFDC 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 Fund's
Transfer Agent with a completed IRA application signed by the investor prior to
settlement of such purchase orders.
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 CONFIRM NUMBER TO ENSURE TIMELY CREDIT.
PURCHASE BY CHECK
An initial investment made by check must be accompanied by an application,
completed in its entirety. Additional shares of a Fund may also be purchased by
sending a check payable to the appropriate Fund, 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.
PRE-AUTHORIZED INVESTMENT PLAN
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 automatically debited and your Fund
Account is automatically credited with additional full and fractional shares
($250 subsequent minimum investment). For further information on the
pre-authorized investment plan, please contact the Shareholder Servicing Agent.
The minimum investment requirements may be waived by a Fund for purchases made
pursuant to certain programs such as payroll deduction plans and retirement
plans.
LETTER OF INTENT AND RIGHTS OF ACCUMULATION
FUND I. An investor may immediately qualify for a reduced sales charge on a
purchase of shares of any fund in the Astra Group of Funds which imposes an
initial sales charge by completing the Letter of Intent section of
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<PAGE>
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 Fund
I. 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 Group of Funds will be
effective only after notification to AFDC that the investment qualifies for a
discount. The shareholder's holdings in the Astra Group of 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 AFDC 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 AFDC 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 AFDC a security interest in the Escrow Shares and agrees to
irrevocably appoint AFDC 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 AFDC that this Letter is in effect each time a purchase is made.
The value of all shares of Fund I plus shares of the other funds distributed by
AFDC 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
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<PAGE>
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 $5 million.
Shares of Fund I and other funds of the Astra Group, 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
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.
FUND II. For purposes of Rights of Accumulation and the Letter of Intent
privilege, shares held by investors in Astra funds which impose a contingent
deferred sales charge ("CDSC"), may be combined with shares of the Fund I 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
The combined Purchase Privilege is intended to allow qualifying investors a
reduced sales charge only in an Astra Group Fund which imposes an initial sales
charge and will not affect any CDSC which may be imposed on the redemption of
Fund II shares or the compensation to selling firms on the sale of Fund II
shares. Investors may qualify for the Combined Purchase Privilege by combining
purchases of the Fund II shares with shares of any Astra Group Fund, which
imposes an initial sales charge. Shares of Fund II may also be combined with
shares of such other Astra Group Funds, for purposes of completing a Letter of
Intent.
SPECIAL PURCHASES AT NET ASSET VALUE (FUND I ONLY)
Shares of Fund I may be purchased at net asset value by persons who have, within
the previous 30 days, redeemed their shares of any Fund in the Astra Group 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 Fund I may be purchased at net asset value when the amount invested is
documented to the Fund to be proceeds from the redemption (within 60 days of the
purchase of Fund I shares) of shares of unrelated investment companies and where
a commission or sales charge was paid.
Shares of Fund I 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 Fund I 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
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<PAGE>
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 Group of Funds, AFDC may pay such dealer
.25% of the offering price.
Officers, directors and bona fide full-time employees of Fund I and with certain
exceptions most officers, directors, and full-time employees of AMC, AFDC, Fund
I's 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-at-law, and cousins) employees of such broker-dealers
(including their immediate families) and discretionary advisory accounts of AMC,
may purchase shares of the Fund I 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 Fund I.
Relative to certain fee based Registered Investment Advisors, Management may,
under circumstances, allow such Advisors to make investments on behalf of their
clients at net asset value, without any commission or concession.
Additional terms concerning the offering of the Funds' shares are included in
the Statement of Additional Information.
HOW TO REDEEM SHARES OF THE FUNDS
- -----------------
FUND I. Shares of Fund I 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 any Federal income tax required to be
withheld. The shares of Fund I are not subject to a contingent deferred sales
charge.
FUND II. Shares of Fund 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, reduced by the amount of any applicable
contingent deferred sales charge described below and the amount of any Federal
income tax required to be withheld.
If the shareholder holds his Fund II shares for more than four years after their
purchase, he will not have to pay any charge when he redeems those shares.
Shares of Fund II redeemed within the first four years of their purchase (except
shares acquired through the reinvestment of distributions) will be subject to a
contingent deferred sales charge. A contingent deferred sales charge is not
imposed on (a) shares in the account which were purchased more than four years
prior to the redemption, (b) all shares of Fund II 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 Fund II in the
account (namely those purchased within the four years preceding 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 contingent
deferred sales charge; 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.
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<PAGE>
Any contingent deferred sales charge which is required to be imposed on
redemptions for shares of Fund II will be made in accordance with the following
schedule:
YEAR OF CONTINGENT
REDEMPTION DEFERRED
AFTER PURCHASE SALES CHARGE
-------------- ------------
First ..................................... 4%
Second .................................... 3%
Third ..................................... 2%
Fourth .................................... 1%
Fifth and following ....................... 0%
The contingent deferred sales charge will be paid to AFDC and may affect the
amount of (i) Uncovered Distribution Charges calculated under Fund II's
Distribution Plan, (ii) the management fee payable to AMC and (iii) the daily
compensation payable to AFDC under Fund II's Distribution Plan (see
"Distribution Plan").
No contingent deferred sales charge will be payable in connection with the
redemption of shares purchased by officers, directors and bona fide full-time
employees of the Fund, its service agents, or with certain exceptions, officers,
directors and full-time employees and sales representatives of AMC or AFDC or
affiliated companies thereof (or any trust, pension, profit-sharing or other
benefit plan for such persons), broker-dealers having sales agreements with
AFDC, 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
purchasers are for their own investment purposes only and the purchaser
represents that the shares will not be resold except to the Fund).
No contingent deferred sales charge will be payable in connection with the
redemption of shares of Fund II which were acquired via certain exchange
transactions as fully described in the Exchange Privilege Section of this
Prospectus.
The contingent deferred sales charge will be waived for certain redemptions of
shares of Fund II (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 contingent deferred sales charge will be waived
in the case of a redemption of shares of Fund II 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 Fund II 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 contingent deferred sales charge will
also be waived in the case of a total or partial redemption of shares of Fund II
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 Funds' Transfer Agent either directly or through
AFDC, at the time of redemption, that the shareholder is entitled to a waiver of
the contingent deferred sales charge. The relevant information as requested in
the Contingent Deferred Sales Charge Waiver Form, included in this prospectus on
page 39, must be provided to the Funds' Transfer Agent at the time of the
redemption request. The waiver will be granted subject to confirmation of the
Investor's entitlement.
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 a
corporation or an association
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<PAGE>
on file before a redemption request will 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 Funds' 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 request but neither the Funds nor AFDC impose any such charges
other than the contingent deferred sales charge described above in connection
with the redemption of shares of Fund II.
EXPEDITED 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 wire to the Transfer Agent. For telephone redemptions, call the
Transfer Agent at (800) 441-7267. You must complete the "Expedited Redemption"
section of the application 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 value before any
contingent deferred sales charge with respect to shares of Fund II) 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 withdrawals, or $1,200, whichever is greater.
There are no separate charges to you under this Plan, however, all shares of
Fund II may be subject to applicable contingent deferred sales charge. A number
of full and fractional shares equal in value, after taking into account any
applicable contingent deferred sales charge, 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. If you would
like such payments automatically deposited to your bank account, please
additionally complete the Automated Clearance House (ACH) Distribution Form
which follows the Additional Account Privileges Form.
You may change the amount, frequency, and payee, or terminate this plan by
giving written notice to the Funds' Transfer Agent. As shares of a Fund 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 Fund.
GENERAL
Payment to shareholders for shares redeemed or repurchased will be made within
seven days after receipt by the Fund's Transfer Agent. A Fund 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 Funds recommend that all purchases be made by bank wire Federal
funds. A Fund may suspend the
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<PAGE>
right of redemption under certain extraordinary circumstances in accordance with
the Rules of the Securities and Exchange Commission. Due to the relatively high
cost of handling small investments, the Funds reserve the right upon 30-days'
written notice to redeem, at net asset value, the shares of any shareholder
whose account has a value of less than $5,000 other than as a result of a
decline in the net asset value per share.
SHAREHOLDER OPTIONS/PRIVILEGES
- -----------------
EXCHANGE PRIVILEGE
FUND I. Shares of Fund I which have been held for a minimum of 30 days may be
exchanged for shares of other Astra Group Funds distributed by AFDC which offer
an exchange privilege at the then current net asset values of the respective
funds at the time of such exchange provided that the value of shares being
exchanged meets the minimum investment requirement of the fund into which they
are being exchanged.
Shares of the other Funds distributed by AFDC which offer an exchange privilege
may be exchanged for shares of Fund I 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.
FUND II. Shares of Fund II which have been held for a minimum of 30 days, may be
exchanged for shares of any other Astra Group Fund which imposes a comparable
contingent deferred sales charge and offers an exchange privilege (Astra
Adjustable U.S. Government Securities Trust I and Astra Adjustable Rate
Securities Trust I), at the then current net asset values of the respective
funds and such exchanged shares will not be reduced by an amount of the
otherwise applicable contingent deferred sales charge 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 contingent deferred sales charge
if such shares were held less than four years since the purchase of Fund II's
shares.
Shares of Fund II held for at least 4 years may be exchanged into any other
Astra Fund distributed by AFDC which offers an exchange privilege at the then
current net asset value provided that the value of the 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 Astra Adjustable U.S. Government Securities Trust I and Astra
Adjustable Rate Securities Trust I may be exchanged for shares of Fund 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.
GENERAL
The prospectuses of the other funds should be reviewed before effecting any
exchange. With respect to both Fund I and Fund II, you should note that any such
exchange, which may only be made in states where shares of the other funds are
qualified for sale, 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, which indicates that you do not wish to have the privilege (see
"Telephone Exchange Privilege" section of application). 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 identically registered account.
The exchange privilege may be modified at any time or discontinued upon 60 days'
written notice to shareholders.
REINSTATEMENT
PRIVILEGE If you have redeemed your shares of Fund II, 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 contingent deferred sales charge
- -----
23
<PAGE>
also will be reinvested. Such reinvested shares will retain their original cost
and purchase date only for purposes of the contingent deferred sales charge. A
reinvesting shareholder may realize a gain or loss for Federal income tax
purposes as a result of such reinvestment, but to the extent that any shares are
sold at a loss and the proceeds are reinvested in shares of Fund II (or other
shares of Fund II are purchased through reinvestment of distributions or
otherwise within 30 days before or after the redemption), some or all of the
loss will not be allowed as a deduction depending upon the relationship between
the number of shares sold and the number of shares purchased by the reinvesting
shareholder. In order to exercise this privilege, a written order for the
purchase of shares must be received by Fund II's Transfer Agent, or be
postmarked, within 30 days after the date of redemption. This privilege can be
used only once per calendar year.
RETIREMENT PLANS
The Funds have available prototype qualified retirement plans for both
corporations and self-employed individuals. The Funds also have available
prototype Individual Retirement Account ("IRA") plans (for both individuals and
employers) and Simplified Employee Pension ("SEP") plans as well as Section
403(b)(7) Tax-Sheltered Retirement Plans which are designed for employees of
public educational institutions and certain non-profit, tax-exempt
organizations. Investors Fiduciary Trust Company acts as the custodian under
these 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 AFDC.
EXPEDITED REDEMPTION AND TELEPHONE EXCHANGE INFORMATION
- -----------------
The Funds 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 Funds or their Transfer Agent reasonably believe that such
instructions were genuine. The Funds and their Transfer Agent have established
procedures that the Funds 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 Funds 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 FUNDS VALUE THEIR SHARES
- -----------------
The net asset value and offering price of shares of each Fund are determined
once daily as of the close of trading on the New York Stock Exchange (the "NYSE"
or the "Exchange") during a Fund's business day, which is any day on which the
Exchange is open for business. The net asset value of a Fund serves as the basis
for the purchase and redemption price of Fund 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 the value of a Fund's portfolio securities and other assets,
less its liabilities, divided by the number of its shares outstanding.
Generally, a Fund's investments are valued at market value or, in the absence of
a market value, at fair value as determined by or under the direction of the
Funds Board of Trustees. Portfolio securities that are primarily traded on
foreign exchanges are generally valued at the preceding closing values of the
securities on their respective exchanges, except that when an occurrence
subsequent to the time a value was so established is likely to have changed that
value, then the fair market of those securities will be determined by
consideration of other factors by or under the direction of the Fund's Board of
Trustees or its
- -----
24
<PAGE>
delegates. A security that is primarily traded on a U.S. or foreign stock
exchange is valued at the last sale price on that exchange or, if there were no
sales during the day, at the current mean between bid and asked prices.
Investments in U.S. Government Securities (other than short-term securities) are
valued at the average of the quoted bid and asked prices in the over-the-counter
market. Short-term investments that mature in 60 days or less are valued at
amortized cost when the Board of Trustees has determined that amortized cost is
fair value. An option is generally valued at the last sale price or, in the
absence of the last sale price, the last offer price. The value of a futures
contract equals the unrealized gain or loss on the contract that is determined
by marking the contract to the current settlement price for a like contract on
the valuation date of the futures contract. A settlement price may not be used
if the market makes a limit move with respect to a particular futures contract
or if the securities underlying the futures contract experience significant
price fluctuations after the determination of the settlement price. When a
settlement price cannot be used, futures contracts will be valued at their fair
market value as determined by or under the direction of the Fund's Board of
Trustees. Further information regarding the Fund's valuation policies is
contained in the Statement of Additional Information.
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, CA 90212. It comprises several affiliated companies,
including AMC and AFDC (whose principal business address is 750 B Street, Suite
2350, San Diego, California 92101), which provide advisory, distribution and
administrative services to the Funds. Atlas Group is a Delaware corporation of
which Palomba Weingarten, Chairman of the Board of Trustees of the Funds, 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 $175 million.
Astra Fund Distributors Corp. distributes shares for all of Astra Group's mutual
funds. AMC and AFDC are wholly-owned subsidiaries of Atlas Holdings Group, Inc.
These companies are part of the umbrella name "Astra Group."
PORTFOLIO MANAGEMENT
- -----------------
Mr. Robert Womack, Jr. is the Portfolio Manager for Astra Short-Term
Multi-Market Income Fund I and Fund II and has primary responsibility for the
day-to-day management of the Funds on behalf of AMC. Additionally, Mr. Womack
manages the Astra All-Americas Government Income Trust and is a member of the
investment management committee responsible for the management of the Astra U.S.
Government Securities Trust and the Astra Adjustable Rate Securities Trust. Mr.
Womack has been a portfolio manager with the Pilgrim America Group (April 1995
to June 1995) and the Pilgrim Group of Funds (predecessor of "Atlas Group")
(June 1993 to April 1995), responsible for managing the Pilgrim America
Government Securities Income Fund (formerly known as Pilgrim GNMA Fund).
Mr. Womack joined the Pilgrim Group of Funds (predecessor of "Atlas Group") in
June 1993 from World Savings and Loan Association in Oakland, California, where,
from 1989 to 1993, his responsibilities included managing a $2.5 billion
mortgage-backed securities portfolio, a $250 million government and
mortgage-backed securities mutual fund, the institution's futures, options and
interest rate swap portfolios, and World's $1 billion short-term investment
portfolio.Prior to that he worked as a financial analyst for the Federal Home
Loan Bank of San Francisco for 21 @ 2 years. Mr. Womack earned an MBA from
Southern Methodist University in 1986 and a Bachelor's degree in business
administration from Baylor University.
- -----
25
<PAGE>
MANAGEMENT FEES
- -----------------
The Funds have a Board of Trustees, which establishes the Funds' investment
policies and supervises and reviews the operations and management of each Fund.
See "Trustees and Officers" in the Statement of Additional Information for each
Fund for a complete description of the Trustees of the Funds. Management and
administrative services are provided to the Funds by AMC pursuant to an
Investment Management Agreement. For furnishing each Fund with investment advice
and investment management and administrative services with respect to the Funds'
assets, including making specific recommendations as to the purchase and sale of
portfolio securities, furnishing requisite personnel and office space, and in
general supervising and managing the Funds' investments (subject to the ultimate
supervision and direction of the Funds' Board of Trustees), each Fund pays AMC a
monthly fee equal to 0.625% per annum of its average daily net assets on the
first $1 billion of net assets, plus 0.55% on net assets in excess of $1
billion.
AMC will reduce its aggregate fees for any fiscal year, or reimburse each Fund,
to the extent required so that each Fund's expenses do not exceed the expense
limitations applicable to each Fund under the securities laws or regulations of
those states or jurisdictions in which a Funds' shares are registered or
qualified for sale. Expenses for purposes of these expense limitations include
the management fee, but exclude brokerage commissions and fees, taxes, interest
and extraordinary expenses such as litigation, paid or incurred by a Fund. In
addition, the state with the most restrictive expense limitation allows the
exclusion of distribution expenses.
ADMINISTRATIVE FEES
- -----------------
Pursuant to the Investment Management Agreement, AMC supervises the overall
administration of the Trust. These administrative services include supervising
the preparation and filing of all documents required for compliance by the Funds
with applicable laws and regulations, supervising the maintenance of books and
records, and other general and administrative responsibilities.
Under a sub-administration agreement between AMC and PFPC Inc. ("PFPC"), PFPC
provides certain administrative services to the Funds, subject to the
supervision of AMC. Such services include regulatory compliance, assistance in
the preparation and filing of post-effective amendments to the Funds'
registration statement with the Securities and Exchange Commission (the
"Commission"), 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,
AMC (not the Funds) has agreed to pay PFPC a monthly fee at the annual rate of
.07% of the average net assets of each Fund subject to certain minimums,
exclusive of out-of-pocket expenses. In addition, the Funds reimburse AMC for
the costs of preparing tax returns and filing of Blue Sky registrations.
DISTRIBUTION PLAN
- -----------------
The Funds finance activities which are primarily intended to result in the sale
of the Funds shares and each Fund has adopted a Distribution Plan pursuant to
Rule 12b-1 under the 1940 Act. Rule 12b-1 permits mutual funds, such as the
Funds, 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.
- -----
26
<PAGE>
FUND I. Fund I has adopted a Plan (the "Plan"), pursuant to Rule 12b-1 under the
Investment Company Act of 1940, as amended (the "1940 Act"), whereby it will pay
AFDC up to a maximum of 0.30% (3/10 of 1%) per annum of its average daily net
assets for expenses incurred in the distribution and promotion of its shares,
including the printing of prospectuses and reports used 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 and others who have executed a distribution or
service agreement with AFDC. Some payments under the Plan are used to compensate
broker-dealers with trail or maintenance commissions in an amount not to exceed
0.20%, annualized, of the assets maintained in the Fund by their customers. For
the year ended December 31, 1995, the Fund reimbursed AFDC $37,853 for such
distribution expenses.
The payments which AFDC is entitled to receive annually under the Plan will be
reduced if they exceed AFDC's actual reimbursable distribution expenses in a
given year plus unpaid expenses incurred in the prior three years. At December
31, 1995, AFDC had incurred approximately $375,182 (3.54% of the Fund I's net
assets) of distribution expenses in excess of amounts currently reimbursable by
the Fund.
If the Plan is terminated or not continued in accordance with its terms, the
Fund I's obligation to make payments to AFDC pursuant to the Plan will cease and
Fund I will not be required to make any further payments for expenses incurred
after the date on which the Plan terminates.
Under the Glass-Steagall Act and other applicable laws, certain banking
institutions are prohibited from distributing investment company shares. If a
bank were prohibited from providing certain agency or administrative services,
shareholders would be permitted to remain as Fund I shareholders and alternate
means for continuing the servicing of such shareholders would be sought. It is
not expected that shareholders would suffer any adverse financial consequences
as a result of any of these occurrences.
FUND II. The Plan provides daily compensation to Fund II's principal underwriter
for its distribution services and facilities (daily compensation). Pursuant to
the Plan, but subject to the .75% limitation described below, Fund II will pay
the principal underwriter daily compensation in the form of (i) sales
commissions equal to 4% of the amount received by Fund II for each share sold
(excluding reinvestment of dividends and distributions) 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. The principal underwriter currently expects to pay
sales commissions to dealers at the time of sale of 3% of the purchase price of
the shares sold by such dealer. See How to Buy Shares of the Funds. The
principal underwriter will use it own funds (which may be borrowed from banks)
to pay such sales commissions.
Because the payment of the sales commissions and interest fees to the principal
underwriter in the form of daily compensation is subject to the .75% limitation
in the Plan, it will take the principal underwriter a number of years to recoup
the sales commissions paid by it to dealers from the daily compensation payments
received by it from Fund II pursuant to the Plan. Such daily compensation will
be accrued daily (at the rate of 1/365 of .75% of Fund II'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 Plan. Uncovered
Distribution Charges are calculated daily and, briefly, are equivalent on any
given day to all unpaid sales commissions (sales commissions previously due less
amounts received pursuant to the Plan) and the interest fee to which the
principal underwriter is entitled under the Plan less all contingent deferred
sales charges previously paid to the principal underwriter. The Atlas Holdings
organization may be considered to have realized a profit under the Plan if at
any point in time the aggregate amounts of all daily compensation and contingent
deferred sales charge payments previously made to the principal underwriter have
exceeded the total expenses incurred by the Atlas Holdings organization in
distributing shares of Fund II. Total expenses for this purpose will include an
allocable portion of the overhead costs of such organization.
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27
<PAGE>
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 Fund II and
will accordingly reduce Fund II's net assets upon such accrual. However, in
accordance with generally accepted accounting principles, Fund II does not
accrue future daily compensation as a liability of Fund II or reduce Fund II's
current net assets in respect of daily compensation which may become payable
under the 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 Fund II's net
assets on such day. The level of Fund II's net assets changes each day and
depends upon the amount of sales and redemptions of Fund II shares, the changes
in the value of Fund II's portfolio investments, the expenses of Fund II accrued
on such day, income on portfolio investments accrued on such day, and dividends
and distributions declared by Fund II.
The Plan provides that Fund II 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 the Plan. During the year ended December
31, 1995, the principal underwriter earned $35,098 in daily compensation.
The 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 Fund II and a majority of the Trustees of Fund II who are not
interested persons of Fund II and who have no direct or indirect financial
interest in the operation of the Plan or any agreements related to the Plan (the
Rule 12b-1 Trustees).
Periods with a high level of sales of Fund II shares accompanied by a low level
of redemptions of Fund II 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 Fund II shares accompanied by a high level
of early redemptions of Fund II 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 Fund II
shares during the first few years of Fund II's operations would cause a large
portion of the daily compensation attributable to a sale of Fund II shares to be
accrued and paid by Fund II to the principal underwriter in fiscal years
subsequent to the years in which such shares were sold. The spreading of sales
commissions payments under the Plan over an extended period would result in the
incurrence and payment of increased interest fees under the Plan. At December
31, 1995, Uncovered Distribution Charges (cumulative sales commissions and
interest fees reduced by cumulative daily compensation and contingent deferred
sales charges paid to the principal underwriter) amounted to $688,146.
The Plan authorizes payments which may be equivalent, on an aggregate basis
during any fiscal year of Fund II, of up to .75% of Fund II's average daily net
assets for such year. It is anticipated that the Astra organization will benefit
by reason of the operation of the Plan through increases in Fund II's assets
(thereby increasing the advisory fees paid to AMC) resulting from sale of Fund
II shares and through daily compensation and contingent deferred sales charges
paid to the principal underwriter. It is anticipated that Fund II 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.
Fund II 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, Fund II's management intends to consider all relevant factors,
including, without limitation, the size of Fund II, the investment climate and
market conditions, the
- -----
28
<PAGE>
volume of sales and redemptions of Fund II shares, and the amount of Uncovered
Distribution Charges of the principal underwriter. The Plan may continue in
effect and payments may be made under the Plan following any such suspension,
discontinuance or limitation of the offering of Fund II shares. However, Fund II
is not contractually obligated to continue the Plan for any particular period of
time. Suspension of the offering of Fund II shares would not, of course, affect
a shareholder's ability to redeem his shares.
The National Association of Securities Dealers has reviewed Article III, Section
26 of its Rules of Fair Practice governing sales charges and its members have
approved a proposed revision of such rules. The NASD rule proposal will cover
Rule 12b-1 distribution fees and can be expected to affect a number of plans
adopted by the mutual fund industry under Rule 12b-1. If the SEC approves the
proposed amendment to the NASD rules, the Trustees will consider what, if any,
modification of Fund II's Plan or distribution practices may be appropriate.
See the Statement of Additional Information for a further description of the
Distribution Plans.
SHAREHOLDER MAINTENANCE AGREEMENT
Fund II has entered into a shareholder maintenance agreement with AFDC pursuant
to which AFDC may pay certain broker-dealers or financial service firms a trail
commission or maintenance fee. AFDC will receive an annual fee equal to 0.25% of
the Fund's average daily net assets and may compensate such firms periodically,
determined by a formula based upon the net assets represented by accounts
serviced by such firm during the period for which payment is being made, the
level of activity in accounts serviced during such period, and the expenses
incurred, provided that such fees will not exceed, on an annualized basis for
Fund II's then-current fiscal year, 0.25% of its average daily net assets
represented by shares owned during the period for which payment is being made.
During the year ended December 31, 1995, AFDC earned maintenance fees of
$11,699.
GENERAL INFORMATION
- -----------------
AGIS was organized as a Massachusetts business trust on November 21, 1985 under
the name Pilgrim Preferred Fund. All shares, when issued, are fully paid and
nonassessable. There are no preemptive, conversion or exchange rights. AGIS'
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.
AGIS currently issues shares of beneficial interest, without par value, in two
series. The investment objectives and policies and investment restrictions are
the same for both series. Shares of Astra Short-Term Multi-Market Income Fund I
may be purchased at a price equal to the next determined net asset value per
share plus a varying front-end sales charge. Shares of Astra Short-Term
Multi-Market Income Fund II are sold at the net asset value per share next
determined, but may be subject to a contingent deferred sales charge. Each of
the Funds' shares of beneficial interest has one vote and shares equally in
dividends and distributions and in the respective Fund's net assets upon
liquidation. Additional series may be added in the future by the Board of
Trustees.
The Board of Trustees may classify or reclassify any unissued shares of a Fund
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.
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29
<PAGE>
The overall management of the business of each Fund is vested with the Board of
Trustees. The Board of Trustees approves all significant agreements between each
Fund and persons or companies furnishing services to a Fund.
Day-to-day operations of the Funds are delegated to its elected officers,
subject to the investment objective and policies of the Funds, the general
supervision of the Board of Trustees and applicable state law.
Generally, there will not be annual meetings of shareholders. A Trustee of the
Funds may, in accordance with certain rules of the Securities and Exchange
Commission, be removed from office when the holders of record of not less than
two-thirds of the outstanding shares either present a written declaration to the
Funds' Custodian or vote in person or by proxy at a meeting called for this
purpose. In addition, the Trustees will promptly call a meeting of shareholders
to remove a Trustee(s) when requested to do so in writing by record holders of
not less than 10% of the outstanding shares. Finally, the Trustees shall, in
certain circumstances, give such shareholders access to a list of the names and
addresses of all other shareholders or inform them of the number of shareholders
and the cost of mailing their request.
Under Massachusetts law, shareholders could, under certain circumstances, be
held liable for the obligations of the Funds. However, the Declaration of Trust
disclaims shareholder liability for acts of obligations of the Funds and
requires that notice of such disclaimer be given in each agreement, obligation
or instrument entered into or executed by the Funds or the Trustees to all
parties, and each party thereto must expressly waive all rights of action
directly against shareholders. The Declaration of Trust provides for
indemnification out of the property of for all loss and expense of any
shareholder of the Funds 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 the Funds would be
unable to meet their obligations wherein the complaining party was held not 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 the Funds
of the Trustees and officers of the Funds 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 best interests of the Funds. Such person
may not be indemnified against any liability to the Funds or the Funds
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.
OTHER INFORMATION
As used in this Prospectus, the term "majority vote" means the affirmative vote
of (a) more than 50% of the outstanding shares of a Fund or (b) 67% or more of
the shares present at a meeting if more than 50% of the outstanding shares of a
Fund are represented at the meeting in person or by proxy, whichever is less.
Investors in each Fund will be informed of its progress through periodic
reports. Financial statements certified by independent public accountants will
be submitted to shareholders at least annually.
This Prospectus is not an offering of the securities herein described in any
state in which the 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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30
<PAGE>
[ASTRA ASTRA SHORT-TERM MULTI-MARKET INCOME FUND I AND II
LOGO] NEW ACCOUNT APPLICATION
- -------------------------------------------------------------------------------
INITIAL INVESTMENT
PLEASE MAIL THE COMPLETED
APPLICATION TO:
DST SYSTEMS, INC.
P.O. BOX 419174
KANSAS CITY, MO 64141
For accounts established
via Federal Funds Wire,
please mail the completed
application to:
DST Systems, Inc.
P.O. Box 419174
Kansas City, MO 64141
Attn: Order Dept.
Please check the box mext to the Fund in which you are investing. If no
selection is made, your investment may be delayed.
[ ] (81) Astra Short-Term Multi-Market Income Fund I
[ ] (29) Astra Short-Term Multi-Market Income Fund II*
[ ] Establish the account specified below with the enclosed check for $ ________
payable to the Fund selected above. Minimum initial investment is $5,000
[ ] 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
REGISTRATION
Joint Tenancy will be
assumed unless
otherwise noted.
Full Name/Corporate Name **Social Security or Taxpayer I.D. #
_____________________________________ _______________________________________
Co-owner (if applicable) [ ] 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 1978)
[ ] I am a Non-Resident Alien (Please complete a W-8)
Indicate what country a tax resident of ______________________.
Special Note: If Joint Registration each Non-Resident Alien must fill out a
W-8.
- --------------------------------------------------------------------------------
*SHARES MAY BE SUBJECT TO A CONTINGENT DEFERRED SALES CHARGE.
**THE FUND 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.
- -----
31
<PAGE>
- --------------------------------------------------------------------------------
DISTRIBUTION
INSTRUCTIONS
If you wish your cash
distributions to be
electronically credited
to your bank account,
please attach a voided
check.
If no box is checked, all distributions will be reinvested in additional shares
of the Fund.
INCOME DIVIDENDS: (elect one)
[ ] Reinvest dividends [ ] Pay dividends in cash
[ ] 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. If you would like to have
your distribution payments automatically deposited to your bank account,
please complete the Automated Clearing House (ACH) Distribution Form which
follows the Additional Account Privileges Form herein.:
______________________________________________________________________________
Payee
______________________________________________________________________________
Street Address
______________________________________________________________________________
Account Number If Applicable
______________________________________________________________________________
City, State and Zip Code
______________________________________________________________________________
SPECIAL SERVICES:
EXPEDITED
REDEMPTIONS
Please indicate a commer-
cial bank and ATTACH A
VOIDED CHECK for this
account. "FOR DEALER
ONLY" section must be
completed.
TELEPHONE EXCHANGE
PRIVILEGE--Telephone
exchanges may be made by
calling DST Systems,
Inc. at (800) 441-7267 before
the close of the NYSE on any
business day the exchange is
open.
I (we) authorized the Fund's Transfer Agent to act upon telephone or wire
instructions from any person to have amounts redeemed from my (our) account in
the Fund and:
[ ] WIRED to the bank account designated below. ($5,000 minimum)
Name of Bank Branch
______________________________________________________________________________
Bank Address
______________________________________________________________________________
______________________________________________________________________________
Name of Account Account Number
______________________________________________________________________________
You will automatically be assigned this privilege unless you instruct the Fund
otherwise by checking the box below. Shares may only be exchanged between
accounts with identical registrations. Any certificates for shares must be
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 Telephone Exchange Privilege.
_______________________________________________________________________________
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32
<PAGE>
_______________________________________________________________________________
OTHER SERVICES
READ THE PROSPECTUS FOR
FURTHER DETAILS ON RIGHTS
OF ACCUMULATION AND
LETTERS OF INTENT, OR
CALL (800) 441-7267.
FIVE PERCENT OF THE DOLLAR
AMOUNT OF THE LETTER OF
INTENT WILL BE HELD IN
ESCROW UNTIL THE INTENDED
PURCHASE HAS BEEN
COMPLETED.
[ ] RIGHTS OF ACCUMULATION
I apply for reduced sales charges, subject to the Transfer Agent's
confirmation of the following eligible holdings:
Fund Shareholder Registration Account No.
---- ------------------------ -----------
___________________ _______________________________ __________________
___________________ _______________________________ __________________
[ ] LETTER OF INTENT
I intend to invest over a 13-month period beginning _____________________
[ ] $100,000 [ ] $500,000 [ ] $1,000,000
[ ] $2,500,000 [ ] $5,000,000 or more
Existing account information:
Fund Shareholder Registration Account No.
---- ------------------------ -----------
___________________ _______________________________ __________________
___________________ _______________________________ __________________
_______________________________________________________________________________
CERTIFICATION AND
SIGNATURE
Cross out (2) if it is not
correct.
The account owners or their representatives 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 Fund has been received and read and that the authorizations
hereon shall continue until the Fund 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 Fund's Prospectus, as amended from time
to time, and the terms herein set forth, and subject to acceptance by the Fund
and to the laws of California. All terms shall be binding upon the
representatives, successors, and assigns of the account owners.
Under penalties of perjury, the undersigned hereby certify (1) that the Social
Security or Taxpayer I.D. Number above is correct and (2) that the account
owner is not subject to backup withholding because (a) 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 (b) 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 Fund, 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 Fund.
Authorized Signature Title
______________________________________________________________________________
Authorized Signature Title
______________________________________________________________________________
Authorized Signature Title
______________________________________________________________________________
Date
________________________________
Telephone Number:
Home: (___)_______________
Other: (___)_______________
______________________________________________________________________________
- -----
33
<PAGE>
______________________________________________________________________________
FOR DEALER ONLY:
(Please Print)
The undersigned ("Dealer") agrees to all 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>
[LOGO] ASTRA SHORT-TERM MULTI-MARKET INCOME FUND I AND II
ADDITIONAL ACCOUNT PRIVILEGES
______________________________________________________________________________
SYSTEMATIC
WITHDRAWAL
PLAN
PLEASE MAIL THE
COMPLETED FORM TO:
DST Systems, Inc.
P.O. Box 419174
Kansas City, MO 64141
If you wish your SWP
payments to be electronically
credited to your bank account,
please attach a voided check.
I (we) authorize the Fund's Transfer Agent, to liquidate shares in and withdraw
cash from my 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 following designated payee:
Full Name/Corporate Name
______________________________________________________________________________
Name of Payee or Payee Bank Bank Account Number (if any)
(If payments are to be made to a bank account, please complete the Automated
Clearing House (ACH) Distribution Form which follows):
______________________________________________________________________________
Street Address
______________________________________________________________________________
City, State, Zip
______________________________________________________________________________
Authorized Signature(s)
______________________________________________________________________________
PRE-AUTHORIZED
INVESTMENT PLAN
PLEASE ATTACH A VOIDED
CHECK FOR THIS ACCOUNT
Mail the completed
form to the above
address
I (we) authorize the Fund's Transfer Agent, to draw checks or debit instructions
on the bank account provided below, beginning on the [ ] 5th and/or [ ] 20th of
___________________ (month) and on the same day each month thereafter in the
amount of $_________________ ($250 minimum) to purchase additional shares of the
Fund:
Full Name/Corporate Name Bank Account Number
______________________________________________________________________________
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 OR DEBIT INSTRUCTIONS DRAWN BY DST SYSTEMS, INC.,
ON BEHALF OF ASTRA SHORT-TERM MULTI MARKET INCOME FUND I AND II,
FOR AUTOMATIC PURCHASE PLAN)
Please PRINT
Name of
Depositor
(as shown on
bank records)_______________________________
Bank
Account
Number_______________________________
Name
of Bank_______________________________
Address
of Bank_______________________________
City, State and
Zip Code
of Bank_______________________________
As a convenience, I (we) hereby request and authorize you to pay and charge to
my (our) account checks or debit instructions drawn on my (our) account by DST
Systems, Inc., the Fund's Agent and payable to the order of the Fund provided
there are sufficient collected funds in said account to pay the same upon
presentation. I (we) agree that your rights with respect to each such check or
debit instructions 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 or debit instructions.
I (we) further agree that if any such check or debit instructions 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)
X_____________________________________________________________________________
X_____________________________________________________________________________
___________________________________________________________ 19________________
Date Signed
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35
<PAGE>
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<PAGE>
THE ASTRA GROUP OF FUNDS AUTOMATED CLEARING HOUSE ("ACH") DISTRIBUTION FORM
- --------------------------------------------------------------------------------
Please accept this form as instructions to have future (check those that apply)
[ ] Income [ ] Dividends [ ] Capital Gains Distributions [ ] Systematic
Withdrawal Plan Payments deposited directly into my bank account as indicated
below:
- --------------------------------------------------------------------------------
BANK ACCOUNT INFORMATION
( )
--------------------------------------------------------------------
Bank Name Bank Telephone Number
--------------------------------------------------------------------
Address of Bank
--------------------------------------------------------------------
Name of Depositor Bank Account Number*
--------------------------------------------------------------------
Name of Joint Depositor (if any)
- --------------------------------------------------------------------------------
ASTRA ACCOUNT INFORMATION
/
--------------------------------------------------------------------
Fund Name Account Number
/
--------------------------------------------------------------------
Fund Name Account Number
/
--------------------------------------------------------------------
Fund Name Account Number
/
--------------------------------------------------------------------
Fund Name Account Number
- --------------------------------------------------------------------------------
AUTHORIZATION
As a convenience to me (us), The Astra Group of Funds is hereby directed to
initiate credit and, if necessary, debit entries, and adjustments for any credit
or debit entries made in error, to my (our) bank account. This authority is to
remain in effect until receipt of revocation, in writing, from me (us). I (we)
agree that The Astra Group of Funds, Atlas Holdings Group, Inc., and its
affiliates ("Companies") shall be fully indemnified and protected in honoring
any such transactions. If any such credit is dishonored, whether with or without
cause and whether intentional or inadvertently caused, I (we) also agree that
Companies shall be under no liability whatsoever beyond the payment of the
Income Dividend, Capital Gains Distribution or Systematic Withdrawal Plan
Payment addressed herein.
_____________________________________ _____________________________________
Signature of Shareholder** Signature of Co-Owner**
(if applicable)
( ) _____________ ( ) _____________ ( ) _____________ ( ) _____________
Home Telephone Bus. Telephone Home Telephone Bus. Telephone
*A voided check or deposit slip for this account must be attached.
**Must be signed exactly as account is registered.
- -----
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<PAGE>
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<PAGE>
ASTRA SHORT-TERM MULTI-MARKET INCOME FUND II
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 pages 20-21 of the
prospectus, you must complete this Contingent Deferred Sales Charge Waiver Form
and send it to the Fund'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. For IRA or other qualified retirement
plan accounts where IFTC acts as custodian, please contact the Fund for a
Distribution Request Form which must accompany this Contingent Deferred
Sales Charge Waiver Form.
Briefly explain the basis on which the undersigned believes he is eligible
to rely on the item above.
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
Signature _________________________________________________________________
(Exactly as on Account Registration)
DATE ________________________________________________________________, 19
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 determined 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 ______________________________
- -----
39
<PAGE>
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- ------
40
<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.
================================================================================
<TABLE>
<CAPTION>
<S> <C>
GUIDELINES FOR DETERMINING GIVE THE
PROPER NUMBER SOCIAL SECURITY
FOR THIS TYPE OF ACCOUNT: NUMBER OF--
1. An individual's account The individual
2. Two or more individuals (joint The actual owner of the account or,
account) if combined funds any one of
the individuals(superior1)
3. Husband and wife (joint account) The actual owner of the account or,
if joint funds, either person(superior1)
4. Custodian account to a minor The minor(superior2)
(Uniform Gift to Minors Act)
5. Adult and minor The adult or if the minor is the only
contributor, the minor(superior1)
6. Account in the name of guardian or The ward, minor, or incompetent
committee for a designated ward, person(superior3)
minor or incompetent person
7. a. The usual revocable savings trust The grantor-trustee(superior5)
account (grantor is also trustee)
b. So-called trust account that is The actual owner(superior1)
not a legal or valid trust under
state law
8. Sole proprietorship account The owner(superior4)
GIVE THE EMPLOYER
IDENTIFICATION
FOR THIS TYPE OF ACCOUNT: NUMBER OF--
9. A valid trust, estate or pension Legal entity (Do not furnish the
trust identifying number of the personal
representative or trustee unless the
legal entity itself is not designated in
the account title.)(superior5)
10. Corporate account The corporation
educational organization account
11. Religious, charitable, or The organization
12. Partnership account held in the The partnership
name of the business
13. Association, club or other The organization
tax-exempt organization
14. A broker or registered nominee The broker or nominee
15. Account with the Department of The public entity
Agriculture in the name of a
public entity (such as a State or
local government, school district,
or prison) that receives
agricultural program payments
</TABLE>
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41
<PAGE>
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<PAGE>
ASTRA LOGO
=================================== ===================================
750 B Street ASTRA
Suite 2350 SHORT-TERM
San Diego, California 92101 MULTI-MARKET
INCOME FUNDS
- ----------------------------------- -----------------------------------
ASTRA SHORT-TERM MULTI-MARKET PROSPECTUS
INCOME FUNDS APRIL 29, 1996
INVESTMENT MANAGER
Astra Management Corporation
750 B Street
Suite 2350
San Diego, California 92101
(619) 238-7100
PRINCIPAL UNDERWRITER
Astra Fund Distributors Corp.
750 B Street
Suite 2350
San Diego, California 92101
(619) 238-7100
SHAREHOLDER SERVICING AGENT
DST Systems, Inc.
P.O. Box 419174
Kansas City, Missouri 64141
(800) 441-7267
TRANSFER AGENT
Investor 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
Kramer, Levin, Naftalis, Nessen,
Kamin & Frankel
919 Third Ave.
New York, New York 10022
AUDITORS
Tait, Weller & Baker
Two Penn Center Plaza
Philadelphia, Pennsylvania 19102
ASTMM 594 3
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
April 29, 1996
ASTRA SHORT-TERM MULTI-MARKET INCOME FUND I
750 B Street
Suite 2350
San Diego, CA 92101
(800) 219-1080
ASTRA SHORT-TERM MULTI-MARKET INCOME FUND I (the "Fund") a non-diversified,
open-end management investment company, is a series of Astra Global Investment
Series (the "Trust"), which was organized as a business trust under the laws of
The Commonwealth of Massachusetts under the name "Pilgrim Preferred Fund." The
Fund, renamed on April 7, 1995, was formerly known as "Pilgrim Short-Term
Multi-Market Income Fund". The Trust, also renamed on April 7, 1995, was
formerly known as "Pilgrim Global Investment Series." The Trust is currently
organized into two series. This Statement of Additional Information relates
primarily to the Astra Short-Term Multi-Market Income Fund I series of the
Trust. The Fund's primary investment objective is to provide investors with a
high current income with capital appreciation as a secondary objective.
This document is not the prospectus of the Fund and should be read in
conjunction with that prospectus dated April 29, 1996, which may be obtained
without charge upon written request to the Fund at the address above, or by
calling (800) 219-1080.
TABLE OF CONTENTS
Page
----
The Fund ................................................................ 2
Investment Objectives and Policies....................................... 2
Investment Restrictions................................................. 11
Trustees and Officers.................................................... 11
Investment Management.................................................... 12
Sub-Administration Agreement............................................. 14
Investment Advisory...................................................... 14
Execution of Portfolio Transactions...................................... 15
Principal Underwriter.................................................... 16
Distribution Plan........................................................ 16
Additional Purchase and Redemption Information........................... 17
The Price of the Shares is Determined Daily.............................. 19
Tax Matters.............................................................. 19
Investment Return Information............................................ 25
General Information...................................................... 27
Accountants.............................................................. 28
Financial Statements..................................................... 28
<PAGE>
THE FUND
On June 29, 1990, the shareholders of the Fund approved a proposal to
change the investment objectives and policies of the Fund, including a change of
the Fund's name to "Pilgrim Short-Term Multi-Market Income Fund" from "Pilgrim
Preferred Fund." On February 13, 1991, the Trustees approved a change in the
name of the Trust to "Pilgrim Global Investment Series." On April 7, 1995, the
name of the Trust was changed to "Astra Global Investment Series" and the name
of the Fund was changed to "Astra Short-Term Multi-Market Income Fund I."
INVESTMENT OBJECTIVES AND POLICIES
As described in the Fund's prospectus, the Fund is a non-diversified,
open-end management investment company. The Fund's primary investment objective
is to provide investors with high current income with preservation of capital as
a secondary objective. These investment objectives are fundamental policies and
may not be changed except by a majority vote of shareholders.
To achieve its objectives, the Fund will invest in a non-diversified
portfolio of high quality debt instruments having remaining maturities of not
more than 3 years denominated in the U.S. Dollar and a range of foreign
currencies and will write call options on the currencies and securities in which
the Fund is invested. The Fund also may invest in repurchase agreements, cash or
cash equivalents or other such high quality debt instruments as is consistent
with its objectives. In addition, the Fund will attempt to hedge its currency
exposure through the use of forward selling and options.
The Fund seeks to provide the highest level of current income, consistent
with what the Fund's investment manager, Astra Management Corporation ("AMC"),
considers to be prudent investment risk, that is available from a portfolio
of high-quality debt securities having remaining maturities of not more than
three years. The Fund seeks high current yields by investing in a portfolio of
debt securities denominated in the U.S. Dollar and a range of foreign
currencies. Accordingly, the Fund will seek investment opportunities in foreign,
as well as domestic, securities markets. While the Fund normally will maintain a
substantial portion of its assets in debt securities denominated in foreign
currencies, the Fund also will invest in U.S. Dollar denominated securities. The
Fund currently does not intend to invest in securities issued by Eastern
European countries. The Fund is designed for the investor who seeks a higher
yield than a money market fund and less fluctuation in net asset value than a
longer-term bond fund.
The Fund invests in debt securities denominated in the currencies of
countries whose governments AMC considers stable. In addition to the U.S.
Dollar, such currencies include, among others, the Australian Dollar, Austrian
Schilling, British Pound Sterling, Canadian Dollar, Dutch Guilder, European
Currency Unit ("ECU"), French Franc, Japanese Yen, New Zealand Dollar, Spanish
Peseta, Swedish Krona, Swiss Franc and German Mark. An issuer of debt securities
purchased by the Fund may be domiciled in a country other than the country in
whose currency the instrument is denominated.
The Fund seeks to minimize investment risk by limiting its portfolio
investments to debt securities of high quality. Accordingly, the Fund's
portfolio consists only of: (i) debt securities issued or guaranteed by the U.S.
government, its agencies or instrumentalities ("U.S. Government Securities");
(ii) obligations issued or guaranteed by a foreign government or any of its
political subdivisions, authorities, agencies, or instrumentalities, or by
supranational entities, all of which are rated AAA or AA by Standard & Poor's
Corporation ("S&P") or Aaa or Aa by Moody's Investors Services, Inc. ("Moody's")
("High Quality Ratings") or, if unrated, determined by AMC to be of equivalent
quality; (iii) corporate debt securities having at least one High Quality Rating
or, if unrated, determined by AMC to be of equivalent quality; (iv) certificates
of deposit and banker's acceptances issued or guaranteed by, or time deposits
maintained at, banks (including foreign branches of U.S. banks or U.S. or
foreign branches of foreign banks) having total assets of more than $500 million
and determined by AMC to be of high quality; and (v) commercial paper rated A-1
or A-2 by S&P, Prime-1 or Prime-2 by Moody's, Fitch-1 or Fitch-2 by Fitch
Investors Service, Inc., Duff 1 or Duff 2 by Duff & Phelps Inc. or, if not
rated, issued by U.S. or foreign companies having outstanding debt securities
rated AAA or AA or A by S&P, or Aaa, Aa or A by Moody's and determined by AMC to
be of high quality, and loan participation interests having a remaining term not
exceeding one year in loans extended to such companies by commercial banks or
other commercial lending
2
<PAGE>
institutions whose long-term debt and commercial paper are of a High Quality
Rating; and (vi) future contracts, options on future contracts, options on
foreign currencies, options on portfolio securities, and forward foreign
currency exchange contracts to such companies.
The Fund may invest in debt securities issued by supranational
organizations such as: the World Bank, which was chartered to finance
development projects in developing member countries; the European Community,
which is a twelve-nation organization engaged in cooperative economic
activities; the European Coal and Steel Community, which is an economic union of
various European nations' steel and coal industries; and the Asian Development
Bank, which is an international development bank established to lend funds,
promote investment and provide technical assistance to member nations in the
Asian and Pacific regions. The World Bank, Asian Development Bank and other such
supranational organizations are not considered by the Fund or AMC as "banks" for
purposes of computing investment restrictions regarding non-diversification or
concentration policies and, as a result, the debt securities issued by such
supranational organizations will not be included as those of banks for
determination of compliance with the percentage limitations of such investment
policies.
The Fund may invest in debt securities denominated in the ECU, which is a
"basket" consisting of specified amounts of the currencies of certain of the
twelve member states of the European Community. The specific amounts of
currencies comprising the ECU may be adjusted by the Council of Ministers of the
European Community to reflect changes in relative values of the underlying
currencies. AMC does not believe that such adjustments will adversely affect
holders of ECU-denominated obligations or the marketability of such securities.
European supranationals, in particular, issue ECU-denominated obligations.
The Fund is a "non-diversified" investment company, which means the Fund is
not limited in the proportion of its assets that may be invested in the
securities of a single issuer. However, the Fund intends to conduct its
operations so as to qualify as a "regulated investment company" for purposes of
the Internal Revenue Code of 1986, as amended, which will relieve the Fund of
any liability for Federal income tax to the extent its earnings are distributed
to shareholders. See "Distributions and Taxes." To so qualify, among other
requirements, the Fund will limit its investments so that, at the close of each
quarter of the taxable year, (i) not more than 25% of the market value of the
Fund's total assets will be invested in the securities of a single issuer, and
(ii) with respect to 50% of the market value of its total assets, not more than
5% of the market value of its total assets will be invested in the securities of
a single issuer and the Fund will not own more than 10% of the outstanding
voting securities of a single issuer. For purposes of the Fund's requirements to
maintain diversification for tax purposes, the issuer of a loan participation
will be the underlying borrower. In cases where the Fund does not have recourse
directly against the borrower, both the borrower and each agent bank and
co-lender interposed between the Fund and the borrower will be deemed issuers of
the loan participation for tax diversification purposes. The Fund's investments
in U.S. Government Securities are not subject to these limitations. Because the
Fund, as a non-diversified investment company, may invest in a smaller number of
individual issuers than a diversified investment company, an investment in the
Fund may, under certain circumstances, present greater risk to an investor than
an investment in a diversified company.
FUTURES CONTRACTS
The Fund may enter into contracts for the purchase or sale for future
delivery of fixed-income securities or foreign currencies which otherwise meet
the Fund's investment policies, to the extent permitted by the Commodity Futures
Trading Commission (the "CFTC"). U.S. futures contracts have been designed by
exchanges which have been designated "contract markets" by the CFTC, and must be
executed through a futures commission merchant, or brokerage firm, which is a
member of the relevant contract market. Futures contracts trade on a number of
contract markets, and, through their clearing corporations, the exchanges
guarantee performance of the contracts as between the clearing members of the
exchange. The Fund will enter into futures contracts which are based on debt
securities that are backed by the full faith and credit of the U.S. Government,
such as Treasury Notes, Government National Mortgage Association modified
pass-through mortgage-backed securities and three-month U.S. Treasury Bills. The
Fund may also enter into futures contracts which are based on non-U.S.
Government bonds.
An interest rate futures contract provides for the future sale by one party
and the purchase by the other party of a certain amount of a specific interest
rate-sensitive financial instrument (debt security) at a specified price, date,
time and place. A foreign currency futures contract provides for the future sale
by one party and the
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purchase by the other party of a certain amount of a specified foreign currency
at a specified price, date, time and place.
The Fund may not enter into futures transactions if the sum of the amount
of initial margin deposits on its existing futures contracts and premiums paid
for unexpired options would exceed 5% of the fair market value of the Fund's
total assets, after taking into account unrealized profits and unrealized losses
on commodity contracts it has entered into. The Fund will not use leverage when
it enters into long futures or options contracts and for each such long position
the Fund will deposit cash or cash equivalents, such as U.S. Government
Securities or high grade debt obligations, having a value equal to the
underlying commodity value of the contract as collateral with its custodian in a
segregated account.
The purpose of entering into a futures contract is to protect the Fund from
fluctuations in value of its portfolio securities without its necessarily buying
or selling the securities. Of course, because the value of portfolio securities
will far exceed the value of the futures contracts sold by the Fund, an increase
in the value of the futures contracts could only mitigate but not totally offset
the decline in the value of the Fund's assets. No consideration is paid or
received by the Fund upon entering into a futures contract. Upon entering into a
futures contract, the Fund will be required to deposit in a segregated account
with its custodian an amount of cash or cash equivalents, such as U.S.
Government Securities or high grade debt obligations, equal to approximately 1
to 10% of the contract amount (this amount is subject to change by the exchange
on which the contract is traded and brokers may charge a higher amount). This
amount is known as "initial margin" and is in the nature of a performance bond
or good faith deposit on the contract which is returned to the Fund upon
termination of the futures contract, assuming all contractual obligations have
been satisfied. The broker will have access to amounts in the margin account if
the Fund fails to meet its contractual obligations. Subsequent payments, known
as "variation margin," to and from the broker, will be made daily as the price
of the currency or securities underlying the futures contract fluctuates, making
the long and short positions in the futures contract more or less valuable, a
process known as "marking-to-market." At any time prior to the expiration of a
futures contract, the Fund may elect to close the position by taking an opposite
position, which will operate to terminate the Fund's existing position in the
contract.
There are several risks in connection with the use of futures contracts as
a hedging device. Successful use of futures contracts is subject to the ability
of the Fund's investment adviser to predict correctly movements in the price of
the securities or currencies underlying the particular hedge. These predictions
and, thus, the use of futures contracts involve skills and techniques that are
different from those involved in the management of the portfolio securities
being hedged. In addition, there can be no assurance that there will be a
correlation between movements in the price of the underlying securities or
currencies and movements in the price of the securities which are the subject of
the hedge. A decision concerning whether, when and how to hedge involves the
exercise of skill and judgment and even a well-conceived hedge may be
unsuccessful to some degree because of unexpected market behavior or trends in
interest rates or currency values.
Positions in future contracts and options on futures contracts may be
closed out only on the exchange on which they were entered into (or through a
linked exchange). No secondary market for such contracts exists. Although the
Fund intends to enter into futures contracts only if there is an active market
for such contracts, there is no assurance that an active market will exist for
the contracts at any particular time. Most futures exchanges limit the amount of
fluctuation permitted in futures contract prices during a single trading day.
Once the daily limit has been reached in a particular contract, no trades may be
made that day at a price beyond that limit. It is possible that futures contract
prices could move to the daily limit for several consecutive trading days with
little or no trading, thereby preventing prompt liquidation of futures positions
and subjecting the Fund to substantial losses. In such event, and in the event
of adverse price movements, the Fund would be required to make daily cash
payments of variation margin. In such circumstances, an increase in the value of
the portion of the Fund's securities being hedged, if any, may partially or
completely offset losses on the futures contract. However, as described above,
there is no guarantee that the price of the securities being hedged will, in
fact, correlate with the price movements in a futures contract and thus provide
an offset to losses on the futures contract.
If the Fund has hedged against the possibility of an event adversely
affecting the value of securities held in its portfolio and that event does not
occur, the Fund will lose part or all of the benefit of the increased value of
securities which it has hedged because it will have offsetting losses in its
futures positions. Losses incurred in hedging transactions and the costs of
these transactions will affect the Fund's performance. In addition, in such
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situations, if the Fund had insufficient cash, it might have to sell securities
to meet daily variation margin requirements at a time when it would be
disadvantageous to do so. These sales of securities could, but will not
necessarily, be at increased prices which reflect the change in interest rates
or currency values, as the case may be.
OPTIONS ON FUTURES CONTRACTS
The Fund may purchase and write put and call options on interest rate and
foreign currency contracts that are traded on a U.S. exchange or board of trade
or a foreign exchange, to the extent permitted by the CFTC, as a hedge against
changes in interest rates and market conditions, and may enter into closing
transactions with respect to such options to terminate existing positions. There
is no guarantee that such closing transactions can be effected.
An option on an interest rate or foreign currency contract, as contrasted
with the direct investment in such a contract, gives the purchaser the right, in
return for the premium paid, to assume a position in an interest rate or foreign
currency contract at a specified exercise price at any time prior to the
expiration date of the option. Options on interest rate futures contracts
currently available include those with respect to U.S. Treasury Bonds, U.S.
Treasury Notes, U.S. Treasury Bills and Eurodollars. Options on foreign currency
futures currently available include those with respect to British Pounds, Swiss
Francs, Japanese Yen, Canadian Dollars and Australian Dollars. Upon exercise of
an option, the delivery of the futures position by the writer of the option to
the holder of the option will be accompanied by delivery of the accumulated
balance in the writer's futures margin account, which represents the amount by
which the market price of the futures contracts exceeds, in the case of a call,
or is less than, in the case of a put, the exercise price of the option on the
futures contract. The potential loss related to the purchase of an option on
futures contracts is limited to the premium paid for the option (plus
transaction costs). Because the value of the option is fixed at the point of
sale, there are no daily cash payments to reflect changes in the value of the
underlying contract; however, the value of the option does change daily and that
change would be reflected in the net asset value of the Fund.
There are several risks relating to options on futures contracts. The
ability to establish and close out positions on such options will be subject to
the existence of a liquid market. In addition, the purchase of put or call
options will be based upon predictions as to anticipated trends in interest
rates and securities markets and in currency values by AMC, which could prove to
be incorrect. Even if AMC's expectations are correct, there may be an imperfect
correlation between the change in the value of the options and of the portfolio
securities hedged.
OPTIONS ON FOREIGN CURRENCIES
The Fund may purchase and write options on foreign currencies to increase
its gross income and for hedging purposes in a manner similar to that in which
futures contracts on foreign currencies, or forward contracts, will be utilized.
For example, a decline in the dollar value of a foreign currency in which
portfolio securities are denominated will reduce the dollar value of such
securities, even if their value in the foreign currency remains constant. In
order to protect against such diminutions in the value of portfolio securities,
the Fund may purchase put options on the foreign currency. If the value of the
currency does decline, the Fund will have the right to sell such currency for a
fixed amount in dollars and will thereby offset, in whole or in part, the
adverse effect on its portfolio which otherwise would have resulted.
Conversely, where a rise in the dollar value of a currency in which
securities to be acquired are denominated is projected thereby increasing the
cost of such securities, the Fund may purchase call options thereon. The
purchase of such options could offset, at least partially, the effects of the
adverse movements in exchange rates. As in the case of other types of options,
however, the benefit to the Fund deriving from purchases of foreign currency
options will be reduced by the amount of the premium and related transaction
costs. In addition, where currency exchange rates do not move in the direction
or to the extent anticipated, the Fund could sustain losses on transactions in
foreign currency options which would require it to forego a portion or all of
the benefits of advantageous changes in such rates.
The Fund may write options on foreign currencies to increase its gross
income and for the same types of hedging purposes. For example, where the Fund
anticipates a decline in the dollar value of foreign currency denominated
securities due to adverse fluctuations in exchange rates it could, instead of
purchasing a put option,
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write a call option on the relevant currency. If the expected decline occurs,
the option will most likely not be exercised, and the diminution in value of
portfolio securities will be offset by the amount of the premium received.
Similarly, instead of purchasing a call option to hedge against an
anticipated increase in the dollar cost of securities to be acquired, the Fund
could write a put option on the relevant currency which, if the currency moves
in the manner projected, will expire unexercised and allow the fund to hedge
such increased cost up to the amount of the premium. As in the case of other
types of options, however, the writing of a foreign currency option will
constitute only a partial hedge up to the amount of the premium, and only if
rates move in the expected direction. If this does not occur, the option may be
exercised and the Fund would be required to purchase or sell the underlying
currency at a loss which may not be offset by the amount of the premium. Through
the writing of options on foreign currencies, the Fund also may be required to
forego all or a portion of the benefits which might otherwise have been obtained
from favorable movements in exchange rates.
The Fund intends to write covered call options on foreign currencies. A
call option written on a foreign currency by the Fund is "covered" if the Fund
owns the underlying foreign currency covered by the call or has an absolute and
immediate right to acquire that foreign currency without additional cash
consideration (or for additional cash consideration held in a segregated account
by its Custodian, which acts as the Fund's custodian, or by a designated
sub-custodian) upon conversion or exchange of other foreign currency held in its
portfolio. A call option is also covered if the Fund has a call on the same
foreign currency and in the same principal amount as the call written where the
exercise price of the call held (a) is equal to or less than the exercise price
or the call written or (b) is greater than the exercise price of the call
written if the difference is maintained by the Fund in cash, U.S. Government
Securities and other high grade liquid debt securities in a segregated account
with its Custodian or with a designated sub-custodian.
The Fund also intends to write call options on foreign currencies that are
not covered for cross-hedging purposes. A call option on a foreign currency is
for cross-hedging purposes if it is not covered, but is designed to provide a
hedge against a decline in the U.S. dollar value of a security which the Fund
owns or has the right to acquire and which is denominated in the currency
underlying the option due to an adverse change in the exchange rate. In such
circumstances, the Fund collateralizes the option by maintaining in a segregated
account with its Custodian or with a designated sub-custodian, cash or U.S.
Government Securities in an amount not less than the value of the underlying
foreign currency in U.S. dollars marked-to-market daily.
FORWARD CURRENCY CONTRACTS
The Fund may engage in currency exchange transactions to hedge against
uncertainty in the level of future exchange rates. The Fund will conduct its
currency exchange transactions either on a spot (i.e., cash) basis at the rate
prevailing in the currency exchange market, or through entering into forward
contracts to purchase or sell currency. A forward currency contract involves an
obligation to purchase or sell a specific currency at a future date, which may
be any fixed number of days from the date of the contract agreed upon by the
parties, at a price set at the time of the contract. The Fund's dealings in
forward currency contracts will be limited to hedging involving either specific
transactions or portfolio positions. Transaction hedging is the purchase or sale
of forward currency with respect to specific receivables or payables of the Fund
generally accruing in connection with the purchase or sale of its portfolio
securities. Position hedging is the sale of forward currency with respect to
portfolio security positions denominated or quoted in the currency. The Fund may
not position hedge with respect to a particular currency to an extent greater
than the aggregate market value (at the time of making such sale) of the
securities held in its portfolio denominated or quoted in or currently
convertible into that particular currency. The Fund may, however, enter into a
position hedging transaction with respect to a currency other than that held in
the Fund's portfolio, if such a transaction is deemed a hedge by AMC. If the
Fund enters into a position hedging transaction, cash or liquid high grade debt
securities will be placed in a segregated account in an amount equal to the
value of the Fund's total assets committed to the consummation of the forward
contract. If the value of the securities placed in the segregated account
declines, additional cash or securities will be placed in the account so that
the value of the account will equal the amount of the Fund's commitment with
respect to the contract. Hedging transactions may be made from any foreign
currency into U.S. dollars or into other appropriate currencies.
At or before the maturity of a forward currency contract, the Fund may
either sell a portfolio security
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and make delivery of the currency, or retain the security and offset its
contractual obligation to deliver the currency by purchasing a second contract
pursuant to which the Fund will obtain, on the same maturity date, the same
amount of the currency which it is obligated to deliver. If the Fund retains the
portfolio security and engages in an offsetting transaction, the Fund, at the
time of execution of the offsetting transaction, will incur a gain or a loss to
the extent that movement has occurred in forward currency contract prices.
Should forward prices decline during the period between the Fund's entering into
a forward contract for the sale of a currency and the date it enters into an
offsetting contract for the purchase of the currency, the Fund will realize a
gain to the extent the price of the currency it has agreed to sell exceeds the
price of the currency it has agreed to purchase. Should forward prices increase,
the Fund will suffer a loss to the extent the price of the currency it has
agreed to purchase exceeds the price of the currency it has agreed to sell.
The cost to the Fund of engaging in currency transactions varies with
factors such as the currency involved, the length of the contract period and the
market conditions then prevailing. Because transactions in currency exchange are
usually conducted on a principal basis, no fees or commissions are involved. The
use of forward currency contracts does not eliminate fluctuations in the
underlying prices of the securities, but it does establish a rate of exchange
that can be achieved in the future. In addition, although forward currency
contracts limit the risk of loss due to a decline in the value of the hedged
currency, at the same time, they limit any potential gain that might result
should the value of the currency increase.
If a devaluation is generally anticipated, the Fund may not be able to
contract to sell the currency at a price above the devaluation level it
anticipates. The Fund will not enter into a currency transaction if, as a
result, it will fail to qualify as a regulated investment company under the
Internal Revenue Code of 1986 for a given year.
OPTIONS ON PORTFOLIO SECURITIES
The Fund may write only covered call option contracts. Currently, the
principal exchanges on which such options may be written are the Chicago Board
Option Exchange and the American, Philadelphia, and Pacific Stock Exchanges. In
addition, and in certain instances, the Fund may purchase and sell options in
the over-the-counter market ("OTC Options"). A call option gives the purchaser
of the option the right to buy the underlying security from the writer at the
exercise price at any time prior to the expiration of the contract, regardless
of the market price of the security during the option period. The premium paid
to the writer is the consideration for undertaking the obligations under the
option contract. The writer forgoes the opportunity to profit from an increase
in the market price of the underlying security above the exercise price so long
as the option remains open and covered, except insofar as the premium represents
such a profit.
The Fund may purchase options only to close out a position. In order to
close out a position, the Fund will make a "closing purchase transaction"--the
purchase of a call option on the same security with the same exercise price and
expiration date as the call option which it has previously written on any
particular security. The Fund will effect a closing purchase transaction so as
to close out any existing call option on a security which it intends to sell.
The Fund will realize a profit or loss from a closing purchase transaction if
the amount paid to execute a closing purchase transaction is less or more than
the amount received from the sale thereof. In determining the term of any option
written, the Fund will consider the Internal Revenue Code's limitations on the
sale or disposition of securities held for less than three months in order to
maintain its status as a regulated investment company.
The staff of the SEC has taken the position that purchased over-the-counter
options and the assets used as cover for written over-the-counter options are
illiquid securities. The Fund will write OTC Options only with primary U.S.
Government Securities dealers recognized by the Board of Governors of the
Federal Reserve System or member banks of the Federal Reserve System ("primary
dealers"). The fund may also write, to the extent available, OTC Options with
non-primary dealers, such as foreign dealers; however, unlike OTC Options
written with primary dealers, any OTC Options written with such non-primary
dealers and the assets used as cover for such options will be treated as
illiquid securities. In connection with these special arrangements, the Fund
intends to establish standards for the creditworthiness of the primary and
non-primary dealers with which it may enter into OTC Option contracts and those
standards, as modified from time to time, will be implemented and monitored by
AMC. Under these special arrangements, the Fund will enter into contracts with
primary and non-primary dealers which provide that the Fund has the absolute
right to repurchase an option it writes at any
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time at a repurchase price which represents the fair market value, as determined
in good faith through negotiation between the parties, but which in no event
will exceed a price determined pursuant to a formula contained in the contract.
Although the specific details of the formula may vary between contracts with
different primary and non-primary dealers, the formula will generally be based
on a multiple of the premium received by the Fund for writing the option, plus
the amount, if any, by which the option is "in-the-money." The formula will also
include a factor to account for the difference between the price of the security
and the strike price of the option if the option is written "out-of-the-money".
Under such circumstances, and with respect to OTC Options written with primary
dealers only, the Fund will treat as illiquid that amount of the "cover" assets
equal to the amount by which the formula price for the repurchase of the option
is greater than the amount by which the market value of the security subject to
the option exceeds the exercise price of the option (the amount by which the
option is "in-the-money"). Although each agreement will provide that the Fund's
repurchase price shall be determined in good faith (and that it shall not exceed
the maximum determined pursuant to the formula) the formula price will not
necessarily reflect the market value of the option written, therefore, the Fund
might pay more to repurchase the OTC Option contract than the Fund would pay to
close out a similar exchange traded option.
In determining the Fund's net asset value, the current market value of any
option written by the Fund is subtracted from net asset value. If the current
market value of the option exceeds the premium received by the Fund, the excess
represents an unrealized loss, and, conversely, if the premium exceeds the
current market value of the option, such excess would be unrealized gain.
ADDITIONAL RISKS OF OPTIONS ON FUTURES CONTRACTS, FORWARD CONTRACTS AND
OPTIONS ON FOREIGN CURRENCIES
Unlike transactions entered into by the Fund in certain futures contracts,
certain other futures contracts, options on foreign currencies and forward
contracts are not traded on contract markets regulated by the CFTC and forward
currency contracts are not regulated by the SEC. Instead, forward currency
contracts are traded through financial institutions acting as market-makers.
Foreign currency options are traded on certain national securities exchanges,
such as the Philadelphia Stock Exchange and the Chicago Board Options Exchange,
subject to SEC regulation. In the forward currency market, there are no daily
price fluctuation limits, and adverse market movements could therefore continue
to an unlimited extent over a period of time. Moreover, a trader of forward
contracts could lose amounts substantially in excess of its initial investments,
due to the collateral requirements associated with such positions.
Options on foreign currencies traded on national securities exchanges are
within the jurisdiction of the SEC, as are other securities traded on such
exchanges. As a result, many of the protections provided to traders on organized
exchanges will be available with respect to such transactions. In particular,
all foreign currency option positions entered into on a national securities
exchange are cleared and guaranteed by the Options Clearing Corporation (the
"OCC"), thereby reducing the risk of counterparty default. Further, a liquid
secondary market in options traded on a national securities exchange may exist,
potentially permitting the Fund to liquidate open positions at a profit prior to
exercise or expiration, or to limit losses in the event of adverse market
movements.
The purchase and sale of exchange-traded foreign currency options, however,
are subject to the risks of the availability of a liquid secondary market
described above, as well as the risks regarding adverse market movements,
margining of options written, the nature of the foreign currency market,
possible intervention by governmental authorities and the effects of other
political and economic events. In addition, exercise and settlement of such
options must be made exclusively through the OCC, which has established banking
relationships in applicable foreign countries for this purpose. As a result, the
OCC may, if it determines that foreign governmental restrictions or taxes would
prevent the orderly settlement of foreign currency option exercises, or would
result in undue burdens on the OCC or its clearing member, impose special
procedures on exercise and settlement, such as technical changes in the
mechanics of delivery of currency, the fixing of dollar settlement prices or
prohibitions on exercise.
In addition, future contracts, options on futures contracts, forward
contracts and options on foreign currencies may be traded on foreign exchanges,
to the extent permitted by the CFTC. Such transactions are subject to the risk
of governmental actions affecting trading in or the prices of foreign currencies
or securities. The value of such positions also could be adversely affected by
(a) other complex foreign political and economic factors, (b) lesser
availability than in the United States of data on which to make trading
decisions, (c) delays in
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the Fund's ability to act upon economic events occurring in foreign markets
during nonbusiness hours in the United States and the United Kingdom, (d) the
imposition of different exercise and settlement terms and procedures and margin
requirements than in the United States, and (e) lesser trading volume.
The Fund may enter into repurchase agreements. Under a repurchase
agreement, the Fund acquires a debt instrument for a relatively short period
(usually not more than one week) subject to the obligation of the seller to
repurchase and the Fund to resell such debt instrument at a fixed price. The
resale price is in excess of the purchase price in that it reflects an
agreed-upon market interest rate effective for the period of time during which
the Fund's money is invested. The Fund's risk is limited to the ability of the
seller to pay the agreed-upon sum upon the delivery date. When the Fund enters
into a repurchase agreement, it obtains collateral having a value at least equal
to the amount of the purchase price. Repurchase agreements can be considered
loans as defined by the Investment Company Act of 1940, as amended (the "1940
Act"), collateralized by the underlying securities. The return on the collateral
may be more or less than that from the repurchase agreement. The securities
underlying a repurchase agreement will be marked to market every business day so
that the value of the collateral is at least equal to the value of the loan,
including the accrued interest earned. In evaluating whether to enter into a
repurchase agreement, AMC will carefully consider the creditworthiness of the
seller. If the financial institution that is the party to the repurchase
agreement petitions for bankruptcy or otherwise becomes subject to the U.S.
Bankruptcy Code, the law regarding the rights of the Fund is unsettled. As a
result, under these extreme circumstances, there may be restrictions on the
Fund's ability to sell the collateral and the Fund may suffer a loss.
Lending of Portfolio Securities--In order to generate additional income,
the Fund may lend its portfolio securities in an amount up to 33-1/3% of total
Fund assets to broker-dealers, major banks, or other recognized domestic
institutional borrowers of securities. No lending may be made to any companies
affiliated with AMC. The borrower at all times during the loan must maintain
with the Fund cash or cash equivalent collateral or provide to the Fund an
irrevocable letter of credit equal in value at all times to at least 100% of the
value of the securities loaned. During the time portfolio securities are on
loan, the borrower pays the Fund any dividends or interest paid on such
securities, and the Fund may invest the cash collateral and earn additional
income, or it may receive an agreed-upon amount of interest income from the
borrower who has delivered equivalent collateral or a letter of credit. Loans
are subject to termination at the option of the Fund or the borrower at any
time. The Fund may pay reasonable administrative 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.
INVESTMENT RESTRICTIONS
The Fund has adopted the following investment restrictions as fundamental
policies which cannot be changed without approval by the holders of a majority
of its outstanding shares, which means the lesser of (1) 67% of the Fund's
shares present at a meeting at which the holders of more than 50% of the
outstanding shares are present in person or by proxy, or (2) more than 50% of
the Fund's outstanding shares. The Fund may not:
1. Issue senior securities.
2. Purchase securities for which there are legal or contractual
restrictions on resale or otherwise not readily marketable (including repurchase
agreements maturing in more than 7 days), if as a result of such purchase more
than 10% of the Fund's total assets would be invested in such securities.
3. Underwrite securities of other issuers except to the extent that it may
be deemed to act as an underwriter in certain cases when disposing of restricted
securities.
4. Make loans to persons except by the loan of its portfolio securities as
described in "Lending of Portfolio Securities" in the Prospectus and in this
Statement.
5. Borrow money. (Does not preclude the Fund from obtaining such short-term
credit as may be necessary for the clearance of purchases and sales of its
portfolio securities.)
6. Invest in the securities of any company which, including its
predecessors, has not been in business for at least three years.
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7. Invest more than 25% of the value of its total assets in any one
industry except that this limitation is not applicable to the Fund's investments
in U.S. Government Securities.
8. Invest in securities of any one issuer for the purpose of exercising
control or management.
9. Purchase securities on margin, sell securities short or participate on a
joint or joint and several basis in any securities trading account.
10. Buy or sell interests in oil, gas or mineral exploration or development
programs, or purchase or sell commodities, commodity contracts or real estate.
11. Purchase or hold securities of any issuer, if, at the time of purchase
or thereafter, any of the officers and trustees of the Fund or the officers and
directors of AMC own beneficially more than 1/2 of 1%, and such officers,
trustees and directors holding more than 1/2 of 1% together own beneficially
more than 5%, of the issuer's securities.
12. Invest in securities of other investment companies, except as they may
be acquired as part of a merger, consolidation or acquisition of assets.
TRUSTEES AND OFFICERS
Responsibility for management of the Fund is vested in the Board of
Trustees. The Trustees, in turn, elect the officers of the Fund to supervise
actively the day-to-day operations of the Fund. The shareholders of the Fund may
elect Trustees at any meeting of shareholders called by the Trustees for that
purpose. Each Trustee serves during the continued lifetime of the Fund 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 of the Trustees and principal officers during the past
five years are set forth below.
PALOMBA WEINGARTEN, Chairman of the Board and Trustee of the Fund * (53)
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
Corporation ("AMC"), the Fund's distributor and investment manager,
respectively. Chairman of the Board and Trustee of Astra Strategic
Investment Series and Astra Institutional Securities Trust; Chairman of the
Board and Trustee of Astra Institutional Trust.
AL BURTON, Trustee of the Fund (67)
2300 Coldwater Canyon, Los Angeles, California 90210. President of Al
Burton Productions from 1992 to present. Executive Producer First Run
Syndication for Castle Rock Entertainment Inc. from 1992 to 1995. Executive
Producer - Consultant for Universal Television from 1982 to 1992. Board
Member of the Astra Group of Funds and Board Member of the Pilgrim America
Group of Funds.
GARRY D. PEARSON, Trustee (47)
150 North Myers Street, Los Angeles, California 90033. Vice President of
ColorGraphics, a printing company located in Los Angeles, since January
1996. Formerly, Senior Vice President of George Rice & Sons, a printing
company located in Los Angeles, California, from July 1994 to December
l995. 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 * (32)
750 B Street, Suite 2350, San Diego, California 92101. President of AMC,
Astra Fund Distributors Corp., Astra Strategic Investment Series, Astra
Institutional Securities Trust and Astra Institutional Trust. Mr. Womack
joined AMC in July 1995 as a Portfolio Manager. From April to June 1995,
Portfolio Manager for Pilgrim 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.
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JOHN R. ELERDING, Chief Financial Officer, Senior Vice President, Treasurer and
Secretary of the Fund * (44)
750 B Street, Suite 2350, San Diego, California 92101. Senior Vice
President, Secretary, Treasurer and Chief Financial Officer of Astra
Management Corporation and Astra Fund Distributors Corp. Senior Vice
President, Secretary, Treasurer and Chief Financial Officer of Astra
Institutional Trust, Astra Institutional Securities Trust and Astra
Strategic Investment Series. 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.
The officers and Trustees of the Fund, as a group, owned of record and
beneficially less than 1% of the outstanding shares of the Fund as of December
31, 1995.
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* "Interested person" of the Fund as defined in the 1940 Act.
The Trustees of the Fund who are not affiliated with or interested persons
of the Fund's investment adviser received an aggregate of approximately $1,796
during the year ended December 31, 1995 for fees and expenses for each meeting
of the Board of Trustees attended. The officers of the Fund receive no
compensation directly from it for performing the duties of their offices.
However, those officers and Trustees of the Fund who are officers and Directors
of AMC may receive remuneration indirectly because AMC will receive management
fees from the Fund.
INVESTMENT MANAGEMENT
Investment management and administrative services are provided to the Fund
by AMC, pursuant to an Investment Management Agreement (the "Agreement") dated
November 13, 1992. (See the Prospectus--"Investment Manager".) As compensation
for its services, AMC is paid monthly an annual fee at the rate of .625% of the
average daily net asset value of the Fund on the first $1 billion and .55% on
the net assets above $1 billion.
AMC will reduce its aggregate fees for any fiscal year, or reimburse the
Fund, to the extent required so that the Fund's expenses do not exceed the
expense limitations applicable to the Fund under the securities laws or
regulations of those states or jurisdictions in which the Fund's shares are
registered or qualified for sale. Currently, the most restrictive of such
expense limitations would require AMC to reduce its respective fees, only to the
extent received, or to reimburse the Fund, to the extent required so that the
Fund's expenses, as described above, for any fiscal year do not exceed 2 1/2% of
the first $30 million of the Fund's average daily net assets, 2% of the next $70
million of the Fund's average net assets and 1 1/2% of the Fund's remaining
average net assets. Expenses for purposes of this expense limitation include the
management fee, but exclude distribution expenses, brokerage commissions and
fees, taxes, interest and extraordinary expenses such as litigation, paid or
incurred by the Fund. The Fund's expense limitation may change to reflect
changes in the expense limitations of the state having the most restrictive
limitation in which shares of the Fund are registered for sale. For the years
ended December 31, 1993, 1994 and 1995, the Fund paid management fees to AMC of
approximately $258,000, $126,174 and $78,861, respectively. For such periods,
the Fund reimbursed AMC approximately $15,500, $4,239 and $0, respectively, for
the costs of personnel involved with recordkeeping and daily net asset value
calculations, portfolio trading, shareholder servicing, and state securities
registration and compliance.
The Fund pays its own operating expenses which are not assumed by AMC,
including the fees of its custodian, transfer and shareholder servicing agent;
cost 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 the Fund's Trustees and shareholders, except those called to
accommodate AMC; fees and expenses of Trustees who are not affiliated with or
interested persons of AMC; salaries of personnel involved in placing orders for
the execution of
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the Fund's portfolio transactions, in maintaining registration of its shares
under state securities laws or in providing shareholder and dealer services;
insurance premiums on property or personnel of the Fund which inure to its
benefit; costs of preparing and printing reports, proxy statements and
prospectuses of the Fund for distribution to its shareholders; legal, auditing
and accounting fees; fees and expenses of registering and maintaining
registration of its shares for sale under Federal and applicable state
securities laws; and all other expenses in connection with the issuance,
registration and transfer of its shares. Under the Agreement, the Fund is
required to pay for the salaries of any officers employed directly by the Fund.
However, no such officers have ever been employed by the Fund nor is it the
current intention of the Fund to employ any such officers.
The Agreement was most recently approved by the Board of Trustees of the
Fund on August 9, 1995, and will remain in effect from year to year as long as
its continuation is approved at least annually by (1) the Board of Trustees or
the vote of a majority of the outstanding voting securities of the Fund, and (2)
a majority of the Trustees of the Fund who are not interested persons of any
party to the Agreement, cast in person at a meeting called for the purpose of
voting on such approval. The Agreement may be terminated at any time, without
penalty, by either the Fund or AMC upon sixty days' written notice, and is
automatically terminated in the event of its assignment as defined in the 1940
Act.
AMC is a wholly-owned subsidiary of Atlas Holdings Group, Inc. ("AHGI").
AMC also acts as the investment manager to Astra Institutional Adjustable U.S.
Government Securities Portfolio, Astra Institutional Adjustable Rate Securities
Portfolio, Astra All Americas Government Income Trust and Astra Short-Term
Multi-Market Income Fund II, open-end investment companies. As of March 31,
1996, total assets under management in the Astra Group were approximately $175
million. AHGI is a Delaware corporation of which Mrs. Weingarten is the majority
stockholder.
SUB-ADMINISTRATION AGREEMENT
Under a sub-administration agreement between AMC and PFPC Inc. ("PFPC"),
PFPC provides certain administrative services to the Fund, subject to the
supervision of the Fund's Board of Trustees. Such services include regulatory
compliance, assistance in the preparation and filing of post-effective
amendments to the Fund's registration statement with the Securities and Exchange
Commission (the "Commission"), 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, AMC (not the Fund) has agreed to pay PFPC a
monthly fee at the annual rate of .07% of the average net assets of the Fund
subject to certain minimums, exclusive of out-of-pocket expenses. In addition,
the Fund reimburses AMC for the costs of preparing tax returns and filing Blue
Sky registrations.
EXECUTION OF PORTFOLIO TRANSACTIONS
In all purchases and sales of securities for the portfolio of the Fund, the
primary consideration is to obtain the most favorable price and execution
available. Pursuant to the Investment Management Agreement, AMC determines,
subject to the instructions of and review by the Board of Trustees of the Fund,
which securities are to be purchased and sold by the Fund and which brokers are
to be eligible to execute portfolio transactions of the Fund. 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 operational
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,
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consideration may be given to those brokers which supply research and
statistical information to the Fund and/or AMC, and provide other services in
addition to execution services. AMC considers such information to be useful in
varying degrees, but of indeterminable value. The placement of portfolio
brokerage with broker-dealers who have sold shares of the Fund is subject to
rules adopted by the National Association of Securities Dealers, Inc. Provided
the Fund's officers are satisfied that the Fund is receiving the most favorable
price and execution available, the Fund may also consider the sale of the Fund's
shares as a factor in the selection of broker-dealers to execute its portfolio
transactions.
While it will continue to be the Fund'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 Fund, the Fund may also give weight to
the ability of a broker to furnish brokerage and research services to the Fund
or AMC, even if the specific services were not imputed just to the Fund and were
useful to AMC in advising other clients. In negotiating commissions with a
broker, the Fund 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 the Fund
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 Fund or assist AMC in carrying out its responsibilities to the Fund. The
standard of reasonableness is to be measured in light of AMC's overall
responsibilities to the Fund.
For the years ended December 31, 1993, 1994 and 1995, no brokerage
commissions were paid by the Fund. The Fund 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 advisory fee a part of any tender fees which legally may be received by such
affiliated broker-dealer.
Investment decisions for the Fund are made independently from those of the
other funds in the Astra Group, although 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 either 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 the Fund is concerned.
PRINCIPAL UNDERWRITER
Astra Fund Distributors Corp. ("AFDC") is the Fund's principal underwriter
and distributor. The Fund has entered into an Underwriting Agreement between the
Fund and AFDC which will continue in effect from year to year if approved at
least annually (i) by the Board of Trustees of the Fund or by the vote of a
majority of the outstanding voting securities of the Fund and (ii) by a majority
of the Trustees of the Fund who are not parties to the Agreement or interested
persons of any such party, cast in person at a meeting called for the purpose of
voting on such approval. The Agreement may be terminated without penalty by
either party on sixty days' written notice and shall automatically terminate in
the event of its assignment as defined in the 1940 Act.
DISTRIBUTION PLAN
The Fund has adopted a Plan pursuant to Rule 12b-1 under the 1940 Act (the
"Plan"), whereby it will pay up to a maximum of 0.30% per annum of its average
daily net assets for expenses incurred in the distribution of the Fund's shares.
The Plan provides that AFDC may include as a distribution expense a portion of
its overhead expenses directly attributable to the distribution of the Fund's
shares. These overhead expenses include communications, salaries, training,
supplies, photocopying and any other category of AFDC's expenses
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attributable to the distribution of the Fund's shares.
The Plan also permits AFDC to carry forward for a maximum of three years
(without carrying charge) distribution expenses from prior years covered by the
Plan for which AFDC has not yet received reimbursement. Under this type of
arrangement, it is likely that the actual reimbursable expenses incurred and
paid by AFDC during the early years of the Plan will exceed the amounts for
which it is entitled to be reimbursed and will be carried forward as provided in
the Plan.
In addition to providing for the reimbursement to AFDC for actual
reimbursable distribution expenses as discussed above, the Plan also recognizes
that AMC may use its management fee or other resources to pay expenses
associated with activities primarily intended to result in the promotion and
distribution of the Fund's shares and that some of the Fund's normal operating
expenses, such as the management fee, and other payments made in the ordinary
course of its business are appropriately used in this manner.
The Board of Trustees determined that a continuous cash flow resulting from
the sale of new shares will be necessary and appropriate to meet redemptions and
to take advantage of buying opportunities without having to make unwarranted
liquidations of portfolio securities. Since AFDC retains a portion of the sales
charge, the Board felt it would benefit the Fund to have monies available for
the direct distribution and service activities of AFDC in promoting the
continuous sale of the Fund'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 the Plan will benefit the Fund and its shareholders.
The Plan, which was most recently approved by the Board of Trustees of the
Fund on August 9, 1995, including all of the Trustees who are "non-interested"
persons as defined in the 1940 Act, and by a majority of the Fund's outstanding
shareholders, is currently in effect until August 9, 1996. The Plan must be
renewed annually by the Fund's Board of Trustees, including a majority of the
Trustees who are "non-interested" persons of the Fund and who have no direct or
indirect financial interest in the operation of the 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. The Plan and
any distribution or service agreement may be terminated at any time, without any
penalty, by such trustees on 60 days' written notice, by any act that terminates
the Agreement with AMC or the Underwriting Agreement with AFDC, or by vote of a
majority of the Fund's outstanding shares. AFDC or any dealer or institution may
also terminate their respective distribution or service agreement at any time
upon written notice.
The Plan and any distribution or service agreement may not be amended to
increase materially the amount spent for distribution or service expenses
without approval by a majority of the Fund's outstanding shares, and all other
material amendments to the Plan or any distribution or service agreement also
shall be approved by the non-interested Trustees, cast in person at a meeting
called for the purpose of voting on any such amendment.
AFDC is required to report in writing to the Board of Trustees of the Fund
at least quarterly on the amounts and purpose of any payments made under the
Plan and any distribution or service agreement, as well as to furnish the Board
with such other information as may reasonably be requested in order to enable
the Board to make an informed determination of whether the Plan should be
continued.
For the year ended December 31, 1995, the Fund reimbursed AFDC
approximately $37,853 pursuant to the Plan for distribution of the Fund's
shares, including expenses for advertising; salaries and commissions; printing,
postage and handling; brokers' servicing fees and miscellaneous and other
promotional activities. Of the amount incurred by AFDC during the last year,
approximately $7,015 was for the costs of personnel of AFDC and its affiliates
involved in the promotion and distribution of the Fund's shares.
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
Rights of Accumulation--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 3.00% of the offering
price (3.09% of the net amount invested).
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Reinstatement Privilege--Shares of the Fund may be sold at net asset value,
without sales charge, to persons who have redeemed their shares of the Fund
within the previous 30 days. The amount which may be so reinvested in the Fund
is limited to an amount up to, but not exceeding, the redemption proceeds (or to
the nearest full share if fractional shares are not purchased). 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 Fund's Transfer Agent, or be postmarked, within 30 days after
the date of redemption. The previously redeemed shares will be reinvested at the
Fund's current net asset value upon receipt of the redemption proceeds from the
shareholder. This reinstatement privilege may only be used once a year. 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, although such disallowance is added to the tax basis of the shares
acquired upon the reinstatement. See "Tax Matters -- Sale or Redemption of
Shares."
Letter of Intent--As stated in the Prospectus, a shareholder may establish
a Letter of Intent to invest in a certain dollar amount of the Fund's 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 AFDC that the Letter of Intent is in effect, in order to insure that the
reduced sales price will be received. Shares of the Fund 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 Group Fund offering the Letter of Intent Option may be included for
purposes of determining whether the Letter of Intent is met.
Redemptions--Payment to shareholders for shares redeemed or repurchased
will be made within seven days after receipt by the Fund's Transfer Agent of the
written request in proper form, except that the Fund 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 Securities and
Exchange Commission ("Commission") or such Exchange is closed for other than
weekends and holidays; (b) an emergency exists as determined by the Commission
making disposal of portfolio securities or valuation of net assets of the Fund
not reasonably practicable; or (c) for such other periods as the Commission may
permit for the protection of the Fund's shareholders. At various times the Fund
may be requested to redeem its shares for which it has not yet received good
payment. Accordingly, the Fund 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 Fund recommends that all
purchases be made by certified or cashier's check, or by bank wire of Federal
funds.
Due to the relatively high costs of handling small investments, the Fund
reserves the right to redeem, at net asset value, the shares of any shareholder
whose account has a value of less than $5,000. Before the Fund redeems such
shares and sends the proceeds to the shareholder, the shareholder will be given
notice that the value of the shares in the account is less than the minimum
amount and will be allowed 30 days to make an additional investment in an amount
which will increase the value of the account to at least $5,000. The Fund also
reserves the right to redeem shares if share ownership is or may become so
concentrated that, in the opinion of management, it may cause the Fund to fail
to qualify for the special Federal tax treatment available to investment
companies.
The Fund intends to pay in cash for all shares redeemed, but under abnormal
conditions which make payment in cash unwise, the Fund may make payment wholly
or partly in securities at their then market value equal to the redemption
price. In such cases an investor may incur brokerage costs in converting such
securities to cash. The Fund has elected to be governed by the provisions of
Rule 18f-1 under the 1940 Act, which contains a formula for determining the
minimum amount of cash to be paid as part of any redemption in kind.
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.
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THE PRICE OF THE SHARES IS DETERMINED DAILY
As noted in the Prospectus, the net asset value and offering price of the
Fund's shares will be determined once daily as of the close of trading on the
New York Stock Exchange on each Fund "business day", which is any day 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.
The Fund may invest in foreign securities, and as a result, the calculation
of the Fund's net asset value may not take place contemporaneously with the
determination of the prices of certain of the portfolio securities used in the
calculation. Portfolio securities of the Fund which are traded both on an
exchange and in the over-the-counter market, will be valued according to the
broadest and most representative market. All assets and liabilities initially
expressed in foreign currency values will be converted into U.S. dollar values
at the mean between the bid and offered quotations of the currencies against
U.S. dollars as last quoted by any recognized dealer. When portfolio securities
are traded, the valuation will be the last reported sale price on the day of
valuation. If there is no such reported sale or the valuation is based on the
over-the-counter market, the securities will be valued at the last available bid
price or at the mean between the bid and asked prices, as determined by the
Board of Trustees. As of the date of this Statement of Additional Information,
such securities will be valued by the latter method. Securities for which
reliable quotations are not readily available and all other assets will be
valued at their respective fair market value as determined in good faith by, or
under procedures established by, the Board of Trustees of the Fund.
Money market instruments with less than sixty days remaining to maturity
when acquired by the Fund will be valued on an amortized cost basis by the Fund,
excluding unrealized gains or losses thereon from the valuation. This is
accomplished by valuing the security at cost and then assuming a constant
amortization to maturity of any premium or discount. If the Fund acquires a
money market instrument with more than sixty days remaining to its maturity, it
will be valued at current market value 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 Board determines during such 60-day period that this amortized cost
value does not represent fair market value.
All liabilities incurred or accrued are deducted from the Fund's total
assets. The resulting net assets are divided by the number of shares of the Fund
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 AFDC prior to 4:00
P.M. (Pacific time) on that day. It is the responsibility of the dealer to
insure that all orders are transmitted timely to the Fund. Orders received by
dealers after the close of trading on such Exchange will be confirmed at the
next computed offering price.
TAX MATTERS
The following is only a summary of certain additional tax considerations
generally affecting the Fund and its shareholders that are not described in the
Prospectus. No attempt is made to present a detailed explanation of the tax
treatment of the Fund or its shareholders, and the discussion here and in the
Prospectus is not intended as a substitute for careful tax planning.
QUALIFICATION AS A REGULATED INVESTMENT COMPANY
The Fund has elected 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, the Fund is not subject to federal income tax on
the portion of its net investment income (i.e., taxable interest, dividends and
other taxable ordinary income, net of expenses) and capital gain net income
(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) for the taxable year
(the "Distribution Requirement"), and satisfies certain other requirements of
the Code that are
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described below. Distributions by the Fund made during the taxable year or,
under specified circumstances, within twelve months 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.
If the Fund has a net capital loss (i.e., the excess of capital losses over
capital gains) for any year, the amount thereof may be carried forward up to
eight years and treated as a short term capital loss which can be used to offset
capital gains in such years. As of December 31, 1995 the Fund has capital loss
carryforwards of approximately $81,720,401, which expire through December 31,
2003. Under Section 382 of the Code, if the Fund has an ownership change, the
Fund's use of its capital loss carryforwards in any year following the ownership
change will be limited to an amount equal to the net asset value of the Fund
immediately prior to the ownership change multiplied by the highest adjusted
long-term tax-exempt rate (which is published monthly by the Internal Revenue
Service (the "IRS") in effect for any month in the three-calendar-month period
ending with the calendar month of the ownership change (the highest rate for the
three-month period ending in April 1996 is 6.5%). The Fund will use its best
efforts to avoid having an ownership change. However, because of circumstances
which may be beyond the control or knowledge of the Fund, there can be no
assurance that the Fund will not have, or has not already had, an ownership
change. If the Fund has or has had an ownership change, any capital gain net
income for any year following the ownership change in excess of the annual
limitation on the capital loss carryforwards will have to be distributed by the
Fund and will be taxable to shareholders as described under "Fund Distributions"
below.
In addition to satisfying the Distribution Requirement, a regulated
investment company 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 directly related to the regulated
investment company's principal business of investing in stock or securities) and
other income (including but not limited to 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 in any
event be characterized as Short-Short Gain if they are directly related to the
regulated investment company's investments in stock or securities (or options or
futures thereon). Because of the Short-Short Gain Test, the Fund may have to
limit the sale of appreciated securities that it has held for less than three
months. However, the Short-Short Gain Test will not prevent the Fund from
disposing of investments at a loss, since the recognition of a loss before the
expiration of the three-month holding period is disregarded for this purpose.
Interest (including original issue discount) received by the Fund 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, gain or loss recognized by the Fund on the disposition of an
asset will be a capital gain or loss. However, gain recognized on the
disposition of a debt obligation purchased by the Fund at a market discount
(generally, at a price less than its principal amount) will be treated as
ordinary income to the extent of the portion of the market discount which
accrued during the period of time the Fund held the debt obligation. In
addition, under the rules of Code Section 988, gain or loss recognized on the
disposition of a debt obligation denominated in a foreign currency or an option
with respect thereto (but only to the extent attributable to changes in foreign
currency exchange rates), and gain or loss recognized on the disposition of a
foreign currency forward contract, futures contract, option or similar financial
instrument, or of foreign currency itself, except for regulated futures
contracts or non-equity options subject to Code Section 1256, will generally be
treated as ordinary income or loss.
In general, for purposes of determining whether capital gain or loss
recognized by the Fund 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 the Fund as part of a "straddle"
(which term generally excludes a situation where the asset is stock and the Fund
grants a qualified covered call option (which,
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among other things, must not be deep-in-the-money) with respect thereto) or
(iii) the asset is stock and the Fund grants an in-the-money qualified covered
call option 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. In addition, the Fund may be required to defer the
recognition of a loss on the disposition of an asset held as part of a straddle
to the extent of any unrecognized gain on the offsetting position.
Any gain recognized by the Fund on the lapse of, or any gain or loss
recognized by the Fund from a closing transaction with respect to, an option
written by the Fund will be treated as a short-term capital gain or loss. For
purposes of the Short-Short Gain Test, the holding period of an option written
by the Fund will commence on the date it is written and end on the date it
lapses or the date a closing transaction is entered into. Accordingly, the Fund
may be limited in its ability to write options which expire within three months
and to enter into closing transactions at a gain within three months of the
writing of options.
Transactions that may be engaged in by the Fund (such as regulated futures
contracts, certain foreign currency contracts, and options on stock indexes and
futures contracts) will be subject to special tax treatment as "Section 1256
contracts." Section 1256 contracts are treated as if they are sold for their
fair market value on the last business day of the taxable year, regardless of
whether a taxpayer's obligations (or rights) under such contracts have not
terminated (by delivery, exercise, entering into a closing transaction or
otherwise) as of such date. Any gain or loss recognized as a consequence of the
year-end deemed disposition of Section 1256 contracts is taken into account for
the taxable year together with any other gain or loss that was previously
recognized upon the termination of Section 1256 contracts during that taxable
year. Any capital gain or loss for the taxable year with respect to Section 1256
contracts (including any capital gain or loss arising as a consequence of the
year-end deemed sale of such contracts) is generally treated as 60% long-term
capital gain or loss and 40% short-term capital gain or loss. The Fund may elect
not to have this special tax treatment apply to Section 1256 contracts that are
part of a "mixed straddle" with other investments of the Fund that are not
Section 1256 contracts. The Internal Revenue Service has held in several private
rulings that gains arising from Section 1256 contracts will be treated for
purposes of the Short-Short Gain Test as being derived from securities held for
not less than three months if the gains arise as a result of a constructive sale
under Code Section 1256.
Treasury Regulations permit a regulated investment company, in determining
its investment company taxable income and net capital gain (i.e., the excess of
net long-term capital gain over net short-term capital loss) for any taxable
year, to elect (unless it has made a taxable year election for excise tax
purposes as discussed below) to treat all or any part of any net capital loss,
any net long-term capital loss or any net foreign currency loss incurred after
October 31 as if it had been incurred in the succeeding year.
In addition to satisfying the requirements described above, the Fund must
satisfy an asset diversification test in order to qualify as a regulated
investment company. Under this test, at the close of each quarter of its taxable
year, at least 50% of the value of the Fund'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 the Fund has not
invested more than 5% of the value of the Fund's total assets in securities of
such issuer and as to which the Fund 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 the Fund controls and which are
engaged in the same or similar trades or businesses. Generally, an option (call
or put) with respect to a security is treated as issued by the issuer of the
security, not the issuer of the option. However, with regard to forward currency
contracts, there does not appear to be any formal or informal authority which
identifies the issuer of such instrument.
If for any taxable year the Fund 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 Fund's current and accumulated earnings
and profits. 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 a regulated investment company
that fails to distribute in
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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 (or, at the election of a regulated
investment company having a taxable year ending November 30 or December 31, for
its taxable year (a "taxable year election"). 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.
For purposes of the excise tax, a regulated investment company shall (1)
reduce its capital gain net income (but not below its net capital gain) by the
amount of any net ordinary loss for the calendar year and (2) exclude foreign
currency gains and losses incurred after October 31 of any year (or after the
end of its taxable year if it has made a taxable year election) 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).
The Fund 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 the Fund may in certain circumstances be required to liquidate
portfolio investments to make sufficient distributions to avoid excise tax
liability.
FUND DISTRIBUTIONS
The Fund 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 will not qualify for the 70% dividends-received deduction for
corporations.
The Fund may either retain or distribute to shareholders its net capital
gain for each taxable year. The Fund currently intends to distribute any such
amounts after reduction for any capital loss carryforwards. Net capital gain
that is distributed and designated as a capital gain dividend will be taxable to
shareholders as long-term capital gain, regardless of the length of time the
shareholder has held his shares or whether such gain was recognized by the Fund
prior to the date on which the shareholder acquired his shares.
Investment income that may be received by the Fund from sources within
foreign countries may be subject to foreign taxes withheld at the source. The
United States has entered into tax treaties with many foreign countries which
entitle the Fund to a reduced rate of, or exemption from, taxes on such income.
It is impossible to determine the effective rate of foreign tax in advance since
the amount of the Fund's assets to be invested in various countries is not
known. If more than 50% of the value of the Fund's total assets at the close of
its taxable year consists of the stock or securities of foreign corporations,
the Fund may elect to "pass through" to the Fund's shareholders the amount of
foreign taxes paid by the Fund. If the Fund so elects, each shareholder would be
required to include in gross income, even though not actually received, his pro
rata share of the foreign taxes paid by the Fund, but would be treated as having
paid his pro rata share of such foreign taxes and would therefore be allowed to
either deduct such amount in computing taxable income or use such amount
(subject to various Code limitations) as a foreign tax credit against federal
income tax (but not both). For purposes of the foreign tax credit limitation
rules of the Code, each shareholder would treat as foreign source income his pro
rata share of such foreign taxes plus the portion of dividends received from the
Fund representing income derived from foreign sources. No deduction for foreign
taxes could be claimed by an individual shareholder who does not itemize
deductions. Each shareholder should consult his own tax adviser regarding the
potential application of foreign tax credits.
Distributions by the Fund 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 reduction of) the shareholder's tax basis in his shares; any excess
will be treated as gain from a sale of the shares, as discussed below.
Distributions by the Fund will be treated in the manner described above
regardless of whether such distributions are paid in cash or reinvested in
additional shares of the Fund (or of another fund). 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. In addition, if the net asset value at
the time a shareholder purchases shares of the Fund reflects undistributed
income or gain, or
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<PAGE>
unrealized appreciation in the value of assets held by the Fund, a subsequent
distribution of such amounts will be taxable to the shareholder in the manner
described above, although it economically constitutes a return of capital.
Ordinarily, shareholders are required to take distributions by the Fund
into account in the year in which they are made. However, dividends 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 the Fund) on December 31 of such calendar year if such
dividends are actually paid 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) to them during the year.
The Fund will be required in certain cases to withhold and remit to the
U.S. Treasury 31% of ordinary income and capital gain dividends, and the
proceeds of redemption of shares, paid to any shareholder who (1) has provided
either an incorrect tax identification number or no number at all, (2) is
subject to backup withholding by the Internal Revenue Service for failure to
report the receipt of interest or dividend income properly, or (3) has failed to
certify to the Fund that it is not subject to backup withholding or that it is a
corporation or other "exempt recipient."
SALE OR REDEMPTION OF SHARES
A shareholder will recognize gain or loss on the sale or redemption of
shares of the Fund in an amount equal to the difference between the proceeds of
the sale or redemption and the shareholder's adjusted tax basis in the shares.
All or a portion of any loss so recognized may be disallowed if the shareholder
purchases other shares of the Fund within 30 days before or after the sale or
redemption. In general, any gain or loss arising from (or treated as arising
from) the sale or redemption of shares of the Fund will be considered capital
gain or loss and will be long-term capital gain or loss if the shares were held
for longer than one year. However, any capital loss arising from the sale or
redemption of shares held for six months or less will be treated as a long-term
capital loss to the extent of the amount of capital gain dividends received on
such shares. For this purpose, the special holding period rules of Code Section
246(c)(3) and (4) generally will apply in determining the holding period of
shares. Long-term capital gains of noncorporate taxpayers are currently taxed at
a maximum rate 11.6% lower than the maximum rate applicable to ordinary income.
Capital losses in any year are deductible only to the extent of capital gains
plus, in the case of noncorporate taxpayers, $3,000 of ordinary income.
If a shareholder (i) incurs a sales load in acquiring shares of the Fund,
(ii) disposes of such shares less than 91 days after they are acquired and (iii)
subsequently acquires shares of the same or another Fund at a reduced sales load
pursuant to a right to reinvest at such reduced sales load acquired in
connection with the acquisition of the shares disposed of, then the sales load
on the shares disposed of (to the extent of the reduction in the sales load on
the shares subsequently acquired) shall not be taken into account in determining
gain or loss on the shares disposed of but shall be treated as incurred on the
acquisition of the shares subsequently acquired.
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 the Fund
is "effectively connected" with a U.S. trade or business carried on by such
shareholder.
If the income from the Fund is not effectively connected with a U.S. trade
or business of a foreign shareholder, ordinary income dividends paid to the
shareholder will be subject to U.S. withholding tax at the rate of 30% (or lower
applicable treaty rate) and on the gross amount of the dividend. Furthermore,
such a foreign shareholder may be subject to U.S. withholding tax at the rate of
30% (or lower treaty rate) on the gross income resulting from the Fund's
election to treat any foreign taxes paid by it as paid by its shareholders, but
may not be allowed a deduction against this gross income or a credit against
this U.S. withholding tax for the foreign shareholder's pro rata share of such
foreign taxes which it is treated as having paid. Such a foreign shareholder
would generally be exempt from U.S. federal income tax on gains realized on the
sale of shares of the Fund and capital gain dividends.
If the income from the Fund is effectively connected with a U.S. trade or
business of a foreign shareholder, ordinary income and capital gain dividends
received in respect of, and any gains realized on the sale
20
<PAGE>
of, shares of the Fund will be subject to U.S. federal income tax at the rates
applicable to U.S. citizens or domestic corporations.
In the case of a foreign noncorporate shareholder, the Fund may be required
to withhold U.S. federal income tax at a rate of 31% on distributions that are
otherwise exempt from withholding (or taxable at a reduced treaty rate), unless
the shareholder furnishes the Fund with proper notification of its 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 the Fund,
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 Treasury Regulations issued thereunder as in effect on the
date of this Statement. Future legislative or administrative changes or court
decisions may significantly change the conclusions expressed herein, perhaps
with retroactive effect.
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 to them of federal, state and
local tax rules with respect to an investment in the Fund.
INVESTMENT RETURN INFORMATION
For purposes of quoting and comparing the performance of the Fund 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 Securities and Exchange Commission ("SEC
rules"), funds advertising performance must include total return quotes
calculated according to the following formula:
P(1 + T)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
one, five, and ten year periods or a shorter period dating from the
effectiveness of the Fund's Registration Statement. In calculating the ending
redeemable value, the maximum sales load is deducted from the initial $1,000
payment and all dividends and distributions by the Fund 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 "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. Any recurring account charges
that might in the future be imposed by the Fund would be included at that time.
All of the percentage figures listed below are reflective of the maximum 3.0%
sales load in effect through December 31, 1995.
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<PAGE>
The Fund's average annual compounded rate of return for the one and five
year periods ended December 31, 1995 and the period from January 21, 1986 (the
effective date of the Fund's initial registration under the Securities Act of
1933, as amended) through December 31, 1995 was 2.57%, -1.57% and -3.12,
respectively.
The Fund 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 Fund's performance with other measures of
investment return. For example, in comparing the Fund's total return with data
published by Lipper Analytical Services, Inc., or with the performance of the
Standard & Poor's 500 Stock Index or the Dow Jones Industrial Average, the Fund
calculates its aggregate total return for the specified periods of time by
assuming the investment of $10,000 in Fund 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 Fund does not, for these purposes, deduct from the initial
value invested any amount representing sales charges. The Fund will, however,
disclose the maximum sales charge and will also disclose that the performance
data do not reflect sales charges and that inclusion of 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.
In addition to the total return quotations discussed above, the Fund may
advertise its yield based on a 30-day (or one month) period, 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:
a-b
YIELD = 2[( ----- +1)6-1]
cd
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.
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 the Fund 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 for each day of the subsequent month that the obligation is in the
Fund'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 the Fund's portfolio. For
purposes of "b" above, Rule 12b-1 Plan expenses are included among the expenses
accrued for the period. Any amounts representing sales charges will not be
included among these expenses; however, the Fund 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.
The Fund's 30-day yield for the 30 days ended December 31, 1995 was 2.99%.
Any quotation of performance stated in terms of yield 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
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<PAGE>
worth more or less than their original cost.
GENERAL INFORMATION
The Fund was organized under the name "Pilgrim Preferred Fund" as a
Massachusetts business trust and as an open-end, diversified management
investment company. The Declaration of Trust dated November 21, 1985, amended on
June 26, 1990 and February 22, 1991, copies of which are on file in the office
of the Secretary of The Commonwealth of Massachusetts, authorize the issuance of
shares of beneficial interest in the Fund without par value. On June 29, 1990,
the shareholders of the Fund voted for the approval of a change in the Fund's
investment objectives and policies and certain investment restrictions. The name
of the Trust was changed to "Astra Global Investment Series" by a vote of the
Trustees on February 13, 1991. On April 7, 1995, the Trust changed its name to
"Astra Global Investment Series" and the Fund changed its name to "Astra
Short-Term Multi-Market Income Fund I." Each share of the Fund has one vote and
shares equally in dividends and distributions when and if declared by the Fund
and in the Fund's net assets upon liquidation. All shares, when issued, are
fully paid and non-assessable. There are no preemptive, conversion or exchange
rights. Fund 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. As used in this
Prospectus, the term "majority vote" means the affirmative vote of (a) more than
50% of the outstanding shares of the Fund or (b) 67% or more of the shares
present at a meeting if more than 50% of the outstanding shares of the Fund 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 the
Fund 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 the Fund is vested with the Board
of Trustees. The Board of Trustees approves all significant agreements between
the Fund and persons or companies furnishing services to the Fund. The
day-to-day operations of the Fund are delegated to the Fund's officers subject
to the investment objective and policies of the Fund, the general supervision of
the Fund's Board 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 the Fund. However, the Declaration of
Trust disclaims shareholder liability for acts or obligations of the Fund and
requires that notice of such disclaimer be given in each agreement, obligation
or instrument entered into or executed by the Fund or the Trustees to all
parties, and each party thereto must expressly waive all rights of action
directly against shareholders. The Declaration of Trust provides for
indemnification out of the Fund's property for all loss and expense of any
shareholder of the Fund 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 the Fund 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 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 wilful 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 the Fund of
the Trustees and officers of the Fund 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 best interests of the Fund. Such person
may not be indemnified against any liability to the Fund or the Funds
shareholders to which he would otherwise be subject by reason of wilful
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.
23
<PAGE>
OTHER INFORMATION
As of April 27, 1996, there were no shareholders known to the Fund to have
been the beneficial owner of 5% or more of the Fund's outstanding shares.
ACCOUNTANTS
Tait, Weller & Baker, Two Penn Center, Philadelphia, Pennsylvania
19102-1707, acts as independent certified public accountants for the Fund.
CUSTODIAN
The cash and securities owned by the Fund are held by PNC Bank, N.A.,
Airport Business Center, 200 Stevens Drive, Lester, Pennsylvania 19113, as
Custodian, which takes no part in the decisions relating to the purchase or sale
of the Fund's portfolio securities.
FINANCIAL STATEMENTS
The Financial Statements for the year ended December 31, 1995 are
incorporated herein by reference from the 1995 Annual Report to Shareholders.
The Fund's Annual Report will be provided at no additional cost to all
shareholders requesting a copy of this Statement of Additional Information.
24
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
April 29, 1996
ASTRA SHORT-TERM MULTI-MARKET INCOME FUND II
750 B Street
Suite 2350
San Diego, CA 92101
(800) 219-1080
ASTRA SHORT-TERM MULTI-MARKET INCOME FUND II (the "Fund") a
non-diversified, open-end management investment company, is a series of Astra
Global Investment Series (the "Trust"), which was organized as a business trust
under the laws of The Commonwealth of Massachusetts under the name "Pilgrim
Preferred Fund." The Fund, renamed on April 7, 1995, was formerly known as
"Pilgrim Short-Term Multi-Market Income Fund II" . The Trust, also renamed on
April 7, 1995, was formerly known as "Pilgrim Global Investment Series." The
Trust is currently organized into two series. This Statement of Additional
Information relates primarily to the Astra Short-Term Multi-Market Income Fund
II series of the Trust. The Fund's primary investment objective is to provide
investors with a high current income with capital appreciation as a secondary
objective.
This document is not the prospectus of the Fund and should be read in
conjunction with that prospectus dated April 29, 1996, which may be obtained
without charge upon written request to the Fund at the address above, or by
calling (800) 219-1080.
TABLE OF CONTENTS
Page
----
Investment Objectives and Policies......................................... 2
Investment Restrictions.................................................... 11
Trustees and Officers...................................................... 12
Investment Management...................................................... 13
Sub-Administration Agreement............................................... 14
Investment Advisory........................................................ 15
Execution of Portfolio Transactions........................................ 16
Principal Underwriter...................................................... 17
Distribution Plan.......................................................... 17
Additional Purchase and Redemption Information............................. 20
The Price of the Shares is Determined Daily................................ 21
Tax Matters................................................................ 22
Investment Return Information.............................................. 28
General Information........................................................ 30
Shareholder Maintenance Agreement.......................................... 31
Other Information.......................................................... 32
Accountants................................................................ 32
Custodian.................................................................. 32
Financial Statements....................................................... 32
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INVESTMENT OBJECTIVES AND POLICIES
As described in the Fund's prospectus, the Fund is a non-diversified,
open-end management investment company. The Fund's primary investment objective
is to provide investors with high current income with preservation of capital as
a secondary objective. These investment objectives are fundamental policies and
may not be changed except by a majority vote of shareholders.
To achieve its objectives, the Fund will invest in a non-diversified
portfolio of high quality debt instruments having remaining maturities of not
more than 3 years denominated in the U.S. Dollar and a range of foreign
currencies and will write call options on the currencies and securities in which
the Fund is invested. The Fund also may invest in repurchase agreements, cash or
cash equivalents or other such high quality debt instruments as is consistent
with its objectives. In addition, the Fund will attempt to hedge its currency
exposure through the use of forward selling and options.
The Fund seeks to provide the highest level of current income, consistent
with what the Fund's investment manager, Astra Management Corporation ("AMC"),
considers to be prudent investment risk, that is available from a portfolio
of high-quality debt securities having remaining maturities of not more than
three years. The Fund seeks high current yields by investing in a portfolio of
debt securities denominated in the U.S. Dollar and a range of foreign
currencies. Accordingly, the Fund will seek investment opportunities in foreign,
as well as domestic, securities markets. While the Fund normally will maintain a
substantial portion of its assets in debt securities denominated in foreign
currencies, the Fund also will invest in U.S. Dollar denominated securities. The
Fund currently does not intend to invest in securities issued by Eastern
European countries. The Fund is designed for the investor who seeks a higher
yield than a money market fund and less fluctuation in net asset value than a
longer-term bond fund.
The Fund invests in debt securities denominated in the currencies of
countries whose governments AMC considers stable. In addition to the U.S.
Dollar, such currencies include, among others, the Australian Dollar, Austrian
Schilling, British Pound Sterling, Canadian Dollar, Dutch Guilder, European
Currency Unit ("ECU"), French Franc, Japanese Yen, New Zealand Dollar, Spanish
Peseta, Swedish Krona, Swiss Franc and German Mark. An issuer of debt securities
purchased by the Fund may be domiciled in a country other than the country in
whose currency the instrument is denominated.
The Fund seeks to minimize investment risk by limiting its portfolio
investments to debt securities of high quality. Accordingly, the Fund's
portfolio consists only of: (i) debt securities issued or guaranteed by the U.S.
government, its agencies or instrumentalities ("U.S. Government Securities");
(ii) obligations issued or guaranteed by a foreign government or any of its
political subdivisions, authorities, agencies, or instrumentalities, or by
supranational entities, all of which are rated AAA or AA by Standard & Poor's
Corporation ("S&P") or Aaa or Aa by Moody's Investors Services, Inc. ("Moody's")
("High Quality Ratings") or, if unrated, determined by AMC to be equivalent
quality; (iii) corporate debt securities having at least one High Quality Rating
or, if unrated, determined by AMC to be of equivalent quality; (iv) certificates
of deposit and banker's acceptances issued or guaranteed by, or time deposits
maintained at, banks (including foreign branches of U.S. banks or U.S. or
foreign branches of foreign banks) having total assets of more than $500 million
and determined by AMC to be of high quality; and (v) commercial paper rated A-1
or A-2 by S&P, Prime-1 or Prime-2 by Moody's, Fitch-1 or Fitch-2 by Fitch
Investors Service, Inc., Duff 1 or Duff 2 by Duff & Phelps Inc. or, if not
rated, issued by U.S. or foreign companies having outstanding debt securities
rated AAA or AA or A by S&P, or Aaa, Aa or A by Moody's and determined by AMC to
be of high quality, and loan participation interests having a remaining term not
exceeding one year in loans extended to such companies by commercial banks or
other commercial lending institutions whose long-term debt and commercial paper
are of a High Quality Rating; and (vi) future contracts, options on future
contracts, options on foreign currencies, options on portfolio securities, and
forward foreign currency exchange contracts to such companies.
The Fund may invest in debt securities issued by supranational
organizations such as: the World Bank, which was chartered to finance
development projects in developing member countries; the European Community,
which is a twelve-nation organization engaged in cooperative economic
activities; the European Coal and Steel Community, which is an economic union of
various European nations' steel and coal industries; and the Asian Development
Bank, which is an international development bank established to lend funds,
promote investment and provide technical assistance to member nations in the
Asian and Pacific regions. The World Bank,
2
<PAGE>
Asian Development Bank and other such supranational organizations are not
considered by the Fund or AMC ^ as "banks" for purposes of computing investment
restrictions regarding non-diversification or concentration policies and, as a
result, the debt securities issued by such supranational organizations will not
be included as those of banks for determination of compliance with the
percentage limitations of such investment policies.
The Fund may invest in debt securities denominated in the ECU, which is a
"basket" consisting of specified amounts of the currencies of certain of the
twelve member states of the European Community. The specific amounts of
currencies comprising the ECU may be adjusted by the Council of Ministers of the
European Community to reflect changes in relative values of the underlying
currencies. AMC does not believe that such adjustments will adversely affect
holders of ECU-denominated obligations or the marketability of such securities.
European supranationals, in particular, issue ECU-denominated obligations.
The Fund is a "non-diversified" investment company, which means the Fund is
not limited in the proportion of its assets that may be invested in the
securities of a single issuer. However, the Fund intends to conduct its
operations so as to qualify as a "regulated investment company" for purposes of
the Internal Revenue Code of 1986, as amended (the "Internal Revenue Code"),
which will relieve the Fund of any liability for Federal income tax to the
extent its earnings are distributed to shareholders. See "Distributions and
Taxes." To so qualify, among other requirements, the Fund will limit its
investments so that, at the close of each quarter of the taxable year, (i) not
more than 25% of the market value of the Fund's total assets will be invested in
the securities of a single issuer, and (ii) with respect to 50% of the market
value of its total assets, not more than 5% of the market value of its total
assets will be invested in the securities of a single issuer and the Fund will
not own more than 10% of the outstanding voting securities of a single issuer.
For purposes of the Fund's requirements to maintain diversification for tax
purposes, the issuer of a loan participation will be the underlying borrower. In
cases where the Fund does not have recourse directly against the borrower, both
the borrower and each agent bank and co-lender interposed between the Fund and
the borrower will be deemed issuers of the loan participation for tax
diversification purposes. The Fund's investments in U.S. Government Securities
are not subject to these limitations. Because the Fund, as a non-diversified
investment company, may invest in a smaller number of individual issuers than a
diversified investment company, an investment in the Fund may, under certain
circumstances, present greater risk to an investor than an investment in a
diversified company.
FUTURES CONTRACTS
The Fund may enter into contracts for the purchase or sale for future
delivery of fixed-income securities or foreign currencies which otherwise meet
the Fund's investment policies, to the extent permitted by the Commodity Futures
Trading Commission (the "CFTC"). U.S. futures contracts have been designed by
exchanges which have been designated "contract markets" by the CFTC, and must be
executed through a futures commission merchant, or brokerage firm, which is a
member of the relevant contract market. Futures contracts trade on a number of
contract markets, and, through their clearing corporations, the exchanges
guarantee performance of the contracts as between the clearing members of the
exchange. The Fund will enter into futures contracts which are based on debt
securities that are backed by the full faith and credit of the U.S. Government,
such as Treasury Notes, Government National Mortgage Association modified
pass-through mortgage-backed securities and three-month U.S. Treasury Bills. The
Fund may also enter into futures contracts which are based on non-U.S.
Government bonds.
An interest rate futures contract provides for the future sale by one party
and the purchase by the other party of a certain amount of a specific interest
rate-sensitive financial instrument (debt security) at a specified price, date,
time and place. A foreign currency futures contract provides for the future sale
by one party and the purchase by the other party of a certain amount of a
specified foreign currency at a specified price, date, time and place.
The Fund may not enter into futures transactions if the sum of the amount
of initial margin deposits on its existing futures contracts and premiums paid
for unexpired options would exceed 5% of the fair market value of the Fund's
total assets, after taking into account unrealized profits and unrealized losses
on commodity contracts it has entered into. The Fund will not use leverage when
it enters into long futures or options contracts and for each such long position
the Fund will deposit cash or cash equivalents, such as U.S. Government
Securities or high grade debt obligations, having a value equal to the
underlying commodity value of the contract as collateral with its custodian in a
segregated account.
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The purpose of entering into a futures contract is to protect the Fund from
fluctuations in value of its portfolio securities without its necessarily buying
or selling the securities. Of course, because the value of portfolio securities
will far exceed the value of the futures contracts sold by the Fund, an increase
in the value of the futures contracts could only mitigate but not totally offset
the decline in the value of the Fund's assets. No consideration is paid or
received by the Fund upon entering into a futures contract. Upon entering into a
futures contract, the Fund will be required to deposit in a segregated account
with its custodian an amount of cash or cash equivalents, such as U.S.
Government Securities or high grade debt obligations, equal to approximately 1
to 10% of the contract amount (this amount is subject to change by the exchange
on which the contract is traded and brokers may charge a higher amount). This
amount is known as "initial margin" and is in the nature of a performance bond
or good faith deposit on the contract which is returned to the Fund upon
termination of the futures contract, assuming all contractual obligations have
been satisfied. The broker will have access to amounts in the margin account if
the Fund fails to meet its contractual obligations. Subsequent payments, known
as "variation margin," to and from the broker, will be made daily as the price
of the currency or securities underlying the futures contract fluctuates, making
the long and short positions in the futures contract more or less valuable, a
process known as "marking-to-market." At any time prior to the expiration of a
futures contract, the Fund may elect to close the position by taking an opposite
position, which will operate to terminate the Fund's existing position in the
contract.
There are several risks in connection with the use of futures contracts as
a hedging device. Successful use of futures contracts is subject to the ability
of the Fund's investment adviser to predict correctly movements in the price of
the securities or currencies underlying the particular hedge. These predictions
and, thus, the use of futures contracts involve skills and techniques that are
different from those involved in the management of the portfolio securities
being hedged. In addition, there can be no assurance that there will be a
correlation between movements in the price of the underlying securities or
currencies and movements in the price of the securities which are the subject of
the hedge. A decision concerning whether, when and how to hedge involves the
exercise of skill and judgment and even a well-conceived hedge may be
unsuccessful to some degree because of unexpected market behavior or trends in
interest rates or currency values.
Positions in future contracts and options on futures contracts may be
closed out only on the exchange on which they were entered into (or through a
linked exchange). No secondary market for such contracts exists. Although the
Fund intends to enter into futures contracts only if there is an active market
for such contracts, there is no assurance that an active market will exist for
the contracts at any particular time. Most futures exchanges limit the amount of
fluctuation permitted in futures contract prices during a single trading day.
Once the daily limit has been reached in a particular contract, no trades may be
made that day at a price beyond that limit. It is possible that futures contract
prices could move to the daily limit for several consecutive trading days with
little or no trading, thereby preventing prompt liquidation of futures positions
and subjecting the Fund to substantial losses. In such event, and in the event
of adverse price movements, the Fund would be required to make daily cash
payments of variation margin. In such circumstances, an increase in the value of
the portion of the Fund's securities being hedged, if any, may partially or
completely offset losses on the futures contract. However, as described above,
there is no guarantee that the price of the securities being hedged will, in
fact, correlate with the price movements in a futures contract and thus provide
an offset to losses on the futures contract.
If the Fund has hedged against the possibility of an event adversely
affecting the value of securities held in its portfolio and that event does not
occur, the Fund will lose part or all of the benefit of the increased value of
securities which it has hedged because it will have offsetting losses in its
futures positions. Losses incurred in hedging transactions and the costs of
these transactions will affect the Fund's performance. In addition, in such
situations, if the Fund had insufficient cash, it might have to sell securities
to meet daily variation margin requirements at a time when it would be
disadvantageous to do so. These sales of securities could, but will not
necessarily, be at increased prices which reflect the change in interest rates
or currency values, as the case may be.
OPTIONS ON FUTURES CONTRACTS
The Fund may purchase and write put and call options on interest rate and
foreign currency contracts that are traded on a U.S. exchange or board of trade
or a foreign exchange, to the extent permitted by the CFTC, as a hedge against
changes in interest rates and market conditions, and may enter into closing
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transactions with respect to such options to terminate existing positions. There
is no guarantee that such closing transactions can be effected.
An option on an interest rate or foreign currency contract, as contrasted
with the direct investment in such a contract, gives the purchaser the right, in
return for the premium paid, to assume a position in an interest rate or foreign
currency contract at a specified exercise price at any time prior to the
expiration date of the option. Options on interest rate futures contracts
currently available include those with respect to U.S. Treasury Bonds, U.S.
Treasury Notes, U.S. Treasury Bills and Eurodollars. Options on foreign currency
futures currently available include those with respect to British Pounds, Swiss
Francs, Japanese Yen, Canadian Dollars and Australian Dollars. Upon exercise of
an option, the delivery of the futures position by the writer of the option to
the holder of the option will be accompanied by delivery of the accumulated
balance in the writer's futures margin account, which represents the amount by
which the market price of the futures contracts exceeds, in the case of a call,
or is less than, in the case of a put, the exercise price of the option on the
futures contract. The potential loss related to the purchase of an option on
futures contracts is limited to the premium paid for the option (plus
transaction costs). Because the value of the option is fixed at the point of
sale, there are no daily cash payments to reflect changes in the value of the
underlying contract; however, the value of the option does change daily and that
change would be reflected in the net asset value of the Fund.
There are several risks relating to options on futures contracts. The
ability to establish and close out positions on such options will be subject to
the existence of a liquid market. In addition, the purchase of put or call
options will be based upon predictions as to anticipated trends in interest
rates and securities markets and in currency values by AMC, which could prove to
be incorrect. Even if AMC's expectations are correct, there may be an imperfect
correlation between the change in the value of the options and of the portfolio
securities hedged.
OPTIONS ON FOREIGN CURRENCIES
The Fund may purchase and write options on foreign currencies to increase
its gross income and for hedging purposes in a manner similar to that in which
futures contracts on foreign currencies, or forward contracts, will be utilized.
For example, a decline in the dollar value of a foreign currency in which
portfolio securities are denominated will reduce the dollar value of such
securities, even if their value in the foreign currency remains constant. In
order to protect against such diminutions in the value of portfolio securities,
the Fund may purchase put options on the foreign currency. If the value of the
currency does decline, the Fund will have the right to sell such currency for a
fixed amount in dollars and will thereby offset, in whole or in part, the
adverse effect on its portfolio which otherwise would have resulted.
Conversely, where a rise in the dollar value of a currency in which
securities to be acquired are denominated is projected thereby increasing the
cost of such securities, the Fund may purchase call options thereon. The
purchase of such options could offset, at least partially, the effects of the
adverse movements in exchange rates. As in the case of other types of options,
however, the benefit to the Fund derived from purchases of foreign currency
options will be reduced by the amount of the premium and related transaction
costs. In addition, where currency exchange rates do not move in the direction
or to the extent anticipated, the Fund could sustain losses on transactions in
foreign currency options which would require it to forego a portion or all of
the benefits of advantageous changes in such rates.
The Fund may write options on foreign currencies to increase its gross
income and for the same types of hedging purposes. For example, where the Fund
anticipates a decline in the dollar value of foreign currency denominated
securities due to adverse fluctuations in exchange rates it could, instead of
purchasing a put option, write a call option on the relevant currency. If the
expected decline occurs, the option will most likely not be exercised, and the
diminution in value of portfolio securities will be offset by the amount of the
premium received.
Similarly, instead of purchasing a call option to hedge against an
anticipated increase in the dollar cost of securities to be acquired, the Fund
could write a put option on the relevant currency which, if the currency moves
in the manner projected, will expire unexercised and allow the fund to hedge
such increased cost up to the amount of the premium. As in the case of other
types of options, however, the writing of a foreign currency option will
constitute only a partial hedge up to the amount of the premium, and only if
rates move in the expected direction. If this does not occur, the option may be
exercised and the Fund would be required to
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purchase or sell the underlying currency at a loss which may not be offset by
the amount of the premium. Through the writing of options on foreign currencies,
the Fund also may be required to forego all or a portion of the benefits which
might otherwise have been obtained from favorable movements in exchange rates.
The Fund intends to write covered call options on foreign currencies. A
call option written on a foreign currency by the Fund is "covered" if the Fund
owns the underlying foreign currency covered by the call or has an absolute and
immediate right to acquire that foreign currency without additional cash
consideration (or for additional cash consideration held in a segregated account
by its Custodian, which acts as the Fund's custodian, or by a designated
sub-custodian) upon conversion or exchange of other foreign currency held in its
portfolio. A call option is also covered if the Fund has a call on the same
foreign currency and in the same principal amount as the call written where the
exercise price of the call held (a) is equal to or less than the exercise price
of the call written or (b) is greater than the exercise price of the call
written if the difference is maintained by the Fund in cash, U.S. Government
Securities or other high grade liquid debt securities in a segregated account
with its Custodian or with a designated sub-custodian.
The Fund also intends to write call options on foreign currencies that are
not covered for cross-hedging purposes. A call option on a foreign currency is
for cross-hedging purposes if it is not covered, but is designed to provide a
hedge against a decline in the U.S. dollar value of a security which the Fund
owns or has the right to acquire and which is denominated in the currency
underlying the option due to an adverse change in the exchange rate. In such
circumstances, the Fund collateralizes the option by maintaining in a segregated
account with its Custodian or with a designated sub-custodian, cash or U.S.
Government Securities in an amount not less than the value of the underlying
foreign currency in U.S. dollars marked-to-market daily.
FORWARD CURRENCY CONTRACTS
The Fund may engage in currency exchange transactions to hedge against
uncertainty in the level of future exchange rates. The Fund will conduct its
currency exchange transactions either on a spot (i.e., cash) basis at the rate
prevailing in the currency exchange market, or through entering into forward
contracts to purchase or sell currency. A forward currency contract involves an
obligation to purchase or sell a specific currency at a future date, which may
be any fixed number of days from the date of the contract agreed upon by the
parties, at a price set at the time of the contract. The Fund's dealings in
forward currency contracts will be limited to hedging involving either specific
transactions or portfolio positions. Transaction hedging is the purchase or sale
of forward currency with respect to specific receivables or payables of the Fund
generally accruing in connection with the purchase or sale of its portfolio
securities. Position hedging is the sale of forward currency with respect to
portfolio security positions denominated or quoted in the currency. The Fund may
not position hedge with respect to a particular currency to an extent greater
than the aggregate market value (at the time of making such sale) of the
securities held in its portfolio denominated or quoted in or currently
convertible into that particular currency. The Fund may, however, enter into a
position hedging transaction with respect to a currency other than that held in
the Fund's portfolio, if such a transaction is deemed a hedge by AMC. If the
Fund enters into a position hedging transaction, cash or liquid high grade debt
securities will be placed in a segregated account in an amount equal to the
value of the Fund's total assets committed to the consummation of the forward
contract. If the value of the securities placed in the segregated account
declines, additional cash or securities will be placed in the account so that
the value of the account will equal the amount of the Fund's commitment with
respect to the contract. Hedging transactions may be made from any foreign
currency into U.S. dollars or into other appropriate currencies.
At or before the maturity of a forward currency contract, the Fund may
either sell a portfolio security and make delivery of the currency, or retain
the security and offset its contractual obligation to deliver the currency by
purchasing a second contract pursuant to which the Fund will obtain, on the same
maturity date, the same amount of the currency which it is obligated to deliver.
If the Fund retains the portfolio security and engages in an offsetting
transaction, the Fund, at the time of execution of the offsetting transaction,
will incur a gain or a loss to the extent that movement has occurred in forward
currency contract prices. Should forward prices decline during the period
between the Fund's entering into a forward contract for the sale of a currency
and the date it enters into an offsetting contract for the purchase of the
currency, the Fund will realize a gain to the extent the price of the currency
it has agreed to sell exceeds the price of the currency it has agreed to
purchase. Should forward prices increase, the Fund will suffer a loss to the
extent the price of the currency it has agreed to purchase exceeds the price of
the currency it has agreed to sell.
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The cost to the Fund of engaging in currency transactions varies with
factors such as the currency involved, the length of the contract period and the
market conditions then prevailing. Because transactions in currency exchange are
usually conducted on a principal basis, no fees or commissions are involved. The
use of forward currency contracts does not eliminate fluctuations in the
underlying prices of the securities, but it does establish a rate of exchange
that can be achieved in the future. In addition, although forward currency
contracts limit the risk of loss due to a decline in the value of the hedged
currency, at the same time, they limit any potential gain that might result
should the value of the currency increase.
If a devaluation is generally anticipated, the Fund may not be able to
contract to sell the currency at a price above the devaluation level it
anticipates. The Fund will not enter into a currency transaction if, as a
result, it will fail to qualify as a regulated investment company under the
Internal Revenue Code for a given year.
OPTIONS ON PORTFOLIO SECURITIES
The Fund may write only covered call option contracts. Currently, the
principal exchanges on which such options may be written are the Chicago Board
Option Exchange and the American, Philadelphia, and Pacific Stock Exchanges. In
addition, and in certain instances, the Fund may purchase and sell options in
the over-the-counter market ("OTC Options"). A call option gives the purchaser
of the option the right to buy the underlying security from the writer at the
exercise price at any time prior to the expiration of the contract, regardless
of the market price of the security during the option period. The premium paid
to the writer is the consideration for undertaking the obligations under the
option contract. The writer forgoes the opportunity to profit from an increase
in the market price of the underlying security above the exercise price so long
as the option remains open and covered, except insofar as the premium represents
such a profit.
The Fund may purchase options only to close out a position. In order to
close out a position, the Fund will make a "closing purchase transaction"--the
purchase of a call option on the same security with the same exercise price and
expiration date as the call option which it has previously written on any
particular security. The Fund will effect a closing purchase transaction so as
to close out any existing call option on a security which it intends to sell.
The Fund will realize a profit or loss from a closing purchase transaction if
the amount paid to execute a closing purchase transaction is less or more than
the amount received from the sale thereof. In determining the term of any option
written, the Fund will consider the Internal Revenue Code's limitations on the
sale or disposition of securities held for less than three months in order to
maintain its status as a regulated investment company.
The staff of the SEC has taken the position that purchased OTC Options and
the assets used as cover for written OTC Options are illiquid securities. The
Fund will generally write OTC Options with primary U.S. Government Securities
dealers recognized by the Board of Governors of the Federal Reserve System or
member banks of the Federal Reserve System ("primary dealers"). The Fund may
also write, to the extent available, OTC Options with non-primary dealers, such
as foreign dealers; however, unlike OTC Options written with primary dealers,
any OTC Options written with such non-primary dealers and the assets used as
cover for such options will be treated as illiquid securities. In connection
with these special arrangements, the Fund intends to establish standards for the
creditworthiness of the primary and non-primary dealers with which it may enter
into OTC Option contracts and those standards, as modified from time to time,
will be implemented and monitored by AMC. Under these special arrangements, the
Fund will enter into contracts with primary and non-primary dealers which
provide that the Fund has the absolute right to repurchase an option it writes
at any time at a repurchase price which represents the fair market value, as
determined in good faith through negotiation between the parties, but which in
no event will exceed a price determined pursuant to a formula contained in the
contract. Although the specific details of the formula may vary between
contracts with different primary and non-primary dealers, the formula will
generally be based on a multiple of the premium received by the Fund for writing
the option, plus the amount, if any, by which the option is "in-the-money." The
formula will also include a factor to account for the difference between the
price of the security and the strike price of the option if the option is
written "out-of-the-money". Under such circumstances, and with respect to OTC
Options written with primary dealers only, the Fund will treat as illiquid that
amount of the "cover" assets equal to the amount by which the formula price for
the repurchase of the option is greater than the amount by which the market
value of the security subject to the option exceeds the exercise price of the
option (the amount by which the option is "in-the-money"). Although each
agreement will provide that the Fund's repurchase price shall be determined in
good faith (and that
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it shall not exceed the maximum determined pursuant to the formula) the formula
price will not necessarily reflect the market value of the option written,
therefore, the Fund might pay more to repurchase the OTC Option contract than
the Fund would pay to close out a similar exchange traded option.
In determining the Fund's net asset value, the current market value of any
option written by the Fund is subtracted from net asset value. If the current
market value of the option exceeds the premium received by the Fund, the excess
represents an unrealized loss, and, conversely, if the premium exceeds the
current market value of the option, such excess would be unrealized gain.
ADDITIONAL RISKS OF OPTIONS ON FUTURES CONTRACTS, FORWARD CONTRACTS AND OPTIONS
ON FOREIGN CURRENCIES
Unlike transactions entered into by the Fund in certain futures contracts,
certain other futures contracts, options on foreign currencies and forward
contracts are not traded on contract markets regulated by the CFTC and forward
currency contracts are not regulated by the SEC. Instead, forward currency
contracts are traded through financial institutions acting as market-makers.
Foreign currency options are traded on certain national securities exchanges,
such as the Philadelphia Stock Exchange and the Chicago Board Options Exchange,
subject to SEC regulation. In the forward currency market, there are no daily
price fluctuation limits, and adverse market movements could therefore continue
to an unlimited extent over a period of time. Moreover, a trader of forward
contracts could lose amounts substantially in excess of its initial investments,
due to the collateral requirements associated with such positions.
Options on foreign currencies traded on national securities exchanges are
within the jurisdiction of the SEC, as are other securities traded on such
exchanges. As a result, many of the protections provided to traders on organized
exchanges will be available with respect to such transactions. In particular,
all foreign currency option positions entered into on a national securities
exchange are cleared and guaranteed by the Options Clearing Corporation (the
"OCC"), thereby reducing the risk of counterparty default. Further, a liquid
secondary market in options traded on a national securities exchange may exist,
potentially permitting the Fund to liquidate open positions at a profit prior to
exercise or expiration, or to limit losses in the event of adverse market
movements.
The purchase and sale of exchange-traded foreign currency options, however,
are subject to the risks of the availability of a liquid secondary market as
described above, as well as the risks regarding adverse market movements,
margining of options written, the nature of the foreign currency market,
possible intervention by governmental authorities and the effects of other
political and economic events. In addition, exercise and settlement of such
options must be made exclusively through the OCC, which has established banking
relationships in applicable foreign countries for this purpose. As a result, the
OCC may, if it determines that foreign governmental restrictions or taxes would
prevent the orderly settlement of foreign currency option exercises, or would
result in undue burdens on the OCC or its clearing member, impose special
procedures on exercise and settlement, such as technical changes in the
mechanics of delivery of currency, the fixing of dollar settlement prices or
prohibitions on exercise.
In addition, future contracts, options on futures contracts, forward
contracts and options on foreign currencies may be traded on foreign exchanges,
to the extent permitted by the CFTC. Such transactions are subject to the risk
of governmental actions affecting trading in or the prices of foreign currencies
or securities. The value of such positions also could be adversely affected by
(a) other complex foreign political and economic factors, (b) lesser
availability than in the United States of data on which to make trading
decisions, (c) delays in the Fund's ability to act upon economic events
occurring in foreign markets during nonbusiness hours in the United States and
the United Kingdom, (d) the imposition of different exercise and settlement
terms and procedures and margin requirements than in the United States, and (e)
lesser trading volume.
The Fund may enter into repurchase agreements. Under a repurchase
agreement, the Fund acquires a debt instrument for a relatively short period
(usually not more than one week) subject to the obligation of the seller to
repurchase and the Fund to resell such debt instrument at a fixed price. The
resale price is in excess of the purchase price in that it reflects an
agreed-upon market interest rate effective for the period of time during which
the Fund's money is invested. The Fund's risk is limited to the ability of the
seller to pay the agreed-upon sum upon the delivery date. When the Fund enters
into a repurchase agreement, it obtains collateral having a value at least equal
to the amount of the purchase price. Repurchase agreements can be considered
loans
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as defined by the Investment Company Act of 1940, as amended (the "1940 Act"),
collateralized by the underlying securities. The return on the collateral may be
more or less than that from the repurchase agreement. The securities underlying
a repurchase agreement will be marked to market every business day so that the
value of the collateral is at least equal to the value of the loan, including
the accrued interest earned. In evaluating whether to enter into a repurchase
agreement, AMC will carefully consider the creditworthiness of the seller. If
the financial institution that is the party to the repurchase agreement
petitions for bankruptcy or otherwise becomes subject to the U.S. Bankruptcy
Code, the law regarding the rights of the Fund is unsettled. As a result, under
these extreme circumstances, there may be restrictions on the Fund's ability to
sell the collateral and the Fund may suffer a loss.
Lending of Portfolio Securities--In order to generate additional income,
the Fund may lend its portfolio securities in an amount up to 33-1/3% of total
Fund assets to broker-dealers, major banks, or other recognized domestic
institutional borrowers of securities. No lending may be made to any companies
affiliated with AMC. The borrower at all times during the loan must maintain
with the Fund cash or cash equivalent collateral or provide to the Fund an
irrevocable letter of credit equal in value at all times to at least 100% of the
value of the securities loaned. During the time portfolio securities are on
loan, the borrower pays the Fund any dividends or interest paid on such
securities, and the Fund may invest the cash collateral and earn additional
income, or it may receive an agreed-upon amount of interest income from the
borrower who has delivered equivalent collateral or a letter of credit. Loans
are subject to termination at the option of the Fund or the borrower at any
time. The Fund may pay reasonable administrative 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.
INVESTMENT RESTRICTIONS
The Fund has adopted the following investment restrictions as fundamental
policies which cannot be changed without approval by the holders of a majority
of its outstanding shares, which means the lesser of (1) 67% of the Fund's
shares present at a meeting at which the holders of more than 50% of the
outstanding shares are present in person or by proxy, or (2) more than 50% of
the Fund's outstanding shares. The Fund may not:
1. Issue senior securities.
2. Purchase securities for which there are legal or contractual
restrictions on resale or otherwise not readily marketable (including repurchase
agreements maturing in more than 7 days), if as a result of such purchase more
than 10% of the Fund's total assets would be invested in such securities.
3. Underwrite securities of other issuers except to the extent that it may
be deemed to act as an underwriter in certain cases when disposing of restricted
securities.
4. Make loans to persons except by the loan of its portfolio securities as
described in "Lending of Portfolio Securities" in the Prospectus and in this
Statement.
5. Borrow money except from banks for temporary or emergency purposes,
including the meeting of redemption requests which might otherwise require the
untimely disposition of securities; such borrowing may not exceed in the
aggregate 15%, and borrowing for purposes other than meeting redemptions may not
exceed 5% of the value of the Fund's assets (including the amount borrowed) less
liabilities (not including the amount borrowed) at the time the borrowing is
made; securities will not be purchased while borrowings in excess of 5% of the
value of the Fund's total assets are outstanding.
6. Invest in the securities of any company which, including its
predecessors, has not been in business for at least three years.
7. Invest more than 25% of the value of its total assets in any one
industry except that this limitation is not applicable to the Fund's investments
in U.S. Government Securities.
8. Invest in securities of any one issuer for the purpose of exercising
control or management.
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9. Purchase securities on margin, sell securities short or participate on a
joint or joint and several basis in any securities trading account.
10. Buy or sell interests in oil, gas or mineral exploration or development
programs, or purchase or sell commodities, commodity contracts or real estate.
11. Purchase or hold securities of any issuer, if, at the time of purchase
or thereafter, any of the officers and trustees of the Fund or the officers and
directors of AMC own beneficially more than 1/2 of 1%, and such officers,
trustees and directors holding more than 1/2 of 1% together own beneficially
more than 5%, of the issuer's securities.
12. Invest in securities of other investment companies, except as they may
be acquired as part of a merger, consolidation or acquisition of assets.
TRUSTEES AND OFFICERS
Responsibility for management of the Fund is vested in the Board of
Trustees. The Trustees, in turn, elect the officers of the Fund to supervise
actively the day-to-day operations of the Fund. The shareholders of the Fund may
elect Trustees at any meeting of shareholders called by the Trustees for that
purpose. Each Trustee serves during the continued lifetime of the Fund 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 of the Trustees and principal officers during the past
five years are set forth below.
PALOMBA WEINGARTEN, CHAIRMAN OF THE BOARD AND TRUSTEE OF THE FUND * (53)
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
Corporation ("AMC"), the Fund's distributor and investment manager,
respectively. Chairman of the Board and Trustee of Astra Strategic
Investment Series and Astra Institutional Securities Trust; Chairman of the
Board and Trustee of Astra Institutional Trust.
AL BURTON, TRUSTEE OF THE FUND (67)
2300 Coldwater Canyon, Los Angeles, California 90210. President of Al
Burton Productions from 1992 to present. Executive Producer First Run
Syndication for Castle Rock Entertainment Inc. from 1992 to 1995. Executive
Producer - Consultant for Universal Television from 1982 to 1992. Board
Member of the Astra Group of Funds and Board Member of the Pilgrim America
Group of Funds.
GARRY D. PEARSON, TRUSTEE (47)
150 North Myers Street, Los Angeles, California 90033. Vice President of
ColorGraphics, a printing company located in Los Angeles, since January
1996. Formerly, Senior Vice President of George Rice & Sons, a printing
company located in Los Angeles, California, from July 1994 to December
1995. 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 * (32)
750 B Street, Suite 2350, San Diego, California 92101. President of AMC,
Astra Fund Distributors Corp., Astra Strategic Investment Series, Astra
Institutional Securities Trust and Astra Institutional Trust. Mr. Womack
joined AMC in July 1995 as a Portfolio Manager. From April to June 1995,
Portfolio Manager for Pilgrim 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.
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JOHN R. ELERDING, CHIEF FINANCIAL OFFICER, SENIOR VICE PRESIDENT, TREASURER AND
SECRETARY OF THE FUND * (44)
750 B Street, Suite 2350, San Diego, California 92101. Senior Vice
President, Secretary, Treasurer and Chief Financial Officer of Astra
Management Corporation and Astra Fund Distributors Corp. Senior Vice
President, Secretary, Treasurer and Chief Financial Officer of Astra
Institutional Trust, Astra Institutional Securities Trust and Astra
Strategic Investment Series. 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.
The officers and Trustees of the Fund, as a group, owned of record and
beneficially less than 1% of the outstanding shares of the Fund as of December
31, 1995.
- ------------
* "Interested person" of the Fund as defined in the 1940 Act.
The Trustees of the Fund who are not affiliated with or interested persons
of the Fund's investment adviser received an aggregate of approximately $764
during the year ended December 31, 1995 for fees and expenses for each meeting
of the Board of Trustees attended. The officers of the Fund receive no
compensation directly from it for performing the duties of their offices.
However, those officers and Trustees of the Fund who are officers and Directors
of AMC may receive remuneration indirectly because AMC will receive management
fees from the Fund.
INVESTMENT MANAGEMENT
Investment management and administrative services are provided to the Fund
by AMC, pursuant to an Investment Management Agreement (the "Agreement") dated
November 13, 1992. (See the Prospectus--"Investment Manager.") As compensation
for its services, AMC is paid monthly an annual fee at the rate of .625% of the
average daily net asset value of the Fund on the first $1 billion and .55% on
the net assets above $1 billion.
AMC will reduce its aggregate fees for any fiscal year, or reimburse the
Fund, to the extent required so that the Fund's expenses do not exceed the
expense limitations applicable to the Fund under the securities laws or
regulations of those states or jurisdictions in which the Fund's shares are
registered or qualified for sale. Currently, the most restrictive of such
expense limitations would require AMC to reduce its respective fees, only to the
extent received, or to reimburse the Fund, to the extent required so that the
Fund's expenses, as described above, for any fiscal year do not exceed 2 1/2% of
the first $30 million of the Fund's average daily net assets, 2% of the next $70
million of the Fund's average net assets and 1 1/2% of the Fund's remaining
average net assets. Expenses for purposes of this expense limitation include the
management fee, but exclude distribution expenses, brokerage commissions and
fees, taxes, interest and extraordinary expenses such as litigation, paid or
incurred by the Fund. The Fund's expense limitation may change to reflect
changes in the expense limitations of the state having the most restrictive
limitation in which shares of the Fund are registered for sale. For the years
ended December 31, 1993, 1994 and 1995, the Fund paid management fees to AMC of
approximately $71,210, $38,405 and $29,248, respectively. For the years ended
December 31, 1993, 1994 and 1995, management fees of approximately $0, $0 and
$13,415, respectively, were waived by AMC. For the same period, the Fund
reimbursed AMC approximately $0, $0 and $0, respectively, for the costs of
personnel involved with recordkeeping and daily net asset value calculations,
portfolio trading, shareholder servicing, and state securities registration and
compliance.
The Fund pays its own operating expenses which are not assumed by AMC,
including the fees of
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<PAGE>
its custodian, transfer and shareholder servicing agent; cost 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 the Fund's
Trustees and shareholders, except those called to accommodate AMC; fees and
expenses of Trustees who are not affiliated with or interested persons of AMC;
salaries of personnel involved in placing orders for the execution of the Fund's
portfolio transactions, in maintaining registration of its shares under state
securities laws or in providing shareholder and dealer services; insurance
premiums on property or personnel of the Fund which inure to its benefit; costs
of preparing and printing reports, proxy statements and prospectuses of the Fund
for distribution to its shareholders; legal, auditing and accounting fees; fees
and expenses of registering and maintaining registration of its shares for sale
under Federal and applicable state securities laws; and all other expenses in
connection with the issuance, registration and transfer of its shares. Under the
Agreement, the Fund is required to pay for the salaries of any officers employed
directly by the Fund. However, no such officers have ever been employed by the
Fund nor is it the current intention of the Fund to employ any such officers.
The Agreement was most recently approved by the Board of Trustees of the
Fund on August 9, 1995 and shall continue in effect from year to year thereafter
so long as such continuation is approved at least annually by (1) the Board of
Trustees or the vote of a majority of the outstanding voting securities of the
Fund, and (2) a majority of the Trustees of the Fund who are not interested
persons of any party to the Agreement, cast in person at a meeting called for
the purpose of voting on such approval. The Agreement may be terminated at any
time, without penalty, by either the Fund or AMC upon sixty days' written
notice, and is automatically terminated in the event of its assignment as
defined in the 1940 Act.
AMC is a wholly-owned subsidiary of Atlas Holdings Group, Inc. ("AHGI").
AMC also acts as the investment manager to Astra Institutional Adjustable U.S.
Government Securities Portfolio, Astra Institutional Adjustable Rate Securities
Portfolio, Astra All-Americas Government Income Trust and Astra Short-Term
Multi-Market Fund, open-end investment companies. As of March 31, 1996, total
assets under management in the Astra Group were approximately $175 million. AHGI
is a Delaware corporation of which Mrs. Weingarten is the majority
stockholder.
SUB-ADMINISTRATION AGREEMENT
Under a sub-administration agreement between AMC and PFPC Inc.
("PFPC"), PFPC provides certain administrative services to the Fund, subject
to the supervision of the Fund's Board of Trustees. Such services include
regulatory compliance, assistance in the preparation and filing of
post-effective amendments to the Fund's registration statement with the
Securities and Exchange Commission (the "Commission"), 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, AMC (not the Fund) has agreed to pay PFPC a
monthly fee at the annual rate of .07% of the average net assets of the Fund
subject to certain minimums, exclusive of out-of-pocket expenses. In addition,
the Fund reimburses AMC for the costs of preparing tax returns and filing of
Blue Sky registrations.
EXECUTION OF PORTFOLIO TRANSACTIONS
In all purchases and sales of securities for the portfolio of the Fund, the
primary consideration is to obtain the most favorable price and execution
available. Pursuant to the Investment Management Agreement, AMC determines,
subject to the instructions of and review by the Board of Trustees of the Fund,
which securities are to be purchased and sold by the Fund and which brokers are
to be eligible to execute portfolio transactions of the Fund. 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
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<PAGE>
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 operational 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 Fund and/or AMC, and provide other services in
addition to execution services. AMC considers such information to be useful in
varying degrees, but of indeterminable value. The placement of portfolio
brokerage with broker-dealers who have sold shares of the Fund is subject to
rules adopted by the National Association of Securities Dealers, Inc. Provided
the Fund's officers are satisfied that the Fund is receiving the most favorable
price and execution available, the Fund may also consider the sale of the Fund's
shares as a factor in the selection of broker-dealers to execute its portfolio
transactions.
While it will continue to be the Fund'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 Fund, the Fund may also give weight to
the ability of a broker to furnish brokerage and research services to the Fund
or AMC, even if the specific services were not imputed just to the Fund and were
useful to AMC in advising other clients. In negotiating commissions with a
broker, the Fund 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 the Fund
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 Fund or assist AMC in carrying out its responsibilities to the Fund. The
standard of reasonableness is to be measured in light of AMC's overall
responsibilities to the Fund.
For the years ended December 31, 1993, 1994 and 1995, no brokerage
commissions were paid by the Fund. The Fund 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.
Investment decisions for the Fund are made independently from those of the
other funds in the Astra Group, although 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 either 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 the Fund is concerned.
PRINCIPAL UNDERWRITER
Astra Fund Distributors Corp. ("AFDC") is the Fund's principal underwriter
and distributor. The Fund has entered into an Underwriting Agreement between the
Fund and AFDC which will continue in effect from year to year if approved at
least annually (i) by the Board of Trustees of the Fund or by the vote of a
majority of the outstanding voting securities of the Fund and (ii) by a majority
of the Trustees of the Fund who are not parties to the Agreement or interested
persons of any such party, cast in person at a meeting called for the purpose of
voting on such approval. The Agreement may be terminated without penalty by
either party on sixty days' written notice and shall automatically terminate in
the event of its assignment as defined in the 1940 Act.
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<PAGE>
DISTRIBUTION PLAN
The Fund's Distribution Plan (the "Plan") is described in the Prospectus
and is designed to meet the requirements of Rule 12b-1 under the 1940 Act. The
purpose of the Plan is to permit the Fund to finance distribution activities and
bear expenses associated with the distribution of its shares. The Plan provides
for daily compensation to the principal underwriter for its distribution
services and facilities. Pursuant to the Plan but subject to the .75% limitation
described below the Fund will pay the principal underwriter (i) sales
commissions equal to 4% of the amount received by the Fund for each share sold
(excluding reinvestment of dividends and distributions) 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 expects to pay sales commission to a dealer at
the time of the sale of 3% of the purchase price of the shares sold by such
dealer. The principal underwriter will use its own funds (which may be borrowed)
to pay such amounts. Because the payment of the 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 by it to dealers from the daily
compensation payments received by it from the Fund pursuant to the Plan.
Payment of the sales commissions and interest fees will be spread over a
period of time, and the Plan requires that the aggregate amount of all such
payments during any fiscal year shall not exceed 0.75% of the Fund's average
daily net assets for such year. Accordingly, the Fund will pay the principal
underwriter daily compensation payable monthly at the rate of .75% per annum of
the Fund'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 sales
commissions and interest fees which the principal underwriter is entitled to be
paid under the Plan since its inception. Payments of daily compensation
previously paid and payable under the Plan by the Fund 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 then 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 the Fund. It is anticipated that the Atlas Holdings organization
will profit by reason of the operation of the Plan through an increase in the
Fund's assets (thereby increasing the advisory fee payable to AMC) resulting
from sale of Fund shares and through daily compensation and contingent deferred
sales charges paid to the principal underwriter. The Atlas Holdings organization
may be considered to have realized a profit under the 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 the Fund. 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 Pilgrim organization in a manner deemed equitable to the Fund.
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 the Fund and
will accordingly reduce the Fund's net assets upon such accrual. However, in
accordance with generally accepted accounting principles, the Fund does not
accrue future daily compensation as a liability of the Fund or reduce the
current net assets in respect of daily compensation which may become payable
under the 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 the Fund's net
assets on such day. The level of the Fund's net assets changes each day and
depends upon the amount of sales and redemptions of Fund shares, the changes in
the value of the Fund's portfolio investments, the expenses of the Fund accrued
on such day, income on portfolio investments accrued on
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<PAGE>
such day, and dividends and distributions declared by the Fund.
The amount of Uncovered Distribution Charges of the principal underwriter
is computed daily to determine whether daily compensation is accrued on such
day. 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 Fund shares, the level and timing of redemptions of
Fund shares upon which a contingent deferred sales charge will be imposed, the
level and timing of redemptions of Fund shares upon which no contingent deferred
sales charge will be imposed, changes in the level of the net assets of the
Fund, and changes in the interest rate used in the calculation of the interest
fee under the Plan.
Periods with a high level of sales of Fund shares accompanied by a low
level of redemption of Fund 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 Fund shares accompanied by a high level of
early redemption of Fund 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 Fund
shares during the first few years of the Fund's operations will cause a large
portion of the sales commissions attributable to a sale of Fund shares to be
accrued and paid by the Fund to the principal underwriter in fiscal years
subsequent to the year in which such shares were sold. This spreading of sales
commissions payments under the Plan over an extended period will result in the
incurrence and payment of increased interest fees under the Plan. During the
years ended December 31, 1993, 1994 and 1995, AFDC earned $85,453, $46,086, and
$35,098 in daily compensation, respectively. At December 31, 1995, Uncovered
Distribution Charges (cumulative sales commissions and interest fees reduced by
cumulative daily compensation and contingent deferred sales charges paid to the
principal underwriter) amounted to $688,146.
The Plan also recognizes that AMC may use its management fee or other
resources to pay expenses associated with activities primarily intended to
result in the promotion and distribution of the Fund's shares and that some of
the Fund's normal operating expenses, such as the management fee, and other
payments made in the ordinary course of its business are appropriately used in
this manner.
The Plan, which was most recently approved by the Fund's Board of Trustees
on August 9, 1995, including all of the Trustees who are "non-interested"
persons as defined in the 1940 Act and who have no direct or indirect financial
interest in the operation of the Plan or any agreements related to the Plan, is
currently in effect until August 9, 1996. The Plan must be renewed annually by
the Fund's Board of Trustees, including a majority of the Trustees who are
"non-interested" persons of the Fund and who have no direct or indirect
financial interest in the operation of the 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. The Plan and any
distribution or service agreement related thereto may be terminated at any time,
without any penalty, by such trustees on 60 days' written notice, by any act
that terminates the Agreement with AMC or the Underwriting Agreement with AFDC,
or by vote of a majority of the Fund's outstanding shares. AFDC or any dealer or
institution may also terminate their respective distribution or service
agreement at any time upon written notice.
The Plan and any distribution or service agreement may not be amended to
increase materially the amount spent for distribution or service expenses
without approval by a majority of the Fund's outstanding shares, and all other
material amendments to the Plan or any distribution or service agreement also
shall be approved by the non-interested Trustees, cast in person at a meeting
called for the purpose of voting on any such amendment.
AFDC is required to report in writing to the Board of Trustees of the Fund
at least quarterly on the amounts and purpose of any payments made under the
Plan and any distribution or service agreement, as well as to furnish the Board
with such other information as may reasonably be requested in order to enable
the Board to make an informed determination of whether the Plan should be
continued.
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<PAGE>
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION
REINSTATEMENT PRIVILEGE
Any shareholder who redeems his shares from the Fund and pays the
contingent deferred sales charge on such redemption may receive a return of such
contingent deferred sales charge by reinvesting the net proceeds of such prior
redemption in the Fund within 30 days of such redemption. In order to exercise
this privilege, a written order for the purchase of shares must be received by
the Fund's Transfer Agent, or be postmarked, within 30 days after the date of
redemption. In such event, the shareholder will receive a number of shares of
the Fund equal to the net proceeds of the prior redemption plus the amount of
contingent deferred sales charge imposed at the time of such prior redemption
divided by the Fund's current net asset value. For federal income tax purposes,
(i) the amount of the contingent deferred sales charge imposed on the prior
redemption and returned to the shareholder will be taken into account in
determining the shareholder's gain or loss in the prior redemption, (ii) any
loss on the prior redemption will be disallowed and (iii) the shareholder's tax
basis in the shares purchased under this reinvestment privilege will be equal to
their net asset value at the time of reinvestment plus the amount of any
disallowed loss on the prior redemption.
CONTINGENT DEFERRED SALES CHARGE
A contingent deferred sales charge will be imposed on any redemption or
repurchase of shares of the Fund which reduces the current value of the
investor's shares of the Fund to an amount which is lower than the dollar amount
of all payments by the investor for the purchase of the Fund's shares during the
preceding four years. 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, 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 shares above the total amount of payments for the
purchase of the Fund's shares made during the preceding four years. 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 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 AFDC. (See
"Contingent Deferred Sales Charge" in the Prospectus for a more detailed
discussion on the calculation of such charge.)
No contingent deferred sales charge will be payable upon an exchange of
shares of the Fund for shares of another Fund in the Astra Group sold with a
contingent deferred sales charge.
OTHER INFORMATION
Payment to shareholders for shares redeemed or repurchased will be made
within seven days after receipt by the Fund's Transfer Agent of the written
request in proper form, except that the Fund 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 Securities and Exchange
Commission ("Commission") or such Exchange is closed for other than weekends and
holidays; (b) an emergency exists as determined by the Commission making
disposal of portfolio securities or valuation of net assets of the Fund not
reasonably practicable; or (c) for such other periods as the Commission may
permit for the protection of the Fund's shareholders. At various times the Fund
may be requested to redeem its shares for which it has not yet received good
payment. Accordingly, the Fund 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 Fund recommends that all
purchases be made by certified or cashier's check, or by bank wire of Federal
funds.
Due to the relatively high costs of handling small investments, the Fund
reserves the right to redeem, at net asset value, the shares of any shareholder
whose account has a value of less than $5,000. Before the Fund redeems such
shares and sends the proceeds to the shareholder, the shareholder will be given
notice that
16
<PAGE>
the value of the shares in the account is less than the minimum amount and will
be allowed 30 days to make an additional investment in an amount which will
increase the value of the account to at least $5,000. The Fund also reserves the
right to redeem shares if share ownership is or may become so concentrated that,
in the opinion of management, it may cause the Fund to fail to qualify for the
special Federal tax treatment available to investment companies.
The Fund intends to pay in cash for all shares redeemed, but under abnormal
conditions which make payment in cash unwise, the Fund may make payment wholly
or partly in securities at their then market value equal to the redemption
price. In such cases an investor may incur brokerage costs in converting such
securities to cash. The Fund has elected to be governed by the provisions of
Rule 18f-1 under the 1940 Act, which contains a formula for determining the
minimum amount of cash to be paid as part of any redemption in kind.
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.
THE PRICE OF THE SHARES IS DETERMINED DAILY
As noted in the Prospectus, the net asset value and offering price of the
Fund's shares will be determined once daily as of the close of trading on the
New York Stock Exchange on each Fund "business day," which is any day 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.
The Fund may invest in foreign securities, and as a result, the calculation
of the Fund's net asset value may not take place contemporaneously with the
determination of the prices of certain of the portfolio securities used in the
calculation. Portfolio securities of the Fund which are traded both on an
exchange and in the over-the-counter market, will be valued according to the
broadest and most representative market. All assets and liabilities initially
expressed in foreign currency values will be converted into U.S. dollar values
at the mean between the bid and offered quotations of the currencies against
U.S. dollars as last quoted by any recognized dealer. When portfolio securities
are traded, the valuation will be the last reported sale price on the day of
valuation. If there is no such reported sale or the valuation is based on the
over-the-counter market, the securities will be valued at the last available bid
price or at the mean between the bid and asked prices, as determined by the
Board of Trustees. As of the date of this Statement of Additional Information,
such securities will be valued by the latter method. Securities for which
reliable quotations are not readily available and all other assets will be
valued at their respective fair market value as determined in good faith by, or
under procedures established by, the Board of Trustees of the Fund.
Money market instruments with less than sixty days remaining to maturity
when acquired by the Fund will be valued on an amortized cost basis by the Fund,
excluding unrealized gains or losses thereon from the valuation. This is
accomplished by valuing the security at cost and then assuming a constant
amortization to maturity of any premium or discount. If the Fund acquires a
money market instrument with more than sixty days remaining to its maturity, it
will be valued at current market value 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 Board determines during such 60-day period that this amortized cost
value does not represent fair market value.
All liabilities incurred or accrued are deducted from the Fund's total
assets. The resulting net assets are divided by the number of shares of the Fund
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 AFDC prior to 4:00
P.M. (Pacific time) on that day. It is the responsibility of the dealer to
insure
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<PAGE>
that all orders are transmitted in a timely manner to the Fund. Orders received
by dealers after the close of trading on such Exchange will be confirmed at the
next computed offering price.
TAX MATTERS
The following is only a summary of certain additional tax considerations
generally affecting the Fund and its shareholders that are not described in the
Prospectus. No attempt is made to present a detailed explanation of the tax
treatment of the Fund or its shareholders, and the discussion here and in the
Prospectus is not intended as a substitute for careful tax planning.
QUALIFICATION AS A REGULATED INVESTMENT COMPANY
The Fund has elected 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, the Fund is not subject to federal income tax on
the portion of its net investment income (i.e., taxable interest, dividends and
other taxable ordinary income, net of expenses) and capital gain net income
(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) for the taxable year
(the "Distribution Requirement"), and satisfies certain other requirements of
the Code that are described below. Distributions by the Fund made during the
taxable year or, under specified circumstances, within twelve months 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.
If the Fund has a net capital loss (i.e., the excess of capital losses over
capital gains) for any year, the amount thereof may be carried forward up to
eight years and treated as a short-term capital loss which can be used to offset
capital gains in such years. As of December 31, 1995, the Fund has capital loss
carryforwards of approximately $1,481,971 which expires through December 31,
2002. Under Code Section 382, if the Fund has an "ownership change," the Fund's
use of its capital loss carryforwards in any year following the ownership change
will be limited to an amount equal to the net asset value of the Fund
immediately prior to the ownership change multiplied by the highest adjusted
long-term tax-exempt rate (which is published monthly by the Internal Revenue
Service (the "IRS") in effect for any month in the three-calendar-month period
ending with the calendar month of the ownership change (the highest rate for the
three-month period ending in April 1996 is 6.5%). The Fund will use its best
efforts to avoid having an ownership change. However, because of uncertainty
regarding the application of certain portions of the temporary and proposed
Treasury Regulations promulgated under Code Sections 382 and 383 to open-end
regulated investment companies such as the Fund, and because of circumstances
which may be beyond the control or knowledge of the Fund, there can be no
assurance that the Fund will not have, or has not already had, an ownership
change. If the Fund has or has had an ownership change, any capital gain net
income for any year following the ownership change in excess of the annual
limitation on the capital loss carryforwards will have to be distributed by the
Fund and will be taxable to shareholders as described under "Fund Distributions"
below.
In addition to satisfying the Distribution Requirement, a regulated
investment company 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 directly related to the regulated
investment company's principal business of investing in stock or securities) and
other income (including but not limited to 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 in any
event be characterized as Short-Short Gain if they are directly related to the
regulated investment company's investments in stock or securities (or options or
futures thereon).
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<PAGE>
Because of the Short-Short Gain Test, the Fund may have to limit the sale of
appreciated securities that it has held for less than three months. However, the
Short-Short Gain Test will not prevent the Fund from disposing of investments at
a loss, since the recognition of a loss before the expiration of the three-month
holding period is disregarded for this purpose. Interest (including original
issue discount) received by the Fund 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, gain or loss recognized by the Fund on the disposition of an
asset will be a capital gain or loss. However, gain recognized on the
disposition of a debt obligation purchased by the Fund at a market discount
(generally, at a price less than its principal amount) will be treated as
ordinary income to the extent of the portion of the market discount which
accrued during the period of time the Fund held the debt obligation. In
addition, under the rules of Code Section 988, gain or loss recognized on the
disposition of a debt obligation denominated in a foreign currency or an option
with respect thereto (but only to the extent attributable to changes in foreign
currency exchange rates), and gain or loss recognized on the disposition of a
foreign currency forward contract, futures contract, option or similar financial
instrument, or of foreign currency itself, except for regulated futures
contracts or non-equity options subject to Code Section 1256, will generally be
treated as ordinary income or loss.
In general, for purposes of determining whether capital gain or loss
recognized by the Fund 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 the Fund as part of a "straddle"
(which term generally excludes a situation where the asset is stock and the Fund
grants a qualified covered call option (which, among other things, must not be
deep-in-the-money) with respect thereto) or (iii) the asset is stock and the
Fund grants an in-the-money qualified covered call option 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. In
addition, the Fund may be required to defer the recognition of a loss on the
disposition of an asset held as part of a straddle to the extent of any
unrecognized gain on the offsetting position.
Any gain recognized by the Fund on the lapse of, or any gain or loss
recognized by the Fund from a closing transaction with respect to, an option
written by the Fund will be treated as a short-term capital gain or loss. For
purposes of the Short-Short Gain Test, the holding period of an option written
by the Fund will commence on the date it is written and end on the date it
lapses or the date a closing transaction is entered into. Accordingly, the Fund
may be limited in its ability to write options which expire within three months
and to enter into closing transactions at a gain within three months of the
writing of options.
Transactions that may be engaged in by the Fund (such as regulated futures
contracts, certain foreign currency contracts, and options on stock indexes and
futures contracts) will be subject to special tax treatment as "Section 1256
contracts." Section 1256 contracts are treated as if they are sold for their
fair market value on the last business day of the taxable year, even though a
taxpayer's obligations (or rights) under such contracts have not terminated (by
delivery, exercise, entering into a closing transaction or otherwise) as of such
date. Any gain or loss recognized as a consequence of the year-end deemed
disposition of Section 1256 contracts is taken into account for the taxable year
together with any other gain or loss that was previously recognized upon the
termination of Section 1256 contracts during that taxable year. Any capital gain
or loss for the taxable year with respect to Section 1256 contracts (including
any capital gain or loss arising as a consequence of the year-end deemed sale of
such contracts) is generally treated as 60% long-term capital gain or loss and
40% short-term capital gain or loss. The Fund may elect not to have this special
tax treatment apply to Section 1256 contracts that are part of a "mixed
straddle" with other investments of the Fund that are not Section 1256
contracts. The Internal Revenue Service has held in several private rulings that
gains arising from Section 1256 contracts will be treated for purposes of the
Short-Short Gain Test as being derived from securities held for not less than
three months if the gains arise as a result of a constructive sale under Code
Section 1256.
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<PAGE>
Treasury Regulations permit a regulated investment company, in determining
its investment company taxable income and net capital gain (i.e., the excess of
net long-term capital gain over net short-term capital loss) for any taxable
year, to elect (unless it has made a taxable year election for excise tax
purposes as discussed below) to treat all or any part of any net capital loss,
any net long-term capital loss or any net foreign currency loss incurred after
October 31 as if it had been incurred in the succeeding year.
In addition to satisfying the requirements described above, the Fund must
satisfy an asset diversification test in order to qualify as a regulated
investment company. Under this test, at the close of each quarter of its taxable
year, at least 50% of the value of the Fund'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 the Fund has not
invested more than 5% of the value of the Fund's total assets in securities of
such issuer and as to which the Fund 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 the Fund controls and which are
engaged in the same or similar trades or businesses. Generally, an option (call
or put) with respect to a security is treated as issued by the issuer of the
security not the issuer of the option. However, with regard to forward currency
contracts, there does not appear to be any formal or informal authority which
identifies the issuer of such instrument.
If for any taxable year the Fund 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 Fund's current and accumulated earnings
and profits. 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 a regulated investment company
that fails 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 (or, at the
election of a regulated investment company having a taxable year ending November
30 or December 31, for its taxable year (a "taxable year election")). 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.
For purposes of the excise tax, a regulated investment company shall (1)
reduce its capital gain net income (but not below its net capital gain) by the
amount of any net ordinary loss for the calendar year and (2) exclude foreign
currency gains and losses incurred after October 31 of any year (or after the
end of its taxable year if it has made a taxable year election) 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).
The Fund 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 the Fund may in certain circumstances be required to liquidate
portfolio investments to make sufficient distributions to avoid excise tax
liability.
FUND DISTRIBUTIONS
The Fund 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 will not qualify for the 70% dividends-received deduction for
corporations.
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<PAGE>
The Fund may either retain or distribute to shareholders its net capital
gain for each taxable year. The Fund currently intends to distribute any such
amounts. Net capital gain that is distributed and designated as a capital gain
dividend will be taxable to shareholders as long-term capital gain, regardless
of the length of time the shareholder has held his shares or whether such gain
was recognized by the Fund prior to the date on which the shareholder acquired
his shares.
Investment income that may be received by the Fund from sources within
foreign countries may be subject to foreign taxes withheld at the source. The
United States has entered into tax treaties with many foreign countries which
entitle the Fund to a reduced rate of, or exemption from, taxes on such income.
It is impossible to determine the effective rate of foreign tax in advance since
the amount of the Fund's assets to be invested in various countries is not
known. If more than 50% of the value of the Fund's total assets at the close of
its taxable year consists of the stock or securities of foreign corporations,
the Fund may elect to "pass through" to the Fund's shareholders the amount of
foreign taxes paid by the Fund. If the Fund so elects, each shareholder would be
required to include in gross income, even though not actually received, his pro
rata share of the foreign taxes paid by the Fund, but would be treated as having
paid his pro rata share of such foreign taxes and would therefore be allowed to
either deduct such amount in computing taxable income or use such amount
(subject to various Code limitations) as a foreign tax credit against federal
income tax (but not both). For purposes of the foreign tax credit limitation
rules of the Code, each shareholder would treat as foreign source income his pro
rata share of such foreign taxes plus the portion of dividends received from the
Fund representing income derived from foreign sources. No deduction for foreign
taxes could be claimed by an individual shareholder who does not itemize
deductions. Each shareholder should consult his own tax adviser regarding the
potential application of foreign tax credits.
Distributions by the Fund 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 reduction of) the shareholder's tax basis in his shares; any excess
will be treated as gain from a sale of the shares, as discussed below.
Distributions by the Fund will be treated in the manner described above
regardless of whether such distributions are paid in cash or reinvested in
additional shares of the Fund (or of another fund). 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. In addition, if the net asset value at
the time a shareholder purchases shares of the Fund reflects undistributed
income or gain, or unrealized appreciation in the value of assets held by the
Fund, a subsequent distribution of such amounts will be taxable to the
shareholder in the manner described above, although it economically constitutes
a return of capital.
Ordinarily, shareholders are required to take distributions by the Fund
into account in the year in which they are made. However, dividends 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 the Fund) on December 31 of such calendar year if such
dividends are actually paid 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) to them during the year.
The Fund will be required in certain cases to withhold and remit to the
U.S. Treasury 31% of ordinary income and capital gain dividends, and the
proceeds of redemption of shares, paid to any shareholder who (1) has provided
either an incorrect tax identification number or no number at all, (2) is
subject to backup withholding by the Internal Revenue Service for failure to
report the receipt of interest or dividend income properly, or (3) has failed to
certify to the Fund that it is not subject to backup withholding or that it is a
corporation or other "exempt recipient."
SALE OR REDEMPTION OF SHARES
A shareholder will recognize gain or loss on the sale or redemption of
shares of the Fund in an amount equal to the difference between the proceeds of
the sale or redemption (without reduction for any
21
<PAGE>
contingent deferred sales charge paid therefrom) and the shareholder's adjusted
tax basis in the shares (including any contingent deferred sales charge paid
upon the sale or redemption). All or a portion of any loss so recognized may be
disallowed if the shareholder purchases other shares of the Fund within 30 days
before or after the sale or redemption. In general, any gain or loss arising
from (or treated as arising from) the sale or redemption of shares of the Fund
will be considered capital gain or loss and will be long-term capital gain or
loss if the shares were held for longer than one year. However, any capital loss
arising from the sale or redemption of shares held for six months or less will
be treated as a long-term capital loss to the extent of the amount of capital
gain dividends received on such shares. For this purpose, the special holding
period rules of Code Section 246(c)(3) and (4) generally will apply in
determining the holding period of shares. Long-term capital gains of
noncorporate taxpayers are currently taxed at a maximum rate 11.6% lower than
the maximum rate applicable to ordinary income. Capital losses in any year are
deductible only to the extent of capital gains plus, in the case of noncorporate
taxpayers, $3,000 of ordinary income.
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 the Fund
is "effectively connected" with a U.S. trade or business carried on by such
shareholder.
If the income from the Fund is not effectively connected with a U.S. trade
or business of a foreign shareholder, ordinary income dividends paid to the
shareholder will be subject to U.S. withholding tax at the rate of 30% (or lower
applicable treaty rate) on the gross amount of the dividend. Furthermore, such a
foreign shareholder may be subject to U.S. withholding tax at the rate of 30%
(or lower treaty rate) on the gross income resulting from the Fund's election to
treat any foreign taxes paid by it as paid by its shareholders, but may not be
allowed a deduction against this gross income or a credit against this U.S.
withholding tax for the foreign shareholder's pro rata share of such foreign
taxes which it is treated as having paid. Such a foreign shareholder would
generally be exempt from U.S. federal income tax on gains realized on the sale
of shares of the Fund and capital gain dividends.
If the income from the Fund is effectively connected with a U.S. trade or
business of a foreign shareholder, ordinary income and capital gain dividends
received in respect of, and any gains realized on the sale of, shares of the
Fund will be subject to U.S. federal income tax at the rates applicable to U.S.
citizens or domestic corporations.
In the case of a foreign noncorporate shareholder, the Fund may be required
to withhold U.S. federal income tax at a rate of 31% on distributions that are
otherwise exempt from withholding (or taxable at a reduced treaty rate), unless
such shareholder furnishes the Fund with proper notification of its 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 the Fund,
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 Treasury Regulations issued thereunder as in effect on the
date of this Statement. Future legislative or administrative changes or court
decisions may significantly change the conclusions expressed herein, perhaps
with retroactive effect.
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 to them of federal, state and
local tax rules with respect to an investment in the Fund.
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<PAGE>
INVESTMENT RETURN INFORMATION
For purposes of quoting and comparing the performance of the Fund 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 Securities and Exchange Commission ("SEC
rules"), funds advertising performance must include total return quotes
calculated according to the following formula:
n
P(1 + T) = 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
one, five, and ten year periods or a shorter period dating from the
effectiveness of the Fund's Registration Statement. In calculating the ending
redeemable value, the maximum contingent deferred sales charge is deducted from
the ending redeemable value and all dividends and distributions by the Fund 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 "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. Any
recurring account charges that might in the future be imposed by the Fund would
be included at that time.
The Fund's average annual compounded rate of return for the one year period
ended December 31, 1995 and for the period from October 1, 1991 to December 31,
1995 was (-)0.04%, and (-)1.48%, respectively.
The Fund 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 Fund's performance with other measures of
investment return. For example, in comparing the Fund's total return with data
published by Lipper Analytical Services, Inc., or with the performance of the
Standard & Poor's 500 Stock Index or the Dow Jones Industrial Average, the Fund
calculates its aggregate total return for the specified periods of time by
assuming the investment of $10,000 in Fund 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 Fund does not, for these purposes, deduct from the ending
redeemable value any amount representing contingent deferred sales charges. The
Fund will, however, disclose the maximum contingent deferred sales charge and
will also disclose that the performance data do 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.
In addition to the total return quotations discussed above, the Fund 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 the Fund's 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:
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<PAGE>
a-b
6
YIELD = 2[( ----- +1) (-)1]
cd
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.
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 the Fund 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 for each day of the subsequent month that the obligation is in the
Fund'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 the Fund's portfolio. For
purposes of "b" above, Rule 12b-1 Plan expenses are included among the expenses
accrued for the period. Any amounts representing sales charges will not be
included among these expenses; however, the Fund 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.
The Fund's 30-day yield for the 30 days ended December 31, 1995 was 3.33%.
This yield calculation reflects expenses waived and reimbursed by the Manager.
Any quotation of performance stated in terms of yield 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.
GENERAL INFORMATION
Pilgrim Global Investment Series (the "Trust"), was organized under the
name "Pilgrim Preferred Fund," as a Massachusetts business trust, and as an
open-end, diversified management investment company under the 1940 Act. The
Trust currently consists of two series. Pilgrim Short-Term Multi-Market Income
Fund may be purchased at a price equal to the next determined net asset value
per share, plus a varying front-end sales charge. The investment objective and
policies and investment restrictions are the same for both series. The
Declaration of Trust dated November 21, 1985, amended on June 26, 1990 and
February 22, 1991, copies of which are on file in the office of the Secretary of
The Commonwealth of Massachusetts, authorize the issuance of shares of
beneficial interest in each Fund without par value. The name of the Trust was
changed to "Pilgrim Global Investment Series" by vote of the Board of Trustees
on February 13, 1991. On April 7, 1995, the Trust changed its name to "Astra
Global Investment Series" and the Fund changed its name to "Astra Short-Term
Multi-Market Income Fund II." On June 29, 1990, the shareholders of the Trust
voted for the approval of a change in the Trust's investment objectives and
policies and certain investment restrictions. Each share of a Fund has one vote
and shares equally in dividends and distributions when and if declared by the
Fund and in the Fund's
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<PAGE>
net assets upon liquidation. All shares, when issued, are fully paid and
non-assessable. There are no preemptive, conversion or exchange rights. Each
share of the Trust has one vote. Trust 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. As used in this Prospectus, the term "majority vote" means the
affirmative vote of (a) more than 50% of the outstanding shares of the Trust or
(b) 67% or more of the shares present at a meeting if more than 50% of the
outstanding shares of the Trust 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 the
Trust 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 the Fund is vested with the Board
of Trustees. The Board of Trustees approves all significant agreements between
the Trust and persons or companies furnishing services to the Fund. The
day-to-day operations of the Fund are delegated to the Fund's officers subject
to the investment objective and policies of the Fund, the general supervision of
the Trust's Board 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 the Trust. However, the Declaration of
Trust disclaims shareholder liability for acts or obligations of the Fund and
requires that notice of such disclaimer be given in each agreement, obligation
or instrument entered into or executed by the Fund or the Trustees to all
parties, and each party thereto must expressly waive all rights of action
directly against shareholders. The Declaration of Trust provides for
indemnification out of the Fund's property for all loss and expense of any
shareholder of the Fund 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 the Fund 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 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 wilful misfeasance, bad faith,
gross negligence, or reckless disregard of the duties involving the conduct of
his or her office. The Declaration of Trust provides for indemnification by the
Fund of the Trustees and officers of the Trust except with respect to any matter
as to which any such person did not act in good faith in the reasonable belief
that his or her action was in, or not opposed to, the best interests of the
Fund. Such person may not be indemnified against any liability to the Fund or
the Fund's shareholders to which he or she would otherwise be subject by reason
of wilful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his or her office. The Declaration of Trust
also authorizes the purchase of liability insurance on behalf of Trustees and
officers.
SHAREHOLDER MAINTENANCE AGREEMENT
The Fund has entered into a shareholder maintenance agreement with AFDC,
pursuant to which AFDC may pay certain broker-dealers or financial services
firms a trail commission or maintenance fee. Such firms may provide certain
services to their clients, including the following: answer customer inquiries
regarding account status and history, the manner in which purchases and
redemptions of shares may be effected for the Fund and certain other matters
pertaining to the Fund; assist shareholders in designating and changing dividend
options, account designations and addresses; provided necessary personnel and
facilities to establish and maintain shareholder accounts and records; assist in
processing purchase and redemption transactions; arrange for the
25
<PAGE>
wiring of funds; transmit and receive funds in connection with customer orders
to purchase or redeem shares; verify and guarantee shareholder signatures in
connection with redemption orders and transfers and changes in
shareholder-designated accounts; furnish (either separately or on an integrated
basis with other reports sent to a shareholder) monthly and year-end statements
and confirmations of purchases and redemptions; transmit, on behalf of the Fund,
proxy statements, annual reports, updated prospectuses and other communications
to shareholders; receive, tabulate and transmit to the Fund proxies executed by
shareholders with respect to meetings of shareholders of the Fund; and provide
such other related services as the Fund or a shareholder may request. For these
services, AFDC receives an annual fee equal to 0.25% of the Fund's average daily
net assets and may compensate such firms periodically, determined by a formula
based upon the net assets represented by accounts serviced by such firm during
the period for which payment is being made, the level of activity in accounts
serviced during such period, and the expenses incurred, provided that such fees
will not exceed, on an annualized basis for the Fund's then-current fiscal year,
0.25% of its average daily net assets represented by shares owned during the
period for which payment is being made. During the period ended December 31,
1995 AFDC received $11,699 for such services.
OTHER INFORMATION
As of April 27, 1996, there were no shareholders known by the Fund to have
been the beneficial owners of 5% or more of the Fund's outstanding shares.
ACCOUNTANTS
Tait, Weller & Baker, Two Penn Center, Philadelphia, Pennsylvania
19102-1707, acts as independent certified public accountants for the Fund.
CUSTODIAN
The cash and securities owned by the Fund are held by PNC Bank, N.A.,
Airport Business Center, 200 Stevens Drive, Lester, Pennsylvania 19113, as
Custodian, which takes no part in the decisions relating to the purchase or sale
of the Fund's portfolio securities.
FINANCIAL STATEMENTS
The Financial Statements of the Fund for the year ended December 31, 1995
are incorporated herein by reference from the Fund's 1995 Annual Report to
Shareholders. The Fund's Annual Report will be provided at no additional cost to
all shareholders requesting a copy of this Statement of Additional Information.
26
<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:
Per Share Data Ratios.
In Part B:
Audited Financial Statements and Report of Independent Certified Public
Accountants for Astra Short-Term Multi-Market Income Funds I and II for the
period ended December 31, 1995 are incorporated herein by reference to
Registrant's Annual Report to Shareholders dated December 31, 1995 which was
filed with, and accepted by, the U.S. Securities and Exchange Commission via
EDGAR on Form Type N-30D (with accession number: 0000950110-96-000193) on
March 4, 1996.
In Part C:
None.
(b) Exhibits
--------
1(a) - Declaration of Trust. (1)
1(b) - Amendment to Declaration of Trust dated June 26, 1990. (6)
1(c) - Amendment to Declaration of Trust dated February 22, 1991. (9)
2(a) - By-Laws. (1)
2(b) - Name Change Amendment to By-Laws. *
3 - Not applicable.
4(a) - Specimen share certificate for Astra Short-Term Multi-Market
Income Fund. (11)
4(b) - Form of specimen share certificate for Astra Short-Term Multi-
Market Income Fund II. (11)
4(c) - Form of specimen share certificate for Pilgrim Global Cash
Fund. (7)
5(a) - Investment Management Agreement for Pilgrim Short-Term Multi-
Market Income Fund (now Astra Short-Term Multi-Market Income
Fund). (4)
5(b) - Investment Management Agreement for Pilgrim Short-Term Multi-
Market Income Fund II (now Astra Short-Term Multi-Market
Income Fund II). (4)
5(c) - Form of Investment Management Agreement for Pilgrim Global
Cash Fund. (7)
5(d) - Investment Advisory Agreement for Pilgrim Short-Term Multi-
Market Income Fund (now Astra Short-Term Multi-Market Income
Fund). (4)
5(e) - Investment Advisory Agreement for Pilgrim Short-Term Multi-
Market Income Fund II (now Astra Short-Term Multi-Market
Income Fund II). (4)
5(f) - Form of Name Change Amendment to Investment Management
Agreement. *
6(a) - Underwriting Agreement for Pilgrim Short-Term Multi-Market
Income Fund (now Astra Short-Term Multi-Market Income
Fund). (2)
6(b) - Form of Underwriting Agreement for Pilgrim Short-Term Multi-
Market Income Fund II (now Astra Short-Term Multi-Market
Income Fund II). (2)
6(c) - Form of Underwriting Agreement for Pilgrim Global Cash
Fund. (7)
6(d) - Form of Name Change Amendment to Underwriting Agreement for
Astra Short-Term Multi-Market Income Fund I. *
C-1
<PAGE>
6(e) - Form of Name Change Amendment to Underwriting Agreement for
Astra Short-Term Multi-Market Income Fund II .*
7 - Not applicable.
8(a) - Custody Agreement. *
8(b) - Sub-Custody Agreement.*
9(a) - Transfer Agency Agreement. (2)
9(b) - Form of Shareholder Servicing Agreement for Pilgrim Short-Term
Multi-Market Income Fund II (now Astra Short-Term Multi-Market
Income Fund II). (4)
9(c) - Form of Shareholder Servicing Agreement for Pilgrim Global Cash
Fund. (7)
9(d) - Form of Name Change Amendment to Shareholder Servicing
Agreement for Astra Short-Term Multi-Market Income Fund II. *
9(e) - Accounting Services Agreement. *
9(f) - Sub-Administration Agreement. *
10 - Consent of Kramer, Levin, Naftalis, Nessen, Kamin & Frankel. *
11 - Consent of Tait, Weller and Baker, independent accountants
for Registrant. *
12 - Annual Reports to Shareholders dated December 31, 1995,
including the Reports of Independent Certified Public
Accountants. *
13 - Agreement with initial shareholder. (2)
14(a) - Pilgrim (Astra) Section 403(b)(7) Tax Sheltered Retirement
Plan. (8)
14(b) - Pilgrim (Astra) Individual Retirement Account. (8)
14(c) - Form of Pilgrim (Astra) Retirement Plan and Trust Agreement
including Money Purchase Pension Plan and Profit Sharing
Plan. (8)
15(a) - Distribution Plan for Pilgrim (Astra) Short-Term Multi-Market
Income Fund. (5)
15(b) - Form of Distribution Plan for Pilgrim (Astra) Short-Term Multi-
Market Income Fund. (6)
15(c) - Form of Distribution Plan for Pilgrim Global Cash Fund. (7)
15(d) - Form of Name Change Amendment to Distribution Plan for Astra
Short-Term Multi-Market Income Fund I *
15(e) - Form of Name Change Amendment to Distribution Plan for Astra
Short-Term Multi-Market Income Fund II. *
16 - Schedule of Performance Quotations. (3)
17 - Financial Data Schedule. *
18 - Not Applicable.
- --------------
(1) Previously filed on November 15, 1985, in the Registrant's Registration
Statement.
(2) Previously filed on January 6, 1986, in Pre-Effective Amendment No. 1 to
the Registrant's Registration Statement.
(3) Previously filed on March 1, 1989, in Post-Effective Amendment No. 5 to
the Registrant's Registration Statement.
(4) Previously filed on October 15, 1990, in Post-Effective Amendment No. 8
to the Registrant's Registration Statement.
(5) Filed as part of Exhibit No. 6 to the Pre-Effective Amendment No. 1.
(6) Previously filed on December 11, 1990, in Post-Effective Amendment No. 10
to the Registrant's Registration Statement.
(7) Previously filed on December 24, 1990, in Post-Effective Amendment No. 11
to Registrant's Registration Statement.
(8) Previously filed on September 30,1991, in Post-Effective Amendment No. 12
to the Registrant's Registration Statement.
(9) Previously filed on April 29, 1992, in Post-Effective Amendment No. 13 to
the Registrant's Registration Statement.
(10) Previously filed on April 30, 1993, in Post-Effective Amendment No. 14
to the Registrant's Registration Statement.
(11) Previously filed on April 28, 1995, in Post-Effective Amendment No. 16 to
the Registrant's Registration Statement.
* Filed herewith.
C-2
<PAGE>
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 March 31, 1995
- -------------- --------------------
Astra Short-Term
Multi-Market Income
Fund I 1,062
Astra Short-Term
Multi-Market Income
Fund II 307
Shares of Beneficial
Interest (no par value)
ITEM 27. Indemnification
Incorporated by reference to Post-Effective Amendment No. 16 to this
Registration Statement filed April 28, 1995.
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 investment companies
in the Astra Group 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 Strategic Investment Series and
Astra Institutional Securities 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 Offices Positions and Office
Business Address* with Principal Underwriter with Registrant
- ------------------ ------------------------------------- ------------------------------------
<S> <C> <C>
John R. Elerding Senior Vice President, Treasurer, Chief Financial Officer, Senior Vice
Secretary and Chief Financial Officer President, Treasurer and Secretary
</TABLE>
- --------
* The principal business address for all of the above is 750 B Street,
Suite 2350, San Diego, California 92101.
C-3
<PAGE>
<TABLE>
<S> <C> <C>
Robert R. Womack, Jr. President President
</TABLE>
(c) Not Applicable. The Registrant's principal underwriter is an affiliated
person of 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. (See Parts A and B).
ITEM 31. Management Services
There are no management-related service contracts not discussed in Parts A
and B.
ITEM 32. Undertakings
(1) Registrant undertakes to furnish to each person to whom a prospectus
relating to the Fund is delivered, a copy of the Fund's latest Annual
Report to shareholders, upon request and without charge.
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 19th day of April, 1996.
ASTRA GLOBAL INVESTMENT SERIES
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 April 19, 1996
- -------------------------- and Trustee
Palomba Weingarten
/s/ ROBERT R. WOMACK, JR. President April 19, 1996
- --------------------------
Robert R. Womack, Jr.
/s/ JOHN R. ELERDING Senior Vice President, April 19, 1996
- -------------------------- Treasurer, Secretary and
John R. Elerding Chief Financial Officer
/s/ AL BURTON Trustee April 19, 1996
- --------------------------
Al Burton
/s/ GARRY D. PEARSON Trustee April 19, 1996
- --------------------------
Garry D. Pearson
C-5
<PAGE>
EXHIBIT INDEX
Exhibit Description
- ------- -----------
2(b) Name Change Amendment to By-Laws.
5(f) Form of Name Change Amendment to Investment Management Agreement.
6(d) Form of Name Change Amendment to Underwriting Agreement for Astra
Short-Term Multi-Market Income Fund I.
6(e) Form of Name Change Amendment to Underwriting Agreement for Astra
Short-Term Multi-Market Income Fund II.
8(a) Custody Agreement.
8(b) Sub-Custody Agreement.
9(d) Form of Name Change Amendment to Shareholder Servicing Agreement for
Astra Short-Term Multi-Market Income Fund II.
9(e) Accounting Services Agreement.
9(f) Sub-Administration Agreement.
10. Consent of Kramer, Levin, Naftalis, Nessen, Kamin & Frankel.
11. Consent of Tait, Weller and Baker, independent accountants for
Registrant.
12. Annual Reports to Shareholder dated December 31, 1995, including the
Reports of Independent Certified public Accountants.
15(d) Form of Name Change Amendment to Distribution Plan for Astra Short-Term
Multi-Market Income Fund I.
15(e) Form of Name Change Amendment to Distribution Plan for Astra Short-Term
Multi-Market Income Fund II.
17. Financial Data Schedule.
EXHIBIT 2-(b)
AMENDMENT TO THE BY-LAWS OF ASTRA GLOBAL INVESTMENT SERIES
(FORMERLY PILGRIM GLOBAL INVESTMENT SERIES)
The By-laws are hereby amended to change all references to the name
"Pilgrim" to "Astra," including the name of the Trust to "Astra Global
Investment Series."
As adopted at a meeting of
the Board of Trustees on
April 10, 1995
EXHIBIT 5(f)
FORM OF AMENDED AND RESTATED INVESTMENT MANAGEMENT AGREEMENT
BETWEEN
ASTRA GLOBAL INVESTMENT SERIES
(FORMERLY PILGRIM GLOBAL INVESTMENT SERIES)
AND
ASTRA MANAGEMENT COMPANY
(FORMERLY PILGRIM MANAGEMENT CORPORATION)
The Investment Management Agreement dated November 8, 1990 between Pilgrim
Global Investment Series, on behalf of its series Pilgrim Short Term
Multi-Market Fund and Pilgrim Short Term Multi-Market Fund II and Pilgrim
Management Corporation (the "Agreement") is hereby amended to change the names
of the parties to Astra Global Investment Series, Astra Short Term Multi-Market
Fund, Astra Short Term Multi-Market Fund II and Astra Management Company,
effective April 10, 1995.
ASTRA GLOBAL INVESTMENT SERIES,
on behalf of its series Astra
Short Term Multi-Market Fund and
Astra Short Term Multi-Market
Fund II
By:
-----------------------------
Palomba Weingarten, President
ATTEST:
- ----------------------------
ASTRA MANAGEMENT COMPANY
By:
-----------------------------
ATTEST:
- ----------------------------
EXHIBIT 6(d)
FORM OF AMENDMENT TO UNDERWRITING AGREEMENT
BETWEEN
ASTRA GLOBAL INVESTMENT SERIES
(FORMERLY PILGRIM GLOBAL INVESTMENT SERIES)
AND
ASTRA FUNDS DISTRIBUTORS CORP.
(FORMERLY PILGRIM DISTRIBUTORS CORP.)
Gentlemen:
We hereby amend the Underwriting Agreement dated November 8, 1988, as
revised July 2, 1990, and February 13, 1991, between you and us to change the
names of the Pilgrim Global Investment Series to Astra Global Investment Series
Trust and Pilgrim Distributors Corp. to Astra Fund Distributors Corp., effective
April 10, 1995.
Very truly yours,
ASTRA GLOBAL INVESTMENT SERIES
on behalf of Astra Short-Term Multi Market
By:
-------------------------------------
Its:
-------------------------------------
Agreed to and Accepted:
ASTRA FUND DISTRIBUTORS CORP.
By:
---------------------------
Its:
---------------------------
EXHIBIT 6(e)
FORM OF AMENDMENT TO UNDERWRITING AGREEMENT
BETWEEN
ASTRA GLOBAL INVESTMENT SERIES
(FORMERLY PILGRIM GLOBAL INVESTMENT SERIES)
AND
ASTRA FUNDS DISTRIBUTORS CORP.
(FORMERLY PILGRIM DISTRIBUTORS CORP.)
Gentlemen:
We hereby amend the Underwriting Agreement dated November 8, 1990, as
revised February 13, 1992, between you and us to change the names of the Pilgrim
Global Investment Series to Astra Global Investment Series Trust and Pilgrim
Distributors Corp. to Astra Fund Distributors Corp., effective April 10, 1995.
Very truly yours,
ASTRA GLOBAL INVESTMENT SERIES
on behalf of Astra Short-Term
Multi Market II
By:
------------------------------
Its:
------------------------------
Agreed to and Accepted:
ASTRA FUND DISTRIBUTORS CORP.
By:
---------------------------
Its:
---------------------------
EXHIBIT 8(a)
CUSTODIAN SERVICES AGREEMENT
THIS AGREEMENT is made as of September 5, 1995 by and between PNC BANK,
NATIONAL ASSOCIATION, a national banking association ("PNC Bank"), and ASTRA
GLOBAL INVESTMENT SERIES, a Massachusetts business trust (the "Fund").
W I T N E S S E T H:
WHEREAS, the Fund is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act");
and
WHEREAS, the Fund wishes to retain PNC Bank to provide custodian services,
and PNC Bank wishes to furnish custodian services to its investment portfolios
listed on Exhibit A attached hereto and made a part hereof, as such Exhibit A
may be amended from time to time (each a "Portfolio"), either directly or
through an affiliate or affiliates, as more fully described herein.
NOW, THEREFORE, In consideration of the premises and mutual covenants
herein contained, and intending to be legally bound hereby, the parties hereto
agree as follows:
1. DEFINITIONS. AS USED IN THIS AGREEMENT:
(a) "1933 Act" means the Securities Act of 1933, as amended.
(b) "1934 Act" means the Securities Exchange Act of 1934, as amended.
(c) "Authorized Person" means any officer of the Fund and any other person
duly authorized by the Fund's Board of Trustees to give Oral and Written
Instructions on behalf of the Fund and listed on the Authorized Persons Appendix
attached hereto and made a part hereof or any amendment thereto as may be
received by PNC Bank. An Authorized Person's scope of authority may be limited
by the Fund by setting forth such limitation in the Authorized Persons Appendix.
(d) "Book-Entry System" means Federal Reserve Treasury book-entry system
for United States and federal agency securities, its successor or successors,
and its nominee or nominees and any book-entry system maintained by an exchange
registered with the SEC under the 1934 Act.
(e) "CEA" means the Commodities Exchange Act, as amended.
1
<PAGE>
(f) "Oral Instructions" mean oral instructions received by PNC Bank from an
Authorized Person or from a person reasonably believed by PNC Bank to be an
Authorized Person.
(g) "PNC Bank" means PNC Bank, National Association or a subsidiary or
affiliate of PNC Bank, National Association.
(h) "SEC" means the Securities and Exchange Commission.
(i) "Securities Laws" mean the 1933 Act, the 1934 Act, the 1940 Act and the
CEA.
(j) "Shares" mean the shares of beneficial interest of any series or class
of the Fund.
(k) "Property" means:
(i) any and all securities and other investment items which the Fund
may from time to time deposit, or cause to be deposited, with
PNC Bank or which PNC Bank may from time to time hold for the
Fund;
(ii) all income in respect of any of such securities or other
investment items;
(iii) all proceeds of the sale of any of such securities or investment
items; and
(iv) all proceeds of the sale of securities issued by the Fund, which
are received by PNC Bank from time to time, from or on behalf of
the Fund.
(k) "Written Instructions" mean written instructions signed by two
Authorized Persons and received by PNC Bank. The instructions may be delivered
by hand, mail, tested telegram, cable, telex or facsimile sending device.
2. APPOINTMENT. The Fund hereby appoints PNC Bank to provide custodian
services to the Fund, on behalf of each of its investment portfolios (each, a
"Portfolio"), and PNC Bank accepts such appointment and agrees to furnish such
services.
3. DELIVERY OF DOCUMENTS. The Fund has provided or, where applicable, will
provide PNC Bank with the following:
(a) certified or authenticated copies of the resolutions of the
Fund's Board of Trustees, approving the appointment of PNC Bank
or its affiliates to provide services;
(b) a copy of the Fund's most recent effective registration
statement;
(c) a copy of each Portfolio's advisory agreements;
(d) a copy of the distribution agreement with respect to each class
of Shares;
(e) a copy of each Portfolio's administration agreement if PNC Bank
is not providing the Portfolio with such services;
(f) copies of any shareholder servicing agreements made in respect
of the Fund or a Portfolio; and
2
<PAGE>
(g) certified or authenticated copies of any and all amendments or
supplements to the foregoing.
4. COMPLIANCE WITH LAWS.
PNC Bank undertakes to comply with all applicable requirements of the
Securities Laws and any laws, rules and regulations of governmental authorities
having jurisdiction with respect to the duties to be performed by PNC Bank
hereunder. Except as specifically set forth herein, PNC Bank assumes no
responsibility for such compliance by the Fund or any Portfolio.
5. INSTRUCTIONS.
(a) Unless otherwise provided in this Agreement, PNC Bank shall act only
upon Oral and Written Instructions.
(b) PNC Bank shall be entitled to rely upon any Oral and Written
Instructions it receives from an Authorized Person (or from a person reasonably
believed by PNC Bank to be an Authorized Person) pursuant to this Agreement. PNC
Bank may assume that any Oral or Written Instructions received hereunder are not
in any way inconsistent with the provisions of organizational documents of the
Fund or of any vote, resolution or proceeding of the Fund's Board of Trustees or
of the Fund's shareholders, unless and until PFPC receives Written Instructions
to the contrary.
(c) The Fund agrees to forward to PNC Bank Written Instructions confirming
Oral Instructions (except where such Oral Instructions are given by PNC Bank or
its affiliates) so that PNC Bank receives the Written Instructions by the close
of business on the same day that such Oral Instructions are received. The fact
that such confirming Written Instructions are not received by PNC Bank shall in
no way invalidate the transactions or enforceability of the transactions
authorized by the Oral Instructions. Where Oral or Written Instructions
reasonably appear to have been received from an Authorized Person, PNC Bank
shall incur no liability to the Fund in acting upon such Oral or Written
Instructions provided that PNC Bank's actions comply with the other provisions
of this Agreement.
6. RIGHT TO RECEIVE ADVICE.
(a) Advice of the Fund. If PNC Bank is in doubt as to any action it should
or should not take, PNC Bank may request directions or advice, including Oral or
Written Instructions, from the Fund.
(b) Advice of Counsel. If PNC Bank shall be in doubt as to any question of
law pertaining to any action it should or should not take, PNC Bank may request
advice at its own cost from such counsel of its own choosing (who may be counsel
for the Fund, the Fund's investment adviser or PNC Bank, at the option of PNC
Bank).
(c) Conflicting Advice. In the event of a conflict between directions,
advice or Oral or Written Instructions
3
<PAGE>
PNC Bank receives from the Fund, and the advice it receives from counsel, PNC
Bank shall be entitled to rely upon and follow the advice of counsel. In the
event PNC Bank so relies on the advice of counsel, PNC Bank remains liable for
any action or omission on the part of PNC Bank which constitutes willful
misfeasance, bad faith, gross negligence or reckless disregard by PNC Bank of
any duties, obligations or responsibilities set forth in this Agreement.
(d) Protection of PNC Bank. PNC Bank shall be protected in any action it
takes or does not take in reliance upon directions, advice or Oral or Written
Instructions it receives from the Fund or from counsel and which PNC Bank
believes, in good faith, to be consistent with those directions, advice or Oral
or Written Instructions. Nothing in this section shall be construed so as to
impose an obligation upon PNC Bank (i) to seek such directions, advice or Oral
or Written Instructions, or (ii) to act in accordance with such directions,
advice or Oral or Written Instructions unless, under the terms of other
provisions of this Agreement, the same is a condition of PNC Bank's properly
taking or not taking such action. Nothing in this subsection shall excuse PNC
Bank when an action or omission on the part of PNC Bank constitutes willful
misfeasance, bad faith, gross negligence or reckless disregard by PNC Bank of
any duties, obligations or responsibilities set forth in this Agreement.
7. RECORDS; VISITS. The books and records pertaining to the Fund and
any Portfolio, which are in the possession or under the control of PNC Bank,
shall be the property of the Fund. Such books and records shall be prepared and
maintained as required by the 1940 Act and other applicable securities laws,
rules and regulations. The Fund and Authorized Persons shall have access to such
books and records at all times during PNC Bank's normal business hours. Upon the
reasonable request of the Fund, copies of any such books and records shall be
provided by PNC Bank to the Fund or to an authorized representative of the Fund,
at the Fund's expense.
8. CONFIDENTIALITY. PNC Bank agrees on its own behalf and that of its
employees to keep confidential all records of the Fund and information relating
to the Fund and its shareholders (past, present and future), unless the release
of such records or information is otherwise consented to, in writing, by the
Fund. The Fund agrees that such consent shall not be unreasonably withheld and
may not be withheld where PNC Bank may be exposed to civil or criminal contempt
proceedings or when required to divulge such information or records to duly
constituted authorities.
9. COOPERATION WITH ACCOUNTANTS. PNC Bank shall cooperate with the Fund's
independent public accountants and shall take all reasonable action in the
performance of its obligations under this Agreement to ensure that the necessary
information is made available to such accountants for the expression of their
opinion, as required by the Fund.
4
<PAGE>
10. DISASTER RECOVERY. PNC Bank shall enter into and shall maintain in
effect with appropriate parties one or more agreements making reasonable
provisions for emergency use of electronic data processing equipment to the
extent appropriate equipment is available. In the event of equipment failures,
PNC Bank shall, at no additional expense to the Fund, take reasonable steps to
minimize service interruptions. PNC Bank shall have no liability with respect to
the loss of data or service interruptions caused by equipment failure provided
such loss or interruption is not covered by PNC Bank's own willful misfeasance,
bad faith, gross negligence or reckless disregard of its duties or obligations
under this Agreement.
11. COMPENSATION. As compensation for custody services rendered by PNC Bank
during the term of this Agreement, the Fund, on behalf of each of the
Portfolios, will pay to PNC Bank a fee or fees as may be agreed to in writing
from time to time by the Fund and PNC Bank.
12. INDEMNIFICATION. The Fund, on behalf of each Portfolio, agrees to
indemnify and hold harmless PNC Bank and its affiliates from all taxes, charges,
expenses, assessments, claims and liabilities (including, without limitation,
liabilities arising under the Securities Laws and any state and foreign
securities and blue sky laws, and amendments thereto, and expenses, including
(without limitation) attorneys' fees and disbursements, arising directly or
indirectly from any action or omission to act which PNC Bank takes (i) at the
request or on the direction of or in reliance on the advice of the Fund or (ii)
upon Oral or Written Instructions. Neither PNC Bank, nor any of its affiliates,
shall be indemnified against any liability (or any expenses incident to such
liability) arising out of PNC Bank's or its affiliates' own willful misfeasance,
bad faith, gross negligence or reckless disregard of its duties under this
Agreement.
13. RESPONSIBILITY OF PNC BANK.
(a) PNC Bank shall be under no duty to take any action on behalf of the
Fund or any Portfolio except as specifically set forth herein or as may be
specifically agreed to by PNC Bank in writing. PNC Bank shall be obligated to
exercise care and diligence in the performance of its duties hereunder, to act
in good faith and to use its best efforts, within reasonable limits, in
performing services provided for under this Agreement. PNC Bank shall be liable
for any damages arising out of PNC Bank's failure to perform its duties under
this agreement to the extent such damages arise out of PNC Bank's willful
misfeasance, bad faith, gross negligence or reckless disregard of its duties
under this Agreement.
(b) Without limiting the generality of the foregoing or of any other
provision of this Agreement, (i) PNC Bank shall not be under any duty or
obligation to inquire into and shall not be liable for (A) the validity or
invalidity or authority or lack
5
<PAGE>
thereof of any Oral or Written Instruction, notice or other instrument which
conforms to the applicable requirements of this Agreement, and which PNC Bank
reasonably believes to be genuine; or (B) subject to section 10, delays or
errors or loss of data occurring by reason of circumstances beyond PNC Bank's
control, including acts of civil or military authority, national emergencies,
fire, flood, catastrophe, acts of God, insurrection, war, riots or failure of
the mails, transportation, communication or power supply.
(c) Notwithstanding anything in this Agreement to the contrary, PNC Bank
shall have no liability to the Fund or to any Portfolio for any consequential,
special or indirect losses or damages which the Fund may incur or suffer by or
as a consequence of PNC Bank's performance of the services provided hereunder,
whether or not the likelihood of such losses or damages was known by PNC Bank.
14. DESCRIPTION OF SERVICES.
(a) Delivery of the Property. The Fund will deliver or arrange for delivery
to PNC Bank, all the Property owned by the Portfolios, including cash received
as a result of the distribution of Shares, during the period that is set forth
in this Agreement. PNC Bank will not be responsible for such property until
actual receipt.
(b) Receipt and Disbursement of Money. PNC Bank, acting upon Written
Instructions, shall open and maintain separate accounts in the Fund's name using
all cash received from or for the account of the Fund, subject to the terms of
this Agreement. In addition, upon Written Instructions, PNC Bank shall open
separate custodial accounts for each separate series or Portfolio of the Fund
(collectively, the "Accounts") and shall hold in the Accounts all cash received
from or for the Accounts of the Fund specifically designated to each separate
series or Portfolio.
PNC Bank shall make cash payments from or for the Accounts of a Portfolio
only for:
(i) purchases of securities in the name of a Portfolio or PNC Bank
or PNC Bank's nominee as provided in sub-section (j) and for
which PNC Bank has received a copy of the broker's or dealer's
confirmation or payee's invoice, as appropriate;
(ii) purchase or redemption of Shares of the Fund delivered to PNC
Bank;
(iii) payment of, subject to Written Instructions, interest, taxes,
administration, accounting, distribution, advisory, management
fees or similar expenses which are to be borne by a Portfolio;
(iv) payment to, subject to receipt of Written Instructions, the
Fund's transfer agent, as agent for the shareholders, an amount
equal to the amount of dividends and distributions stated in
the Written Instructions to be distributed in cash by the
transfer agent to shareholders, or, in lieu of paying the
Fund's transfer agent, PNC Bank may arrange for the direct
payment of cash dividends and distributions to shareholders in
accordance with procedures mutually agreed upon from time to
time
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by and among the Fund, PNC Bank and the Fund's transfer agent.
(v) payments, upon receipt Written Instructions, in connection with
the conversion, exchange or surrender of securities owned or
subscribed to by the Fund and held by or delivered to PNC Bank;
(vi) payments of the amounts of dividends received with respect to
securities sold short;
(vii) payments made to a sub-custodian pursuant to provisions in
sub-section (c) of this Section; and
(viii) payments, upon Written Instructions, made for other proper Fund
purposes.
PNC Bank is hereby authorized to endorse and collect all checks, drafts or
other orders for the payment of money received as custodian for the Accounts.
(c) Receipt of Securities; Subcustodians.
(i) PNC Bank shall hold all securities received by it for the
Accounts in a separate account that physically segregates such
securities from those of any other persons, firms or
corporations, except for securities held in a Book-Entry
System. All such securities shall be held or disposed of only
upon Written Instructions of the Fund pursuant to the terms of
this Agreement. PNC Bank shall have no power or authority to
assign, hypothecate, pledge or otherwise dispose of any such
securities or investment, except upon the express terms of this
Agreement and upon Written Instructions, accompanied by a
certified resolution of the Fund's Board of Trustees,
authorizing the transaction. In no case may any member of the
Fund's Board of Trustees, or any officer, employee or agent of
the Fund withdraw any securities.
At PNC Bank's own expense and for its own convenience, PNC Bank
may enter into sub-custodian agreements with other United
States banks or trust companies to perform duties described in
this sub-section (c). Such bank or trust company shall have an
aggregate capital, surplus and undivided profits, according to
its last published report, of at least one million dollars
($1,000,000), if it is a subsidiary or affiliate of PNC Bank,
or at least twenty million dollars ($20,000,000) if such bank
or trust company is not a subsidiary or affiliate of PNC Bank.
In addition, such bank or trust company must be qualified to
act as custodian and agree to comply with the relevant
provisions of the 1940 Act and other applicable rules and
regulations. Any such arrangement will not be entered into
without prior written notice to the Fund.
PNC Bank shall remain responsible for the performance of all
of its duties as described in this Agreement and shall hold the
Fund and each Portfolio harmless from its own acts or
omissions, under the standards of care provided for herein, or
the acts and omissions of any sub-custodian chosen by PNC Bank
under the terms of this sub-section (c).
(d) Transactions Requiring Instructions. Upon receipt of Oral or Written
Instructions and not otherwise, PNC Bank, directly or through the use of the
Book-Entry System, shall:
(i) deliver any securities held for a Portfolio against the receipt
of payment for the sale of such securities;
(ii) execute and deliver to such persons as may be designated in
such Oral or Written Instructions, proxies, consents,
authorizations, and any other instruments whereby the
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authority of a Portfolio as owner of any securities may be
exercised;
(iii) deliver any securities to the issuer thereof, or its agent,
when such securities are called, redeemed, retired or otherwise
become payable; provided that, in any such case, the cash or
other consideration is to be delivered to PNC Bank;
(iv) deliver any securities held for a Portfolio against receipt of
other securities or cash issued or paid in connection with the
liquidation, reorganization, refinancing, tender offer, merger,
consolidation or recapitalization of any corporation, or the
exercise of any conversion privilege;
(v) deliver any securities held for a Portfolio to any protective
committee, reorganization committee or other person in
connection with the reorganization, refinancing, merger,
consolidation, recapitalization or sale of assets of any
corporation, and receive and hold under the terms of this
Agreement such certificates of deposit, interim receipts or
other instruments or documents as may be issued to it to
evidence such delivery;
(vi) make such transfer or exchanges of the assets of the Portfolios
and take such other steps as shall be stated in said Oral or
Written Instructions to be for the purpose of effectuating a
duly authorized plan of liquidation, reorganization, merger,
consolidation or recapitalization of the Fund;
(vii) release securities belonging to a Portfolio to any bank or
trust company for the purpose of a pledge or hypothecation to
secure any loan incurred by the Fund on behalf of that
Portfolio; provided, however, that securities shall be released
only upon payment to PNC Bank of the monies borrowed, except
that in cases where additional collateral is required to secure
a borrowing already made subject to proper prior authorization,
further securities may be released for that purpose; and repay
such loan upon redelivery to it of the securities pledged or
hypothecated therefor and upon surrender of the note or notes
evidencing the loan;
(viii) release and deliver securities owned by a Portfolio in
connection with any repurchase agreement entered into on behalf
of the Fund, but only on receipt of payment therefor; and pay
out moneys of the Fund in connection with such repurchase
agreements, but only upon the delivery of the securities;
(ix) release and deliver or exchange securities owned by the Fund in
connection with any conversion of such securities, pursuant to
their terms, into other securities;
(x) release and deliver securities owned by the fund for the
purpose of redeeming in kind shares of the Fund upon delivery
thereof to PNC Bank; and
(xi) release and deliver or exchange securities owned by the Fund
for other corporate purposes.
PNC Bank must also receive a certified resolution describing
the nature of the corporate purpose and the name and address of
the person(s) to whom delivery shall be made when such action
is pursuant to sub-paragraph d.
(e) Use of Book-Entry System. The Fund shall deliver to PNC Bank certified
resolutions of the Fund's Board of Trustees approving, authorizing and
instructing PNC Bank on a continuous basis, to deposit in the Book-Entry System
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<PAGE>
all securities belonging to the Portfolios eligible for deposit therein and
to utilize the Book-Entry System to the extent possible in connection with
settlements of purchases and sales of securities by the Portfolios, and
deliveries and returns of securities loaned, subject to repurchase agreements or
used as collateral in connection with borrowings. PNC Bank shall continue to
perform such duties until it receives Written or Oral Instructions authorizing
contrary actions.
PNC Bank shall administer the Book-Entry System as follows:
(i) With respect to securities of each Portfolio which are
maintained in the Book-Entry System, the records of PNC Bank
shall identify by Book-Entry or otherwise those securities
belonging to each Portfolio. PNC Bank shall furnish to the Fund
a detailed statement of the Property held for each Portfolio
under this Agreement at least monthly and from time to time and
upon written request.
(ii) Securities and any cash of each Portfolio deposited in the
Book-Entry System will at all times be segregated from any
assets and cash controlled by PNC Bank in other than a
fiduciary or custodian capacity but may be commingled with
other assets held in such capacities. PNC Bank and its
sub-custodian, if any, will pay out money only upon receipt of
securities and will deliver securities only upon the receipt of
money.
(iii) All books and records maintained by PNC Bank which relate to
the Fund's participation in the Book-Entry System will at all
times during PNC Bank's regular business hours be open to the
inspection of Authorized Persons, and PNC Bank will furnish to
the Fund all information in respect of the services rendered as
it may require.
PNC Bank will also provide the Fund with such reports on its own system of
internal control as the Fund may reasonably request from time to time.
(f) Registration of Securities. All Securities held for a Portfolio which
are issued or issuable only in bearer form, except such securities held in the
Book-Entry System, shall be held by PNC Bank in bearer form; all other
securities held for a Portfolio may be registered in the name of the Fund on
behalf of that Portfolio, PNC Bank, the Book-Entry System, a sub-custodian, or
any duly appointed nominees of the Fund, PNC Bank, Book-Entry System or
sub-custodian. The Fund reserves the right to instruct PNC Bank as to the method
of registration and safekeeping of the securities of the Fund. The Fund agrees
to furnish to PNC Bank appropriate instruments to enable PNC Bank to hold or
deliver in proper form for transfer, or to register in the name of its nominee
or in the name of the Book-Entry System, any securities which it may hold for
the Accounts and which may from time to time be registered in the name of the
Fund on behalf of a Portfolio.
(g) Voting and Other Action. Neither PNC Bank nor its nominee shall vote
any of the securities held pursuant to this Agreement by or for the account of a
Portfolio, except in accordance with Written Instructions. PNC Bank, directly or
through the use of the Book-Entry System, shall execute in blank and promptly
deliver all notices, proxies and proxy soliciting
9
<PAGE>
materials to the registered holder of such securities. If the registered
holder is not the Fund on behalf of a Portfolio, then Written or Oral
Instructions must designate the person who owns such securities.
(h) Transactions Not Requiring Instructions. In the absence of contrary
Written Instructions, PNC Bank is authorized to take the following actions:
(i) Collection of Income and Other Payments.
(A) collect and receive for the account of each Portfolio, all
income, dividends, distributions, coupons, option
premiums, other payments and similar items, included or to
be included in the Property, and, in addition, promptly
advise each Portfolio of such receipt and credit such
income, as collected, to each Portfolio's custodian
account;
(B) endorse and deposit for collection, in the name of the
Fund, checks, drafts, or other orders for the payment of
money;
(C) receive and hold for the account of each Portfolio all
securities received as a distribution on the Portfolio's
securities as a result of a stock dividend, share split-up
or reorganization, recapitalization, readjustment or other
rearrangement or distribution of rights or similar
securities issued with respect to any securities belonging
to a Portfolio and held by PNC Bank hereunder;
(D) present for payment and collect the amount payable upon
all securities which may mature or be called, redeemed, or
retired, or otherwise become payable on the date such
securities become payable; and
(E) take any action which may be necessary and proper in
connection with the collection and receipt of such income
and other payments and the endorsement for collection of
checks, drafts, and other negotiable instruments.
(ii) Miscellaneous Transactions.
(A) deliver or cause to be delivered Property against payment
or other consideration or written receipt therefor in the
following cases:
(1) for examination by a broker or dealer selling for the
account of a Portfolio in accordance with street
delivery custom;
(2) for the exchange of interim receipts or temporary
securities for definitive securities; and
(3) for transfer of securities into the name of the Fund
on behalf of a Portfolio or PNC Bank or nominee of
either, or for exchange of securities for a different
number of bonds, certificates, or other evidence,
representing the same aggregate face amount or number
of units bearing the same interest rate, maturity
date and call provisions, if any; provided that, in
any such case, the new securities are to be delivered
to PNC Bank.
(B) Unless and until PNC Bank receives Oral or Written
Instructions to the contrary, PNC Bank shall:
10
<PAGE>
(1) pay all income items held by it which call for
payment upon presentation and hold the cash received
by it upon such payment for the account of each
Portfolio;
(2) collect interest and cash dividends received, with
notice to the Fund, to the account of each Portfolio;
(3) hold for the account of each Portfolio all stock
dividends, rights and similar securities issued with
respect to any securities held by PNC Bank; and
(4) execute as agent on behalf of the Fund all necessary
ownership certificates required by the Internal
Revenue Code or the Income Tax Regulations of the
United States Treasury Department or under the laws
of any state now or hereafter in effect, inserting
the Fund's name, on behalf of a Portfolio, on such
certificate as the owner of the securities covered
thereby, to the extent it may lawfully do so.
(i) Segregated Accounts.
(i) PNC Bank shall upon receipt of Written or Oral Instructions
establish and maintain a segregated accounts on its records for
and on behalf of each Portfolio. Such accounts may be used to
transfer cash and securities, including securities in the
Book-Entry System:
(A) for the purposes of compliance by the Fund with the
procedures required by a securities or option exchange,
providing such procedures comply with the 1940 Act and any
releases of the SEC relating to the maintenance of
segregated accounts by registered investment companies;
and
(B) Upon receipt of Written Instructions, for other proper
corporate purposes.
(ii) PNC Bank shall arrange for the establishment of IRA custodian
accounts for such shareholders holding Shares through IRA
accounts, in accordance with the Fund's prospectuses, the
Internal Revenue Code of 1986, as amended (including
regulations promulgated thereunder), and with such other
procedures as are mutually agreed upon from time to time by and
among the Fund, PNC Bank and the Fund's transfer agent.
(j) Purchases of Securities. PNC Bank shall settle purchased securities
upon receipt of Oral or Written Instructions from the Fund or its investment
advisers that specify:
(i) the name of the issuer and the title of the securities,
including CUSIP number if applicable;
(ii) the number of shares or the principal amount purchased and
accrued interest, if any;
(iii) the date of purchase and settlement;
(iv) the purchase price per unit;
(v) the total amount payable upon such purchase;
(vi) the Portfolio involved; and
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(vii) the name of the person from whom or the broker through whom the
purchase was made. PNC Bank shall upon receipt of securities
purchased by or for a Portfolio pay out of the moneys held for
the account of the Portfolio the total amount payable to the
person from whom or the broker through whom the purchase was
made, provided that the same conforms to the total amount
payable as set forth in such Oral or Written Instructions.
(k) Sales of Securities. PNC Bank shall settle sold securities upon receipt
of Oral or Written Instructions from the Fund that specify:
(i) the name of the issuer and the title of the security, including
CUSIP number if applicable;
(ii) the number of shares or principal amount sold, and accrued
interest, if any;
(iii) the date of trade and settlement;
(iv) the sale price per unit;
(v) the total amount payable to the Fund upon such sale;
(vi) the name of the broker through whom or the person to whom the
sale was made; and
(vii) the location to which the security must be delivered and
delivery deadline, if any; and
(viii) the Portfolio involved.
PNC Bank shall deliver the securities upon receipt of the total amount
payable to the Portfolio upon such sale, provided that the total amount payable
is the same as was set forth in the Oral or Written Instructions. Subject to the
foregoing, PNC Bank may accept payment in such form as shall be satisfactory to
it, and may deliver securities and arrange for payment in accordance with the
customs prevailing among dealers in securities.
(l) Reports; Proxy Materials.
(i) PNC Bank shall furnish to the Fund the following reports:
(A) such periodic and special reports as the Fund may
reasonably request;
(B) a monthly statement summarizing all transactions and
entries for the account of each Portfolio, listing each
Portfolio securities belonging to each Portfolio with the
adjusted average cost of each issue and the market value
at the end of such month and stating the cash account of
each Portfolio including disbursements;
(C) the reports required to be furnished to the Fund pursuant
to Rule 17f-4; and
(D) such other information as may be agreed upon from time to
time between the Fund and PNC Bank.
(ii) PNC Bank shall transmit promptly to the Fund any proxy
statement, proxy material, notice of a call or conversion or
similar communication received by it as custodian of the
Property. PNC Bank shall be under no other obligation to inform
the Fund as to such actions or events.
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(m) Collections. All collections of monies or other property in respect, or
which are to become part, of the Property (but not the safekeeping thereof upon
receipt by PNC Bank) shall be at the sole risk of the Fund. If payment is not
received by PNC Bank within a reasonable time after proper demands have been
made, PNC Bank shall notify the Fund in writing, including copies of all demand
letters, any written responses, memoranda of all oral responses and shall await
instructions from the Fund. PNC Bank shall not be obliged to take legal action
for collection unless and until reasonably indemnified to its satisfaction. PNC
Bank shall also notify the Fund as soon as reasonably practicable whenever
income due on securities is not collected in due course and shall provide the
Fund with periodic status reports of such income collected after a reasonable
time.
15. DURATION AND TERMINATION. This Agreement shall continue until
terminated by the Fund or by PNC Bank on sixty (60) days' prior written notice
to the other party. In the event this Agreement is terminated (pending
appointment of a successor to PNC Bank or vote of the shareholders of the Fund
to dissolve or to function without a custodian of its cash, securities or other
property), PNC Bank shall not deliver cash, securities or other property of the
Portfolios to the Fund. It may deliver them to a bank or trust company of PNC
Bank's choice, having an aggregate capital, surplus and undivided profits, as
shown by its last published report, of not less than twenty million dollars
($20,000,000), as a custodian for the Fund to be held under terms similar to
those of this Agreement. PNC Bank shall not be required to make any such
delivery or payment until full payment shall have been made to PNC Bank of all
of its fees, compensation, costs and expenses. PNC Bank shall have a security
interest in and shall have a right of setoff against the Property as security
for the payment of such fees, compensation, costs and expenses.
16. NOTICES. All notices and other communications, including Written
Instructions, shall be in writing or by confirming telegram, cable, telex or
facsimile sending device. Notice shall be addressed (a) if to PNC Bank at
Airport Business Center, International Court 2, 200 Stevens Drive, Lester,
Pennsylvania 19113, marked for the attention of the Custodian Services
Department (or its successor) (b) if to the Fund, at Astra Management Corp.,
Symphony Towers, 750 B Street, Suite 2350, San Diego, CA 92101; or (c) if to
neither of the foregoing, at such other address as shall have been given by like
notice to the sender of any such notice or other communication by the other
party. If notice is sent by confirming telegram, cable, telex or facsimile
sending device, it shall be deemed to have been given immediately. If notice is
sent by first-class mail, it shall be deemed to have been given five days after
it has been mailed. If notice is sent by messenger, it shall be deemed to have
been given on the day it
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is delivered.
17. AMENDMENTS. This Agreement, or any term hereof, may be changed or
waived only by a written amendment, signed by the party against whom enforcement
of such change or waiver is sought.
18. DELEGATION; ASSIGNMENT. PNC Bank may assign its rights and delegate its
duties hereunder to any wholly-owned direct or indirect subsidiary of PNC Bank,
National Association or PNC Bank Corp., provided that (i) PNC Bank gives the
Fund thirty (30) days' prior written notice; (ii) the delegate (or assignee)
agrees with PNC Bank and the Fund to comply with all relevant provisions of the
1940 Act; and (iii) PNC Bank and such delegate (or assignee) promptly provide
such information as the Fund may request, and respond to such questions as the
Fund may ask, relative to the delegation (or assignment), including (without
limitation) the capabilities of the delegate (or assignee).
19. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
20. FURTHER ACTIONS. Each party agrees to perform such further acts and
execute such further documents as are necessary to effectuate the purposes
hereof.
21. MISCELLANEOUS.
(a) Entire Agreement. This Agreement embodies the entire agreement and
understanding between the parties and supersedes all prior agreements and
understandings relating to the subject matter hereof, provided that the parties
may embody in one or more separate documents their agreement, if any, with
respect to delegated duties and Oral Instructions.
(b) Captions. The captions in this Agreement are included for convenience
of reference only and in no way define or delimit any of the provisions hereof
or otherwise affect their construction or effect.
(c) Governing Law. This Agreement shall be deemed to be a contract made in
Pennsylvania and governed by Pennsylvania law, without regard to principles of
conflicts of law.
(d) Partial Invalidity. If any provision of this Agreement shall be held or
made invalid by a court decision, statute, rule or otherwise, the remainder of
this Agreement shall not be affected thereby.
(e) Successors and Assigns. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors and
permitted assigns.
(f) Facsimile Signatures. The facsimile signature of any party to this
Agreement shall constitute the valid and binding execution hereof by such party.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
PNC BANK, NATIONAL ASSOCIATION
By: /s/ JOHN FOSTER
---------------------------
Title: Vice President
-------------------------
ASTRA GLOBAL INVESTMENT SERIES
By: /s/ JOHN R. ELERDING
---------------------------
Title: Chief Financial Officer
------------------------
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EXHIBIT A
THIS EXHIBIT A, dated as of September 5, 1995, is Exhibit A to that certain
Custodian Services Agreement dated as of September 5, 1995 between PNC Bank,
National Association and Astra Global Investment Series.
PORTFOLIOS
Astra Short-Term Multi-Market Income Fund
Astra Short-Term Multi-Market Income Fund II
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AUTHORIZED PERSONS APPENDIX
NAME (Type) SIGNATURE
- ----------------- ---------------------
- ----------------- ---------------------
- ----------------- ---------------------
- ----------------- ---------------------
- ----------------- ---------------------
- ----------------- ---------------------
17
EXHIBIT 8(b)
SUB-CUSTODIAN AGREEMENT
AGREEMENT dated as of September 5, 1995 among THE CHASE MANHATTAN BANK,
N.A. ("Bank"), ASTRA GLOBAL INVESTMENT SERIES (the "Fund") and PNC BANK,
NATIONAL ASSOCIATION ("Company").
WITNESSETH:
WHEREAS, Company has entered into a Custodian Agreement with the Fund, a
Massachusetts business trust registered under the Investment Company Act of
1940, as amended (the "Investment Company Act"), to provide certain custody
services; and
WHEREAS, the Company and the Fund wish to retain Bank to provide certain
sub-custodian services to the Company and the Fund for the benefit of the Fund,
and Bank is willing to furnish such services;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. Custody Account. (a) The Bank agrees to establish and maintain (a) a
separate custody account for each investment portfolio of the Fund ("Custody
Account") for any and all stocks, shares, bonds, debentures, notes, mortgages or
other obligations for the payment of money and any certificates, receipts,
warrants or other instruments representing rights to receive, purchase or
subscribe for the same or evidencing or representing any other rights or
interests therein and other similar property (hereinafter called "Securities")
from time to time received by the Bank or any sub-custodian (as defined in the
second paragraph of Section 3 hereof) for the account of the particular
investment portfolio of the Fund; and (b) a separate deposit account or accounts
in the name of each investment portfolio of the Fund ("Deposit Account") for any
and all cash and cash equivalents in any currency received by the Bank or any
sub-custodian for the account of the particular investment portfolio of the
Fund, which cash shall not be subject to withdrawal by draft or check. The term
"Property" as used herein shall mean all Securities, cash, cash equivalents and
other assets of the Fund.
(b) The Bank shall be responsible for providing information to the Fund to
enable the Fund to determine that the Bank and each sub-custodian is an eligible
foreign custodian, qualified U.S. bank or overseas branch of a qualified U.S.
bank in accordance with the definitions thereof set forth herein.
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2. Maintenance of Property Abroad. Securities in a Custody Account shall be
held in the country or other jurisdiction as shall be specified from time to
time in Instructions (as defined in Section 9 hereof), provided that such
country or other jurisdiction shall be one in which the principal trading market
for such Securities is located or the country or other jurisdiction in which
such Securities are to be presented for payment or are acquired for the Custody
Account, and cash in a Deposit Account shall be credited to an account in such
country or other jurisdiction in which such cash may be legally deposited or is
the legal currency for the payment of public or private debts. Cash may be held
pursuant to Instructions in either interest or non-interest bearing accounts as
may be available for the particular currency. To the extent Instructions are
issued and the Bank can comply with such Instructions, the Bank is authorized to
maintain cash balances on deposit for the Fund with itself or one of its
affiliates at such reasonable rates of interest as may from time to time be paid
on such accounts, or in non-interest bearing accounts as the Fund may direct, if
acceptable to the Bank.
3. Eligible Foreign Custodians and Securities Depositories. The Trustees of
the Fund authorize the Bank to hold the Securities in the Custody Account(s) and
the cash in the Deposit Account(s) in custody and deposit accounts,
respectively, which have been established by the Bank with one of its branches,
a branch of a qualified U.S. bank, an eligible foreign custodian or an eligible
foreign securities depository; provided, however, that the Trustees of the Fund
have approved the use of, and the Bank's contract with, such eligible foreign
custodian or eligible foreign securities depository by resolution, and
Instructions to such effect have been provided to the Bank. Furthermore, if a
Bank's branch, a branch of a qualified U.S. bank or an eligible foreign
custodian is selected to act as the Bank's sub-custodian to hold any Property,
such entity is authorized to hold such Property in its account with any eligible
foreign securities depository in which it participates so long as such foreign
securities depository has been approved by the Trustees of the Fund. For
purposes of this Agreement (a) "qualified U.S. bank" shall mean a qualified U.S.
bank as defined in Rule 17f-5 under the Investment Company Act, ("Rule 17f-5");
(b) "eligible foreign custodian" shall mean a banking institution or trust
company incorporated or organized under the laws of a country other than the
United States as defined in Rule 17-5; (c) "eligible foreign securities
depository" shall mean a securities depository or clearing agency, incorporated
or organized under the laws of a country other than the United States, which
operates (i) the central system, or in specific markets a system that is the
subject of a then currently viable and favorable "no-action letter" that has
been issued to Chase Manhattan Bank, N.A. by the staff of the Securities and
Exchange Commission, for handling of securities or equivalent book-entries in
that country or (ii) a transnational system for the central handling of
securities or equivalent book-entries.
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Hereinafter the term "sub-custodian" will refer to any Bank branch, any
branch of a qualified U.S. bank, any eligible foreign custodian or any eligible
foreign securities depository with which the Bank has entered into an agreement
of the type contemplated hereunder regarding Securities and/or cash held in or
to be acquired for a Custody Account or a Deposit Account.
If, after the initial approval of the sub-custodians by the Trustees of the
Fund in connection with this Agreement, the Bank wishes to appoint other
sub-custodians to hold the Fund's Property, it will so notify the Company and
the Fund and will provide them with information reasonably necessary to
determine any such new sub-custodian's eligibility under Rule 17f-5, including a
copy of the proposed agreement with such sub-custodian. The Fund shall within 30
days after receipt of such notice give a written approval or disapproval of the
proposed action.
If the Bank intends to remove any sub-custodian previously approved, it
shall so notify the Fund and the Company and shall move the Property deposited
with such sub-custodian to another sub-custodian previously approved or to a new
sub-custodian, provided that the appointment of any new sub-custodian will be
subject to the requirements set forth in the preceding paragraph. The Bank shall
take steps as may be required to remove any sub-custodian which has ceased to
meet the requirements of Rule 17f-5.
4. Use of Sub-Custodians. With respect to Property which is maintained by
the Bank in the physical custody of a sub-custodian pursuant to Section 3:
(a) The Bank will identify on its books as belonging to the particular
investment portfolio of the Fund any Property held by such sub-custodian.
(b) In the event that a sub-custodian permits any of the Securities placed
in its care to be held in an eligible foreign securities depository, such
sub-custodian will be required by its agreement with the Bank to identify on its
books such Securities as being held for the account of the Bank as a custodian
for its customers.
(c) Any Securities in a Custody Account held by a sub-custodian of the Bank
will be subject only to the instructions of the Bank or its agents; and any
Securities held in an eligible foreign securities depository for the account of
a sub-custodian will be subject only to the instructions of such sub-custodian.
(d) The Bank will only deposit Securities in an account with a
sub-custodian which includes exclusively the assets held by the Bank for its
customers, and the Bank will cause such account to be designated by such
sub-custodian as a
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<PAGE>
special custody account for the exclusive benefit of customers of the Bank.
(e) Any agreement the Bank shall enter into with a sub-custodian with
respect to the holding of Securities shall be consistent with Rule 17f-5 and
shall require that (i) the Securities are not subject to any right, charge,
security interest, lien or claim of any kind in favor of such sub-custodian or
its creditors except for a claim of payment for its safe custody or
administration and (ii) beneficial ownership of such Securities is freely
transferable without the payment of money or value other than for safe custody
or administration; provided, however, that the foregoing shall not apply to the
extent that any of the above-mentioned rights, charges, etc. result from any
compensation or other expenses arising with respect to the safekeeping of
Securities pursuant to such agreement.
(f) The Bank shall allow independent public accountants of the Fund such
reasonable access to the records of the Bank relating to Property held in a
Custody Account and a Deposit Account as required by such accountants in
connection with their examination of the books and records pertaining to the
affairs of the Fund. The Bank shall, subject to restrictions under applicable
law, also obtain from any sub-custodian with which the Bank maintains the
physical possession of any Property an undertaking to permit independent public
accountants of the Fund such reasonable access to the records of such
sub-custodian as may be required in connection with their examination of the
books and records pertaining to the affairs of the Fund or to supply a
verifiable confirmation of the contents of such records. The Bank shall furnish
the Fund and the Company such reports (or portions thereof) of the Bank's
external auditors as relate directly to the Bank's system of internal accounting
controls applicable to the Bank's duties under this Agreement.
(g) The Bank will supply to the Fund, care of its investment adviser, and
the Company at least monthly a statement in respect to any Property in a Custody
and a Deposit Account held by each sub-custodian, including an identification of
the entity having possession of such Property, and the Bank will send to the
Fund and the Company an advice or notification of any transfers of Property to
or from the Custody Account and Deposit Account, indicating, as to Property
acquired for an investment portfolio of the Fund, the identity of the entity
having physical possession of such Property. In the absence of the filing in
writing with the Bank by the Company of exceptions or objections to any such
statement within sixty (60) days of the Company's receipt of such statement, or
within sixty (60) days after the date that a material defect is reasonably
discoverable, the Company shall be deemed to have approved such statement; and
in such case or upon written approval of the Company of any such statement the
Bank shall, to the extent permitted by law and provided the Bank has met the
standard of care in Section 12
4
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hereof, be released, relieved and discharged with respect to all matters and
things set forth in such statement as though such statement has been settled by
the decree of a court of competent jurisdiction in an action in which the Fund
and all persons having any equity interest in the Fund were parties.
(h) The Bank shall provide to the Company and to the Trustees of the Fund
on an annual basis a report confirming the Bank's belief that it and each of the
sub-custodians is an eligible foreign custodian, a qualified U.S. bank or branch
of a qualified U.S. bank, as defined herein. The Bank shall also provide such
relevant information regarding the Securities and other assets, any
sub-custodian, any foreign country or itself as may be reasonably requested from
time to time by the Company or the Fund.
(i) The Bank hereby warrants to the Fund and the Company that in its
opinion, after due inquiry, the established procedures to be followed by each of
its branches, each branch of a qualified U.S. bank, each eligible foreign
custodian and each eligible foreign securities depository holding Securities or
cash of the Fund pursuant to this Agreement afford protection for such
Securities or cash at least equal to that afforded by the Bank's established
procedures with respect to similar Securities or cash held by the Bank (and its
securities depositories) in New York.
(j) The Bank hereby warrants to the Fund and the Company that as of the
date of this Agreement it is maintaining a Bankers Blanket Bond and hereby
agrees to notify the Fund and the Company in the event its Bankers Blanket Bond
is cancelled or otherwise lapses.
5. Deposit Account Payments. Subject to the provisions of Section 7, the
Bank shall make, or cause its sub-custodian to make, payments of cash credited
to a Deposit Account only:
(a) in connection with the purchase of Securities for the particular
investment portfolio of the Fund involved and the delivery of such Securities
to, or the crediting of such Securities to the particular Custody Account of,
the Bank or its sub-custodian, each such payment to be made at prices as
confirmed by Instructions from Authorized Persons (as defined in Section 10
hereof);
(b) for the purchase or redemption of shares of the capital stock of the
particular investment portfolio of the Fund involved and the delivery to, or
crediting to the account of, the Bank or its sub-custodian of such shares to be
so purchased or redeemed;
(c) for the payment for the account of the particular investment portfolio
of the Fund involved of dividends,
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<PAGE>
interest, taxes, management or supervisory fees, capital distributions or
operating expenses;
(d) for the payments to be made in connection with the conversion, exchange
or surrender of Securities held in a Custody Account;
(e) for other proper corporate purposes of the particular investment
portfolio of the Fund involved; or
(f) upon the termination of this Custody Agreement as hereinafter set
forth.
All payments of cash for a purpose permitted by subsection (a), (b), (c) or (d)
of this Section 5 will be made only upon receipt by the Bank of Instructions
from Authorized Persons which shall specify the purpose for which the payment is
to be made and the applicable subsection of this Section 5. In the case of any
payment to be made for the purpose permitted by subsection (e) of this Section
5, the Bank must first receive a certified copy of a resolution of the Trustees
of the Fund adequately describing such payment, declaring such purpose to be a
proper corporate purpose, and naming the person or persons to whom such payment
shall be made. Any payment pursuant to subsection (f) of this Section 5 will be
made in accordance with Section 17 hereof. In the event that any payment for an
investment portfolio of the Fund made under this Section 5 exceeds the funds
available in that investment portfolio's Deposit Account, the Bank may, in its
discretion, advance the Fund on behalf of that investment portfolio an amount
equal to such excess and such advance shall be deemed a loan from the Bank to
that investment portfolio payable on demand, bearing interest at the rate of
interest customarily charged by the Bank on similar loans. If the Bank causes a
Deposit Account to be credited on the payable date for interest, dividends or
redemptions, the particular investment portfolio of the Fund involved will
promptly return to the Bank any such amount or property so credited upon oral or
written notification that neither the Bank nor its sub-custodian can collect
such amount or property in the ordinary course of business. The Bank or its
sub-custodian, as the case may be, shall have no duty or obligation to institute
legal proceedings, file a claim or proof of claim in any insolvency proceeding
or take any other action with respect to the collection of such amount or
property beyond its ordinary collection procedures.
6. Custody Account Transactions. Subject to the provisions of Section 7,
Securities in a Custody Account will be transferred, exchanged or delivered by
the Bank or its sub-custodians only:
(a) upon sale of such Securities for the particular investment portfolio of
the Fund involved and receipt by the Bank or its sub-custodian of payment
therefor, each such payment to be in the amount confirmed by Instructions from
Authorized Persons;
6
<PAGE>
(b) when such Securities are called, redeemed or retired, or otherwise
become payable;
(c) in exchange for or upon conversion into other Securities alone or other
Securities and cash pursuant to any plan of merger, consolidation,
reorganization, recapitalization or readjustment;
(d) upon conversion of such Securities pursuant to their terms into other
Securities;
(e) upon exercise of subscription, purchase or other similar rights
represented by such Securities;
(f) for the purpose of exchanging interim receipts or temporary Securities
for definitive Securities;
(g) for the purpose of redeeming in kind shares of the capital stock of the
particular investment portfolio of the Fund involved against delivery to the
Bank or its sub-custodian of such shares to be redeemed;
(h) for other proper corporate purposes of the particular investment
portfolio of the Fund involved; or (i) upon the termination of this Custody
Agreement as hereinafter set forth.
All transfers, exchanges or deliveries of Securities in a Custody Account
for a purpose permitted by either subsection (a), (b), (c), (d), (e) or (f) of
this Section 6 will be made, except as provided in Section 8 hereof, only upon
receipt by the Bank of Instructions from Authorized Persons which shall specify
the purpose of the transfer, exchange or delivery to be made and the applicable
subsection of this Section 6. In the case of any transfer or delivery to be made
for the purpose permitted by subsection (g) of this Section 6, the Bank must
first receive Instructions from Authorized Persons specifying the shares held by
the Bank or its sub-custodian to be so transferred or delivered and naming the
person or persons to whom transfers or delivery of such shares shall be made. In
the case of any transfer, exchange or delivery to be made for the purpose
permitted by subsection (h) of this Section 6, the Bank must first receive a
certified copy of a resolution of the Trustees of the Fund adequately describing
such transfer, exchange or delivery, declaring such purpose to be a proper
corporate purpose, and naming the person or persons to whom delivery of such
Securities shall be made. Any transfer or delivery pursuant to subsection (i) of
this Section 6 will be made in accordance with Section 17 hereof.
7. Custody Account Procedures. With respect to any transaction involving
Securities held in or to be acquired for a Custody Account, the Bank in its
discretion may cause the Deposit Account for the particular investment portfolio
of the Fund involved to be credited on the contractual settlement date with the
proceeds of any sale or exchange of Securities from the particular Custody
Account and to be debited on the contractual settlement date for the cost of
Securities purchased or acquired
7
<PAGE>
for the particular Custody Account. The Bank may reverse any such credit or
debit if the transaction with respect to which such credit or debit was made
fails to settle within a reasonable period, determined by the Bank in its
discretion, after the contractual settlement date, except that if any Securities
delivered pursuant to this Section 7 are returned by the recipient thereof, the
Bank may cause any such credits and debits to be reversed at any time. With
respect to any transactions as to which the Bank does not determine so to credit
or debit the particular Deposit Account, the proceeds from the sale or exchange
of Securities will be credited and the cost of such Securities purchased or
acquired will be debited to the particular Deposit Account on the date such
proceeds or Securities are received by the Bank.
Notwithstanding the preceding paragraph, settlement and payment for
Securities received for, and delivery of Securities out of, a Custody Account
may be effected in accordance with the customary or established securities
trading or securities processing practices and procedures in the jurisdiction or
market in which the transaction occurs, including, without limitation,
delivering Securities to the purchaser thereof or to a dealer therefor (or an
agent for such purchaser or dealer) against a receipt with the expectation of
receiving later payment for such Securities from such purchaser or dealer.
8. Actions of the Bank. Until the Bank receives Instructions from
Authorized Persons to the contrary, the Bank will, or will instruct its
sub-custodian, to:
(a) present for payment any Securities in a Custody Account which are
called, redeemed or retired or otherwise become payable and all coupons and
other income items which call for payment upon presentation to the extent that
the Bank or sub-custodian is aware of such opportunities for payment, and hold
cash received upon presentation of such Securities in accordance with the
provisions of Sections 2, 3 and 4 hereof;
(b) in respect of Securities in a Custody Account, execute in the name of
the Fund on behalf of the particular investment portfolio involved such
ownership and other certificates as may be required to obtain payments in
respect thereof;
(c) exchange interim receipts or temporary Securities in a Custody Account
for definitive Securities;
(d) (if applicable) convert monies received with respect to Securities of
foreign issue into United States dollars or any other currency necessary to
effect any transaction involving the Securities whenever it is practicable to do
so through customary banking channels, using any method or agency available,
including, but not limited to, the facilities of the Bank, its subsidiaries,
affiliates or sub-custodians;
(e) (if applicable) appoint brokers and agents for any transaction
involving the Securities in a Custody Account,
8
<PAGE>
including, without limitation, affiliates of the Bank or any sub-custodian; and
(f) reclaim taxes withheld by foreign issuers where reclaim is possible,
provided that Bank has been provided with all documentation it may require.
9. Instructions. As used in this Agreement, the term "Instructions" means
instructions of the Fund or the Company received by the Bank via telephone,
telex, TWX, facsimile transmission, bank wire or other teleprocess or electronic
instruction system acceptable to the Bank which the Bank believes in good faith
to have been given by Authorized Persons or which are transmitted with proper
testing or authentication pursuant to terms and conditions which the Bank may
specify.
Any Instructions delivered to the Bank by telephone shall promptly
thereafter be confirmed in writing by an Authorized Person (which confirmation
may bear the facsimile signature of such Authorized Person), but the particular
investment portfolio of the Fund involved and the Company will hold the Bank
harmless for the Company's or the Fund's failure to send such confirmation in
writing, to the extent such investment portfolio of the Fund or the Company is
responsible for such failure. Unless otherwise expressly provided, all
Instructions shall continue in full force and effect until cancelled or
superseded. If the Bank requires test arrangements, authentication methods or
other security devices to be used with respect to Instructions, any Instructions
given by the Fund or the Company thereafter shall be given and processed in
accordance with such terms and conditions for the use of such arrangements,
methods or devices as the Bank may put into effect and modify from time to time.
The Fund and the Company shall safeguard any testkeys, identification codes or
other security devices which the Bank shall make available to them. The Bank may
electronically record any Instructions given by telephone, and any other
telephone discussions, with respect to a Custody Account.
10. Authorized Persons. As used in this Agreement, the term "Authorized
Persons" means such officers or such agents of the Fund or the Company as have
been designated by a resolution of the Board of Trustees of the Fund, a
certified copy of which has been provided to the Bank, to act on behalf of the
Fund in the performance of any acts which Authorized Persons may do under this
Agreement. Such persons shall continue to be Authorized Persons until such time
as the Bank receives Instructions from Authorized Persons that any such officer
or agent is no longer an Authorized Person.
11. Nominees. Securities in a Custody Account which are ordinarily held in
registered form may be registered in the name of the Bank's nominee or, as to
any Securities in the possession of an entity other than the Bank, in the name
of such entity's nominee. The particular investment portfolio of the Fund
involved agrees to hold any such nominee harmless from any
9
<PAGE>
liability as a holder of record of such Securities, but not if such liability is
a result of such nominee's negligence. The Bank may without notice to the
Company or the Fund cause any such Securities to cease to be registered in the
name of any such nominee and to be registered in the name of the Fund. In the
event that any Securities registered in the name of the Bank's nominee or held
by one of its sub-custodians and registered in the name of such sub-custodian's
nominee are called for partial redemption by the issuer of such Security, the
Bank may allot, or cause to be allotted, the called portion to the respective
beneficial holders of such class of security in any manner the Bank deems to be
fair and equitable.
12. Standard of Care.
(a) The Bank shall be obligated to perform only such duties as are set
forth in this Agreement or expressly contained in Instructions given to Bank
which are consistent with the provisions of this Agreement.
(i) The Bank will use reasonable care with respect to its
obligations under this Agreement and the safekeeping of
Property. The Bank shall be liable to the Fund and the Company
for any loss which shall occur as the result of the failure of
a sub-custodian or an eligible foreign securities depository
to exercise reasonable care with respect to the safekeeping of
such Property to the same extent that the Bank would be liable
to the Fund and the Company if the Bank were holding such
Property in New York. In the event of any loss to the Fund or
the Company by reason of the failure of the Bank or its sub-
custodian or an eligible foreign securities depository to
exercise reasonable care, the Bank shall be liable to the Fund
or the Company only to the extent of the Fund's or Company's
direct damages and expenses to be determined based on, but not
limited to, the market value of the Property which is the
subject of the loss at the date of discovery of such loss and
without reference to any special conditions or circumstances.
(ii) The Bank will not be responsible for any act, omission,
default or for the solvency of any broker or agent (other than
as provided herein) which it or a sub-custodian appoints and
uses unless such appointment and use were made or done
negligently or in bad faith.
(iii) The Bank shall be indemnified by, and without liability to,
the particular investment portfolio of the Fund involved and
the Company for any action taken or omitted by the Bank
whether pursuant to Instructions or otherwise within the scope
of this Agreement if such act or omission was in good faith
and without negligence. In performing its obligations under
this Agreement, the Bank may rely on the genuineness of any
document which it believes in good faith and without
negligence to have been validly executed. The Fund and the
Company shall idemnify the Bank only to the extent of the
Bank's direct damages and expenses, without reference to any
special conditions or circumstances.
(iv) The Fund, on behalf of the particular investment portfolio of
the Fund involved, agrees to cause such investment portfolio
to pay for and hold the Bank harmless from any liability or
loss resulting from the imposition or assessment of any taxes
or other governmental charges, and any related expenses with
respect to income from or Property in such investment
portfolio's Custody Account and Deposit Account.
(v) The Bank shall be entitled to rely, and may act upon the
advice of counsel (who may be counsel for the Fund or the
Company) on all matters and shall be without liability for any
10
<PAGE>
action reasonably taken or omitted in good faith and without
negligence pursuant to such advice.
(vi) The Bank need not maintain any insurance for the exclusive
benefit of the Fund or Company.
(vii) Without limiting the foregoing, the Bank shall not be liable
for any loss which results from:
1) the general risk of investing, or
2) subject to Section 12(a)(i) hereof, investing or holding
Property in a particular country including, but not limited
to, losses resulting from nationalization, expropriation or
other governmental actions; regulation of the banking or
securities industry; currency restrictions, devaluations or
fluctuations; and market conditions which prevent the
orderly execution of securities transactions or affect the
value of Property.
(viii) No party shall be liable to the other for any loss due to
forces beyond its control including but not limited to strikes
or work stoppages, acts of war or terrorism, insurrection,
revolution, nuclear fusion, fission or radiation, or acts of
God.
(b) Consistent with and without limiting the first paragraph of this
Section 12, it is specifically acknowledged that the Bank shall have no duty or
responsibility to:
(i) Question Instructions or make any suggestions to the Fund,
Company or an Authorized Person regarding such Instructions;
(ii) Supervise or make recommendations with respect to investments
or the retention of Securities;
(iii) Subject to Section 3 and Section 12(a)(ii) hereof, evaluate or
report to the Fund, Company or an Authorized Person regarding
the financial condition of any broker, agent or other party to
which Securities are delivered or payments are made pursuant
to this Agreement; or
(iv) Review or reconcile trade confirmations received from brokers.
(c) The Bank shall provide to the Fund, on an annual basis, a report
confirming that the arrangements hereunder remain in compliance with the rules
of the Securities and Exchange Commission governing such arrangements.
13. Compliance with Securities and Exchange Commission Rules and Orders.
Except to the extent the Bank has specifically agreed pursuant to this Agreement
or in an exemptive order to comply with a condition of Rule 17f-5 or any
interpretation or exemptive order promulgated thereunder by or under the
authority of the Securities and Exchange Commission, the Fund shall be solely
responsible to assure that the maintenance of Securities and cash under this
Agreement complies with such Rule 17f-5.
14. Corporate Action. Whenever the Bank or its sub-custodian receives
information concerning the Securities which requires discretionary action by the
beneficial owner of the Securities (other than a proxy), such as subscription
rights, bonus
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<PAGE>
issues, stock repurchase plans and rights offerings, or legal notices or
other material intended to be transmitted to securities holders ("Corporate
Actions"), the Bank will give the Company notice of such Corporate Actions to
the extent that the Bank's central corporate actions department has actual
knowledge of a Corporate Action in time to notify its customers.
When a rights entitlement or a fractional interest resulting from a rights
issue, stock dividend, stock split or similar Corporate Action is received which
bears an expiration date, the Bank or its sub-custodians will endeavor to obtain
Instructions from the Fund, Company or its Authorized Person, but if
Instructions are not received in time for the Bank to take timely action, or
actual notice of such Corporate Action was received too late to seek
Instructions, the Bank is authorized to sell such rights entitlement or
fractional interest and to credit the applicable Deposit Account with the
proceeds and to take any other action it deems, in good faith, to be appropriate
in which case, provided it has met the standard of care in Section 12 hereof, it
shall be held harmless by the particular investment portfolio of the Fund
involved for any such action.
The Bank will deliver proxies to the Company or its designated agent
pursuant to special arrangements which may have been agreed to in writing
between the parties hereto. Such proxies shall be executed in the appropriate
nominee name relating to Securities in a Custody Account registered in the name
of such nominee but without indicating the manner in which such proxies are to
be voted; and where bearer Securities are involved, proxies will be delivered in
accordance with instructions from Authorized Persons.
15. Fees and Expenses. The Company agrees to pay to the Bank from time to
time such compensation for its services pursuant to this Agreement as may be
mutually agreed upon in writing from time to time and the Bank's out-of-pocket
or incidental expenses, including (but without limitation) reasonable legal
fees. The Fund shall reimburse the Company for the entirety of such amount. The
Fund hereby agrees on behalf of its respective investment portfolios to cause
the particular investment portfolio of the Fund involved to hold the Bank
harmless from any liability or loss resulting from any taxes or other
governmental charges, and any expenses related thereto, which may be imposed, or
assessed with respect to such investment portfolio's Custody Account and also
agrees on behalf of its respective investment portfolios to cause the particular
investment portfolio of the Fund involved to hold the Bank, its sub-custodians,
and their respective nominees harmless from any liability as a record holder of
Securities in such investment portfolio's Custody Account. The Bank is
authorized to charge any account of the particular investment portfolio of the
Fund involved for such items and the Bank shall have a lien on Securities in
such investment portfolio's Custody Account and on cash in such investment
portfolio's Deposit Account for any amount owing to the Bank in
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<PAGE>
connection with such investment portfolio from time to time under this
Agreement.
16. Effectiveness. This Agreement shall be effective on the date first
noted above.
17. Termination. This Agreement may be terminated by the Fund, the Company
or the Bank by 60 days' written notice to the other parties, sent by registered
mail, provided that any termination by the Company shall be authorized by a
resolution of the Trustees of the Fund, a certified copy of which shall
accompany such notice of termination, and provided further, that such resolution
shall specify the names of persons to whom the Bank shall deliver the Securities
in each Custody Account and to whom the cash in each Deposit Account shall be
paid. If notice of termination is given by the Bank, the Fund or the Company
shall, within 60 days following the giving of such notice, deliver to the Bank a
certified copy of a resolution of the Trustees of the Fund specifying the names
of the persons to whom the Bank shall deliver such Securities and cash, after
deducting therefrom any amounts which the Bank reasonably determines to be owed
to it under Section 15 hereof. If within 60 days following the giving of a
notice of termination by the Bank, the Bank does not receive from the Fund or
the Company a certified copy of a resolution of the Trustees of the Fund
specifying the names of the persons to whom the cash in each Deposit Account
shall be paid and to whom the Securities in each Custody Account shall be
delivered, the Bank, at its election, may deliver such Securities and pay such
cash to a bank or trust company doing business in the State of New York and
qualified as a custodian under the Investment Company Act of 1940 (and having
aggregate capital, surplus and undivided profits of at least U.S. $20,000,000)
to be held and disposed of pursuant to the provisions of this Agreement, or may
continue to hold such Securities and cash until a certified copy of one or more
resolutions as aforesaid is delivered to the Bank. The obligations of the
parties hereto regarding the use of reasonable care, indemnities and payment of
fees and expenses shall survive the termination of this Agreement, and the
obligations of each investment portfolio of the Fund to indemnify and/or hold
harmless other persons or entities under this Agreement shall be the several
(and not the joint or joint and several) obligation of each investment portfolio
of the Fund.
18. Notices. Any notice or other communication from the Fund or the Company
to the Bank is to be sent to the office of the Bank at 4 Chase MetroTech Center,
18th Floor, Brooklyn, NY 11245, or such other address as may hereafter be given
to the Fund or the Company in accordance with the notice provisions hereunder,
and any notice from the Bank to the Fund or the Company is to be mailed postage
prepaid, addressed to the Fund and to the Company at the addresses appearing
below, or as the same may hereafter be changed on the Bank's records in
accordance with notice hereunder from the Fund or the Company.
19. Governing Law and Successors and Assigns. This Agreement shall be
governed by the law of the State of New
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York and shall not be assignable by any party, but shall bind the successors and
assigns of the Fund, the Company and the Bank.
20. Headings. The headings of the paragraphs hereof are included for
convenience of reference only and do not form a part of this Agreement.
21. Counterpart Execution. This Agreement may be executed in any number of
counterparts with the same effect as if all parties hereto had signed the same
document. All counterparts shall be construed together and shall constitute one
agreement.
22. Confidentiality. Bank agrees on behalf of itself and its employees to
treat confidentially all records and other information relative to the Fund and
its prior, present, or potential shareholders, and relative to the Company and
its prior, present, or potential customers, except, after prior notification to
and approval in writing by the Fund or the Company, which approval shall not be
unreasonably withheld and may not be withheld where Bank may be exposed to civil
or criminal contempt proceedings for failure to comply, when requested to
divulge such information by duly constituted authorities, or when so requested
by the Fund or the Company.
23. Records. The books and records pertaining to the Fund, which are in the
possession or under the control of the Bank, shall be the property of the Fund.
Such books and records shall be prepared and maintained as required by the
Investment Company Act of 1940 and other applicable securities laws, rules and
regulations. The Fund and Authorized Persons shall have access to such books and
records at all times during the Bank's normal business hours. Upon the
reasonable request of the Fund, copies of any such books and records shall be
provided by the Bank to the Fund or to an authorized representative of the Fund,
at the Fund's own expense.
24. Limitations on the Obligations of the Fund. The obligations of the Fund
are not binding upon any of the Trustees, shareholders, officers, employees or
agents of the Fund individually but are binding only upon the assets and
property of the Fund or one or more of its investment portfolios.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below on the day and year first above
written.
PNC BANK, NATIONAL ASSOCIATION
By: /s/ JOHN FOSTER
--------------------------
Address for record:
Airport Business Center
200 Stevens Drive
Lester, PA 19113
THE CHASE MANHATTAN BANK, N.A.
By: /s/ KEVEN P. NORTON
--------------------------
Address for record:
4 Chase Metro Tech Center
18th Floor
Brooklyn, N.Y. 11245
ASTRA GLOBAL INVESTMENT SERIES
By: /s/ JOHN ELERDING
--------------------------
Address for record:
c/o Astra Management Corp.
Symphony Towers
750 B Street
Suite 2350
San Diego, CA 92101
15
EXHIBIT 9(d)
FORM OF AMENDED AND RESTATED SHAREHOLDER MAINTENANCE AGREEMENT
BETWEEN
ASTRA GLOBAL INVESTMENT SERIES
(FORMERLY PILGRIM GLOBAL INVESTMENT SERIES)
AND
ASTRA FUNDS DISTRIBUTORS CORP.
(FORMERLY PILGRIM DISTRIBUTORS CORP.)
Pursuant to the terms of this Shareholder Maintenance Agreement between
Pilgrim Global Investment Series, whose series is known as Pilgrim Short Term
Multi-Market Income Fund II, and Pilgrim Distributors Corp. (the "Agreement"),
we hereby amend this Agreement to change the names of the parties to ASTRA
GLOBAL INVESTMENT SERIES, whose series is now known as ASTRA SHORT TERM
MULTI-MARKET INCOME FUND II, and ASTRA FUND DISTRIBUTORS CORP., respectively,
effective April 10, 1995.
ASTRA FUND DISTRIBUTORS CORP.
By: _____________________________
Agreed and Accepted:
Broker
By: __________________________
(Authorized Officer)
ASTRA GLOBAL INVESTMENT SERIES, on
behalf of its series, ASTRA SHORT TERM
MULTI-MARKET INCOME FUND II
By: _____________________________
Palomba Weingarten, President
ASTRA FUND DISTRIBUTORS CORP.
By: _____________________________
EXHIBIT 9(e)
ACCOUNTING SERVICES AGREEMENT
THIS AGREEMENT is made as of September 5, 1995 by and between ASTRA GLOBAL
INVESTMENT SERIES, a Massachusetts business trust (the "Fund"), and PFPC Inc.,
a Delaware corporation ("PFPC"), which is an indirect wholly owned subsidiary of
PNC Bank Corp.
W I T N E S S E T H :
WHEREAS, the Fund is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act");
and
WHEREAS, the Fund wishes to retain PFPC to provide accounting services to
its investment portfolios listed on Exhibit A attached hereto and made a part
hereof, as such Exhibit A may be amended from time to time (each a "Portfolio"),
and PFPC wishes to furnish such services.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, and intending to be legally bound hereby the parties hereto
agree as follows:
1. DEFINITIONS. AS USED IN THIS AGREEMENT:
(a) "1933 Act" means the Securities Act of 1933, as amended.
(b) "1934 Act" means the Securities Exchange Act of 1934, as amended.
(c) "Authorized Person" means any officer of the Fund and any other
person duly authorized by the Fund's Board of Trustees to give Oral and Written
Instructions on behalf of the Fund and listed on the Authorized Persons Appendix
attached hereto and made a part hereof or any amendment thereto as may be
received by PFPC. An Authorized Person's scope of authority may be limited by
the Fund by setting forth such limitation in the Authorized Persons Appendix.
(d) "CEA" means the Commodities Exchange Act, as amended.
(e) "Oral Instructions" mean oral instructions received by PFPC from an
Authorized Person or from a person reasonably believed by PFPC to be an
Authorized Person.
(f) "SEC" means the Securities and Exchange Commission.
(g) "Securities Laws" means the 1933 Act, the 1934 Act, the 1940 Act and
the CEA.
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(h) "Shares" mean the shares of beneficial interest of any series or
class of the Fund.
(i) "Written Instructions" mean written instructions signed by an
Authorized Person and received by PFPC. The instructions may be delivered by
hand, mail, tested telegram, cable, telex or facsimile sending device.
2. APPOINTMENT. The Fund hereby appoints PFPC to provide accounting
services to the each of the Portfolios, in accordance with the terms set forth
in this Agreement. PFPC accepts such appointment and agrees to furnish such
services.
3. DELIVERY OF DOCUMENTS. The Fund has provided or, where applicable, will
provide PFPC with the following:
(a) certified or authenticated copies of the resolutions of the Fund's
Board of Trustees, approving the appointment of PFPC or its
affiliates to provide services to each Portfolio and approving this
Agreement;
(b) a copy of Fund's most recent effective registration statement;
(c) a copy of each Portfolio's advisory agreement or agreements;
(d) a copy of the distribution agreement with respect to each class of
Shares representing an interest in a Portfolio;
(e) a copy of any additional administration agreement with respect to a
Portfolio;
(f) a copy of any shareholder servicing agreement made in respect of
the Fund or a Portfolio; and
(f) copies (certified or authenticated, where applicable) of any and
all amendments or supplements to the foregoing.
4. COMPLIANCE WITH RULES AND REGULATIONS.
PFPC undertakes to comply with all applicable requirements of the
Securities Laws, and any laws, rules and regulations of governmental authorities
having jurisdiction with respect to the duties to be performed by PFPC
hereunder. Except as specifically set forth herein, PFPC assumes no
responsibility for such compliance by the Fund or any Portfolio.
5. INSTRUCTIONS.
(a) Unless otherwise provided in this Agreement, PFPC shall act only upon
Oral and Written Instructions.
(b) PFPC shall be entitled to rely upon any Oral and Written Instructions
it receives from an Authorized Person (or from a person reasonably believed by
PFPC to be an Authorized Person) pursuant to this Agreement. PFPC may assume
that any Oral or Written Instruction received hereunder is not in any way
inconsistent with the provisions of organizational documents or this Agreement
or of any vote, resolution or proceeding of the Fund's Board of Trustees or of
the Fund's shareholders, unless and until PFPC receives Written Instructions to
the contrary.
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(c) The Fund agrees to forward to PFPC Written Instructions confirming Oral
Instructions (except where such Oral Instructions are given by PFPC or its
affiliates) so that PFPC receives the Written Instructions by the close of
business on the same day that such Oral Instructions are received. The fact that
such confirming Written Instructions are not received by PFPC shall in no way
invalidate the transactions or enforceability of the transactions authorized by
the Oral Instructions. Where Oral or Written Instructions reasonably appear to
have been received from an Authorized Person, PFPC shall incur no liability to
the Fund in acting upon such Oral or Written Instructions provided that PFPC's
actions comply with the other provisions of this Agreement.
6. RIGHT TO RECEIVE ADVICE.
(a) Advice of the Fund. If PFPC is in doubt as to any action it should or
should not take, PFPC may request directions or advice, including Oral or
Written Instructions, from the Fund.
(b) Advice of Counsel. If PFPC shall be in doubt as to any question of law
pertaining to any action it should or should not take, PFPC may request advice
at its own cost from such counsel of its own choosing (who may be counsel for
the Fund, the Fund's investment adviser or PFPC, at the option of PFPC).
(c) Conflicting Advice. In the event of a conflict between directions,
advice or Oral or Written Instructions PFPC receives from the Fund and the
advice PFPC receives from counsel, PFPC may rely upon and follow the advice of
counsel. In the event PFPC so relies on the advice of counsel, PFPC remains
liable for any action or omission on the part of PFPC which constitutes willful
misfeasance, bad faith, gross negligence or reckless disregard by PFPC of any
duties, obligations or responsibilities set forth in this Agreement.
(d) Protection of PFPC. PFPC shall be protected in any action it takes or
does not take in reliance upon directions, advice or Oral or Written
Instructions it receives from the Fund or from counsel and which PFPC believes,
in good faith, to be consistent with those directions, advice and Oral or
Written Instructions. Nothing in this section shall be construed so as to impose
an obligation upon PFPC (i) to seek such directions, advice or Oral or Written
Instructions, or (ii) to act in accordance with such directions, advice or Oral
or Written Instructions unless, under the terms of other provisions of this
Agreement, the same is a condition of PFPC's properly taking or not taking such
action. Nothing in this subsection shall excuse PFPC when an action or omission
on the part of PFPC constitutes willful misfeasance, bad faith, gross negligence
or reckless disregard by
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PFPC of any duties, obligations or responsibilities set forth in this Agreement.
7. RECORDS; VISITS.
(a) The books and records pertaining to the Fund and the Portfolios which
are in the possession or under the control of PFPC shall be the property of the
Fund. Such books and records shall be prepared and maintained as required by the
1940 Act and other applicable securities laws, rules and regulations. The Fund
and Authorized Persons shall have access to such books and records at all times
during PFPC's normal business hours. Upon the reasonable request of the Fund,
copies of any such books and records shall be provided by PFPC to the Fund or to
an Authorized Person, at the Fund's expense.
(b) PFPC shall keep the following records:
(i) all books and records with respect to each Portfolio's books of
account;
(ii) records of each Portfolio's securities transactions;
(iii) all other books and records as PFPC is required to maintain
pursuant to Rule 31a-1 of the 1940 Act in connection with the
services provided hereunder.
8. CONFIDENTIALITY. PFPC agrees on its own behalf and that of its employees
to keep confidential all records of the Fund and information relating to the
Fund and its shareholders (past, present and future), unless the release of such
records or information is otherwise consented to, in writing, by the Fund. The
Fund agrees that such consent shall not be unreasonably withheld and may not be
withheld where PFPC may be exposed to civil or criminal contempt proceedings or
when required to divulge such information or records to duly constituted
authorities.
9. LIAISON WITH ACCOUNTANTS. PFPC shall act as liaison with the Fund's
independent public accountants and shall provide account analyses, fiscal year
summaries, and other audit-related schedules with respect to each Portfolio.
PFPC shall take all reasonable action in the performance of its duties under
this Agreement to assure that the necessary information is made available to
such accountants for the expression of their opinion, as required by the Fund.
10. DISASTER RECOVERY. PFPC shall enter into and shall maintain in effect
with appropriate parties one or more agreements making reasonable provisions for
emergency use of electronic data processing equipment to the extent appropriate
equipment is available. In the event of equipment failures, PFPC shall, at no
additional expense to the Fund, take reasonable steps to minimize service
interruptions. PFPC shall have no liability with respect to the loss of data or
service interruptions caused by equipment failure, provided such loss or
interruption is not caused by PFPC's own willful misfeasance, bad faith, gross
negligence or reckless disregard of its duties or obligations under this
Agreement.
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11. COMPENSATION. As compensation for services rendered by PFPC during the
term of this Agreement, the Fund, on behalf of each Portfolio, will pay to PFPC
a fee or fees as may be agreed to in writing by the Fund and PFPC.
12. INDEMNIFICATION. The Fund, on behalf of each Portfolio, agrees to
indemnify and hold harmless PFPC and its affiliates from all taxes, charges,
expenses, assessments, claims and liabilities (including, without limitation,
liabilities arising under the Securities Laws and any state or foreign
securities and blue sky laws, and amendments thereto), and expenses, including
(without limitation) attorneys' fees and disbursements arising directly or
indirectly from any action or omission to act which PFPC takes (i) at the
request or on the direction of or in reliance on the advice of the Fund or (ii)
upon Oral or Written Instructions. Neither PFPC, nor any of its affiliates',
shall be indemnified against any liability (or any expenses incident to such
liability) arising out of PFPC's or its affiliates' own willful misfeasance, bad
faith, gross negligence or reckless disregard of its duties and obligations
under this Agreement. Any amounts payable by the Fund hereunder shall be
satisfied only against the relevant Portfolio's assets and not against the
assets of any other investment portfolio of the Fund.
13. RESPONSIBILITY OF PFPC.
(a) PFPC shall be under no duty to take any action on behalf of the Fund or
any Portfolio except as specifically set forth herein or as may be specifically
agreed to by PFPC in writing. PFPC shall be obligated to exercise care and
diligence in the performance of its duties hereunder, to act in good faith and
to use its best efforts, within reasonable limits, in performing services
provided for under this Agreement. PFPC shall be liable for any damages arising
out of PFPC's failure to perform its duties under this Agreement to the extent
such damages arise out of PFPC's willful misfeasance, bad faith, gross
negligence or reckless disregard of such duties.
(b) Without limiting the generality of the foregoing or of any other
provision of this Agreement, (i) PFPC shall not be liable for losses beyond its
control, provided that PFPC has acted in accordance with the standard of care
set forth above; and (ii) PFPC shall not be liable for (A) the validity or
invalidity or authority or lack thereof of any Oral or Written Instruction,
notice or other instrument which conforms to the applicable requirements of this
Agreement, and which PFPC reasonably believes to be genuine; or (B) subject to
Section 10, delays or errors or loss of data occurring by reason of
circumstances beyond PFPC's control, including acts of civil or military
authority, national emergencies, labor difficulties, fire, flood, catastrophe,
acts of God, insurrection, war, riots or failure of the mails, transportation,
communication or power supply.
(c) Notwithstanding anything in this Agreement to the contrary, neither
PFPC nor its affiliates shall be liable to
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the Fund or to any Portfolio for any consequential, special or indirect
losses or damages which the Fund or any Portfolio may incur or suffer by or as a
consequence of PFPC's or any affiliate's performance of the services provided
hereunder, whether or not the likelihood of such losses or damages was known by
PFPC or its affiliates.
14. DESCRIPTION OF ACCOUNTING SERVICES ON A CONTINUOUS BASIS. PFPC will
perform the following accounting services with respect to each Portfolio:
(i) Journalize investment, capital share and income and expense
activities;
(ii) Verify investment buy/sell trade tickets when received from the
investment adviser for a Portfolio (the "Adviser") and transmit
trades to the Fund's custodian (the "Custodian") for proper
settlement;
(iii) Maintain individual ledgers for investment securities;
(iv) Maintain historical tax lots for each security;
(v) Reconcile cash and investment balances of the Fund with the
Custodian, and provide the Adviser with the beginning cash
balance available for investment purposes;
(vi) Update the cash availability throughout the day as required by
the Adviser;
(vii) Post to and prepare the Statement of Assets and Liabilities and
the Statement of Operations;
(viii) Calculate various contractual expenses (e.g., advisory and
custody fees);
(ix) Monitor the expense accruals and notify an officer of the Fund
of any proposed adjustments;
(x) Control all disbursements and authorize such disbursements upon
Written Instructions;
(xi) Calculate capital gains and losses;
(xii) Determine net income;
(xiii) Obtain security market quotes from independent pricing services
approved by the Adviser, or if such quotes are unavailable, then
obtain such prices from the Adviser, and in either case
calculate the market value of each Portfolio's Investments;
(xiv) Transmit or mail a copy of the daily portfolio valuation to the
Adviser;
(xv) Compute net asset value;
(xvi) As appropriate, compute yields, total return, expense ratios,
portfolio turnover rate, and, if required, portfolio average
dollar-weighted maturity; and
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(xvii) Prepare a monthly financial statement, which will include the
following items:
Schedule of Investments
Statement of Assets and Liabilities
Statement of Operations
Statement of Changes in Net Assets Cash
Statement Schedule of Capital Gains and Losses.
15. DURATION AND TERMINATION. This Agreement shall continue until
terminated by either party on sixty (60) days' prior written notice to the other
party.
16. NOTICES. All notices and other communications, including Written
Instructions, shall be in writing or by confirming telegram, cable, telex or
facsimile sending device. If notice is sent by confirming telegram, cable, telex
or facsimile sending device, it shall be deemed to have been given immediately.
If notice is sent by first-class mail, it shall be deemed to have been given
three days after it has been mailed. If notice is sent by messenger, it shall be
deemed to have been given on the day it is delivered. Notices shall be addressed
(a) if to PFPC, at 400 Bellevue Parkway, Wilmington, Delaware 19809; (b) if to
the Fund, at Astra Management Corp., Symphony Towers, 750 B Street, Suite 2350,
San Diego, CA 92101; or (c) if to neither of the foregoing, at such other
address as shall have been provided by like notice to the sender of any such
notice or other communication by the other party.
17. AMENDMENTS. This Agreement, or any term thereof, may be changed or
waived only by written amendment, signed by the party against whom enforcement
of such change or waiver is sought.
18. DELEGATION; ASSIGNMENT. PFPC may assign its rights and delegate its
duties hereunder to any wholly-owned direct or indirect subsidiary of PNC Bank,
National Association or PNC Bank Corp., provided that (i) PFPC gives the Fund
thirty (30) days' prior written notice; (ii) the delegate (or assignee) agrees
with PFPC and the Fund to comply with all relevant provisions of the 1940 Act;
and (iii) PFPC and such delegate (or assignee) promptly provide such information
as the Fund may request, and respond to such questions as the Fund may ask,
relative to the delegation (or assignment), including (without limitation) the
capabilities of the delegate (or assignee).
19. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
20. FURTHER ACTIONS. Each party agrees to perform such further acts and
execute such further documents as are necessary to effectuate the purposes
hereof.
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21. MISCELLANEOUS.
(a) Entire Agreement. This Agreement embodies the entire agreement and
understanding between the parties and supersedes all prior agreements and
understandings relating to the subject matter hereof, provided that the parties
may embody in one or more separate documents their agreement, if any, with
respect to delegated duties and Oral Instructions.
(b) Captions. The captions in this Agreement are included for convenience
of reference only and in no way define or delimit any of the provisions hereof
or otherwise affect their construction or effect.
(c) Governing Law. This Agreement shall be deemed to be a contract made in
Delaware and governed by Delaware law, without regard to principles of conflicts
of law.
(d) Partial Invalidity. If any provision of this Agreement shall be held or
made invalid by a court decision, statute, rule or otherwise, the remainder of
this Agreement shall not be affected thereby.
(e) Successors and Assigns. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors and
permitted assigns.
(f) Facsimile Signatures. The facsimile signature of any party to this
Agreement shall constitute the valid and binding execution hereof by such party.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
PFPC INC.
By: /s/ STEPHEN M. WYNNE
-------------------------------
Title: Executive Vice President
----------------------------
ASTRA GLOBAL INVESTMENT SERIES
By: /s/ JOHN R. ELERDING
-------------------------------
Title: Chief Financial Officer
----------------------------
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EXHIBIT A
THIS EXHIBIT A, dated as of ___________________ , 1995, is Exhibit A to
that certain Accounting Services Agreement dated as of _____________________ ,
1995 between PFPC Inc. and Astra Global Investment Series.
PORTFOLIOS
Astra Short-Term Multi-Market Income Fund
Astra Short-Term Multi-Market Income Fund II
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AUTHORIZED PERSONS APPENDIX
NAME (Type) SIGNATURE
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- -------------------------- --------------------------
- -------------------------- --------------------------
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EXHIBIT 9(f)
SUB-ADMINISTRATION SERVICES AGREEMENT
THIS AGREEMENT is made as of September 5, 1995 by and between ASTRA
MANAGEMENT CORPORATION (the "Company") and PFPC INC., a Delaware corporation
("PFPC"), which is an indirect wholly owned subsidiary of PNC Bank Corp.
W I T N E S S E T H :
WHEREAS, ASTRA GLOBAL INVESTMENT SERIES (the "Fund") is registered as an
open-end management investment company under the Investment Company Act of 1940,
as amended (the "1940 Act");
WHEREAS, the Company has been appointed by the Fund as Administrator of the
Fund; and
WHEREAS, the Company wishes to retain PFPC to provide administration
services for the benefit of the Fund's investment portfolios listed on Exhibit A
attached hereto and made a part hereof, as such Exhibit A may be amended from
time to time (each a "Portfolio"), and PFPC wishes to furnish such services.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, and intending to be legally bound hereby the parties hereto
agree as follows:
1. DEFINITIONS. AS USED IN THIS AGREEMENT:
(a) "1933 Act" means the Securities Act of 1933, as amended.
(b) "1934 Act" means the Securities Exchange Act of 1934, as amended.
(c) "Authorized Person" means any officer of the Fund and any other person
duly authorized by the Fund's Board of Trustees to give Oral and Written
Instructions on behalf of the Fund and listed on the Authorized Persons Appendix
attached hereto and made a part hereof or any amendment thereto as may be
received by PFPC. An Authorized Person's scope of authority may be limited by
setting forth such limitation in the Authorized Persons Appendix.
(d) "CEA" means the Commodities Exchange Act, as amended.
(e) "Oral Instructions" mean oral instructions received by PFPC from an
Authorized Person or from a person reasonably believed by PFPC to be an
Authorized Person.
(f) "SEC" means the Securities and Exchange Commission.
(g) "Securities Laws" means the 1933 Act, the 1934 Act, the 1940 Act and
the CEA.
(h) "Shares" mean the shares of beneficial interest of any series or class
of the Fund.
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(i) "Written Instructions" mean written instructions signed by an
Authorized Person and received by PFPC. The instructions may be delivered by
hand, mail, tested telegram, cable, telex or facsimile sending device.
2. APPOINTMENT. The Company hereby appoints PFPC to provide administration
services for the benefit of each of the Portfolios, in accordance with the terms
set forth in this Agreement. PFPC accepts such appointment and agrees to furnish
such services.
3. DELIVERY OF DOCUMENTS. The Company has provided or, where applicable,
will provide PFPC with the following:
(a) certified or authenticated copies of the resolutions of the Fund's
Board of Trustees, approving the appointment of PFPC or its
affiliates to provide services to each Portfolio and approving this
Agreement;
(b) a copy of Fund's most recent effective registration statement;
(c) a copy of each Portfolio's advisory agreement or agreements;
(d) a copy of the distribution agreement with respect to each class of
Shares representing an interest in a Portfolio;
(e) a copy of any additional administration agreement with respect to a
Portfolio;
(f) a copy of any shareholder servicing agreement made in respect of the
Fund or a Portfolio; and
(f) copies (certified or authenticated, where applicable) of any and all
amendments or supplements to the foregoing.
4. COMPLIANCE WITH RULES AND REGULATIONS. PFPC undertakes to comply with
all applicable requirements of the Securities Laws, and any laws, rules and
regulations of governmental authorities having jurisdiction with respect to the
duties to be performed by PFPC hereunder. Except as specifically set forth
herein, PFPC assumes no responsibility for such compliance by the Fund or any
Portfolio.
5. INSTRUCTIONS.
(a) Unless otherwise provided in this Agreement, PFPC shall act only upon
Oral and Written Instructions.
(b) PFPC shall be entitled to rely upon any Oral and Written Instructions
it receives from an Authorized Person (or from a person reasonably believed by
PFPC to be an Authorized Person) pursuant to this Agreement. PFPC may assume
that any Oral or Written Instruction received hereunder is not in any way
inconsistent with the provisions of organizational documents or this Agreement
or of any vote, resolution or proceeding of the Fund's Board of Trustees or of
the Fund's shareholders, unless and until PFPC receives Written Instructions to
the contrary.
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(c) The Company agrees to forward to PFPC Written Instructions confirming
Oral Instructions (except where such Oral Instructions are given by PFPC or its
affiliates) so that PFPC receives the Written Instructions by the close of
business on the same day that such Oral Instructions are received. The fact that
such confirming Written Instructions are not received by PFPC shall in no way
invalidate the transactions or enforceability of the transactions authorized by
the Oral Instructions. Where Oral or Written Instructions reasonably appear to
have been received from an Authorized Person, PFPC shall incur no liability to
the Fund or the Company in acting upon such Oral or Written Instructions
provided that PFPC's actions comply with the other provisions of this Agreement.
6. RIGHT TO RECEIVE ADVICE.
(a) Advice of the Fund. If PFPC is in doubt as to any action it should or
should not take, PFPC may request directions or advice, including Oral or
Written Instructions, from the Company or the Fund.
(b) Advice of Counsel. If PFPC shall be in doubt as to any question of law
pertaining to any action it should or should not take, PFPC may request advice
at its own cost from such counsel of its own choosing (who may be counsel for
the Company, the Fund, the Fund's investment adviser or PFPC, at the option of
PFPC).
(c) Conflicting Advice. In the event of a conflict between directions,
advice or Oral or Written Instructions PFPC receives from the Company or the
Fund and the advice PFPC receives from counsel, PFPC may rely upon and follow
the advice of counsel. In the event PFPC so relies on the advice of counsel,
PFPC remains liable for any action or omission on the part of PFPC which
constitutes willful misfeasance, bad faith, gross negligence or reckless
disregard by PFPC of any duties, obligations or responsibilities set forth in
this Agreement.
(d) Protection of PFPC. PFPC shall be protected in any action it takes or
does not take in reliance upon directions, advice or Oral or Written
Instructions it receives from the Company, the Fund or from counsel and which
PFPC believes, in good faith, to be consistent with those directions, advice and
Oral or Written Instructions. Nothing in this section shall be construed so as
to impose an obligation upon PFPC (i) to seek such directions, advice or Oral or
Written Instructions, or (ii) to act in accordance with such directions, advice
or Oral or Written Instructions unless, under the terms of other provisions of
this Agreement, the same is a condition of PFPC's properly taking or not taking
such action. Nothing in this subsection shall excuse PFPC when an action or
omission on the part of PFPC constitutes willful misfeasance, bad faith, gross
negligence or reckless disregard by PFPC of any duties, obligations or
responsibilities set forth in this Agreement.
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7. RECORDS; VISITS.
(a) The books and records pertaining to the Fund and the Portfolios which
are in the possession or under the control of PFPC shall be the property of the
Company or the Fund as the Company may direct. Such books and records shall be
prepared and maintained as required by the 1940 Act and other applicable
securities laws, rules and regulations. The Company, the Fund and their
Authorized Persons shall have access to such books and records at all times
during PFPC's normal business hours. Upon the reasonable request of the Company,
copies of any such books and records shall be provided by PFPC to the Fund, the
Company or to an Authorized Person, at the Company's expense.
(b) PFPC shall keep the following records:
(i) all books and records with respect to each Portfolio's books of
account;
(ii) records of each Portfolio's securities transactions;
(iii) all other books and records as PFPC is required to maintain
pursuant to Rule 31a-1 of the 1940 Act in connection with the
services provided hereunder.
8. CONFIDENTIALITY. PFPC agrees on its own behalf and that of its employees
to keep confidential all records of the Company and the Fund and information
relating to the Fund and its shareholders (past, present and future), unless the
release of such records or information is otherwise consented to, in writing, by
the Company or the Fund. The Company agrees that such consent shall not be
unreasonably withheld and may not be withheld where PFPC may be exposed to civil
or criminal contempt proceedings or when required to divulge such information or
records to duly constituted authorities.
9. LIAISON WITH ACCOUNTANTS. PFPC shall act as liaison with the Fund's
independent public accountants and shall provide account analyses, fiscal year
summaries, and other audit-related schedules with respect to each Portfolio.
PFPC shall take all reasonable action in the performance of its duties under
this Agreement to assure that the necessary information is made available to
such accountants for the expression of their opinion, as required by the
Company.
10. DISASTER RECOVERY. PFPC shall enter into and shall maintain in effect
with appropriate parties one or more agreements making reasonable provisions for
emergency use of electronic data processing equipment to the extent appropriate
equipment is available. In the event of equipment failures, PFPC shall, at no
additional expense to the Company, take reasonable steps to minimize service
interruptions. PFPC shall have no liability with respect to the loss of data or
service interruptions caused by equipment failure, provided such loss or
interruption is not caused by PFPC's own willful misfeasance, bad faith, gross
negligence or reckless disregard of its duties or obligations under this
Agreement.
11. COMPENSATION. As compensation for services rendered by PFPC during the
term of this Agreement, the Company will pay to PFPC a fee or fees as may be
agreed to in writing by the Company and PFPC.
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12. INDEMNIFICATION. The Company agrees to indemnify and hold harmless PFPC
and its affiliates from all taxes, charges, expenses, assessments, claims and
liabilities (including, without limitation, liabilities arising under the
Securities Laws and any state or foreign securities and blue sky laws, and
amendments thereto), and expenses, including (without limitation) attorneys'
fees and disbursements arising directly or indirectly from any action or
omission to act which PFPC takes (i) at the request or on the direction of or in
reliance on the advice of the Company or the Fund or (ii) upon Oral or Written
Instructions. Neither PFPC, nor any of its affiliates', shall be indemnified
against any liability (or any expenses incident to such liability) arising out
of PFPC's or its affiliates' own willful misfeasance, bad faith, gross
negligence or reckless disregard of its duties and obligations under this
Agreement. Any amounts payable by the Fund hereunder shall be satisfied only
against the relevant Portfolio's assets and not against the assets of any other
investment portfolio of the Fund.
13. RESPONSIBILITY OF PFPC.
(a) PFPC shall be under no duty to take any action on behalf of the
Company, the Fund or any Portfolio except as specifically set forth herein or as
may be specifically agreed to by PFPC in writing. PFPC shall be obligated to
exercise care and diligence in the performance of its duties hereunder, to act
in good faith and to use its best efforts, within reasonable limits, in
performing services provided for under this Agreement. PFPC shall be liable for
any damages arising out of PFPC's failure to perform its duties under this
Agreement to the extent such damages arise out of PFPC's willful misfeasance,
bad faith, gross negligence or reckless disregard of such duties.
(b) Without limiting the generality of the foregoing or of any other
provision of this Agreement, (i) PFPC shall not be liable for losses beyond its
control, provided that PFPC has acted in accordance with the standard of care
set forth above; and (ii) PFPC shall not be liable for (A) the validity or
invalidity or authority or lack thereof of any Oral or Written Instruction,
notice or other instrument which conforms to the applicable requirements of this
Agreement, and which PFPC reasonably believes to be genuine; or (B) subject to
Section 10, delays or errors or loss of data occurring by reason of
circumstances beyond PFPC's control, including acts of civil or military
authority, national emergencies, labor difficulties, fire, flood, catastrophe,
acts of God, insurrection, war, riots or failure of the mails, transportation,
communication or power supply.
(c) Notwithstanding anything in this Agreement to the contrary, neither
PFPC nor its affiliates shall be liable to the Company, the Fund or to any
Portfolio for any consequential, special or indirect losses or damages which the
Company, the Fund or any Portfolio may incur or suffer by or as a consequence of
PFPC's or any affiliate's performance of the services provided hereunder,
whether or not the likelihood of such losses or damages was known by PFPC or its
affiliates.
5
<PAGE>
14. DESCRIPTION OF ADMINISTRATION SERVICES ON A CONTINUOUS BASIS. PFPC will
perform the following administration services with respect to each Portfolio:
(i) Prepare quarterly broker security transactions summaries;
(ii) Prepare monthly security transaction listings;
(iii) Supply various normal and customary Portfolio and Fund
statistical data as requested on an ongoing basis;
(iv) Coordinate the preparation and filing of the Fund's Federal and
state tax returns;
(v) Coordinate the preparation and filing of the Fund's Form N-SAR
and Rule 24f-2 Notices;
(vi) Assist in the preparation and coordinate the production and
filing of the Fund's annual, semi-annual, and quarterly
shareholder reports;
(vii) Assist in the preparation of registration statements and other
filings relating to the registration of Shares;
(viii) Assist in monitoring each Portfolio's status as a regulated
investment company under Sub-chapter M of the Internal Revenue
Code of 1986, as amended;
(ix) Assist in coordinating the contractual relationships and
communications between the Fund and its contractual service
providers; and
(x) Assist in monitoring the Fund's state blue sky registration and
compliance with the amounts and conditions of each state
qualification.
15. DESCRIPTION OF ADDITIONAL REGULATORY COMPLIANCE AND ADMINISTRATION
SERVICES.
PFPC will perform the following services with respect to each Portfolio.
(i) Assist the investment adviser in monitoring the Fund's compliance with
certain investment restrictions, limited to after-transactions testing
regarding the following procedures:
- Industry Diversification
- Issuer Diversification
- State Diversification
- Country Diversification
- Limitation of International Holdings;
(ii) Assist management in developing a response to the Securities and
Exchange Commission staff's routine examinations;
(iii) Assist in the preparation of Post Effective Amendments to the Funds
Registration Statement on Form N-1A;
(iv) Monitor various SEC and IRS regulatory developments affecting
investment companies;
(v) Coordinate the administrative details of preparing for the Fund's
Board Meeting, including the preparation of the Administration report
and coordination of reports and related materials from the adviser,
distributor, transfer agent and custodian, etc.;
(vi) Provide the Fund with signatories which may be authorized by the Fund
to facilitate certain required
6
<PAGE>
regulatory filings and the processing of invoices;
(vii) Monitor the maintenance of Directors' and Officers' insurance
and Fidelity Bond insurance coverage on behalf of the Fund;
(viii) Coordinate with fund management, independent auditors and
printers for the preparation of shareholder reports;
(ix) Prepare and distribute operational reports to management by
the tenth business day after receiving all applicable reports
from outside vendors; and
(x) Maintain a monthly "task list" calendar noting required
completion dates.
16. DURATION AND TERMINATION. This Agreement shall continue until
terminated by either party on sixty (60) days' prior written notice to the other
party.
17. NOTICES. All notices and other communications, including Written
Instructions, shall be in writing or by confirming telegram, cable, telex or
facsimile sending device. If notice is sent by confirming telegram, cable, telex
or facsimile sending device, it shall be deemed to have been given immediately.
If notice is sent by first-class mail, it shall be deemed to have been given
three days after it has been mailed. If notice is sent by messenger, it shall be
deemed to have been given on the day it is delivered. Notices shall be addressed
(a) if to PFPC, at 400 Bellevue Parkway, Wilmington, Delaware 19809; (b) if to
the Company, at Astra Management Corp., Symphony Towers, 750 B Street, Suite
2350, San Diego, CA 92101; or (c) if to neither of the foregoing, at such other
address as shall have been provided by like notice to the sender of any such
notice or other communication by the other party.
18. AMENDMENTS. This Agreement, or any term thereof, may be changed or
waived only by written amendment, signed by the party against whom enforcement
of such change or waiver is sought.
19. DELEGATION; ASSIGNMENT. PFPC may assign its rights and delegate its
duties hereunder to any wholly-owned direct or indirect subsidiary of PNC Bank,
National Association or PNC Bank Corp., provided that (i) PFPC gives the Company
thirty (30) days' prior written notice; (ii) the delegate (or assignee) agrees
with PFPC and the Company to comply with all relevant provisions of the 1940
Act; and (iii) PFPC and such delegate (or assignee) promptly provide such
information as the Company may request, and respond to such questions as the
Company may ask, relative to the delegation (or assignment), including (without
limitation) the capabilities of the delegate (or assignee).
20. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
7
<PAGE>
21. FURTHER ACTIONS. Each party agrees to perform such further acts and
execute such further documents as are necessary to effectuate the purposes
hereof.
22. MISCELLANEOUS.
(a) Entire Agreement. This Agreement embodies the entire agreement and
understanding between the parties and supersedes all prior agreements and
understandings relating to the subject matter hereof, provided that the parties
may embody in one or more separate documents their agreement, if any, with
respect to delegated duties and Oral Instructions.
(b) Captions. The captions in this Agreement are included for convenience
of reference only and in no way define or delimit any of the provisions hereof
or otherwise affect their construction or effect.
(c) Governing Law. This Agreement shall be deemed to be a contract made in
Delaware and governed by Delaware law, without regard to principles of conflicts
of law.
(d) Partial Invalidity. If any provision of this Agreement shall be held or
made invalid by a court decision, statute, rule or otherwise, the remainder of
this Agreement shall not be affected thereby.
(e) Successors and Assigns. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors and
permitted assigns.
(f) Facsimile Signatures. The facsimile signature of any party to this
Agreement shall constitute the valid and binding execution hereof by such party.
8
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
PFPC INC.
By: /s/ STEPHEN M. WYNNE
---------------------------------
Title: Executive Vice President
------------------------------
ASTRA MANAGEMENT CORPORATION
By: /s/ JOHN R. ELERDING
---------------------------------
Title: Chief Financial Officer
------------------------------
9
<PAGE>
EXHIBIT A
THIS EXHIBIT A, dated as of September 5, 1995, is Exhibit A to that
certain Administration Services Agreement dated as of September 5, 1995 between
PFPC Inc. and Astra Management Corporation.
PORTFOLIOS OF ASTRA GLOBAL INVESTMENT SERIES
Astra Short-Term Multi-Market Income Fund
Astra Short-Term Multi-Market Income Fund II
10
<PAGE>
AUTHORIZED PERSONS APPENDIX
NAME (Type) SIGNATURE
---------------------------- ----------------------------
---------------------------- ----------------------------
---------------------------- ----------------------------
---------------------------- ----------------------------
---------------------------- ----------------------------
---------------------------- ----------------------------
11
EXHIBIT 10
Kramer, Levin, Naftalis, Nessen, Kamin & Frankel
919 Third Avenue
New York, NY 10022-3852
(212) 715-9100
April 24, 1996
Astra Global Investment Series
750 B Street
Suite 2350
San Diego, California 92101
Re: Astra Global Investment Series
Registration No. 33-1474
------------------------------
Gentlemen:
We hereby consent to the reference to our firm as counsel in Post-Effective
Amendment No. 17 to Registration Statement No. 33-1474.
Very truly yours,
/s/ KRAMER, LEVIN, NAFTALIS, NESSEN, KAMIN & FRANKEL
------------------------------------------------
EXHIBIT 11
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the reference to our firm in the Registration Statement, (Form
N-1A), and related Statement of Additional Information of Astra Global
Investment Series (comprising, respectively, Astra Short-Term Multi-Market
Income Funds I and II) and to the inclusion of our report dated January 19, 1996
to the Shareholders and Board of Trustees of Astra Global Investment Series.
/s/ TAIT, WELLER & BAKER
-----------------------------
Tait, Weller & Baker
Philadelphia, Pennsylvania
April 24, 1996
EXHIBIT 12
ANNUAL REPORT TO SHAREHOLDERS IS INCORPORATED BY REFERENCE IN PART C
OF THIS REGISTRATION STATEMENT
EXHIBIT 15(d)
FORM OF AMENDED AND RESTATED DISTRIBUTION PLAN OF
ASTRA SHORT TERM MULTI-MARKET INCOME FUND
(FORMERLY PILGRIM SHORT TERM MULTI-MARKET INCOME FUND)
We hereby amend this Distribution Plan to reflect a change in the name of
the fund from Pilgrim Short Term Multi-Market Income Fund to ASTRA SHORT TERM
MULTI-MARKET INCOME FUND, effective April 10, 1995, and we further amend this
Distribution Plan to reflect a change in the name of the underwriter from
Pilgrim Distributors Corp. to ASTRA FUND DISTRIBUTORS CORP., effective April 10,
1995.
ASTRA SHORT TERM MULTI-MARKET INCOME FUND
By:
-------------------------------------
ASTRA FUND DISTRIBUTORS CORP.
By:
-------------------------------------
EXHIBIT 15(e)
FORM OF AMENDED AND RESTATED DISTRIBUTION PLAN OF
ASTRA SHORT TERM MULTI-MARKET INCOME FUND II
(FORMERLY PILGRIM SHORT TERM MULTI-MARKET INCOME FUND II)
We hereby amend this Distribution Plan to reflect a change in the name
of the fund from Pilgrim Short Term Multi-Market Income Fund II to ASTRA SHORT
TERM MULTI-MARKET INCOME FUND II, effective April 10, 1995, and we further amend
this Distribution Plan to reflect a change in the name of the underwriter from
Pilgrim Distributors Corp. to ASTRA FUND DISTRIBUTORS CORP., effective April 10,
1995.
ASTRA SHORT TERM MULTI-MARKET INCOME FUND II
By:
----------------------------------------
ASTRA FUND DISTRIBUTORS CORP.
By:
----------------------------------------
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