As Filed With The Securities And Exchange Commission On February 27, 1997
Registration No. 811-6408
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940
AMENDMENT NO. 5
ASTRA INSTITUTIONAL SECURITIES TRUST
(formerly Pilgrim Institutional Securities Trust)
(Exact Name of Registrant as Specified in Charter)
11400 West Olympic Boulevard, Suite 200, Los Angeles, CA 90064
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (800) 219-1080
Palomba Weingarten
Atlas Holdings Group, Inc.
9595 Wilshire Boulevard
Suite 1001
Beverly Hills, CA 90212
(Name and Address of Agent for Service of Process)
Copies to:
James F. Jorden, Esquire
Jorden Burt Berenson & Johnson LLP
1025 Thomas Jefferson Street, N.W.
Suite 400 East
Washington, D.C. 20007
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EXPLANATORY NOTE
This Registration Statement has been filed by the Registrant pursuant to
Section 8(b) of the Investment Company Act of 1940, as amended (the "1940 Act").
However, beneficial interests in the Registrant are not being registered under
the Securities Act of 1933, as amended (the "1933 Act") because such interests
will be issued solely in private placement transactions that do not involve any
"public offering" within the meaning of Section 4(2) of the 1933 Act.
Investments in the Registrant may only be made by investment companies,
insurance company separate accounts, common or commingled trust funds or similar
organizations or entities that are "accredited investors" within the meaning of
Regulation D under the 1933 Act. This Registration Statement does not constitute
an offer to sell, or the solicitation of an offer to buy, any beneficial
interests in the Registrant.
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PART A
ITEMS 1-3. RESPONSES TO ITEMS 1 THROUGH 3 HAVE BEEN OMITTED PURSUANT TO
PARAGRAPH 4 OF INSTRUCTION F TO THE GENERAL INSTRUCTIONS TO FORM
N-1A.
ITEM 4. GENERAL DESCRIPTION OF REGISTRANT.
Astra Institutional Securities Trust ("AIST" or the "Trust") is an
open-end management investment company (mutual fund) which was organized as
Pilgrim Institutional Securities Trust ("PIST") pursuant to the laws of the
State of Massachusetts on September 4, 1991. On March 17, 1995, the Board of
Trustees of PIST approved an amendment to PIST's Declaration of Trust changing
the name of PIST to Astra Institutional Securities Trust in consideration of an
acquisition of the assets of several Pilgrim entities, not including PIST. The
amendment to the Declaration of Trust was filed with the Commonwealth of
Massachusetts and became effective on April 10, 1995.
AIST consists of two series: Astra Institutional Adjustable U.S.
Government Securities Portfolio (the "Government Securities Portfolio") and
Astra Institutional Adjustable Rate Securities Portfolio (the "Adjustable Rate
Portfolio") (individually, the "Portfolio" or collectively, the "Portfolios").
Beneficial interests in the Portfolios are issued solely in private placement
transactions that do not involve any "public offering" within the meaning of
Section 4(2) of the 1933 Act. Investments in the Portfolios may only be made by
investment companies, insurance company separate accounts, common or commingled
trust funds or similar organizations or entities that are "accredited investors"
within the meaning of Regulation D under the 1933 Act. This registration
statement does not constitute an offer to sell, or the solicitation of an offer
to buy, any "security" within the meaning of the 1933 Act.
The investment objective of the Government Securities Portfolio is to
provide investors with high current income consistent with low volatility of
principal. The Government Securities Portfolio seeks to achieve its investment
objective by investing at least 65% of its assets in adjustable rate mortgage
securities ("ARMS") representing an interest in mortgages which are issued or
guaranteed by the U.S. Government, its agencies or instrumentalities ("U.S.
Government Mortgage Securities"). The Government Securities Portfolio invests
the remainder of its assets generally in mortgage securities, issued or
sponsored by commercial banks, savings and loan associations, mortgage bankers
or other financial institutions, that have no government guarantee and that are
senior or subordinated to other mortgage securities arising out of the same pool
of mortgages ("Multi-Class Residential Mortgage Securities"). The investment
objective of the Adjustable Rate Portfolio is to seek high current income with
lower volatility of principal than is characteristic of mutual funds that invest
in fixed rate securities. The Adjustable Rate Portfolio seeks to achieve its
objective by investing its assets in Multi-Class Residential Mortgage
Securities. At least 65% of the Adjustable Rate Portfolio's total assets will be
invested in ARMS. A majority of the Adjustable Rate Portfolio's assets will be
invested generally in subordinated Multi-Class Residential Mortgage Securities
("Subordinated Residential Mortgage Securities"). The Adjustable Rate Portfolio
will invest the remainder of its assets in mortgage securities which are issued
or guaranteed by the U.S. Government, its agencies or instrumentalities ("U.S.
Government Mortgage Securities") or which are collateralized by U.S. Government
Mortgage Securities, and certain other mortgage securities. The Adjustable Rate
Portfolio may, from time to time, invest less than a majority of its assets in
Subordinated Residential Mortgage Securities in response to economic conditions.
The investment objectives of the Portfolios are fundamental and may not be
changed without the approval of the respective shareholders of each Portfolio.
Moreover, Astra Management Corp. ("AMC"), the Portfolio's investment
manager, has been managing the Adjustable Rate Portfolio to provide adequate
cash reserve to satisfy the redemption requests of certain investment companies
which invest all of its investable assets in the Adjustable Rate Portfolio,
resulting in decreased ability to achieve the Portfolio's investment objective.
As the Adjustable Rate Portfolio has experienced a high rate of redemptions,
cash and cash equivalents have been maintained in order to meet such
redemptions, which has the effect of reducing yield. AMC intends to maintain
this position until such time as the market for subordinated residential
mortgage securities normalizes and to meet redemption rates. Further
fluctuation in
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the Adjustable Rate Portfolio's net asset value may occur as a result of such
factors as deteriorating or improving market conditions and liquidity and
experience of portfolio securities.
The Portfolios are registered as "non-diversified" investment companies.
Nevertheless, in accordance with requirements of Subchapter M of the Internal
Revenue Code of 1986, as amended, each Portfolio may not purchase the securities
of any one issuer if, as a result of such purchase, more than 5% of such
Portfolio's total assets would be invested in the securities of such issuer at
the end of any fiscal quarter, except that with respect to 50% of the
Portfolio's total assets, the Portfolio may invest up to 25% of its total assets
in the securities of any one issuer. Securities of the U.S. Government and
securities of other regulated investment companies are not subject to any
investment limitations. Since each Portfolio may invest a relatively high
percentage of its assets in the obligations of a limited number of issuers, the
value of each Portfolio's investments will be more affected by any single
adverse economic, political or regulatory occurrence than will a diversified
investment company.
Each Portfolio intends to concentrate its investments in the asset-backed
securities industry. This means that at least 25% of a Portfolio's investments
will be in companies which issue asset-backed securities, such as Multi-Class
Residential Mortgage Securities and residential mortgage loan pools. However,
due to adverse economic conditions or for defensive purposes, a Portfolio may
temporarily have less than 25% of the total value of its assets in that
industry. Each Portfolio will follow this policy at all times because it is
fundamental and may not be changed without a Majority Vote of such Portfolio's
shares.
THE PORTFOLIOS INVEST IN THE FOLLOWING TYPES OF SECURITIES:
(1) U.S. Government Mortgage Securities: The largest issuers or guarantors
of mortgage securities today are the Government National Mortgage Association
("GNMA"), the Federal National Mortgage Association ("FNMA"), and the Federal
Home Loan Mortgage Corporation ("FHLMC"). GNMA creates mortgage securities from
pools of Government-guaranteed or insured (Federal Housing Authority or Veterans
Administration) mortgages originated by mortgage bankers, commercial banks, and
savings and loan associations. FNMA and FHLMC issue mortgage securities from
pools of conventional and federally-insured and/or guaranteed residential
mortgages obtained from various entities, including savings and loan
associations, savings banks, commercial banks, credit unions, and mortgage
bankers.
The mortgage securities either issued or guaranteed by GNMA, FHLMC, or
FNMA ("Certificates") are called pass-through Certificates because a pro rata
share of both regular interest and principal payments (less GNMA, FHLMC, or FNMA
fees and any applicable loan servicing fees), as well as unscheduled early
prepayments on the underlying mortgage pool are passed through monthly to the
holder of the Certificate (i.e., the Portfolios). The principal and interest on
GNMA securities are guaranteed by GNMA and backed by the full faith and credit
of the U.S. Government. FNMA guarantees full and timely payment of all interest
and principal, while FHLMC guarantees timely payment of interest and ultimate
collection of principal. Mortgage securities from FNMA and FHLMC are not backed
by the full faith and credit of the United States; however, their close
relationship with the U.S. Government makes them high quality securities with
minimal credit risks. The yields provided by these mortgage securities have
historically exceeded the yields on other types of U.S.
Government Mortgage Securities with comparable maturities.
(2) Multi-Class Residential Mortgage Securities: Multi-Class Residential
Mortgage Securities are securities representing interests in pools of mortgage
loans to residential home buyers made by lenders such as commercial banks,
savings and loan associations and mortgage bankers. The underlying mortgage
loans are secured by property consisting of single family and multi-family
residential property. The Portfolios only invest in those mortgage securities
with underlying mortgages representing first liens on the properties securing
such mortgages. Unlike U.S. Government Mortgage Securities, such as those issued
by GNMA, the payment of principal and interest on Multi-Class Residential
Mortgage Securities is not guaranteed by the U.S. or any of its agencies or
instrumentalities. The yields on Multi-Class Residential Mortgage Securities,
however, have been historically higher than the yields on U.S. Government
Mortgage Securities. The Multi-
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Class Residential Mortgage Securities in which the Portfolio invests may be
mortgage securities which have interest rates that reset at periodic intervals.
Multi-Class Residential Mortgage Securities are issued with one or more
classes subordinate in a specified manner as to the payment of principal thereof
and interest thereon. As a result, losses on the underlying mortgage loans are
borne by the holders of the Subordinated Residential Mortgage Securities before
the holders of more senior mortgage securities. Accordingly, the stated yield of
Subordinated Residential Mortgage Securities is greater than that of more senior
Multi-Class Residential Mortgage Securities arising out of the same pool. The
return on Subordinated Residential Mortgage Securities is, in turn, decreased by
any realized losses incurred pursuant to the terms of the Subordinated
Residential Mortgage Security. While the Portfolios invest in both senior
Multi-Class Residential Mortgage Securities and Subordinated Residential
Mortgage Securities, each Portfolio expects that a substantial portion of its
investment in Multi-Class Mortgage Securities will be composed of Subordinated
Residential Mortgage Securities. The senior Multi-Class Residential Mortgage
Securities in which the Portfolios invest are rated at least A by Standard &
Poor's Ratings Group or Moody's Investors Service. The Subordinated Residential
Mortgage Securities in which the Portfolio invests are generally unrated and the
Manager is not in the business of determining credit ratings. However, the
Manager believes that the Subordinated Residential Mortgage Securities in which
the Portfolio invests generally present credit risks similar to that of
corporate debt securities rated BBB or Baa by Standard and Poor's Ratings Group
and Moody's Investors Service, respectively, although it notes that certain
recently rated BBB mortgage securities have a first loss protection somewhat
greater and a yield somewhat lower than the Subordinated Residential Mortgage
Securities in which the Portfolio typically invests.
Multi-Class Residential Mortgage Securities represent a beneficial
interest in a pool of mortgage loans or a pool of mortgage pass through
securities often referred to as "mortgage assets." The mortgage assets are
typically held by a trust. The beneficial interests are evidenced by
certificates issued pursuant to a pooling and servicing agreement. The
certificates are usually issued in multiple classes with the specific rights of
each class set forth in the pooling and servicing agreement and the offering
documents for the security. The pooling and servicing agreement is entered into
by a trustee and a party who is responsible for pooling and conveying the
mortgage assets to the trust, sometimes referred to as the depositor. It is the
trustee's responsibility to act on behalf of and in the best interests of
certificate holders by enforcing the provisions of the pooling and servicing
agreement. Various administrative services related to the underlying mortgage
loans, such as collection and remittance of principal and interest payments,
administration of mortgage escrow accounts and collection of insurance claims
are provided by servicers. A master servicer, who may be the depositor or an
affiliate of the depositor, is generally responsible for supervising and
enforcing the performance by the servicers of their duties and maintaining the
insurance coverages required by the terms of the certificates. In some cases,
the master servicer acts as a servicer of all or a portion of the mortgage
loans.
A type of Subordinated Residential Mortgage Security is sometimes called a
"Special Hazard Certificate." Special hazard certificates are typically offered
in conjunction with other classes of mortgage pass through certificates and
constitute a subordinated class. With these securities, a holder bears some or
all losses resulting from special hazard losses to the property securing the
mortgages underlying the other class or classes of Multi-Class Residential
Mortgage Securities arising out of the same pool of mortgages. To the extent
that losses incurred on the underlying mortgage loans constitute special hazard
losses, the rights of the special hazard certificate holders to receive
distributions of principal and interest are subordinated to those of the
certificate holders of the more senior classes of the series. A special hazard
loss is a loss relating to a defaulting mortgage loan as to which all
recoverable liquidation and insurance proceeds have been received. Depending on
the particular terms of the certificates, special hazard losses are allocated
first to the special hazard certificates holders and then to other certificate
holders. Special hazard risks may include damage to mortgage properties caused
by earthquakes, landslides, vandalism, or other risk not covered by other
requisite insurance policies.
Each Portfolio seeks to limit the risks presented by Subordinated
Residential Mortgage Securities by reviewing and analyzing the characteristics
of the mortgage loans underlying the Subordinated Residential
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Mortgage Securities that it acquires. Each Portfolio invests in Subordinated
Residential Mortgage Securities when, in the judgment of AMC, the difference in
stated yield on Subordinated Residential Mortgage Securities over that of the
Senior Mortgage Securities exceeds the marginal risk assumed by the holders of
the Subordinated Residential Mortgage Securities.
The Portfolios seek to purchase Multi-Class Residential Mortgage
Securities with underlying mortgage loans secured by property located in
geographic regions that present favorable economic conditions. In this regard,
the Manager considers and analyzes residential housing trends, employment
information, demographic data and other information it deems relevant in
evaluating a geographic region.
The Portfolios may invest in Multi-Class Residential Mortgage Securities
that represent an interest in mortgage pass-through securities.
THE ADJUSTABLE RATE PORTFOLIO MAY ALSO INVEST IN THE FOLLOWING TYPES OF
SECURITIES:
(1) Collateralized Mortgage Obligations. The Portfolios may invest in
collateralized mortgage obligations ("CMOs"). Collateralized mortgage
obligations are debt obligations collateralized either by mortgage loans or
mortgage pass-through securities (such collateral collectively being called
"Mortgage Assets"). Payments of principal and interest on the Mortgage Assets
and any reinvestment income thereon provide the funds to pay debt service on the
CMOs. CMOs may be issued by the U.S. Government, its agencies or
instrumentalities or by private originators of or investors in mortgage loans,
including savings and loan associations, mortgage bankers, commercial banks,
investment bankers and special purpose subsidiaries of such entities. Typically,
CMOs are collateralized by GNMA certificates or other government mortgage-backed
securities, but they may also be collateralized by whole loans or private
mortgage pass-through securities. CMOs purchased by a Portfolio will be, at the
time of purchase, rated at least A by either Standard & Poor's Corporation or
Moody's Investors Service, or, if unrated, such instruments will be, in the
opinion of the Manager, of comparable quality to A rated securities.
In a CMO, a series of bonds or certificates is issued in multiple classes.
Each class of CMOs, also referred to as a "tranche," is issued at a specific
fixed or floating coupon rate and has a stated maturity or final distribution
date. Principal prepayments on the Mortgage Assets may cause the CMOs to be
retired substantially earlier than their stated maturities or final distribution
dates. Interest is paid or accrues on all classes of the CMOs (other than any
"principal-only" class) on a monthly, quarterly or semi-annual basis. The
principal and interest on the Mortgage Assets may be allocated among the several
classes of a CMO in many ways. In a common structure, payments of principal
(including any prepayments) on the Mortgage Assets are applied to the classes of
the series of a CMO in the order of their respective stated maturities or final
distribution dates, so that no payment of principal will be made on any class of
CMO until all other classes having an earlier stated maturity or final
distribution date have been paid in full.
(2) Stripped Mortgage-Backed Securities. The Portfolios may invest in
stripped mortgage-backed securities ("SMBS"). Stripped mortgage-backed
securities are derivative multi-class mortgage securities and may be issued by
agencies or instrumentalities of the U.S. Government or by private originators
of or investors in mortgage loans, including savings and loan associations,
mortgage bankers, commercial banks, investment bankers and special purpose
subsidiaries of the foregoing.
SMBS are usually structured with two classes that receive different
proportions of the interest and/or principal distributions on a pool of Mortgage
Assets. A common type of SMBS will have one class receiving some of the interest
and most of the principal from the Mortgage Assets, while the other class will
receive most of the interest and the remainder of the principal. In the most
extreme case, one class will receive all of the interest (the interest-only or
"I0" class), while the other class will receive all of the principal (the
principalonly or "PO" class). The yields to maturity on both PO and IO classes
are extremely sensitive to the rate of principal payments (including
prepayments) on the related underlying Mortgage Assets. If the underlying
Mortgage Assets of an IO class of SMBS experience greater than anticipated
prepayments of principal, an investor may fail to recoup fully its initial
investment in these securities even if the securities are rated in the
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highest rating category. SMBS purchased by the Portfolios will be, at the time
of purchase, rated at least A by either Standard & Poor's Ratings Group or
Moody's Investors Service, or, if unrated, such instruments will be, in the
opinion of the Manager, of comparable quality to A rated securities. The Staff
of the Securities and Exchange Commission (the "Staff") takes the position that
SMBS issued by the U.S. Government or its agencies or instrumentalities which
are backed by fixed rate mortgages may be considered liquid securities as
determined under guidelines and standards established by the Board of Trustees.
The Staff considers SMBS not issued by the U.S. Government or its agencies or
instrumentalities and SMBS not backed by fixed rate mortgages as illiquid
securities. The Portfolio will treat these instruments as illiquid when testing
its portfolio for compliance with the 15% limitation on illiquid investments.
Although SMBS are purchased and sold by institutional investors through
several investment bankers acting as brokers or dealers, these securities were
developed only recently. As a result, established trading markets have not yet
developed and, accordingly, these securities are still somewhat illiquid. In
addition, these securities will experience greater volatility than mortgage
securities in general.
RISKS OF MORTGAGE SECURITIES GENERALLY
The yield characteristics of the mortgage securities differ from those of
traditional debt securities. Among the major differences are that interest and
principal payments are made more frequently on mortgage securities, usually
monthly, and that principal may be prepaid at any time because the underlying
mortgage loans or other assets generally permit prepayment at any time.
Evaluating the risks associated with prepayment and determining the rate at
which prepayments may occur depends on a number of factors. The rate of
prepayment is influenced by a variety of economic, geographic, demographic,
social and other factors including interest rate levels, changes in housing
needs, net equity built by mortgagors in the mortgaged properties, job
transfers, and unemployment rates. If a Portfolio purchases these securities at
a premium, a prepayment rate that is faster than expected will reduce yield to
maturity, while a prepayment rate that is slower than expected will have the
opposite effect of increasing yield to maturity. Conversely, if a Portfolio
purchases these securities at a discount, faster than expected prepayments will
increase, while slower than expected prepayments will reduce, yield to maturity.
Amounts available for reinvestment are likely to be greater during a period of
declining interest rates and, as a result, are likely to be reinvested at lower
interest rates than during a period of rising interest rates. Accelerated
prepayments on securities purchased by a Portfolio at a premium also impose a
risk of loss of principal because the premium may not have been fully amortized
at the time the principal is repaid in full.
The rate of principal payments on the certificates, the aggregate amount
of each interest payment and the yield to maturity on the certificates are
related to the rate of principal payments on the underlying mortgage loans. Such
principal payments may be in the form of scheduled principal payments,
prepayments by mortgagors, liquidations due to default, casualty, condemnation
and certain events usually set forth in the related pooling and servicing
agreement. The rate of prepayment may be influenced by a variety of economic,
geographic, social and other factors. In general, however, if interest rates on
comparable obligations were to fall below the mortgage rates on the underlying
mortgage loans, which may be different from prevailing interest rates, the rate
of prepayment would be expected to increase. Conversely, if prevailing rates on
comparable obligations were to rise above the mortgage rates on the underlying
mortgage loans, the mortgage loans would be expected to prepay at lower rates
than if prevailing rates on comparable obligations were to remain at or below
the mortgage rates on the underlying mortgage loans.
The mortgage securities in which the Portfolios invest differ from
conventional bonds in that principal is paid back over the life of the mortgage
securities rather than at maturity. As a result, the holder of the mortgage
securities (i.e., the Portfolios) receives monthly scheduled payments of
principal and interest and may receive unscheduled principal payments
representing prepayments on the underlying mortgages. When the holder reinvests
the payments and any unscheduled prepayments of principal it receives, it may
receive a rate of interest which is lower than the rate on the existing mortgage
securities. For this reason, mortgage securities are less effective than other
types of U.S. Government securities as a means of "locking in" long-term
interest rates.
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CMO classes may be structured in a manner that provides any of a wide
variety of investment characteristics, such as yield, effective maturity and
interest rate sensitivity. As market conditions change, however, and
particularly during periods of rapid or unanticipated changes in market interest
rates, the attractiveness of the CMO classes and the ability of the structure to
provide the anticipated investment characteristics may be significantly reduced.
Such changes in volatility in the market value, and in some instances reduced
liquidity of the CMO classes.
RISKS OF SUBORDINATED RESIDENTIAL MORTGAGE SECURITIES
Subordinated Residential Mortgage Securities generally are likely to be
more sensitive to changes in prepayment and interest rates and the market for
such securities may be less liquid than is the case for traditional debt
securities and mortgage securities. In addition, while Subordinated Residential
Mortgage Securities have a higher stated yield than traditional mortgage
securities, holders of Subordinated Residential Mortgage Securities bear a
greater risk of loss than do holders of senior or more traditional mortgage
obligations. Such holders bear all or a portion of losses arising out of the
underlying mortgage pool prior to senior holders bearing any such losses. The
primary credit risk arising from a holder's subordination are the potential
losses caused by liquidation due to defaults on the part of borrowers of the
mortgages securing the instrument. This risk is usually greater during a period
of declining or stagnant real estate values. There may be certain costs and
delays associated with foreclosure. There is no assurance that the subsequent
sale of the property will produce an amount equal to the sum of the unpaid
principal balance of the loan as of the date the borrower went into default, the
interest that was not paid during the foreclosure period and all foreclosure
expenses, in which case the Portfolios may, depending on the nature of its
subordination, suffer a loss equal to the difference between this amount and the
liquidation proceeds. A Portfolio would generally realize such a loss in
connection with a Subordinated Residential Mortgage Security only if the
subsequent foreclosure sale of the property securing a mortgage loan does not
produce an amount at least equal to the sum of the unpaid principal balance of
the loan as of the date the borrower went into default, the interest that was
not paid during the foreclosure period and all foreclosure expenses. A
Subordinated Residential Mortgage Security may provide that a holder bears a
portion or all of the risk of such losses resulting from (i) the decrease in
value of the property caused by special hazard risks and/or (ii) all other
losses resulting from the default by a borrower. Accordingly, distributions on
Subordinated Residential Mortgage Securities may be reduced by realized losses.
While losses on all mortgage loans in a pool are borne by the holders of
Subordinated Residential Mortgage Securities before the holders of more senior
mortgage securities arising out of the same pool of mortgages, each Portfolio
seeks to limit the risks presented by such instruments by reviewing and
analyzing the characteristics of the mortgage loans underlying the Subordinated
Residential Mortgage Securities that it acquires and evaluating the likelihood
of losses occurring. AMC has developed a set of guidelines to assist in the
analysis of the mortgage loans underlying Subordinated Residential Mortgage
Securities. Each pool purchase is reviewed against the guidelines. Each
Portfolio seeks opportunities to acquire Subordinated Residential Mortgage
Securities where in the view of AMC, the potential for a higher marginal yield
on such instruments outweighs any additional risk presented by such instrument.
In addition, the Manager seeks to increase yield to shareholders by taking
advantage of perceived inefficiencies in the market for Subordinated Residential
Mortgage Securities.
CHARACTERISTICS OF ADJUSTABLE RATE MORTGAGE SECURITIES
General. ARMS are pass-through mortgage securities which are
collateralized by mortgages with adjustable rather than fixed interest rates.
ARMS have become an increasingly important form of residential financing.
Generally, ARMS are mortgages that have a specified maturity date and which
amortize principal much in the fashion of a fixed rate mortgage. In periods of
declining interest rates there is a reasonable likelihood that ARMS will behave
like fixed rate mortgages in that current levels of prepayments of principal on
the underlying mortgages could accelerate. Unlike fixed-rate mortgages which
generally decline in value during periods of rising interest rates, adjustable
rate mortgage securities allow the Portfolio to participate in increases in
interest rates through periodic adjustments in the coupons of the underlying
mortgages, resulting
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in both higher current yields and lower price fluctuations.
Furthermore, during periods of declining interest rates, income to the
Portfolios derived from ARMs will decrease in contrast to the income on fixed
rate mortgages which will remain constant. In addition, ARMs also have less
potential for appreciation in value when interest rates decline than do fixed
rate investments which tend to increase in value as interest rates decline.
However, one difference between ARMS and fixed rate mortgages is that for
certain types of ARMS, the rate of amortization of principal, as well as
interest payments, can and does change in accordance with movements in a
particular, prespecified, published interest rate index. The amount of interest
due to an ARM security holder is calculated by adding a specified additional
amount, the "margin," to the index, subject to limitations or "caps" on the
maximum and minimum interest rate that is charged to the mortgagor during the
life of the mortgage or to maximum and minimum changes to that interest rate
during a given period. It is these special characteristics which are unique to
adjustable rate mortgages that the Manager believes make them attractive
investments in seeking to accomplish each Portfolio's objective.
The market value of ARMS, like other U.S. Government securities, will
generally vary inversely with changes in market interest rates, declining when
interest rates rise and rising when interest rates decline. However, ARMS, while
having less risk of a decline during periods of rapidly rising rates, may also
have less potential for capital appreciation than other investments of
comparable maturities due to the likelihood of increased prepayments of
mortgages as interest rates decline. In addition, to the extent ARMS are
purchased at a premium, mortgage foreclosures and unscheduled principal
prepayments may result in some loss of the holders' principal investment to the
extent of the premium paid. On the other hand, if ARMS are purchased at a
discount, both a scheduled payment of principal and an unscheduled prepayment of
principal will increase current and total returns and will accelerate the
recognition of income which when distributed to shareholders will be taxable as
ordinary income.
The adjustable interest rate feature of the underlying mortgages generally
will act as a buffer to reduce sharp changes in a Portfolio's net asset value in
response to normal interest rate fluctuations. As the interest rates on the
mortgages underlying a Portfolio's investments are reset periodically, yields of
portfolio securities will gradually align themselves to reflect changes in
market rates and should cause the net asset value of a Portfolio to fluctuate
less dramatically than it would if a Portfolio invested in more traditional
long-term, fixed-rate debt securities. However, during periods of rising
interest rates, changes in the coupon rate lag behind changes in the market rate
possibly resulting in a slightly lower net asset value until the coupon resets
to market rates, which could take as long as one month to five years. Thus,
investors could suffer some principal loss if they sold their shares of a
Portfolio before the interest rates on the underlying mortgages are adjusted to
reflect current market rates. During periods of extreme fluctuations in interest
rates, a Portfolio's net asset value will fluctuate as well. Since most mortgage
securities in each Portfolio's portfolio will generally have annual reset caps
of 100 to 200 basis points, fluctuation in interest rates above these levels
could cause such mortgage securities to "cap out" and to behave more like
long-term fixed-rate debt securities and consequently to decrease in value.
Historically, ARMS have had a higher default rate than fixed rate
mortgages. Recently, however, most ARM originators have changed their
underwriting procedures to ensure that applicants qualify for their mortgage
amounts based on the "fully indexed" interest rate of the mortgage. In the past,
many originators would qualify applicants based on the initial interest rate of
the mortgage (commonly called a "teaser rate") which in most instances was
substantially lower than the "fully indexed" interest rate. This procedure
resulted in higher default and delinquency rates for ARMS than for fixed rate
mortgages once the mortgages adjusted up to the "fully indexed" interest rate.
The Manager believes that the curtailment of this practice by most originators
will, over time, lead to a substantial narrowing in the default rates between
fixed and adjustable rate mortgages.
Caps and Floors. The underlying mortgages which collateralize the ARMS in
which the Portfolios invest will frequently have caps and floors which limit the
maximum amount by which the loan rate to the residential borrower may change up
or down (1) per reset or adjustment interval and (2) over the life of the loan.
Some residential mortgage loans restrict periodic adjustments by limiting
changes in the borrower's monthly principal and interest payments rather than
limiting interest rate changes. These payment caps may
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result in negative amortization. Negative amortization occurs when a loan
payment does not keep pace with interest rates and is less than the interest due
for the time period covered by such payment. The result is that the amount of
the deficiency is added to the unpaid principal balance on the loan, increasing
the outstanding amount of the loan notwithstanding the fact that the amount due
has been paid.
Resets. The interest rates paid on the ARMS in which the Portfolios invest
generally are readjusted at intervals of one year or less to an increment over
some predetermined interest rate index. There are two main categories of
indices: those based on U.S. Treasury securities and those derived from a
calculated measure such as a cost of funds index. Commonly utilized indices
include the one-year, three-year and five-year constant maturity Treasury rates,
the three-month Treasury Bill rate, the 180-day Treasury Bill rate, rates on
longer-term Treasury securities, the 11th District Federal Home Loan Bank Cost
of Funds, the National Median Cost of Funds, the one-month, three-month,
six-month or one year London Interbank Offered Rate (LIBOR), the prime rate of a
specific bank, or commercial paper rates. Some indices such as the one-year
constant maturity Treasury rate, closely mirror changes in market interest rate
levels. Others, such as the 11th District Home Loan Bank Cost of Funds index,
tend to lag behind changes in market rate levels and tend to be somewhat less
volatile.
Other Investment Policies of the Portfolios Include the Following:
Hedging Transactions. The Portfolios may enter into various hedging
transactions, such as engaging in interest rate swaps and interest rate futures
transactions and purchasing and selling interest rate collars, caps and floors
to protect against and potentially benefit from fluctuations in interest rates
and to preserve a return or spread on a particular investment or portion of its
portfolio. Hedging transactions may also be used to attempt to protect against
possible declines in the market value of a Portfolio's assets resulting from
downward trends in the debt securities markets (generally due to a rise in
interest rates), to protect a Portfolio's unrealized gains in the value of its
portfolio securities, to facilitate the sale of such securities or to establish
a position in the securities markets as a temporary substitute for purchasing
particular securities. Any or all of these techniques may be used at any time.
There is no particular strategy that requires use of one technique rather than
another. Use of any hedging transaction is a function of market conditions.
Further hedging transactions may be used by the Portfolios in the future as they
are developed or deemed by the Board of Trustees of PIST to be appropriate and
to be in the best interest of investors in the Portfolios. The Portfolios intend
to use these transactions as a hedge against interest rate fluctuations and not
as speculative investments. Each Portfolio reserves the right, but have no
current intention, to engage in options and futures transactions other than
futures transactions on interest rates.
Interest rate swaps involve the exchange with another party of commitments
to pay or receive interest, e.g., an exchange of fixed rate payments for
variable rate payments. The purchase of an interest rate cap entitles the
purchaser, to the extent that a specified index exceeds a predetermined interest
rate, to receive payments of interest on a notional principal amount from the
party selling such interest rate cap. The purchase of an interest rate floor
entitles the purchaser, to the extent that a specified index falls below a
predetermined interest rate, to receive payments of interest on a notional
principal amount from the party selling such interest rate floor. An interest
rate collar combines the elements of purchasing a cap and selling a floor. The
collar protects against an interest rate rise above the maximum amount but gives
up the benefits of an interest rate decline below the minimum amount. Neither
Portfolio will enter into swaps, caps, collars or floors if, on a net basis, the
aggregate notional principal amount with respect to such agreements exceeds the
net assets of such Portfolio.
An interest rate futures contract provides for the future sale and
purchase of a specified amount of a certain debt security at a stated date,
place and price. The Portfolio may enter into interest rate futures contracts to
protect against fluctuations in interest rates effecting the value of debt
securities that the Portfolio either holds or intends to acquire. The Portfolios
will only enter into futures transactions on a national exchange. The
Portfolios' use of such instruments will in all cases be consistent with the
applicable regulatory requirements and, in particular, the rules and regulations
of the Commodity Futures Trading Commission with
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which the Portfolio must comply in order to avoid registration as a commodity
pool operator under the Commodity Exchange Act and any applicable state law.
Inasmuch as these hedging transactions are entered into for good-faith
risk management purposes, AMC and the Portfolios believe such obligations do not
constitute senior securities. The Staff of the Securities and Exchange
Commission (the "SEC") is presently considering its position with respect to
swaps, caps, collars and floors as senior securities. Pending a determination by
the Staff, the Portfolios will either treat caps, collars and floors as being
subject to its senior securities restrictions or will refrain from engaging in
caps, collars and floors. Once the Staff has expressed a position with respect
to swaps, caps, collars and floors, the Portfolios intend to engage in swaps,
caps, collars and floors, if at all, in a manner consistent with such position.
The Portfolios will not treat swaps covered in accordance with applicable
regulatory requirements as senior securities. The Portfolios will usually enter
into interest rate swaps on a net basis, i.e., where the two parties make net
payments with a Portfolio receiving or paying, as the case may be, only the net
amount of the two payments. The net amount of the excess, if any, of a
Portfolio's obligations over its entitlement with respect to each interest rate
swap will be accrued and an amount of cash, U.S. Government Securities or other
liquid high grade debt obligations having an aggregate net asset value at least
equal to the accrued excess will be maintained by the Portfolio's custodian in a
segregated account. If a Portfolio enters into a swap on other than a net basis,
the Portfolio will maintain in the segregated account the full amount of the
Portfolio's obligations under each such swap. The Portfolios may enter into
swaps, caps, collars and floors with member banks of the Federal Reserve System,
members of the New York Stock Exchange or other entities determined by AMC,
pursuant to procedures adopted and reviewed on an ongoing basis by the Board of
Trustees, to be credit worthy. If a default occurs by the other party to such
transaction, a Portfolio will have contractual remedies pursuant to the
agreements related to the transaction but such remedies may be subject to
bankruptcy and insolvency laws which could affect such Portfolio's rights as a
creditor.
The swap market has grown substantially in recent years with a large
number of banks and financial services firms acting both as principals and as
agents utilizing standardized swap documentation. As a result, the swap market
has become relatively liquid. Caps, collars and floors are more recent
innovations and they are less liquid than swaps. There can be no assurance,
however, that a Portfolio will be able to enter into interest rate swaps or to
purchase interest rate caps, collars or floors at prices or on terms AMC
believes are advantageous to such Portfolio. In addition, although the terms of
interest rate swaps, caps, collars and floors may provide for termination, there
can be no assurance that a Portfolio will be able to terminate an interest rate
swap or to sell or offset interest rate caps, collars or floors that it has
purchased. Interest rate swaps, caps, collars and floors are considered by the
Staff to be illiquid securities and, therefore, each Portfolio may not invest
more than 15% of its assets in such instruments.
The successful utilization of hedging and risk management transactions
requires skills different from those needed in the selection of a Portfolio's
portfolio securities and depends on AMC's ability to predict correctly the
direction and degree of movements in interest rates. Although the Portfolios
believe that use of the hedging and risk management techniques described above
will benefit the Portfolios, if AMC's judgment about the direction or extent of
the movement in interest rates is incorrect, a Portfolio's overall performance
would be worse than if it had not entered into any such transactions. For
example, if a Portfolio had purchased an interest rate swap or an interest rate
floor to hedge against its expectation that interest rates would decline but
instead interest rates rose, such Portfolio would lose part or all of the
benefit of the increased payments it would receive as a result of the rising
interest rates because it would have to pay amounts to its counterparts under
the swap agreement or would have paid the purchase price of the interest rate
floor. The Portfolios believe that AMC possesses the skills necessary for the
successful utilization of hedging and risk management transactions.
Other risks associated with the use of futures contracts are: (i)
imperfect correlation between the change in the market value of the underlying
commodity and the prices of futures contracts and options with the result that
futures and options may fail as hedging techniques in cases where the price
movements of the securities underlying the futures and options do not follow the
price movements of a Portfolio's portfolio securities subject to a hedge; and
(ii) possible lack of a liquid secondary market for a futures position when
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liquidation of that position is desired with the result that a Portfolio will
likely be unable to control losses by closing its position where a liquid
secondary market does not exist. In addition, because of the margin deposits
normally required in futures trading, a high degree of leverage is typical of a
futures trading account. As a result, a relatively small price movement in a
futures contract may result in substantial losses to the trader (i.e., a
Portfolio). Furthermore, many futures exchanges and boards of trade limit the
amount of fluctuations permitted in futures contract prices during a single
trading day. Futures contract prices could move to the limit for several
consecutive trading days with little or no trading, thereby preventing prompt
liquidation of futures positions and potentially subjecting the Portfolio to
substantial losses.
New financial products continue to be developed and the Portfolios may
invest in any such products to the extent consistent with their investment
objectives and the regulatory and Federal tax requirements applicable to
investment companies.
When-Issued and Forward Commitment Securities. The Portfolios may purchase
securities on a when-issued basis and may purchase or sell securities on a
forward commitment basis in order to hedge against anticipated changes in
interest rates and prices and/or secure a favorable rate of return. When such
transactions are negotiated, the price is fixed at the time the commitment is
made, but delivery and payment for the securities take place at a later date
which may be a month or more after the date of the transaction. At the time the
Portfolios make the commitment to purchase securities on a when-issued or
forward commitment basis, it will record the transaction and thereafter reflect
the value of such securities in determining its net asset value. At the time the
Portfolios enter into a transaction on a when-issued or forward commitment
basis, a segregated account consisting of cash, U.S. Government Securities or
other liquid high grade debt obligations equal to the value of the when-issued
or forward commitment securities will be established and maintained with the
custodian and will be marked to the market daily. When-issued securities and
forward commitments may be sold prior to the settlement date. If the Portfolios
dispose of the right to acquire a when-issued security prior to its acquisition
or disposes of its right to deliver or receive against a forward commitment, it
may experience a gain or loss due to market fluctuation. On the delivery date,
the Portfolios will meet their obligations from securities that are then
maturing or sales of the securities held in the segregated asset account and/or
from then available cash flow. There is always a risk that the securities may
not be delivered and that each Portfolio may incur a loss or will have lost the
opportunity to otherwise invest the amount set aside for such transaction in the
segregated asset account. Settlements in the ordinary course of business, which
may take substantially more than five business days for mortgage-related
securities, are not treated by the Portfolios as when-issued or forward
commitment transactions and accordingly are not subject to the foregoing
limitations even though some of the risks described above may be present in such
transactions. Securities purchased on a when-issued, delayed delivery or forward
commitment basis do not generally earn interest until their scheduled delivery
date. The Portfolios are not subject to any percentage limit on the amount of
its assets which may be invested in when-issued purchase obligations.
Borrowing. A Portfolio may from time to time borrow money for the purpose
of acquiring additional portfolio investments when it believes that the interest
payments and other costs with respect to such borrowings or indebtedness will be
exceeded by the anticipated total return (a combination of income and
appreciation) on such investments. The amount of any such borrowing or issuance
will depend upon market or economic conditions existing at that time. A
Portfolio may also borrow in order to assure that it remains fully invested by
using borrowed cash to purchase portfolio investments with the intent of
repaying the borrowings from the proceeds of expected sales of its shares.
A Portfolio may borrow money from banks on a secured or unsecured basis at
variable or fixed rates. However, as prescribed by the 1940 Act, each Portfolio
will be required to maintain specified asset coverage of at least 300% with
respect to any such bank borrowing immediately following any such borrowing or
issuance. If at any time asset coverage falls below 300%, each Portfolio must,
within three days (not including Sundays and holidays) reduce the amount of its
borrowings until it has 300% coverage. The Portfolios may be required to dispose
of portfolio investments on unfavorable terms if market fluctuations or other
factors reduce the required asset coverage to less than the prescribed amount.
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In addition, a Portfolio may on a temporary basis issue a note or other
evidence of indebtedness representing up to 5% of its assets at the time the
loan is made. Such a borrowing must be privately arranged and not intended to be
publicly distributed and is presumed to be for temporary purposes if it is
repaid within 60 days.
While, as stated above, a Portfolio will borrow money for the purpose of
acquiring additional portfolio investments only when it believes that such
borrowing will produce additional income to the Portfolio, the interest cost on
the capital raised through leverage may exceed the interest on the assets
purchased. A Portfolio may also be required to maintain minimum average balances
in connection with borrowings or to pay a commitment or other fee to maintain a
line of credit; either of these requirements will increase the cost of borrowing
over the stated interest rate. Borrowings and the issuance of indebtedness
create an opportunity to be more fully invested and to earn greater income per
share. Any such borrowing or issuance is a speculative technique in that it will
increase the Portfolio's exposure to capital risk. Such risks may be mitigated
through the use of borrowings and issuances of indebtedness that have floating
rates of interest. Unless the income and appreciation, if any, on assets
acquired with borrowed funds or offering proceeds exceeds the cost of borrowing
or issuing debt, the use of leverage will diminish the investment performance of
a Portfolio compared with what it would have been without leverage.
A Portfolio will not always borrow money or issue debt to finance
additional investments. A Portfolio's willingness to borrow money and issue debt
for investment purposes, and the amount it will borrow, will depend on many
factors, the most important of which are the investment outlook, market
conditions and interest rates. To the extent that a Portfolio invests borrowed
money in short-term fixed-rate debt obligations, successful use of a leveraging
strategy depends on AMC's ability to correctly predict interest rates and market
movements over these short-term periods. There is no assurance that a leveraging
strategy will be successful during any period in which it is employed.
Loans of Portfolio Securities. Each Portfolio may make loans of its
portfolio securities under certain circumstances. With the approval of the
Trustees and subject to various conditions which may be imposed from time to
time under various securities regulations, a Portfolio may lend its portfolio
securities to qualified broker/dealers or other institutional investors provided
that such loans do not exceed 10% of the value of such Portfolio's total assets
at the time of the most recent loan, that the borrower deposits and maintains
with such Portfolio at least 102% cash collateral and provided the portfolio
securities loaned are "marked to market" daily. There are risks of delay in
recovery and loss of rights and collateral should the borrower fail financially.
The lending of securities is a common practice in the securities industry. A
Portfolio will engage in security loan arrangements with the primary objective
of increasing its income through investment of the cash collateral in short-term
interest bearing obligations, but will do so only to the extent consistent with
its tax status as a regulated investment company. Such Portfolio will continue
to be entitled to all interest on any loaned securities.
Illiquid Securities. The Portfolios may purchase securities that are not
registered ("restricted securities") under the 1933 Act, but can be offered and
sold to "qualified institutional buyers" under Rule 144A under the 1933 Act.
Each Portfolio expects that the Subordinated Residential Mortgage Securities in
which it invests generally will be restricted securities.
A Portfolio will not invest more than 15% of its assets in illiquid
investments. The Portfolio will adhere to a more restrictive limitation on its
investment in illiquid securities as required by the securities laws of those
jurisdictions where shares of the Trusts are registered for sale. Illiquid
securities include securities that are not readily marketable and restricted
securities, unless the Trustees determine, based upon a continuing review of the
trading markets for the specific restricted security, that such restricted
securities are liquid. The Trustees may adopt guidelines and delegate to the
Manager the daily function of determining and monitoring liquidity of restricted
securities. The Trustees, however, retain oversight and will be ultimately
responsible for the determinations. Since it is not possible to predict with
assurance exactly how this market for restricted securities sold and offered
under Rule 144A will develop, the Trustees will carefully monitor each
Portfolio's investments in these securities, focusing on such important factors,
among others, as valuation, liquidity and
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availability of information. This investment practice could have the effect of
increasing the level of illiquidity in the Portfolios to the extent that
qualified institutional buyers become for a time uninterested in purchasing
these restricted securities. In such an event, the Trustees will consider
appropriate remedies to maximize a Portfolio's liquidity and its ability to meet
redemption requests within seven days.
The performance of the Portfolios was negatively affected by interest rate
sensitive conditions in the ARM securities market. As a result of past rapid
interest rate increases and declining bond prices, combined with negative
publicity on the mortgage securities market and the higher than expected price
volatility experienced with many derivative mortgage-backed securities, mortgage
funds industry-wide have experienced heavy redemptions. As a result, many ARM
funds have been forced to liquidate ARM securities to meet redemption requests.
This has resulted in an increased supply of ARM securities in the market,
bringing wider spreads over the relevant indices and reduced prices.
The increase in redemptions coupled with adverse rate conditions have
caused the market for subordinated mortgage securities to be less liquid. As of
October 31, 1996, 0.1% of the Adjustable Rate Portfolio's net assets were deemed
as illiquid. As of February 13, 1997, the percentage of illiquid securities
in the Adjustable Rate Portfolio was to 0.01%. Over the long term, however, AMC
believes that the market will value portfolio securities based primarily upon
fundamental considerations of credit quality, prepayment rates and other such
factors, with less emphasis on market conditions. Yet there can be no assurance
that such will be the case.
The Staff has taken the position that special hazard certificates,
interest rate swaps, caps, collars and floors and SMBS not issued by the U.S.
Government or its agencies or instrumentalities and SMBS not backed by fixed
rate mortgages should be deemed illiquid. Accordingly, each Portfolio currently
treats these instruments as illiquid when testing its portfolio for compliance
with the 15% limitation on illiquid investments.
The purchase price and subsequent valuation of restricted securities
normally reflect a discount from the price at which such securities trade when
they are not restricted, since the restriction makes them less liquid. The
amount of the discount from the prevailing market price is expected to vary
depending upon the type of security, the character of the issuer, the party who
bears the expenses of registering the restricted securities and prevailing
supply and demand conditions.
Portfolio Turnover. A Portfolio's portfolio turnover rate may vary from
year to year, as well as within a year. A higher portfolio turnover rate may
result in higher brokerage commissions and other transactional
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expenses which must be borne, directly or indirectly by the Portfolios and
ultimately by their shareholders. The annual rates of the Government Portfolio's
total portfolio turnover for the fiscal years ended October 31, 1995 and 1996
were 108% and 297% respectively. The annual rates of the Adjustable Rate
Portfolio's total portfolio turnover for the fiscal years ended October 31, 1995
and 1996 were 45% and 311% respectively.
Temporary Defensive Positions. When maintaining a temporary defensive
position, each Portfolio may invest its assets without limit in short-term U.S.
Government and U.S. Government agency securities including, among others, FNMA
and FHLMC short-term agency discount notes.
ITEM 5. MANAGEMENT OF THE PORTFOLIO.
The Trustees of AIST establish each Portfolio's policies and supervise and
review the operations and management of each Portfolio. Astra Management
Corporation ("AMC") provides investment management and administrative services
to the Portfolios. Investment management decisions made by AMC are made by a
committee with no one person being solely responsible for making recommendations
to the committee. For furnishing the Portfolios with investment advice and
investment management services with respect to each Portfolio's assets,
including making specific recommendations as to the purchase and sale of
portfolio securities, furnishing requisite office space and personnel, and in
general supervising and managing each Portfolio's investments subject to the
ultimate supervision and direction of the Trustees, AMC is paid monthly a fee
equal to: (a) with respect to the Government Portfolio, 0.55% per annum of the
average daily net assets of such Portfolio on the first $500 million of assets;
0.50% on net assets of such Portfolio from $500 million to $1 billion; and 0.45%
on net assets of such Portfolio over $1 billion, and (b) with respect to the
Adjustable Rate Portfolio, 0.65% per annum of the average daily net assets of
such Portfolio on the first $500 million of assets; 0.60% on net assets of such
Portfolio from $500 million to $1 billion; and 0.55% on net assets of such
Portfolio over $1 billion. AMC will reduce its aggregate fees for any fiscal
year, or reimburse the Portfolios or Trusts, to the extent required so that
aggregate expenses do not exceed the expense limitations applicable under the
securities laws or regulations of those states or jurisdiction in which the
Trusts' shares are registered for sale. For the fiscal year ended October 31,
1996, the total expenses paid by the Trust were approximately 0.73% of its
average daily net assets for the Rate Portfolio and 0.94% of its average daily
net assets for the Government Portfolio.
AMC, formerly Pilgrim Management Corp. ("PMC"), was founded in 1964. It
provides a number of mutual funds and other personal and institutional accounts
with portfolio management services. It maintains a staff of experienced
investment personnel and support facilities. Current assets under management
exceed $110 million. AMC is a wholly-owned subsidiary of Atlas Holdings Group,
Inc. (the "Atlas Group"), formerly Pilgrim Group Inc. ("PGI").
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 Astra Funds
Distributor Corp. (the "Distributor") (whose principal business address is 11400
West Olympic Boulevard, Suite 200, Los Angeles, California 90064), which provide
advisory, distribution and administrative services to the Portfolios. Atlas
Group is a Delaware corporation of which Palomba Weingarten, Chairman of the
Board of Trustees of AIST, is the sole stockholder and Chief Executive Officer.
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The Distributor distributes shares for all of Astra Group's mutual funds
and is a wholly-owned subsidiary of Atlas Group.
The transfer agent for AIST is Investors Fiduciary Trust Company (the
"Transfer Agent"). The principal business address of the Transfer Agent is c/o
DST Systems, Inc., P.O. Box 419174, Kansas City, Missouri 64141.
Under a sub-administration agreement between AMC and PFPC Inc. ("PFPC"),
PFPC provides certain administrative services to the Trust, subject to the
supervision of the Board of Trustees of AIST. Such services include regulatory
compliance, assistance in the preparation and filing of amendments to AIST's
registration statement with the SEC, preparation of annual, semi-annual and
other reports to shareholders and the SEC, filing of federal and state income
tax returns, preparation of financial and managements 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 Trust) has agreed to pay PFPC a
monthly fee at the annual rate of .07% of the average net assets of the Trust
subject to certain minimums, exclusive of out-of-pocket expenses.
ITEM 6. CAPITAL STOCK AND OTHER SECURITIES.
The Portfolios are series of AIST, which was organized as a Massachusetts
Business Trust on September 4, 1991. Each Portfolio consists of an unlimited
number of shares of beneficial interest without par value.
All shares of each Portfolio have equal voting rights. In the event of
dissolution or liquidation, holders of each Portfolio's shares will receive pro
rata, subject to the rights of creditors, the proceeds of the sale of the assets
held. There are no preemptive or conversion rights applicable to any of the
shares. Portfolio shares do not have cumulative voting rights and, as such,
holders of at least 50% of the shares voting for Trustees can elect all Trustees
and the remaining shareholders would not be able to elect any Trustees. The
shares, when issued, will be fully paid and non-assessable. The Board of
Trustees may create additional series (or classes of series) of the shares of
AIST without shareholder approval. Any series of shares may be terminated by a
vote of shareholders of such series entitled to vote or by Trustees of AIST by
written notice to shareholders of such series.
Generally, there will not be annual meetings of shareholders. Shareholders
may remove Trustees from office by votes cast at a meeting of shareholders or by
written consent. If requested by shareholders of at least 10% of a Portfolio's
outstanding shares, such Portfolio will call a meeting of shareholders for the
purpose of voting upon the question of removal of a Trustee or Trustees and will
assist in communications with other shareholders as required by Section 16(c) of
the 1940 Act.
As used herein, the term "Majority Vote" means the affirmative vote of (a)
more than 50% of the outstanding shares of a Portfolio or AIST, as appropriate,
or (b) 67% or more of the shares present at a meeting if more than 50% of the
outstanding shares of a Portfolio or AIST, as appropriate, are represented at
the meeting in person or by proxy, whichever is less.
Under Massachusetts law, shareholders could, under certain circumstances,
be held liable for the obligations of AIST. However, the Declaration of Trust
disclaims shareholder liability for acts or obligations of AIST and requires the
notice of such disclaimer be given to all parties in each agreement, obligation
or instrument entered into or executed by AIST or the Trustees. The Declaration
of Trust provides for indemnification out of the property of AIST for all loss
and expense of any shareholder of AIST held liable on
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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 AIST 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 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 AIST of the
Trustees and officers of AIST except with respect to any matter as to which such
person did not act in good faith in the reasonable belief that his action was in
or not opposed to the best interests of the AIST. Such person may not be
indemnified against any liability to AIST or the shareholders of AIST to which
he would otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties involved in the conduct of his
office. The Declaration of Trust also authorizes the purchase of liability
insurance on behalf of Trustees and officers.
Any conflict of interest arising between ASIS and AIST will be resolved by
the Trustees of ASIS and AIST in accordance with their fiduciary
responsibilities imposed by the 1940 Act and Massachusetts law. Absent the
adoption of procedures reasonably appropriate to deal with conflicts of
interest, state securities regulations generally do no permit the Trustees of
AIST to be the same individuals as the Trustees of ASIS. The Trustees of ASIS
and AIST, including a majority of disinterested Trustees (as that term is
defined in the 1940 Act, have adopted procedures that they believe are
reasonably appropriate to deal with any potential conflicts of interest up to
and including creating a separate Board of Trustees.
Shareholder inquiries should be directed to the Shareholder Servicing
Agent, DST Systems, Inc. (800- 441-7267).
Distributions. Income dividends will be declared daily and paid monthly.
Each Portfolio intends to declare or distribute sufficient dividends from its
net investment income and/or net capital gain income in order to avoid the
imposition of a 4% excise tax.
A shareholder may choose from the following three distribution options:
(1) The Share Option: The Share Option reinvests income dividends and/or
capital gains distributions, if any, in additional shares. If no option is
selected, income dividends (and capital gains, if any) will be reinvested in
additional shares of a Portfolio. Income dividends and/or capital gains will be
reinvested at the net asset value as of the reinvestment date for the
distribution.
(2) The Cash Option: With the Cash Option, a shareholder may receive
income dividends and/or capital gains distributions in cash. If this option is
selected and the U.S. Postal Service cannot deliver payment checks, or if such
checks remain uncashed for 6 months, the money will be reinvested in the
shareholder's account at the then-current net asset value and the shareholder's
election will be converted to reinvesting both income dividends and capital gain
distributions in additional shares.
(3) The Transfer Option: If a shareholder is also a shareholder in any of
the other Astra Funds distributed by the Distributor, the Transfer Option
permits income dividends and capital gains distributions of a Portfolio to be
automatically invested in shares of any of the Astra Funds shares which are held
by a shareholder at the applicable net asset value. If this option is selected,
the minimum investment requirements for additions to an existing account will be
waived.
A shareholder must specify which option is desired when placing an order
or submitting an application. The tax consequences of distributions (described
below) are the same whether a shareholder chooses to receive them in cash or to
reinvest them in additional shares of a Portfolio or another Astra Fund.
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Taxation of the Portfolios. Each Portfolio is treated as a separate entity
for federal income tax purposes. Each Portfolio intends to elect to be treated
as a regulated investment company under Subchapter M of the Internal Revenue
Code of 1986, as amended (the "Code"). By distributing all of its net investment
income and net realized short-term and long-term capital gain for a fiscal year
in accordance with the timing requirements imposed by the Code and by meeting
certain other requirements relating to the sources of its income and
diversification of its assets, each Portfolio should not be liable for federal
income or excise taxes.
Taxation of Shareholders. For federal income tax purposes, any income
dividends which a shareholder receives from a Portfolio, as well as any
distributions derived from the excess of net short-term capital gain over net
long-term capital loss, are treated as ordinary income whether elected to be
received in cash or in additional shares. Distributions derived from the excess
of net long-term capital gain over net short-term capital loss are treated as
long-term capital gain regardless of the length of time a shareholder has owned
shares and regardless of whether such distributions are received in cash or in
additional shares. Pursuant to the Code, certain distributions which are
declared in October, November or December but which, for operational reasons,
may not be paid to the shareholder until the following January, will be treated
for tax purposes as if received by the shareholder on December 31 of the
calendar year in which they are declared.
Redemptions and exchanges of a Portfolio's shares are taxable events on
which a shareholder may realize a gain or loss. All or a portion of a loss
realized upon a redemption of shares will be disallowed to the extent other
shares of such Portfolio are purchased (through reinvestment of dividends or
otherwise) within 30 days before or after such redemption. Any loss realized
upon the redemption of shares within six months from the date of their purchase
will be treated as a long-term capital loss to the extent of amounts treated as
distributions of net long-term capital gain during such six-month period.
Each Portfolio may be required to report to the Internal Revenue Service
any taxable dividend or other reportable payment (including share redemption
proceeds) and withhold 31% of any such payments made to individuals and other
non-exempt shareholders who have not provided a correct taxpayer identification
number and made certain required certifications that appear in the shareholder
application form. A shareholder may also be subject to backup withholding if the
IRS or a broker notifies a Portfolio that the number furnished by the
shareholder is incorrect or that the shareholder is subject to backup
withholding for previous under-reporting of interest or dividend income.
Shareholders should consult their tax advisors with respect to the
applicability of state and local income taxes to distributions and redemption
proceeds received from the Trust. Distributions by the Trust to shareholders who
are nonresident aliens or foreign corporations may be subject to U.S.
withholding taxes. Such shareholders should consult with their financial or tax
advisors regarding the applicability of U. S.
withholding taxes to distributions received by them from the Trust.
ITEM 7. PURCHASE OF SECURITIES BEING OFFERED.
Shares of the Portfolios may be purchased by institutions, such as
investment companies, banks, thrift institutions, credit unions, trust
companies, corporations and other institutional entities. The minimum initial
investment is $1,000,000 and the minimum subsequent investment is $250,000, but
these requirements may be changed or waived at any time at management's
discretion. Shares of the Portfolios are made available through selected
financial service firms such as broker-dealer firms and banks ("Firms") who have
signed agreements with the Distributor (whose principal business address is 750
B Street, Suite 2350, San Deigo, California 92101), the placement agent. The
Distributor compensates these Firms at a rate of up to .25% of purchase payments
for shares. Shares may also be purchased by check or wire directly to the
Transfer Agent. Each Portfolio's offering price is the net asset value next
determined after an order is received.
An investor will become a shareholder of record as of the close of
business on the day on which a purchase order is accepted by the Distributor or
the Transfer Agent. However, shareholders will not be credited with any return
on an investment until payment has been converted to Federal funds by the
Transfer Agent or a Portfolio's Custodian Bank, which may take up to three days.
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Purchases By Wire. Purchases of shares of the Adjustable Rate Portfolio by
wire transfer should be directed to "Investors Fiduciary Trust Co. ABA
101003621" for credit to Astra Institutional Adjustable Rate Securities
Portfolio as instructed by the Distributor. Purchases of shares of the
Government Securities Portfolio by wire transfer should be directed to
"Investors Fiduciary Trust Co. ABA 101003621" for credit to Astra Institutional
Adjustable U.S. Government Securities Portfolio as instructed by the
Distributor.
For initial purchase by Federal funds wire, a shareholder must first
obtain an account number by telephoning a Portfolio at 800-441-7267. A
shareholder may then instruct his bank to wire funds as described above. After
an account number has been received and funds have been wired, the application
form must be completed and, with respect to the Adjustable Rate Portfolio, sent
to:
Astra Institutional Adjustable Rate
Securities Portfolio
DST Systems, Inc.
P.O. Box 419174
Kansas City, MO 64141
Attn: Order Department
or, with respect to the Government Securities Portfolio, sent to:
Astra Institutional Adjustable U.S.
Government Securities Portfolio
DST Systems, Inc.
P.O. Box 419174
Kansas City, MO 64141
Attn: Order Department
This procedure is for the protection of shareholders. A Portfolio will not
honor orders for redemptions until it receives the proper authorizations.
Shares purchased by Federal funds wire will be purchased at the close of
business on the day on which the Federal funds wire is received and, if the wire
is received before 12:00 noon New York time, the shares will be entitled to
dividends on that business day. Shares purchased by Federal funds wire received
after 12:00 noon New York time will be entitled to dividends on the next
business day.
Purchase By Check. An initial investment made by check must be accompanied
by an Application, completed in its entirety. Additional shares of a Portfolio
may also be purchased by sending a check payable to such Portfolio, along with
information regarding a shareholder's 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.
Valuation. The net asset value and offering price of shares of a Portfolio
are determined once daily as of the close of trading on the New York Stock
Exchange during a Portfolio's "business day," which is any day on which the
Exchange is open for business. The net asset value of a Portfolio serves as the
basis for the purchase and redemption price of Portfolio shares. The net asset
value is also used in calculating the fee paid to AMC.
Calculation of Net Asset Value. Net asset value is calculated by dividing
the value of a Portfolio's portfolio securities, plus any cash or other assets
less all liabilities, by the number of shares outstanding. The securities held
in a Portfolio's portfolio will be valued by using market quotations, or
independent pricing services which use prices provided by market-makers or
estimates of market values obtained from yield data relating to instruments or
securities with similar characteristics. Securities for which reliable
quotations or pricing services are not readily available and all other assets
will be valued at their respective fair value as determined in good faith by, or
under procedures established by, the Trustees, which procedures may include
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the delegation of certain responsibilities regarding valuation to the officers
of AIST. The officers of AIST report, as necessary, to the Trustees regarding
portfolio valuation determination.
Short-term securities with less than sixty days remaining to maturity when
acquired by a Portfolio will be valued on an amortized cost basis by such
Portfolio when the Trustees have determined that amortized cost is fair value.
If a Portfolio acquires such securities with more than sixty days remaining to
maturity, they will be valued at current market value (using the mean of the bid
and the asked prices) until the 60th day prior to maturity, and will then be
valued on an amortized cost basis based upon the value on such date unless the
Board determines during such 60-day period that this amortized cost basis does
not represent fair value.
ITEM 8. REDEMPTION OR REPURCHASE.
Shares of a Portfolio will be 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 Federal
income tax required to be withheld. Shares of a Portfolio may be redeemed in the
following ways:
(1) 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 on file before a
redemption request will be considered in proper form. The Transfer Agent may
also require a signature guarantee by an eligible guarantor as stipulated in
Rule 17 Ad-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 Shareholder Servicing Agent at (800) 441-7267.
(2) Redemption by Wire or Telephone. Brokers, dealers, or other sales
agents may communicate redemption orders by wire or telephone. These firms may
charge for their services in connection with redemption requests but neither of
the Portfolios nor the Distributor imposes any such charges.
(3) Expedited Redemption. Payment of redemption requests (of a specified
amount or more) may be wired or mailed directly to a domestic commercial bank
account that a shareholder has 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, a
wire redemption by telephone or wire to the Transfer Agent may be requested. For
telephone redemptions, a shareholder must call the Transfer Agent at (800)
441-7267.
Payment to shareholders for shares redeemed or repurchased will be made
within seven days after receipt by the Portfolio's Transfer Agent. A Portfolio
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, each Portfolio recommends that all purchases be made by bank
wire Federal funds. A Portfolio may suspend the right of redemption under
certain extraordinary circumstances in accordance with the Rules of the SEC.
Each Portfolio reserves the right upon 30-days' written notice to redeem, at net
asset value, the shares of any shareholder whose account (except for IRAs) has a
value of less than $1,000,000 other than as a result of a decline in the net
asset value per share.
ITEM 9. PENDING LEGAL PROCEEDINGS.
Certain class action lawsuits, the first of which was filed on December
19, 1994 (entitled Lisa Liottali, on behalf of herself and all others similarly
situated v. Pilgrim Adjustable Rate Securities Trust I-A, Pilgrim Institutional
Securities Trust, Pilgrim Management Corporation, Pilgrim Group, Inc. and
Palomba Weingarten), are pending in the United States District Court for the
Central District of California in which Pilgrim Group, Inc., Pilgrim Management
Corporation, Pilgrim Distributors Corp., Pilgrim Institutional Securities Trust
("PIST"), Pilgrim Strategic Investment Series ("PSIS") (and certain series funds
of PSIS) (predecessors to the Atlas
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<PAGE>
Group, AMC, the Distributor, AIST and ASIS) and certain past and present
Trustees and officers of AIST and ASIS are defendants. These actions, which were
consolidated in March 31, 1995, in an action entitled In Re: Pilgrim Securities
Litigation, principally allege violations of the Securities Act of 1933 and the
Investment Company Act of 1940 and relate primarily to disclosure in certain of
PSIS' funds concerning pricing and liquidity of portfolio securities. Management
believes the Complaints are without merit and intends to vigorously defend these
actions. On December 18, 1996, the Court granted preliminary approval of a
tentative class action settlement which would result in a dismissal of the class
actions with prejudice. The tentative settlement would not have a material
adverse effect upon the financial condition of the Trusts or the Portfolio. The
tentative settlement, however, is subject to final court approval, among other
things, and the defendants have the option of terminating the settlement under
certain conditions.
Investors in the Portfolios will be informed of its progress through
periodic reports. Financial statements certified by independent public accounts
will be submitted to shareholders at least annually. A copy of a current list of
investments comprising the Portfolios as of the close of business on the last
day of each month may be obtained by written request to AIST, together with a
stamped, self-addressed envelope.
Shareholder inquiries should be directed to the Shareholder Servicing
Agent, DST Systems, Inc. (800-441-7267).
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PART B
ITEM 10. COVER PAGE.
Not applicable.
ITEM 11. TABLE OF CONTENTS.
Page
----
General Information and History............................B-1
Investment Objective and Policies..........................B-1
Management of the Portfolios...............................B-5
Control Persons and Principal Holders
of Securities..............................................B-7
Investment Advisor and Other Services......................B-7
Brokerage Allocation and Other Practices...................B-9
Capital Stock and Other Securities.........................B-10
Purchase, Redemption and Pricing of
Securities Being Offered.................................B-11
Tax Status.................................................B-12
Underwriters...............................................B-15
Calculation of Performance Data............................B-15
Financial Statements.......................................B-17
ITEM 12. GENERAL INFORMATION AND HISTORY.
Astra Institutional Securities Trust ("AIST" or the "Trust") is an
open-end management investment company (mutual fund) which was organized as
Pilgrim Institutional Securities Trust ("PIST") pursuant to the laws of the
State of Massachusetts on September 4, 1991. On March 17, 1995, the Board of
Trustees of PIST approved an amendment to PIST's Declaration of Trust changing
the name of PIST to Astra Institutional Securities Trust in consideration of an
acquisition of the assets of several Pilgrim entities, not including PIST. The
amendment to the Declaration of Trust was filed with the Commonwealth of
Massachusetts and became effective on April 10, 1995.
ITEM 13. INVESTMENT OBJECTIVE.
Mortgage Securities Generally. Mortgage securities represent a direct or
indirect participation in, or are secured by and payable from, mortgage loans
secured by real property. There are three basic types of mortgage securities:
(1) those issued or guaranteed by the U.S. government, its agencies or
instrumentalities, such as the Government National Mortgage Association, the
Federal National Mortgage Association and the Federal Home Loan Mortgage
Corporation; (2) those issued by private issuers that are collateralized by U.S.
government mortgage securities and (3) those issued by private issuers that are
collateralized by mortgage loans without a government guarantee but that usually
have some form of private credit enhancement.
Since the inception of the mortgage pass-through security in 1970, the
market for mortgage securities has expanded considerably. The size of the
primary issuance market, and active participation in the secondary market by
securities dealers and many types of investors, makes government and
government-
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related pass-through pools highly liquid. Yields on pass-through
securities are typically quoted by investment dealers and vendors based on the
maturity of the underlying instruments and the associated average life
assumption. The average life of pass-through pools varies with the maturities of
the underlying mortgage loans. In addition, a pool's term may be shortened by
unscheduled or early payments of principal on the underlying mortgages. The
occurrence of mortgage prepayments is affected by various factors, including the
level of interest rates, general economic conditions, the location and age of
the mortgage and other social and demographic conditions. Because prepayment
rates of individual pools vary widely, it is not possible to predict accurately
the average life of a particular pool. For pools of fixed rate 30-year
mortgages, a common industry practice has been to assume that prepayments will
result in a 12-year average life. At present, pools (particularly those with
loans with other maturities or different characteristics) are priced on as
assumption of average life determined for each pool. In periods of falling
interest rates, the rate of prepayment tends to increase, thereby shortening the
actual average life of a pool of mortgage-related securities. Conversely, in
periods of rising rates the rate of prepayment tends to decrease, thereby
lengthening the actual average life of the pool. However, these effects may not
be present, or may differ in degree, if the mortgage loans in the pool have
adjustable interest rates or other special payment features. Actual prepayment
experience may cause the yield of mortgage-backed securities to differ from the
assumed average life yield. Reinvestment of prepayments may occur at higher or
lower interest rates than the original investment, thus affecting the yield of a
Portfolio.
The coupon rate of interest on mortgage securities is lower than the
interest rates paid on the mortgages included in the underlying pool due to the
annual fees paid to the servicer of the mortgage pool for passing through
monthly payments to certificate holders. Actual yield to the holder may vary
from the coupon rate if the mortgage securities are purchased at a premium or
discount or traded in the secondary market at a premium or discount.
Each Portfolio will only purchase mortgage securities issued by persons
that are governmental agencies or instrumentalities, fall outside of the
definition of investment company under the Investment Company Act of 1940, as
amended (the "1940 Act'), are excluded from such definition pursuant to such
sections 3(b) or 3(c) or other provision of such Act, unless such purchase is
made consistent within the limits of Section 12(d) of the 1940 Act.
CHARACTERISTICS OF MULTI-CLASS MORTGAGE SECURITIES
The Certificates. In general, a series of certificates is issued in
multiple classes with a stated maturity or final distribution date. One or more
classes of each series may be entitled to receive distributions allocable only
to principal, principal prepayments, interest or any combination thereof prior
to one or more other classes, or only after the occurrence of certain events,
and may be subordinated in the right to receive such distributions on such
certificates to one or more senior classes of certificates. The rights
associated with each class of certificates are set forth in the applicable
pooling and servicing agreement, form of certificate and offering documents for
the certificates.
The subordination terms are usually designed to decrease the likelihood
that the holders of senior certificates will experience losses or delays in the
receipt of their distributions and to increase the likelihood that the senior
certificate holders will receive aggregate distributions of principal and
interest in the amounts anticipated. Generally, pursuant to such subordination
terms, distributions arising out of scheduled principal, principal prepayments,
interest or any combination thereof that otherwise would be payable to one or
more other classes of certificates of such series (i.e., the subordinated
certificates) are paid instead to holders of the senior certificates. Delays in
receipt of scheduled payments on mortgage loans and losses on defaulted
mortgage loans are typically borne first by the various classes of subordinated
certificates and then by the holders of senior certificates.
In some cases, the aggregate losses in respect of defaulted mortgage loans
which must be borne by the subordinated certificates and the amount of the
distributions otherwise distributable on the subordinated certificates that
would, under certain circumstances, be distributable to senior certificate
holders may be
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limited to a specified amount. All or any portion of distributions otherwise
payable to holders of subordinated certificates may, in certain circumstances,
be deposited into one or more reserve accounts for the benefit of the senior
certificate holders. Since a greater risk of loss is borne by the subordinated
certificate holders, such certificates generally have a higher stated yield than
the senior certificates.
Interest on the certificates generally accrues on the aggregate principal
balance of each class of certificates entitled to interest at an applicable
rate. The certificate interest rate may be a fixed rate, a variable rate based
on current values of an objective interest index or a variable rate based on a
weighted average of the interest rate on the mortgage loans underlying or
constituting the mortgage assets. In addition, the underlying mortgage loans may
have variable interest rates.
Generally, to the extent funds are available, interest accrued during each
interest accrual period on each class of certificates entitled to interest is
distributable on certain distribution dates until the aggregate principal
balance of the certificates of such class has been distributed in full.
The amount of interest that accrues during any interest accrual period and
over the life of the certificates depends primarily on the aggregate principal
balance of the class of certificates which, unless otherwise specified, depends
primarily on the principal balance of the mortgage assets for each such period
and the rate of payment (including prepayments) of principal of the underlying
mortgage loans over the life of the trust.
A series of certificates may consist of one or more classes as to which
distributions allocable to principal will be allocated. The method by which the
amount of principal to be distributed on the certificates on each distribution
date is calculated and the manner in which such amount could be allocated among
classes varies and could be effected pursuant to a fixed schedule, in relation
to the occurrence of certain events or otherwise. Special distributions are also
possible if distributions are received with respect to the mortgage assets, such
as is the case when underlying mortgage loans are prepaid.
Credit Enhancement. Credit enhancement for the senior certificates
comprising a series is provided by the holders of the subordinated certificates
to the extent of the specific terms of the subordination and, in some cases, by
the establishment of reserve funds. Depending on the terms of a particular
pooling and servicing agreement, additional or alternative credit enhancement
may be provided by a pool insurance policy and/or other insurance policies,
third party limited guaranties, letters of credit, or similar arrangements.
Letters of credit may be available to be drawn upon with respect to losses due
to mortgagor bankruptcy and with respect to losses due to the failure of a
master servicer to comply with its obligations, under a pooling and servicing
agreement, if any, to repurchase a mortgage loan as to which there was fraud or
negligence on the part of the mortgagor or originator and subsequent denial of
coverage under a pool insurance policy, if any. A master servicer may also be
required to obtain a pool insurance policy to cover losses in an amount up to a
certain percentage of the aggregate principal balance of the mortgage loans in
the pool to the extent not covered by a primary mortgage insurance policy by
reason of default in payments on mortgage loans.
Optional Termination of a Trust. A pooling and servicing agreement may
provide that the depositor and master servicer could effect early termination of
a trust, after a certain specified date or the date on which the aggregate
outstanding principal balance of the underlying mortgage loans is less than a
specific percentage of the original aggregate principal balance of the
underlying mortgage loans by purchasing all of such mortgage loans at a price,
unless otherwise specified, equal to the greater of a specified percentage of
the unpaid principal balance of such mortgage loans, plus accrued interest
thereon at the applicable certificate interest rate, or the fair market value of
such mortgage assets. Generally, the proceeds of such repurchase would be
applied to the distribution of the specified percentage of the principal balance
of each outstanding certificate of such series, plus accrued interest, thereby
retiring such certificates. Notice of such optional termination would be given
by the trustee prior to such distribution date.
Underlying Mortgage Loans. The underlying trust assets are a mortgage pool
generally consisting of mortgage loans on single, multi-family and mobile home
park residential properties. The mortgage loans
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<PAGE>
are originated by savings and loan associations, savings banks, commercial banks
or similar institutions and mortgage banking companies.
Various servicers provide certain customary servicing functions with
respect to the mortgage loans pursuant to servicing agreements entered into
between each servicer and the master servicer. A servicer's duties generally
include collection and remittance of principal and interest payments,
administration of mortgage escrow accounts, collection of insurance claims,
foreclosure procedures, and, if necessary, the advance of funds to the extent
certain payments are not made by the mortgagors and are recoverable under
applicable insurance policies or from proceeds of liquidation of the mortgage
loans.
The mortgage pool is administered by a master servicer who (a) establishes
requirements for each servicer, (b) administers, supervises and enforces the
performance by the servicers of their duties and responsibilities under the
servicing agreements, and (c) maintains any primary insurance, standard hazard
insurance, special hazard insurance and any pool insurance required by the terms
of the certificates.
The master servicer may be an affiliate of the depositor and also may be
the servicer with respect to all or a portion of the mortgage loans contained in
a trust fund for a series of certificates.
Lending of Portfolio Securities. Each Portfolio may lend its portfolio
securities in order to generate additional income. The Portfolio may pay
reasonable administration and custodial fees in connection with a loan and may
pay a negotiated portion of the income earned on the cash to the borrower or
placing broker. Loans are subject to termination at the option of each Portfolio
or the borrower at any time, including when termination is necessary to enable
such Portfolio to be the record owner for each dividend paid by the issuer
thereof. A Portfolio does not have the right to vote securities on loan, but
would terminate the loan and regain the right to vote if that were considered
important with respect to the investment.
Purchase of Mortgage Securities. The Portfolio intends to comply with the
provisions of Section 12(d) of the 1940 Act in connection with purchasing
mortgage securities.
Investment Restrictions. The following investment restrictions which have
been adopted by each Portfolio are fundamental and cannot be changed without
approval by the vote of a majority of the outstanding voting securities of each
Portfolio, as defined in the 1940 Act. (All policies of the Portfolios not
specifically identified in this Part B or Part A as fundamental may be changed
without a vote of the shareholders.)
The Portfolios may not:
1. Borrow money, except if after each borrowing there is asset coverage
of at least 300% as defined in the Act. For purposes of this
investment restriction, short sales, the entry into currency
transactions, options, futures contracts, including those relating
to indexes, options on futures contracts or indexes and forward
commitment transactions shall not constitute borrowing.
2. Invest more than 25% of the value of its total assets in the
securities of one or more issuers conducting their principal
business activities in the same industry, except that a Portfolio
will invest more than 25% of the value of its total assets in
securities of issuers in the asset-backed securities industry.
However, in some future period or periods, due to adverse economic
conditions or for defensive purposes, a Portfolio may temporarily
have less than 25% of the total value of its assets invested in that
industry. This limitation does not apply to investments or
obligations of the U.S. Government or any of its agencies or
instrumentalities. In addition, this limitation does not prevent a
Portfolio from investing all or substantially all of its assets in
another registered investment company having the same investment
objective as that of such Portfolio.
3. Pledge, mortgage or hypothecate its assets, except to the extent
necessary to secure permitted borrowings and to the extent related
to the deposit of assets in escrow in
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<PAGE>
connection with (a) the writing of covered put and call options, (b)
the purchase of securities on a forward commitment or
delayed-delivery basis and (c) collateral and initial or variation
margin arrangements with respect to currency transactions, options,
futures contracts, including those relating to indexes, and options
on futures contracts or indexes.
4. Purchase securities on margin, except for such short-term credits as
are necessary for the clearance of transactions, but a Portfolio may
make margin deposits in connection with transactions in currencies,
options, futures and options on futures.
5. With respect to the Government Securities Portfolio only, make short
sales of securities, except short sales against-the-box, or maintain
a short position.
6. Underwrite any issue of securities issued by others, except to the
extent that the sale of portfolio securities by a Portfolio may be
deemed to be underwriting, except that a Portfolio may invest all or
substantially all of its assets in another registered investment
company with the same investment objective as that of such
Portfolio.
7. Purchase, hold or deal in real estate or oil and gas interests,
although a Portfolio may purchase and sell securities that are
secured by real estate or interests therein and may purchase
mortgage-related securities and may hold and sell real estate
acquired for a Portfolio as a result of the ownership of securities.
8. Invest in commodities except that a Portfolio may purchase and sell
futures contracts, including those relating to securities,
currencies, indexes, and options on futures contracts or indexes and
currencies underlying or related to any such futures contracts, and
purchase and sell currencies (and options thereon) or securities on
a forward commitment or delayed-delivery basis.
9. Lend any funds or other assets except through the purchase of all or
a portion of an issue of securities or obligations of the type in
which it may invest; however, a Portfolio may lend portfolio
securities in an amount not to exceed 10% of the value of such
Portfolio's total assets. Any loans of portfolio securities will be
made according to guidelines established by the SEC and the Board of
Trustees of AIST.
10. Issue any senior security (as such term is defined in Section 18(f)
of the 1940 Act) (including the amount of senior securities issued
but excluding liabilities and indebtedness not constituting senior
securities) except as permitted in Investment Restriction Nos. 1, 3,
4 and 8. Obligations under interest rate swaps will not be treated
as senior securities for purposes of this restriction so long as
they are covered in accordance with applicable regulatory
requirements. Obligations under interest rate collars, caps, and
floors will be treated as senior securities unless and until such
time as the Portfolio receives regulatory relief from the Staff or
until such time as the Staff no longer deems such instruments to be
senior securities. Other good faith hedging transactions and similar
investment strategies will also not be treated as senior securities
for purposes of this restriction so long as they are covered in
accordance with applicable regulatory requirements and are
structured consistent with current Staff interpretation.
ITEM 14. MANAGEMENT OF THE PORTFOLIOS.
Responsibility for management of the Portfolios is vested in the Board of
Trustees of AIST. The Trustees in turn appoint officers to supervise actively
the day-to-day operations of the Portfolios. The shareholders of AIST may elect
Trustees at any meeting of shareholders called by the Trustees for that purpose.
Each Trustee serves during the continued lifetime of AIST until he dies, resigns
or is removed, or, if sooner, until the next meeting of shareholders called for
the purpose of electing Trustees.
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The affiliations and principal occupations during the past five years of
the Trustees and principal officers are:
PALOMBA WEINGARTEN, CHAIRMAN OF THE BOARD, PRESIDENT AND TRUSTEE + (54)
9595 Wilshire Boulevard, Beverly Hills California 90212. Chairman of the
Board, Director and Chief Executive Officer of Atlas Holdings Group Inc.,
the parent of Astra Fund Distributors Corp. and Astra Management Corp.
("AMC"), the Portfolios' distributor and investment manager, respectively.
Chairman of the Board and Trustee of Astra Global Investment Series; Astra
Strategic Investment Series and Astra Institutional Trust.
AL BURTON, TRUSTEE (68)
2300 Coldwater Canyon, Beverly Hills, California 90210. President of Al
Burton Productions from 1992 to present; Executive Producer, First Run
Syndications for Castle Rock Entertainment Inc. from 1992 to 1995;
Executive Producer-Consultant for Universal Television, from 1982 to 1992;
Director of Pilgrim MagnaCap Fund, Inc., Pilgrim GNMA Fund, and Pilgrim
Regional BankShares Inc.; Trustee of Astra Global Investment Series, Astra
Strategic Investment Series, Astra Institutional Trust and Pilgrim Prime
Rate Trust.
FELICE R. CUTLER, TRUSTEE (59)
10601 Wilshire Boulevard, 19th Floor, Los Angeles, California 90024.
Partner in the law firm of Cutler & Cutler, Los Angeles, California since
1991 and for more than five years prior to 1990 and in the law firm of
Dilworth, Paxson, Kalish & Kauffman from 1990 to 1991. Trustee of Astra
Strategic Investment Series and Astra Institutional Trust.
GARRY D. PEARSON, TRUSTEE (48)
150 North Myers Street, Los Angeles, California 90033. Senior Vice
President of George Rice & Sons, a printing company located in Los
Angeles, California, since July 1994. Formerly, Vice President and partner
in Anderson Lithograph, a printing company located in Los Angeles,
California, from 1983 to 1994. Trustee of Astra Institutional Trust, Astra
Global Investment Series and Astra Strategic Investment Series.
ROBERT WOMACK, Jr., PRESIDENT + (33)
11400 West Olympic Boulevard, Suite 200, Los Angeles, California 90064.
President of AMC, Astra Fund Distributors Corp., Astra Strategic
Investment Series, Astra Institutional Trust and Astra Global Investment
Series. From July 1995 to the present, Portfolio Manager with the Astra
Funds. From April to June 1995, Portfolio Manager for Pilgrim America
Group. From June 1993 to April 1995, Portfolio Manager for Pilgrim
Management Corporation. From March 1989 to June 1993, Portfolio Manager
for World Savings and Loan Association in Oakland, California.
JOHN R. ELERDING, SENIOR VICE PRESIDENT, SECRETARY, TREASURER AND CHIEF
FINANCIAL OFFICER + (45)
11400 West Olympic Boulevard, Suite 200, Los Angeles, California 90064.
Senior Vice President, Secretary, Treasurer and Chief Financial Officer of
AMC and Astra Fund Distributors Corp. Senior Vice President, Secretary,
Treasurer and Chief Financial Officer of Astra Global Investment Series,
Astra Strategic Investment Series and Astra Institutional Trust. From
January 1994 to September 1994, Chief Financial Officer at the investment
banking firm of Investment Securities Corp. in San Francisco, California.
From 1991 to August 1993, investment manager and assistant to the Chief
Operating Officer at Robertson Stephens & Company in San Francisco,
California.
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+ Interested person of AIST as defined in the 1940 Act.
The Officers and Trustees of AIST, as a group, owned of record and
beneficially less than 1% of the outstanding shares of the Portfolios as of
October 31, 1996. The Trustees of AIST or ASIS who are not affiliated with or
interested persons of AMC may receive fees for attendance at Trustees' meetings
(during the fiscal year ended October 31, 1996, $33,171 was paid), while
officers of AIST receive no compensation directly from it for performing the
duties of their offices. However, those Officers and Trustees who are affiliated
with AMC may be considered to have received renumeration indirectly because AMC
receives management fees from the Portfolios.
ITEM 15. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES.
The Trustees of AIST establish each Portfolio's policies and supervise and
review the operations and management of each Portfolio.
The principal holders of shares of the Portfolios are the Astra Adjustable
U.S. Government Securities Trusts and the Astra Adjustable Rate Securities
Trusts, both series of ASIS (whose address is 750 B Street, Suite 2350, San
Diego, California 92101). As of January 31, 1997 the beneficial owners of record
of more than 5% of AIST's outstanding securities were as follows:
ADJUSTABLE RATE PORTFOLIO
Astra Adjustable Rate Securites Trust I 20%
Astra Adjustable Rate Securites Trust I-A 59%
Astra Adjustable Rate Securites Trust IV 21%
ADJUSTABLE U.S. GOVERNMENT PORTFOLIO
Astra Adjustable U.S. Government Securites Trust I 54%
Astra Adjustable U.S. Government Securites Trust I-A 40%
ITEM 16. INVESTMENT ADVISER AND OTHER SERVICES
Investment management services are provided to the Portfolios by Astra
Management Corporation ("AMC") pursuant to an Investment Management Agreement
(the "Management Agreement"). As compensation for its services with respect to
the Government Portfolio, AMC is paid monthly a fee equal to 0.55% per annum of
the average daily net assets of such Portfolio on the first $500 million of
assets. The annual rate is reduced to 0.50% on net assets from $500 million to
$1 billion; and to 0.45% on net assets over $1 billion. As compensation for its
services with respect to the Adjustable Rate Portfolio, AMC is paid monthly a
fee equal to 0.65% per annum of the average daily net assets of such Portfolio
on the first $500 million of assets. The annual rate is reduced to 0.60% on net
assets from $500 million to $1 billion; and to 0.55% on net assets over $1
billion. As of October 31, 1996, the total net assets of the Government and
Adjustable Rate Portfolios were approximately $ 89 million and $11 million,
respectively. During the fiscal years ended Octover 31, 1994, 1995 and 1996, AMC
received compensation under its management agreement with the Government
Portfolio in the amounts of $4,789,543, $1,550,152, and $680,424 respectively.
During the fiscal years ended October 31, 1994, 1995 and 1996, AMC received
compensation under its management agreement with the Adjustable Rate Portfolio
in the amounts of $3,257,763, $629,095 and $110,844 respectively.
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AIST pays its own operating expenses which are not assumed by AMC,
including such expenses as organizational and offering expenses of AIST and
expenses incurred in connection with the issuance, registration and transfer of
its shares; fees and costs of its custodian, transfer and shareholder servicing
agents; costs and expenses of pricing and calculating the daily net asset value
of shares of the Portfolios and of maintaining books of account required by the
1940 Act; expenditures in connection with meetings of shareholders and Trustees;
salaries of officers and fees and expenses of Trustees who are not members of or
affiliated with AIST or AMC; insurance premiums on property or personnel of the
Portfolio which inure to the Portfolio's benefit; salaries of personnel involved
in placing orders for the execution of the Portfolio's portfolio transactions
and in maintaining registration of shares under state securities laws; the cost
of preparing and printing reports and proxy statements of the Portfolios or
other communications for distribution to its shareholders; preparing and sending
prospectuses and statements of additional information to existing shareholders;
trade association dues; legal and accounting fees; fees and expenses of
registering and maintaining registration of its shares for sale under federal
and applicable state securities laws; and certain other costs and expenses
related to operation of the Portfolios.
AMC will reduce its aggregate fees for any fiscal year, or reimburse the
Trusts or the Portfolios, to the extent required so that aggregate expenses do
not exceed the expense limitations applicable under the securities laws or
regulations of those states or jurisdictions in which the Trusts' shares are
registered or qualified for sale.
The Management Agreement is in effect until August 28, 1997, and will be
continued in effect from year to year thereafter so long as such continuation is
approved at least annually (1) by the Trustees of AIST or the vote of a majority
of the outstanding voting securities of each Portfolio, and (2) by a majority of
the Trustees who are not interested persons of any party to the Management
Agreement cast in person at a meeting called for the purpose of voting on such
approval. The Management Agreement may be terminated at any time without
penalty, by either the Portfolios or AMC upon 60 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 Group, a Delaware corporation of
which Mrs. Weingarten is the sole stockholder. AMC also acts as the investment
manager to the series of Astra Strategic Investment Series, Astra Short-Term
Multi-Market Income Trust and Astra Short-Term Multi-Market Income Fund II
(series of Astra Global Investment Series) and Astra All-Americas Government
Income Trust (a series of Astra Institutional Trust), open-end investment
companies. As of the date of this Registration Statement, total assets under
management in the Atlas Group were approximately $110 million.
The cash and securities owned by AIST are held by PNC Bank, National
Assosciation, Lester, Pennsylvania, as custodian, which takes no part in the
decisions relating to the purchase or sale of any of the Trust's portfolio
securities. DST Systems Inc. acts as AIST's transfer agent and dividend
disbursing agent.
The Trust's independent public accountant is Tait, Weller & Baker, Two
Penn Center Plaza, Philadelphia, Pennsylvania 19102.
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Certain legal matters for AIST are passed upon by Jorden Burt Berenson &
Johnson LLP, 1025 Thomas Jefferson Street, N.W., Suite 400 East, Washington,
D.C. 20007.
ITEM 17. BROKERAGE ALLOCATION AND OTHER PRACTICES
In all purchases and sales of securities for the portfolios of each
Portfolio, the primary consideration is to obtain the most favorable price and
execution available. Pursuant to the Management Agreements, AMC determines,
subject to the instructions of and review by the Trustees, which securities are
to be purchased and sold by each Portfolio and which brokers are to be eligible
to execute portfolio transactions of a Portfolio. Purchases and sales of
securities in the over-the-counter market will generally be executed directly
with a "market-maker," unless in the opinion of AMC, a better price and
execution can otherwise be obtained by using a broker for the transaction.
In placing portfolio transactions, AMC will use its best efforts to choose
a broker capable of providing the brokerage services necessary to obtain the
most favorable price and execution available. The full range and quality of
brokerage services available will be considered in making these determinations,
such as the size of the order, the difficulty of execution, the operations
facilities of the firm involved, the firm's risk in positioning a block of
securities, and other factors. In those instances where it is reasonably
determined that more than one broker can offer the brokerage services needed to
obtain the most favorable price and execution available, consideration may be
given to those brokers which supply research and statistical information to a
Portfolio and/or AMC, and provide other services in addition to execution
services. AMC considers such information, which is in addition to and not in
lieu of the services required to be performed by AMC under its agreements with
the Portfolios, to be useful in varying degrees, but of indeterminable value.
The placement of portfolio brokerage with broker-dealers who have sold shares of
the Portfolios is subject to rules adopted by the National Association of
Securities Dealers, Inc. Provided the officers of AIST are satisfied that the
Portfolios are receiving the most favorable price and execution available, AIST
may also consider the sale of its shares as a factor in the selection of
broker-dealers to execute its portfolio transactions.
While it will continue to be each Portfolio's general policy to seek first
to obtain the most favorable price and execution available, in selecting a
broker to execute portfolio transactions for a Portfolio, such Portfolio may
also give weight to the ability of a broker to furnish brokerage and research
services to such Portfolio or AMC, even if the specific services were not
imputed just to such Portfolio and were useful to AMC in advising other clients.
In negotiating commissions with a broker, a Portfolio may therefore pay a higher
commission than would be the case if no weight were given to the furnishing of
these supplemental services, provided that the amount of such commission has
been determined in good faith by such Portfolio and AMC to be reasonable in
relation to the value of the brokerage and research services provided by such
broker, which services either produce a direct benefit to the Portfolio or
assist AMC in carrying out its responsibilities to the Portfolio. The standard
of reasonableness is to be measured in light of AMC's overall responsibilities
to the Portfolio.
For the fiscal years ended October 31, 1994, 1995 and 1996, total
brokerage commissions paid by the Government Portfolio amounted to approximately
$109,000, $79,000, and $0 respectively. For the fiscal years ended October 31,
1994, 1995 and 1996, total brokerage commissions paid by the Adjustable Rate
Portfolios amounted to approximately $1,416,000, $28,000, and $0 respectively.
The Portfolios do not intend to effect any brokerage transactions in their
portfolio securities with any broker-dealer affiliated directly or indirectly
with AMC, except for any sales of portfolio securities pursuant to a tender
offer, in which event AMC will offset against the management fee a part of any
tender fees which legally may be received by such affiliated broker-dealer.
Although investment decisions for each Portfolio are made independently
from those of the other funds in the Astra Group, 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
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not be able to acquire as large a portion of such security as it desires, or it
may have to pay a higher price for such security. Similarly, any of the funds
may not be able to obtain as high a price for, or as large an execution of, an
order to sell any particular security if any of the other funds desires to sell
the same security at the same time. If more than one of such funds
simultaneously purchases or sells the same security, each day's transaction in
such security will be averaged as to price and allocated between such funds in
accordance with the total amount of such security being purchased or sold by
each of such funds. It is recognized that in some cases this system could have a
detrimental effect on the price or value of the security insofar as a Portfolio
is concerned.
ITEM 18. CAPITAL STOCK AND OTHER SECURITIES.
The Declaration of Trust dated September 4, 1991, a copy of which is on
file in the office of the Secretary of The Commonwealth of Massachusetts,
authorizes the issuance of shares of beneficial interest in AIST without par
value. Each share of a Portfolio has one vote and shares equally in dividends
and distributions when and if declared by the Trustees of AIST and in each
Portfolio's net assets upon liquidation. All shares, when issued, are fully paid
and non-assessable. There are no preemptive, conversion or exchange rights.
Portfolio shares do not have cumulative voting rights and, as such, holders of
at least 50% of the shares voting for Trustees can elect all Trustees and the
remaining shareholders would not be able to elect any Trustees. The term
"majority vote" means the affirmative vote of (a) more than 50% of the
outstanding shares of the Portfolio or AIST, as appropriate or (b) 67% or more
of the shares present at a meeting if more than 50% of the outstanding shares of
the Portfolio or AIST, as appropriate are represented at the meeting in person
or by proxy, whichever is less.
The Board of Trustees may classify or reclassify any unissued shares of
AIST 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 each Portfolio is vested with
the Trustees. The Trustees approve all significant agreements between the
Portfolios and persons or companies furnishing services to the Portfolios. The
day-to-day operations of the Portfolios are delegated to the Officers of AIST
subject to the investment objective and policies of each Portfolio, the general
supervision of the 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 PIST. However, the Declaration of Trust
disclaims shareholder liability for acts or obligations of AIST and requires
that notice of such disclaimer be given in each agreement, obligation or
instrument entered into or executed by AIST or the Trustees. The Declaration of
Trust provides for indemnification out of AIST's property for all loss and
expense of any shareholder of AIST 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 AIST would
be unable to meet its obligations wherein the complaining party was held out to
be bound by the disclaimer.
The Declaration of Trust further provides that the Trustees will not be
liable for errors of judgment or mistakes of fact or law. However, nothing in
the Declaration of Trust protects a Trustee against any liability to which the
Trustee would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence, or reckless disregard of the duties involving the conduct of
his office. The Declaration of Trust provides for indemnification by AIST of the
Trustees and officers of AIST 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 AIST. Such person may not be
indemnified against any liability to AIST or AIST's shareholders
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to which he would otherwise be subjected by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of the duties involved in the
conduct of his office. The Declaration of Trust also authorizes the purchase of
liability insurance on behalf of Trustees and officers.
ITEM 19. PURCHASE, REDEMPTION AND PRICING OF SECURITIES BEING OFFERED.
The net asset value and offering price of each Portfolio's shares will be
determined once daily as of the close of trading on the New York Stock Exchange
(currently 4:00 p.m., New York Time) on such Portfolio's "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 and on the preceding Friday or subsequent
Monday when one of these holidays falls on Saturday or Sunday, respectfully.
Portfolio securities, listed or traded on a national securities exchange
will be valued at the last sale price on such exchange on the valuation day.
Securities traded on an exchange for which there has been no sale that day and
securities traded in the over-the-counter market, will be valued at the last
reported bid price or the mean between the bid and the asked prices, as
determined by the Board of Trustees. Short-term obligations maturing in less
than 60 days will generally be valued at original cost plus accrued daily
interest. Securities for which quotations are not readily available and all
other assets will be valued at their fair value as determined in good faith by
the Trustees.
All liabilities incurred or accrued (including written call options) are
deducted from the total assets. The resulting net assets are divided by the
number of shares of a Portfolio outstanding at the time of the valuation and the
result (adjusted to the nearest cent) is the net asset value per share.
Orders received by dealers prior to the close of trading on the New York
Stock Exchange will be confirmed at the offering price computed as of the close
of trading on such Exchange provided the order is received by the Distributor
prior to 3:00 P.M. (Pacific time) on that day. It is the responsibility of the
dealer to ensure that all orders are transmitted timely to the Portfolios.
Orders received by dealers after the close of trading on such Exchange will be
confirmed at the next computed offering price.
Shareholder Services and Privileges. For investors purchasing shares of a
Portfolio under a tax-qualified individual retirement or pension plan or under a
group plan through a person designated for the collection and remittance of
monies to be invested in shares of a Portfolio on a periodic basis, a Portfolio
may, in lieu of furnishing confirmations following each purchase of its shares,
send statements not less than quarterly pursuant to the provisions of the
Securities Exchange Act of 1934, as amended, and the rules thereunder. Such
quarterly statements, which will be sent to the investor or to the person
designated by the group for distribution to its members, will be made within
five business days after the end of each quarterly period and shall reflect all
transactions in the investor's account during the preceding quarter.
Each Portfolio's shareholders have the privilege of reinvesting both
income dividends and capital gains distributions, if any, in additional full or
fractional shares of the Portfolio at the net asset value in effect at the
reinvestment date. Each Portfolio's management has made arrangements with the
Transfer Agent to have all income dividends and capital gains distributions
which are declared by such Portfolio automatically reinvested for the account of
each shareholder unless a shareholder elects in writing to such Portfolio or the
Transfer Agent to have such dividends or distribution paid to him in cash. In
the absence of such an election, each purchase of shares of a Portfolio is made
upon the condition and understanding that the Transfer Agent is automatically
appointed to receive the dividends and distributions upon all shares in the
shareholder's account and to reinvest them in full and fractional shares of a
Portfolio at the applicable net asset value in effect at the close of business
on the reinvestment date. A shareholder may still at any time after a purchase
of Trust shares request that dividends and/or capital gains distributions be
paid to him in cash.
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Every shareholder will receive a confirmation of each new transaction in
his account, which will also show the total number of Portfolio shares owned by
the shareholder and the number of shares being held in safekeeping by the
Transfer Agent for the account of the shareholders and a cumulative record of
his account for the entire year. Shareholders may rely on these statements in
lieu of certificates. Certificates representing shares of the portfolios will
not be issued unless the shareholder requests them in writing.
Redemptions. Payment to shareholders for shares redeemed or repurchased
will be made within seven days after receipt by the Transfer Agent of the
written request in proper form, except that a Portfolio may suspend the right of
redemption or postpone the date of payment during any period when (a) trading on
the New York Stock Exchange is restricted as determined by the SEC or such
Exchange is closed for reasons other than weekends and holidays; (b) an
emergency exists as determined by the SEC making disposal of portfolio
securities or valuation of net assets of a Portfolio not reasonably practicable;
or (c) for such other period as the SEC may permit for the protection of a
Portfolio's shareholders. At various times a Portfolio may be requested to
redeem its shares for which it has not yet received good payment. Accordingly, a
Portfolio may delay the mailing of a redemption check until such time as it
determines that it has received good funds for the purchase of the shares being
redeemed, which may take up to 15 days or longer.
Due to the relatively high cost of handling small investments, each
Portfolio reserves the right to redeem, at net asset value, the shares of any
shareholder whose account, as a result of voluntary redemption of shares and not
of investment performance of a Portfolio, has a value of less than $1,000,000
held in such Portfolio. Before a Portfolio redeems such shares and sends the
proceeds to the shareholder, it will notify the shareholder that the value of
the shares in his account is less than the minimum amount and allow him 30 days
to make an additional investment in an amount which will increase the value of
his account to at least $1,000,000 before the redemption is processed. This
policy will not be implemented where a Portfolio had previously waived the
minimum investment requirements.
The value of shares on redemption or repurchase may be more or less than
the investor's cost, depending upon the market value of the portfolio securities
at the time of redemption or repurchase.
ITEM 20. TAX STATUS.
The following is only a summary of certain additional tax considerations
generally affecting a Portfolio and its shareholders that are not described in
Part A. No attempt is made to present a detailed explanation of the tax
treatment of any Portfolio or its shareholders, and the discussion here and in
Part A is not intended as a substitute for careful tax planning.
Qualification as a Regulated Investment Company. Each Portfolio intends to
elect to be taxed as a regulated investment company under Subchapter M of the
Internal Revenue Code of 1986, as amended (the "Code"). As a regulated
investment company, each Portfolio generally is not subject to federal income
tax on the portion of its net investment income (i.e., its taxable interest,
dividends and other taxable ordinary income, net of expenses) and net realized
capital gain (i.e., the excess of capital gains over capital losses) that it
distributes to shareholders, provided that it distributes at least 90% of its
investment company taxable income (i.e., net investment income and the excess of
net short-term capital gain over net long-term capital loss) and at least 90% of
its tax-exempt income (net of expenses allocable thereto) for the taxable year
(the "Distribution Requirement"), and satisfies certain other requirements of
the Code that are described below. A Portfolio will be subject to tax at regular
corporate rates on any income or gains that it does not distribute.
Distributions by a Portfolio made during the taxable year or, under specified
circumstances, within one month after the close of the taxable year, will be
considered distributions of income and gains of the taxable year and can
therefore satisfy the Distribution Requirement.
In addition to satisfying the Distribution Requirement, each Portfolio
must (1) derive at least 90% of its gross income from dividends, interest,
certain payments with respect to securities loans, gains from the sale or other
disposition of stock or securities or foreign currencies (to the extent such
currency gains are ancillary to such Portfolio's principal business of investing
in stock or securities) and other income (including but not
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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 be characterized as Short-Short Gain if
they are directly related to a Portfolio's investment in stock or securities (or
options or futures thereon). Because of the Short-Short Gain Test, a Portfolio
may have to limit the sale of appreciated securities it has held for less than
three months. However, the Short-Short Gain Test will not prevent a Portfolio
from disposing of investments at a loss, since the recognition of a loss before
the expiration of the three-month holding period is disregarded. Interest
(including original issue discount) received by the Portfolio at maturity or
upon the disposition of a security held for less than three months will not be
treated as gross income derived from the sale or other disposition of such
security within the meaning of the Short-Short Gain Test. However, income that
is attributable to realized market appreciation will be treated as gross income
from the sale or other disposition of securities for this purpose.
In general, for purposes of determining whether capital gain or loss
recognized by a Portfolio on the disposition of an asset is long-term or
short-term, the holding period of the asset may be affected if (i) the asset is
used to close a "short sale" (which includes for certain purposes the
acquisition of a put option) or is substantially identical to another asset so
used, (ii) the asset is otherwise held by such Portfolio as part of a "straddle"
or (iii) the asset is stock and such Portfolio grants certain call options with
respect thereto. However, for purposes of the Short-Short Gain Test, the holding
period of the asset disposed of may be reduced only in the case of clause (i)
above.
Certain debt securities purchased by a Portfolio (such as zero-coupon
bonds) may be treated for Federal income tax purposes as having original issue
discount. Original issue discount, generally defined as the excess of the stated
redemption price at maturity over the issue price, is treated as interest for
Federal income tax purposes. Whether or not a Portfolio actually receives cash,
it is deemed to have earned original issue discount income that is subject to
the distribution requirements of the Code. Generally, the amount of original
issue discount included in the income of the Portfolio each year is determined
on the basis of a constant yield to maturity that takes into account the
compounding of accrued interest.
A Portfolio may purchase debt securities at a discount that exceeds any
original issue discount that remained on the securities at the time the
Portfolio purchased the securities. This additional discount represents market
discount for income tax purposes. For a debt security purchased after April 30,
1993, which had an original maturity date of more that one year from the date of
issue and having market discount, the gain realized on disposition will be
treated as interest to the extent it does not exceed the accrued market discount
on the security (unless the Portfolio elects for all its debt securities having
a fixed maturity date of more than one year from the date of issue to include
market discount in income in taxable years to which it is attributable).
Generally, market discount accrues on a daily basis. A Portfolio may be required
to capitalize, rather than deduct currently, part or all of any net direct
interest expense on indebtedness incurred or continued to purchase or carry any
debt security having market discount (unless the Portfolio makes the election to
include market discount in income as it accrues).
At the close of each quarter of its taxable year, at least 50% of the
value of each Portfolio's assets must consist of cash and cash items, U.S.
Government securities, securities of other regulated investment companies, and
securities of other issuers (as to which such Portfolio has not invested more
than 5% of the value of its total assets in securities of such issuer and such
Portfolio does not hold more than 10% of the outstanding voting securities of
such issuer), and no more than 25% of the value of its total assets may be
invested in the securities of any one issuer (other than U.S. Government
securities and securities of other regulated investment companies), or in two or
more issuers which such Portfolio controls and which are engaged in the same or
similar trades or businesses (the "Asset Diversification Test").
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If for any taxable year a Portfolio 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 such Portfolio's current and accumulated
earnings and profits. In such event, such distributions generally will be
eligible for the dividends-received deduction in the case of corporate
shareholders.
Excise Tax on Regulated Investment Companies. A 4% non-deductible excise
tax is imposed on regulated investment companies that fail to distribute in each
calendar year an amount equal to 98% of ordinary taxable income for the calendar
year and 98% of capital gain net income for the one-year period ended on October
31 of such calendar year. The balance of such income must be distributed during
the next calendar year. For the foregoing purposes, a regulated investment
company is treated as having distributed any amount on which it is subject to
income tax for any taxable year ending in such calendar year.
Treasury regulations may permit a regulated investment company in
determining its investment company taxable income and undistributed net capital
gain for any taxable year to treat any capital loss incurred after October 31 as
if it had been incurred in the succeeding year. For purposes of the excise tax,
a regulated investment company may (1) reduce its capital gain net income by the
amount of any net ordinary loss for any calendar year and (2) exclude foreign
currency gains and losses incurred after October 31 of any year in determining
the amount of ordinary taxable income for the current calendar year (and,
instead, include such gains and losses in determining ordinary taxable income
for the succeeding calendar year).
Each Portfolio intends to make sufficient distributions or deemed
distributions of its ordinary taxable income and capital gain net income prior
to the end of each calendar year to avoid liability for the excise tax. However,
investors should note that a Portfolio may in certain circumstances be required
to liquidate portfolio investments to make sufficient distributions to avoid
excise tax liability.
Distributions. Each Portfolio anticipates distributing substantially all
of its investment company taxable income for each taxable year. Such
distributions will be taxable to shareholders as ordinary income and treated as
dividends for federal income tax purposes, but they will generally not qualify
for the 70% dividends-received deduction for corporations.
Distributions of net capital gains, if any, which are designated by a
Portfolio as capital gain dividends are taxable to shareholders as long-term
capital gains, regardless of how long the shareholder has held the Portfolio's
shares, and are not eligible for a dividends-received deduction. The Portfolio
generally intends to distribute any net capital gains.
If a Portfolio should retain net capital gains, it will be subject to a
tax of 35% of the amount retained. Each Portfolio expects to designate amounts
retained, if any, as undistributed capital gains in a notice to its shareholders
who, if subject to U.S. Federal Income taxation on long-term capital gains, (i)
would be required to include in income for U.S. Federal Income tax purposes, as
long-term capital gains, their proportionate shares of the undistributed amount,
and (ii) would be entitled to credit against their U.S. Federal income tax
liabilities for their proportionate shares of the tax paid by each Portfolio on
the undistributed amount and to claim refunds to the extent that their credits
exceed their liabilities. For U.S. Federal Income tax purposes, each adjusted
basis of the Portfolio shares owned by a shareholder of each Portfolio would be
increased by an amount equal to 65% of the amount of undistributed capital gains
included in the shareholder's income.
Investors should be careful to consider the tax implications of purchasing
shares just prior to the next dividend date of any ordinary income dividend or
capital gain dividend. Those purchasing just prior to an ordinary income
dividend or capital gain dividend will be taxable on the entire amount of the
dividend received, even though the net asset value per share on the date of such
purchase reflected the amount of such dividend.
Distributions by a Portfolio that do not constitute ordinary income
dividends or capital gain dividends will be treated as a return of capital to
the extent of (and in the reduction of) the shareholder's tax basis in his
B-14
<PAGE>
shares; any excess will be treated as gain from the sale of his shares.
Distributions by a Portfolio will be treated in the manner described above
regardless of whether such distributions are paid in cash or reinvested in
additional shares of a Portfolio. Shareholders receiving a distribution in the
form of additional shares will be treated as receiving a distribution in an
amount equal to the fair market value of the shares received, determined as of
the reinvestment date. Ordinarily, shareholders are required to take
distributions by a Portfolio into account in the year in which the distributions
are made. However, distributions declared in October, November or December of
any year and payable to shareholders of record on a specified date in such a
month will be deemed to have been received by the shareholders (and made by the
Portfolio) on December 31 of such calendar year if such distributions are
actually made in January of the following year. Shareholders will be advised
annually as to the U.S. federal income tax consequences of distributions made
(or deemed made) during the year.
Sale of Shares. In general, upon the sale or other disposition of shares
of a Portfolio, a shareholder will realize a capital gain or loss which will be
long-term or short-term, depending upon the shareholder's holding period for the
shares. However, if the shareholder sells Portfolio shares to the issuing
Portfolio, proceeds received by the shareholders may, in some cases, be
characterized for tax purposes as dividends. Any loss realized on a sale or
exchange will be disallowed to the extent the shares disposed of are replaced
within a period of 61 days beginning 30 days before and ending 30 days after
disposition of the shares. In such a case, the basis of the shares acquired will
be adjusted to reflect the disallowed loss. Any loss realized by a shareholder
on a disposition of Portfolio shares held by the shareholder for six months or
less will be treated as a long-term capital loss to the extent of any
distributions of capital gain dividends received by the shareholder with respect
to such shares.
ITEM 21. UNDERWRITERS.
The exclusive placement agent for the Portfolio is the Distributor, which
receives no additional compensation for serving in this capacity.
ITEM 22. CALCULATION OF PERFORMANCE DATA.
For purposes of quoting and comparing the performance of the Portfolios to
that of other mutual funds and to other relevant market indices in
advertisements or in reports to shareholders, performance may be stated in terms
of total return and yield. Under the rules of the SEC ("SEC Rules"), funds
advertising performance must include total return quotes calculated according to
the following formula:
P(1 + T) SUP^N=ERV
Where: P = a hypothetical initial payment of $1000
T = average annual total return
n = number of years (1, 5 or 10)
ERV = ending redeemable value of a hypothetical $1,000 payment
made at the beginning of the 1, 5 or 10 year periods at
the end of the 1, 5 or 10 year periods (or fractional
portion thereof).
Under the foregoing formula, the time periods used in advertising will be
based on rolling calendar quarters, updated to the last day of the most recent
quarter prior to submission of the advertising for publication, and will cover
1, 5 and 10 year periods or a shorter period dating from the effectiveness of a
B-15
<PAGE>
Portfolio's Registration Statement. In calculating the ending redeemable value,
the maximum sales load, if any, is deducted from the initial $1,000 payment and
all dividends and distributions by a Portfolio are assumed to have been
reinvested at net asset value 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 Portfolio would be included at that time.
A Portfolio may also from time to time include in such advertising a total
return figure that is not calculated according to the formula set forth above in
order to compare more accurately the performance of such Portfolio with other
measures of investment return. For example, in comparing a Portfolio's total
return with data published by Lipper Analytical Services, Inc., or with the
performance of the Standard & Poor's 500 Stock Index of the Dow Jones Industrial
Average, the Portfolio calculates its aggregate total return for the specified
periods of time by assuming the investment of $10,000 in Trust shares and
assuming the reinvestment of each dividend or other distribution at net asset
value on the reinvestment date. Percentage increases are determined by
subtracting the initial value of the investment from the ending value and by
dividing the remainder by the beginning value. 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, a Portfolio
may advertise its yield based on a 30-day (or one month) period ended on the
date of the most recent balance sheet included in its Registration Statement,
computed by dividing the net investment income per share earned during the
period by the maximum offering price per share on the last day of the period,
according to the following formula:
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 such Portfolio 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 is in such Portfolio's portfolio (assuming a month of 30 days)
and (3) computing the total of the interest earned on all debt obligations and
all dividends accrued on all equity securities during the 30-day or one month
period. In computing dividends accrued, dividend income is recognized by
accruing 1/360 of the stated dividend rate of a security each day that the
security is in such Portfolio'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 Portfolio 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.
B-16
<PAGE>
A Portfolio may also from time to time advertise its yield based on a
30-day period ending on a date other than the most recent balance sheet included
in its Registration Statement, computed in accordance with the yield formula
described above, as adjusted to conform with the differing period for which the
yield computation is based.
Any quotation of performance stated in terms of yield (whether based on a
30-day period) will be given no greater prominence than the information
prescribed under SEC Rules. In addition, all advertisements containing
performance data of any kind will include a legend disclosing that such
performance data represents past performance and that the investment return and
principal value of an investment will fluctuate so that an investor's shares,
when redeemed, may be worth more or less than their original cost.
As of January 31, 1997, the shares of the Adjustable Rate and Government
Portfolios were beneficially owned by the Series of Astra Strategic Investment
Series as follows:
Adjustable Rate Portfolio
Astra Adjustable Rate Securities Trust I 20%
Astra Adjustable Rate Securities Trust I-A 59%
Astra Adjustable Rate Securities Trust IV 21%
Government Portfolio
Astra Adjustable U.S. Government Securities Trust I 54%
Astra Adjustable U.S. Government Securities Trust I-A 40%
Astra Adjustable U.S. Government Securities Trust II 4%
Astra Adjustable U.S. Government Securities Trust IV 2%
ITEM 23. FINANCIAL STATEMENTS.
The audited Financial Statements, notes thereto and independent certified
public accountants report thereon, of the Adjustable Rate Portfolio are
contained in the Annual Report for the fiscal year ended October 31, 1996 of the
Astra Adjustable Rate Securities Trusts and are incorporated herein by
reference, and the audited Financial Statements, notes thereto and independent
certified public accountants report thereon, of the Government Portfolio are
contained in the Annual Report for the fiscal year ended October 31, 1996 of the
Astra Adjustable U.S. Government Securities Trusts and are incorporated herein
by reference. No other parts of such Annual Reports are incorporated by
reference herein.
B-17
<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: None.
In Part B: Audited Financial Statements for Astra Institutional
Adjustable U.S. Government Securities Portfolio for the
fiscal year ended October 31, 1996, including notes
thereto and the Report of Tait, Weller & Baker,
independent certified public accountants for the
Government Portfolio, thereon, are incorporated herein
by reference to pages 28 through 36 of the Annual Report
for the fiscal year ended October 31, 1996 of the Astra
Adjustable U.S. Government Securities Trusts, which was
filed with, and accepted by the U.S. Securities and
Exchange Commission via EDGAR on Form Type N-30D (with
an accession number: 0000950115-97-000024) on January 7,
1997.
Audited Financial Statements for Astra Institutional
Adjustable Rate Securities Portfolio for the fiscal year
ended October 31, 1996, including notes thereto and the
Report of Tait, Weller & Baker, independent certified
public accountants for the Rate Portfolio, thereon, are
incorporated herein by reference to pages 24 through 31
of the Annual Report for the fiscal year ended October
31, 1996 of the Astra Adjustable Rate Securities Trusts,
which was filed with, and accepted by the U.S.
Securities and Exchange Commission via EDGAR on Form
type N-30D (with an accession number:
0000950115-97-000024) on January 7, 1997.
In Part C: None.
(b) Exhibits:
(1) (a) Agreement and Declaration of Trust of Astra
Institutional Securities Trust (formerly Pilgrim
Institutional Securities Trust).(1)
(1) (b) Amendment to the Agreement and Declaration of Trust of
Astra Institutional Securities Trust. (formerly Pilgrim
Institutional Securities Trust).(2)
(2) (a) By-laws of Astra Institutional Securities Trust
(formerly Pilgrim Institutional Securities Trust).(1)
(2) (b) Amendment to the By-laws of Astra Institutional
Securities Trust. (formerly Pilgrim Institutional
Securities Trust).(2)
(3) Not applicable.
(4) Specimen share certificate.(1)
(5) (a) Form of Investment Management Agreement.(1)
(5) (b) Amendment to Investment Management Agreement.(2)
(6) Not applicable.
(7) Not applicable.
- ----------
(1) Incorporated herein by reference from AIST's initial registration
statement, filed September 9, 1991.
(2) Incorporated herein by reference from AIST's amendment No. 4 to this
registration statement, filed February 28, 1996.
C-1
<PAGE>
(3) Filed herewith.
(8) (a) Form of Custody Agreement.(2)
(8) (b) Sub-Administration Agreement.(2)
(8) (c) Accounting Services Agreement.(2)
(9) Form of Transfer Agency Agreement.(1)
(10) Not applicable.
(11) Not applicable.
(12) Not applicable.
(13) Not applicable.
(14) Not applicable.
(15) Not applicable.
(16) Not applicable.
(17) (a) Financial Data Schedule for Astra Institutional U.S.
Government Securities Portfolio.(3)
(b) Financial Data Schedule for Astra Institutional
Adjustable Rate Securities Portfolio.(3)
(18) Not applicable.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON
CONTROL WITH REGISTRANT.
None.
- ----------
(1) Incorporated herein by reference from AIST's initial registration
statement, filed September 9, 1991.
(2) Incorporated herein by reference from AIST's amendment No. 4 to this
registration statement, filed February 28, 1996.
(3) Filed herewith.
C-2
<PAGE>
ITEM 26. NUMBER OF HOLDERS OF SECURITIES.
The following information is given as of January 31, 1997:
(1) (2)
Title of Class Number of Record Holders
-------------- ------------------------
Astra Institutional
Adjustable U.S. Government
Securities Portfolio - 5
Shares of Beneficial
Interest (no Par Value)
Astra Institutional
Adjustable Rate
Securities Portfolio - 4
Shares of Beneficial
Interest (no Par Value)
ITEM 27. INDEMNIFICATION.
Reference is hereby made to Article VIII of Registrant's Declaration of
Trust referenced herewith as Exhibit (b)(1).
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.
The exclusive placement agent for the Portfolio is Astra Fund Distributors
Corp., which receives no additional compensation for serving in this capacity.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS.
The accounts, books or other documents required to be maintained by
Section 31(a) of the Investment Company Act of 1940 will be kept by the
Registrant, its Investment Manager or its Shareholder Servicing Agent.
ITEM 31. MANAGEMENT SERVICES.
There are no management-related service contracts not discussed in Parts A
and B.
ITEM 32. UNDERTAKINGS.
None.
C-3
<PAGE>
SIGNATURE
Pursuant to the requirements of the Investment Company Act of 1940, as
amended, the Registrant has duly caused this Amendment to its Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Beverly Hills and the State of California, on the
26th day of February, 1997.
ASTRA INSTITUTIONAL SECURITIES TRUST
(formerly Pilgrim Institutional Securities Trust)
/s/Palomba Weingarten
--------------------------------------------------
Palomba Weingarten, Chairman
S-1
<PAGE>
EXHIBIT INDEX
A compete list of exhibits is included in Part C, Item 24(b) of the Registration
Statement. The following exhibits are filed herewith:
Exhibits
- --------
(17)(a) Financial Data Schedule for Astra Institutional U.S. Government
Securities Portfolio.
(b) Financial Data Schedule for Astra Institutional Adjustable Rate
Securities Portfolio.
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