As Filed With The Securities And Exchange Commission On July 22, 1996
Registration No. 33-44901
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 (X)
Pre-Effective Amendment No.___ ( )
Post-Effective Amendment No. 7 (X)
---
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 (X)
Amendment No. 9 (X)
---
ASTRA INSTITUTIONAL TRUST
(formerly Pilgrim Institutional Trust)
- --------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in Charter)
750 B Street, Suite 2350, San Diego, CA 92101
- --------------------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
(800) 219-1080
- --------------------------------------------------------------------------------
(Registrant's Telephone Number, Including Area Code)
Palomba Weingarten
Atlas Holdings Group, Inc.
9595 Wilshire Boulevard
Suite 1001
Beverly Hills, California 90212
- --------------------------------------------------------------------------------
(Name and Address of Agent for Service of Process)
Copies to:
James F. Jorden, Esquire
Michael Berenson, Esquire
Jorden Burt Berenson & Johnson LLP
1025 Thomas Jefferson Street, N.W.
Suite 400 East
Washington, D.C. 20007
Approximate Date of Proposed Public Offering:
It is proposed that this filing will become effective (check appropriate box)
X immediately upon filing pursuant to paragraph (b) of Rule 485
- ---
___ on (date)pursuant to paragraph (b)(1)(v) of Rule 485
___ 60 days after filing pursuant to paragraph (a)(1) of Rule 485
___ on (date) pursuant to paragraph (a)(1) of Rule 485
___ 75 days after filing pursuant to paragraph (a)(2) of Rule 485
___ on (date) pursuant to paragraph (a)(2) of Rule 485
Registrant has elected to maintain an indefinite registration of its shares of
beneficial interest (without par value) of each of its currently existing series
under Rule 24f-2. Pursuant to paragraph (b)(2) of Rule 24f-2, Registrant filed
for its fiscal year ended September 30, 1995 on November 22, 1995.
<PAGE>
<TABLE>
Calculation of Registration Fee Under the Securities Act of 1933
<CAPTION>
Proposed Proposed
Maximum Maximum Amount of
Title of Securities Amount Being Offering Price Per Aggregate Registration
Being Registered Registered (1) Unit(2) Offering Price(3) Fee
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
All-Americas
Government Income
Trust:
Class A 33,749 $6.47 $ 96,666 $ 33.33
Class B 29,061 $5.99 $ 96,666 $ 33.33
Class C 229,462 $5.96 $ 96,668 $ 33.34
------- -------- -------
TOTAL 292,272 $290,000 $100.00
======= ======== =======
</TABLE>
(1) Registrant has registered an indefinite number of its shares under the
Securities Act of 1933 pursuant to Rule 24f-2 under the Investment
Company Act of 1940. Registrant's Rule 24f-2 Notice for its fiscal year
ended September 30, 1995, was filed on November 22, 1995.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 24e-2 under the Investment Company Act of 1940 and
Rule 457(d) under the Securities Act of 1933, based on offering prices
of each Trust's shares on July 5, 1996.
(3) The maximum aggregate offering price for Registrant's shares with
respect to All-Americas Government Income Trust Class A, Class B and
Class C is calculated pursuant to rule 24e-2 under the 1940 Act. During
the year ended September 30, 1995, Registrant redeemed 1,939,585
shares, of which Registrant used 1,694,611 shares for reductions
pursuant to paragraph (c) of Rule 24f-2 in Registrant's Rule 24f-2
Notice dated November 22, 1995 for the year ended September 30, 1995,
and none of the redeemed shares were used for reductions pursuant to
Rule 24e-2 in previous post-effective amendments filed during the
current fiscal year. As a result, Registrant is using 244,974 shares to
reduce, pursuant to paragraph (a) of Rule 24e-2, the number of shares
for which the registration fee is payable with respect to this
Post-Effective Amendment. While no fee is required for the 244,974
shares, the Registrant has elected to register for the minimum of $100,
an additional $290,000 of shares (approximately 47,298 shares at the
appropriate proposed maximum offering price per unit).
<PAGE>
ASTRA INSTITUTIONAL TRUST
CONTENTS OF REGISTRATION STATEMENT
This Registration Statement consists of the following papers and documents
pertaining to Astra All-Americas Government Income Trust:
o Cover Sheet
o Contents of Registration Statement
o Cross Reference Sheet
o Part A -- Astra All-Americas Government Income Trust Prospectus
o Part B -- Statement of Additional Information
o Part C -- Other information
o Signature Pages
o Exhibits
<PAGE>
ASTRA INSTITUTIONAL TRUST
REGISTRATION STATEMENT ON FORM N-1A
CROSS REFERENCE SHEET
N-1A Location in
Item No. Registration Statement
- -------- ----------------------
Part A: Information Required In Prospectus
------------------------------------------
1. Cover Page Cover Page
2. Synopsis Key Features
3. Condensed Financial Information Financial Highlights
4. General Description The Trust's Investment
of Registrant Objective; The Astra
Organization; General Information
5. Management of the Fund The Astra Organization;
Management Fees; Administrative
Fees; Distribution Plans
6. Capital Stock and Other General Information
Securities
7. Purchase of Securities How to Buy Shares of the Trust;
Being Offered Shareholder Services and Privileges
8. Redemption or Repurchase How to Redeem Shares of the Trust
9. Pending Legal Proceedings Not Applicable
<PAGE>
Part B: Information Required In
Statement of Additional Information
-----------------------------------
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and History General Information and History
13. Investment Objectives and Policies Investment Objective and Policies;
Investment Restrictions
14. Management of the Registrant Trustees and Officers; Management
of the Trust
15. Control Persons and Principal Trustees and Officers; Management
of Holders of Securities the Trust
16. Investment Advisory and Management of the Trust; General
Other Services Information
17. Brokerage Allocation Execution of Portfolio Transactions
18. Capital Stock and Other General Information
Securities
19. Purchase, Redemption and Additional Purchase and
Redemption Pricing of Securities Information; Price of the Shares is
Being Offered Determined Daily; Shareholder
Services and Privileges
20. Tax Status Federal Tax Treatment of
Dividends and Distributions
21. Underwriters General Information
22. Calculation of Performance Data Investment Return Information
23. Financial Statements Financial Statements
<PAGE>
Part C: Other Information
-------------------------
24. Financial Statements and Exhibits Financial Statements and Exhibits
25. Persons Controlled by or Under Persons Controlled by or Under
Common Control Common Control
26. Number of Holders of Securities Number of Holders of Securities
27. Indemnification Indemnification
28. Business and Other Connections Business and Other Connections of
of Investment Adviser Investment Adviser
29. Principal Underwriters Principal Underwriters
30. Location of Accounts and Records Location of Accounts and Records
31. Management Services Management Services
32. Undertakings Undertakings
33. Signatures Signatures
<PAGE>
Prospectus
ASTRA (LOGO)
ASTRA ALL-AMERICAS GOVERNMENT INCOME TRUST
750 B STREET, SUITE 2350, SAN DIEGO, CALIFORNIA 92101 o 1-800-219-1080
- --------------------------------------------------------------------------------
o HOW THE TRUST WORKS PAGE 8
o SHAREHOLDER'S GUIDE PAGE 24
- --------------------------------------------------------------------------------
Astra All-Americas Government Income Trust (the "Trust") is a non-diversified
series of Astra Institutional Trust ("AIT"), an open-end management investment
company (mutual fund). The Trust seeks the highest level of current income,
consistent with what the Trust's portfolio manager, Astra Management Corporation
("AMC" or the "Manager"), considers to be reasonable investment risk, available
through investment in a portfolio of (i) debt securities issued or guaranteed by
the governments of the United States and other North and South American
countries ("Western Hemisphere Government Securities"), and (ii) investment
grade debt instruments (including interests in foreign bank loans) issued by
corporations in those countries. These securities and debt instruments are
denominated in the U.S. Dollar and the currencies of other North and South
American countries. The Trust may utilize certain currency-related investment
techniques.
Not less than 65% of the Trust's portfolio will consist of Western Hemisphere
Government Securities.
The Trust may invest its assets in Western Hemisphere Government Securities and
investment grade corporate debt instruments of issuers located in the United
States, Canada and Latin America. The Trust considers Latin America to include,
but not be limited to, the following countries: Argentina, Bolivia, Brazil,
Chile, Colombia, Costa Rica, Dominican Republic, Ecuador, Guatemala, Honduras,
Mexico, Nicaragua, Panama, Paraguay, Peru, Uruguay and Venezuela. The Trust may
not invest more than 25% of its assets in the government securities of Canada or
any single Latin American country and may not invest more than 25% of its assets
in any single issuer of corporate debt securities.
The Manager believes that by investing in government and corporate debt
securities of U.S. and other North and South American issuers, investors will
achieve benefits from the increasingly integrated economic relationships and
reduced barriers to free trade among these countries. The Manager believes that
these developments create attractive opportunities in a carefully selected
portfolio of government and corporate debt securities.
The Trust may borrow for investment in accordance with the Trust's investment
objective and policies an amount up to one-third of the Trust's total assets
less liabilities (other than the amount borrowed) from a bank unaffiliated with
the Trust or the Manager. Investors should note the special risks associated
with the use of borrowed funds to purchase investment securities. See "How the
Trust Works -- The Trust's Investment Objective."
The Trust offers three classes of shares which may be purchased at a price equal
to the next determined net asset value per share plus a sales charge which, at
the election of the purchaser, may be imposed (i) at the time of purchase (the
"Class A shares"), or (ii) on a deferred basis (the "Class B and Class C
shares"). For additional information regarding the terms upon which shares are
offered and applicable sales and redemption charges, see "Shareholder's Guide --
How to Buy Shares of the Trust."
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF ANY
BANK, ARE NOT ENDORSED OR GUARANTEED BY ANY BANK, AND ARE NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD, OR ANY OTHER
GOVERNMENTAL AGENCY.
This Prospectus must be delivered to the investor prior to consummation of sale.
This Prospectus sets forth concisely information about the Trust that
prospective investors should know before investing. It should be retained for
future reference. A Statement of Additional Information relating to the Trust,
dated July 22, 1996, has been filed with the Securities and Exchange Commission
and is incorporated herein by reference. This Statement is available without
charge upon request to the Trust at the address and telephone number above.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE DATE OF THIS PROSPECTUS IS JULY 22, 1996
<PAGE>
TABLE OF CONTENTS
- ------------
Page
----
Key Features 2
- --------------------------------------------------------------------------------
The Trust's Investment Objective 8
- --------------------------------------------------------------------------------
Distributions and Taxes 20
- --------------------------------------------------------------------------------
How to Buy Shares of the Trust 24
- --------------------------------------------------------------------------------
How to Redeem Shares of the Trust 28
- --------------------------------------------------------------------------------
Shareholder Services and Privileges 31
- --------------------------------------------------------------------------------
Expedited Redemption and Telephone Exchange Information 33
- --------------------------------------------------------------------------------
How the Trust Values Its Shares 33
- --------------------------------------------------------------------------------
The Astra Group 35
- --------------------------------------------------------------------------------
Portfolio Manager 35
- --------------------------------------------------------------------------------
Management Fees 36
- --------------------------------------------------------------------------------
Administrative Fees 37
- --------------------------------------------------------------------------------
Distribution Plans 37
- --------------------------------------------------------------------------------
General Information 40
- --------------------------------------------------------------------------------
New Account Application 43
- --------------------------------------------------------------------------------
Additional Account Privileges 47
- --------------------------------------------------------------------------------
KEY FEATURES
- ------------
WHAT IS THE TRUST'S INVESTMENT OBJECTIVE?
---------------------------------------------------------------------------
The investment objective of the Trust is to seek the highest level of current
income, consistent with what the Trust's Manager considers to be reasonable
investment risk, available through investment in a portfolio of (i) debt
securities issued or guaranteed by the governments of the United States and
other North and South American countries and (ii) investment grade debt
instruments (including interests in foreign bank loans) issued by corporations
in those countries. See "The Trust's Investment Objective."
HOW DO I BUY AND SELL (REDEEM) MY SHARES OF THE TRUST?
---------------------------------------------------------------------------
Shares of Class A are available through selected broker-dealers and other
financial services firms at their net asset value per share plus a varying sales
charge, depending on the amount purchased. Class B and Class C shares are
available through such financial services firms at their net asset value per
share. The minimum initial investment for Class A, Class B and Class C shares is
$5,000 ($2,000 for IRAs). Shares of Class A are redeemable at their net asset
value per share on any business day. Shares of Class B and Class C are
redeemable at their net asset value per share on any business day, reduced by
the amount of any applicable contingent deferred sales charge. Payments to you
can be made through brokers, directly to you, or to your designated bank. In
addition, the Trust provides certain shareholder services and privileges which
may be suited to your particular investment needs. See "Shareholder's Guide."
- ----
2
<PAGE>
WHEN DO I RECEIVE INCOME?
---------------------------------------------------------------------------
You may elect to receive monthly dividends from net investment income in cash or
you may have dividends reinvested in additional shares at net asset value. See
"Choosing a Distribution Option."
WHO IS ASTRA GROUP?
---------------------------------------------------------------------------
Astra Management Corporation ("AMC" or the "Manager"), the Trust's Manager, and
Astra Fund Distributors Corp., (the "Distributor"), the Trust's principal
underwriter, are part of Atlas Holdings Group, Inc. ("Atlas Group"), a financial
services holding company that provides financial services to mutual funds. Atlas
Group has total combined assets under management of approximately $150 million.
AMC and the Distributor are part of the umbrella name "Astra Group."
FEE TABLE
---------------------------------------------------------------------------
The following fee table is provided to assist investors in understanding the
various costs and expenses which may be borne directly or indirectly by an
investment in the Trust. Annual Trust Operating Expenses percentages shown below
are based on actual amounts incurred by the Trust for the fiscal year ended
September 30, 1995.
Shareholder Transaction Expenses
- --------------------------------
Class A Class B Class C
Shares Shares Shares
------- ------- -------
Maximum Sales Charge Imposed on Purchases
(as a percentage of offering price) ............ 3.5% None None
Maximum Sales Charge Imposed on Reinvested
Dividends (as a percentage of offering price) .. None None None
Deferred Sales Charge
1st year ....................................... None 4% 1.5%
2nd year ....................................... None 3% None
3rd year ....................................... None 2% None
4th year ....................................... None 1% None
5th year and thereafter ........................ None 0% None
Redemption Fees ................................. None None None
- ----
3
<PAGE>
<TABLE>
Annual Trust Operating Expenses
- -------------------------------
(as a percentage of average net assets)
<CAPTION>
Class A Class B Class C
Shares Shares Shares
------- ------- -------
<S> <C> <C> <C>
Management Fees (see "Management Fees")(a) ......... 0.73% 0.73% 0.73%
Administration Fees (see "Administration Fees") .... 0.10% 0.10% 0.10%
12b-1 Fees(b) ...................................... 0.25% 1.00% 1.00%
Other Expenses
Interest Expense .................................. 0.87% 0.78% 0.83%
Other Operating Expenses (after waiver of
expenses)(c) ..................................... 1.42% 0.79% 0.79%
----- ----- -----
Total Other Expenses ............................... 2.29% 1.57% 1.62%
----- ----- -----
Total Trust Operating Expenses ..................... 3.37%(d) 3.40%(d) 3.45%(d)
===== ===== =====
</TABLE>
(a) Represents .65% of the Trust's average daily gross assets (net assets
increased by Trust borrowings). See Management Fees, page 36.
(b) As a result of 12b-1 fees, a long-term shareholder in the Trust may pay
more than the economic equivalent of the maximum sales charges permitted by
the Rules of the National Association of Securities Dealers, Inc. The
Distribution Plans for Class B and C provide for, among other things, a
.25% service fee, as well as the payment of interest at a specified rate on
the balance of unreimbursed distribution expenses. See "Distribution Plans"
at page 37.
(c) The Manager voluntarily waived certain of the Trust's aggregate expenses
during the year ended September 30, 1995. Had such expenses not been waived
total Trust operating expenses (including interest expense) would have been
3.84% for Class A, 3.89% for Class B and 3.93% for Class C.
(d) Excluding the effect of borrowings, total Trust operating expenses after
expenses waived, would be 2.50% for Class A, 2.62% for Class B and 2.62%
for Class C.
EXAMPLE
Assuming a hypothetical investment of $1,000, a 5% annual return and
redemption at the end of each time period, an investor in the Trust would have
paid transaction and operating expenses at the end of each year as follows:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Class A Shares ............. $68 $135 $204 $388
Class B Shares ............. $75 $124 $177 $368
Class C Shares ............. $50 $106 $179 $373
You would pay the following expenses on the same investment assuming no
redemption:
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Class B Shares ............. $34 $104 $177 $368
Class C Shares ............. $35 $106 $179 $373
The purpose of the foregoing table is to assist the investor in understanding
the various costs and expenses an investor in the Trust will bear. Interest
expense represents interest paid by the Trust on borrowings for the purpose of
making additional portfolio investments. SUCH BORROWINGS ARE INTENDED TO ENABLE
THE TRUST TO PRODUCE HIGHER NET YIELDS TO SHAREHOLDERS THAN THE TRUST COULD PAY
WITHOUT SUCH BORROWINGS, ALTHOUGH THIS OBJECTIVE MAY NOT BE ACHIEVED. See "The
Trust's Investment Objective--Special Borrowing Considerations"--page 15.
Excluding the effect of borrowings, total Trust operating expenses would be
lower and the cumulative expenses shown in the example above would be lower.
This Example should not be considered as representative of future expenses and
actual expenses may be greater or less than those shown. The foregoing table has
not been audited by Tait, Weller & Baker, the Trust's independent certified
public accountants.
- ----
4
<PAGE>
FINANCIAL HIGHLIGHTS
---------------------------------------------------------------------------
The financial highlights for the periods ended September 30, 1995 and 1994
relating to the Trust have been audited by Tait, Weller & Baker, independent
certified public accountants, whose report thereon appears in the Trust's Annual
Report to Shareholders for the fiscal year ended September 30, 1995 and is
incorporated by reference in this Prospectus. The financial highlights for the
six months ended March 31, 1996 are unaudited and appear in the Trust's
Semi-Annual Report to Shareholders which is also incorporated by reference in
this Prospectus. A copy of the Trust's Annual Report to Shareholders and
Semi-Annual Report to Shareholders may be obtained without charge by contacting
the Trust's Shareholder Servicing Agent at (800) 441-7267.
<TABLE>
FINANCIAL HIGHLIGHTS
CLASS A SHARES
---------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<CAPTION>
Six Months
Ended February 28, 1994*
March 31, 1996 Year Ended to
(Unaudited) September 30, 1995 September 30, 1994
-------------- ------------------ ------------------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period ................................... $5.99 $6.91 $7.35
----- ----- -----
Income (loss) from investment operations--
Net investment income ................................................. 0.27 0.51 0.14
Net realized and unrealized loss on investments and foreign
currency transactions ................................................ 0.11 (0.92) (0.32)
----- ----- -----
Total from investment operations .................................... 0.38 (0.41) (0.18)
----- ----- -----
Less distributions--
Distributions from net investment income .............................. (0.28) -- (0.14)
Distributions from paid-in capital .................................... -- (0.51) (0.12)
----- ----- -----
Total distributions ................................................. (0.28) (0.51) (0.26)
----- ----- -----
Net asset value, end of period ......................................... $6.09 $5.99 $6.91
===== ===== =====
TOTAL RETURN (a) ....................................................... 6.47% (5.68)% (2.32)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period .............................................. $142,032 $215,633 $364,402
Ratios to average net assets
Expenses (excluding interest expense)--
Before expense waiver ................................................ 2.43%(b) 2.97% 2.86%(b)
After expense waiver ................................................. 2.18%(b) 2.50% 1.41%(b)
Net investment income (excluding interest expense)--
Before expense waiver ................................................ 9.00%(b) 9.07% 9.42%(b)
After expense waiver ................................................. 9.25%(b) 9.54% 10.87%(b)
Interest expense ....................................................... -- 0.87% 1.83%(b)
Portfolio turnover rate ................................................ 142% 204% 407%
Average daily borrowing outstanding during period ...................... -- $ 40,036 $ 87,049
Average daily shares outstanding during period ......................... -- 48,764 35,151
Average daily borrowings outstanding per share during period ........... -- $0.82 $2.48
</TABLE>
- ----------
* Date of initial public offering
(a) Total return has not been annualized and excludes sales charges.
(b) Annualized.
Further information about the Trust's performance is contained in the Trust's
Annual Report to Shareholders for the fiscal year ended September 30, 1995 and
the Trust's Semi-Annual Report to Shareholders for the period ended March 31,
1996, which may be obtained by shareholders without charge by contacting the
Trust's Shareholder Servicing Agent at (800) 441-7267.
- ----
5
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
CLASS B SHARES
---------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<CAPTION>
Six Months
Ended November 1, 1993*
March 31, 1996 Year Ended to
(Unaudited) September 30, 1995 September 30, 1994
-------------- ------------------ ------------------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period .............................. $5.77 $6.65 $7.35
----- ----- -----
Income (loss) from investment operations--
Net investment income ............................................ 0.24 0.50 0.28
Net realized and unrealized loss on investments and foreign
currency transactions ........................................... 0.10 (0.88) (0.46)
----- ----- -----
Total from investment operations ............................... 0.34 (0.38) (0.18)
----- ----- -----
Less distributions--
Distributions from net investment income ......................... (0.26) -- (0.28)
Distributions from paid-in capital ............................... -- (0.50) (0.24)
----- ----- -----
Total distributions ............................................ (0.26) (0.50) (0.52)
----- ----- -----
Net asset value, end of period .................................... $5.85 $5.77 $6.65
===== ===== =====
TOTAL RETURN (a) .................................................. 5.91% (5.55)% (2.48)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period ......................................... $13,554,015 $15,194,572 $17,001,490
Ratios to average net assets
Expenses (excluding interest expense)--
Before expense waiver ........................................... 3.20%(b) 3.11% 3.61%(b)
After expense waiver ............................................ 3.12%(b) 2.62% 1.75%(b)
Net investment income (excluding interest expense)--
Before expense waiver ........................................... 8.16%(b) 8.84% 8.14%(b)
After expense waiver ............................................ 8.24%(b) 9.33% 10.00%(b)
Interest expense .................................................. -- 0.78% 1.69%(b)
Portfolio turnover rate ........................................... 142% 204% 407%
Average daily borrowing outstanding during period ................. -- $ 2,111,536 $ 4,404,462
Average daily shares outstanding during period .................... -- 3,008,143 1,848,041
Average daily borrowings outstanding per share during period ...... -- $0.70 $2.38
</TABLE>
- ----------
* Date of initial public offering
(a) Total return has not been annualized and excludes all contingent deferred
sales charges.
(b) Annualized.
Further information about the Trust's performance is contained in the Trust's
Annual Report to Shareholders for the fiscal year ended September 30, 1995 and
the Trust's Semi-Annual Report to Shareholders for the period ended March 31,
1996, which may be obtained by shareholders without charge by contacting the
Trust's Shareholder Servicing Agent at (800) 441-7267.
- ----
6
<PAGE>
<TABLE>
FINANCIAL HIGHLIGHTS
CLASS C SHARES
---------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<CAPTION>
Six Months
Ended November 1, 1993*
March 31, 1996 Year Ended to
(Unaudited) September 30, 1995 September 30, 1994
-------------- ------------------ ------------------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
Net asset value, beginning of period .................................... $5.75 $6.65 $7.35
----- ----- -----
Income (loss) from investment operations--
Net investment income .................................................. 0.24 0.49 0.28
Net realized and unrealized loss on investments and foreign
currency transactions ................................................. 0.10 (0.89) (0.46)
----- ----- -----
Total from investment operations ..................................... 0.34 (0.40) (0.18)
----- ----- -----
Less distributions--
Distributions from net investment income ............................... (0.26) -- (0.28)
Distributions from paid-in capital ..................................... -- (0.50) (0.24)
----- ----- -----
Total distributions .................................................. (0.26) (0.50) (0.52)
----- ----- -----
Net asset value, end of period .......................................... $5.83 $5.75 $6.65
===== ===== =====
TOTAL RETURN (a) ........................................................ 5.93% (5.86)% (2.48)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period ............................................... $3,095,969 $3,170,633 $4,987,379
Ratios to average net assets
Expenses (excluding interest expense)--
Before expense waiver ................................................. 3.21%(b) 3.10% 3.61%(b)
After expense waiver .................................................. 3.13%(b) 2.62% 1.82%(b)
Net investment income (excluding interest expense)--
Before expense waiver ................................................. 8.13%(b) 8.91% 8.32%(b)
After expense waiver .................................................. 8.21%(b) 9.40% 10.11%(b)
Interest expense ........................................................ -- 0.83% 1.74%(b)
Portfolio turnover rate ................................................. 142% 204% 407%
Average daily borrowing outstanding during period ....................... -- $ 481,332 $1,319,294
Average daily shares outstanding during period .......................... -- 637,550 545,628
Average daily borrowings outstanding per share during period ............ -- $0.75 $2.42
</TABLE>
- ----------
* Date of initial public offering
(a) Total return has not been annualized and excludes all contingent deferred
sales charges.
(b) Annualized.
Further information about the Trust's performance is contained in the Trust's
Annual Report to Shareholders for the fiscal year ended September 30, 1995 and
the Trust's Semi-Annual Report to Shareholders for the period ended March 31,
1996, which may be obtained by shareholders without charge by contacting the
Trust's Shareholder Servicing Agent at (800) 441-7267.
- ----
7
<PAGE>
HOW THE TRUST WORKS
THE TRUST'S INVESTMENT OBJECTIVE
- ------------
The investment objective of the Trust is to seek the highest level of current
income, consistent with what the Trust's Manager considers to be reasonable
investment risk available from a portfolio of: (i) debt securities issued or
guaranteed by the governments of the United States and other North and South
American countries ("Western Hemisphere Government Securities"); and (ii)
investment grade debt instruments (including interests in foreign bank loans)
issued by corporations in those countries. The Trust's investment objective is
fundamental and may not be changed without shareholder approval. There can, of
course, be no assurance that the Trust's investment objective will be achieved.
Except where otherwise indicated, all investment practices and limitations of
the Trust are non-fundamental policies which may be changed by the Board of
Trustees without shareholder approval.
The Trust pursues its investment objective by investing in securities
denominated in the U.S. Dollar and in the currencies of other North and South
American countries. The Trust also may invest in interests in foreign bank
loans, corporate bonds and other debt instruments. The Trust may utilize certain
currency-related investment techniques.
Not less than 65% of the Trust's portfolio will consist of Western Hemisphere
Government Securities.
The Trust may invest its assets in Western Hemisphere Government Securities and
investment grade corporate debt securities of issuers located in the United
States, Canada and Latin America. The Trust considers Latin America to include,
but not be limited to, the following countries: Argentina, Bolivia, Brazil,
Chile, Colombia, Costa Rica, Dominican Republic, Ecuador, Guatemala, Honduras,
Mexico, Nicaragua, Panama, Paraguay, Peru, Uruguay and Venezuela. The Trust may
not invest more than 25% of its assets in the government securities of Canada or
any single Latin American country and may not invest more than 25% of its assets
in any single issuer of corporate debt securities.
The Manager believes that by investing in government and corporate debt
securities of U.S. and other North and South American issuers, investors will
achieve benefits from the increasingly integrated economic relationships and
reduced barriers to free trade among these countries. The Manager believes that
these developments create attractive opportunities in a carefully selected
portfolio of government and corporate debt securities.
The Trust may invest its assets in corporate debt securities of issuers in North
and South American countries considered investment grade or higher (i.e.,
securities rated at least BBB- by Standard & Poor's Corporation ("S&P"), at
least Baa3 by Moody's Investors Service, Inc. ("Moody's"), or similar investment
grade ratings by any major rating agency) or, if not so rated, of equivalent
investment quality as determined by the Manager. See "Additional Investment
Considerations--Securities Ratings," below. For a description of ratings by S&P
and Moody's see Appendix A to the Statement of Additional Information.
Other than corporate debt securities, the Trust has established no rating
criteria for the debt securities in which it may invest, and such securities may
not be rated. The sovereign debt instruments in which the Trust may invest
involve certain risks (such as currency fluctuations and restrictions on
repatriation) and may be deemed to be the equivalent in terms of quality to
securities rated in the medium and lower rating categories of nationally
recognized statistical rating organizations and unrated securities of comparable
quality. Medium and lower rated securities are predominately speculative with
respect to the capacity to pay interest and repay principal in accordance with
the terms of the security and generally involve a greater volatility of price
than
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securities in higher rating categories. The Trust may have difficulty disposing
of certain sovereign debt obligations because there may be limited liquidity for
such securities.
The Manager will actively manage the Trust's assets in relation to market
conditions and general economic conditions in the United States and other North
and South American countries, and will adjust the Trust's investments based on
its perception of which securities will best enable the Trust to achieve its
investment objective of seeking the highest level of current income, consistent
with what the Manager considers to be reasonable investment risk. In this
regard, subject to the limitations described above, the percentage of assets
invested in a particular country or denominated in a particular currency will
vary in accordance with the assessment of the Manager of the relative yield and
appreciation potential of such securities and the relationship of the country's
currency to the U.S. Dollar. In such analysis, the Manager will consider various
factors, including its expectations regarding interest rate changes and changes
in currency rates among the U.S. Dollar and other currencies, as well as general
market, economic and political factors to attempt to take advantage of favorable
investment opportunities in each country.
U.S. GOVERNMENT SECURITIES. U.S. Government Securities include obligations
backed by the full faith and credit of the United States Treasury, including,
Treasury bills, notes, and bonds and mortgage participation certificates
guaranteed by GNMA. Other U.S. Government Securities are instruments not backed
by the full faith and credit of the U.S. Government, but instead are backed only
by the credit of the agency, instrumentality, or Government Sponsored Enterprise
("GSE"), or by the discretionary authority of the U.S. Government to purchase
the issuing entity's obligations. Instrumentalities whose obligations are not
backed by the full faith and credit of the U.S. Government include, among
others, those of the Federal Home Loan Mortgage Corporation ("FHLMC") and the
Federal National Mortgage Association ("FNMA").
A portion of the Trust's assets may be invested in collateralized mortgage
obligations.
LATIN AMERICAN GOVERNMENT SECURITIES. The Trust may invest in a variety of bonds
issued by a Latin American government or its agencies, including, but not
limited to, direct obligation bonds, Brady Bonds, Par bonds, discount bonds,
floating rate instruments, fixed rate bonds, Eurobonds, past due interest bonds,
and interest on interest bonds, development bonds, bank indemnity bonds, urban
renovation bonds, bank development bonds and industrial development bonds. In
addition, the Trust may invest in Latin American Brady Bonds, which are issued
by a Latin American government as part of the restructuring of its commercial
bank debt and may be collateralized by U.S. Treasury zero-coupon bonds. Mexican
Government Securities in which the Trust may invest include: (i) Cetes, which
are Peso-denominated securities sold by the Mexican government on a discount
basis with maturities under one-year; (ii) Bondes, which are Peso-denominated
long-term development bonds issued by the Mexican government with a minimum term
of 364 days; (iii) Ajustabonos, which are Peso-denominated adjustable bonds with
a minimum three-year term issued by the Mexican government with the face amount
adjusted each quarter by the quarterly inflation rate as of the end of the
preceding month; and (iv) Tesobonos, which are U.S. Dollar-denominated
securities sold at a weekly auction which are paid in Pesos equal to the value
of the U.S. Dollar calculated at the prevailing exchange rate. The Trust may
invest in such other Latin American Government Securities as may become
available from time to time.
CANADIAN GOVERNMENT SECURITIES. Canadian Government Securities include
securities issued or guaranteed by the Government of Canada, the Government of a
Province of Canada or their agencies and Crown corporations. These securities
may be denominated or payable in U.S. dollars or Canadian dollars.
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The Bank of Canada, acting on behalf of the federal government, is responsible
for the distribution of Government of Canada Treasury bills and federal bond
issues. The Bank of Canada holds weekly auctions of Treasury bills (maturities
of one year or less) and offers new issues of federal bonds through investment
dealers and banks. An offering of Government of Canada bonds frequently consists
of several different issues with various maturity dates, representing different
segments of the yield curve and generally having maturities ranging from three
to 25 years. The Bank of Canada usually purchases a previously announced amount
of each offering of bonds.
All Canadian Provinces have outstanding bond issues and several Provinces also
guarantee bond issues of Provincial authorities, agencies and provincial Crown
corporations. Spreads in the marketplace are determined by various factors,
including the relative supply and the rating assigned by the rating agencies.
Most Provinces also issue treasury bills.
Many municipalities and municipal financial authorities in Canada raise funds
through the bond market in order to finance capital expenditures. Unlike U.S.
municipal securities, which have special tax status, Canadian municipal
securities have the same tax status as other Canadian Government Securities and
trade similarly to such securities. The Canadian municipal market may be less
liquid than the Provincial bond market.
FOREIGN BANK LOANS
The Trust may invest in interests in corporate loans which are collateralized by
the assets of a foreign corporation. There is no assurance that such collateral
could be readily liquidated. The conversion of such instruments into cash could
take several days or longer. While the Manager does not anticipate any material
difficulty in meeting liquidity needs, there can be no guarantee that the Trust
will be able to liquidate a particular interest it holds within a given period
of time.
In a typical corporate loan syndication, a number of lenders, usually commercial
banks or other commercial lending institutions ("Co-Lenders"), lend to a
corporate borrower ("Corporate Issuer") a specified sum pursuant to the terms
and conditions of a loan agreement primarily negotiated by one of the
Co-Lenders, i.e., the "Lead Lender." The Lead Lender or Co-Lenders sell
interests in corporate loans to third-parties and the interests may in turn be
sold to other persons. The Trust may acquire an interest either by acting as a
Co-Lender or by purchasing an interest in a Co-Lender's interest in a corporate
loan. Co-Lenders and the Trust will not guarantee principal of or interest on
the interests in which the Trust invests. The Manager believes that the credit
standards imposed by lenders when acting as Lead or Co-Lender are comparable to
the standards such lenders use in connection with loans originated by them in
which they intend to retain the entire interest.
OTHER INVESTMENT POLICIES
Currency Related Investment Techniques. The Trust may utilize currency related
investment techniques to protect against, and potentially benefit from,
fluctuations in currency exchange rates. Presently, the principal means by which
these objectives may be achieved in Mexico is by investing in the Cobertura
market. The "Cobertura" is the Mexican domestic foreign exchange market that
allows the investor to cover its currency exposure by locking in a rate of
exchange up to one year in advance. However, the Cobertura market does not
permit the degree of precision and flexibility in the management of currency
exposure available in the United States foreign exchange markets. In addition to
the following currency related techniques, the Trust intends to utilize such
currency management instruments, including privately negotiated currency-related
agreements, as may become available and are economically advantageous.
Futures Contracts and Options on Futures Contracts. The Trust may enter into
contracts for the purchase or sale for future delivery of fixed-income
securities or foreign currencies, or contracts based on financial indices
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including any index of U.S. Government Securities or foreign government
securities ("futures contracts") and may purchase and write put and call options
to buy or sell futures contracts ("options on futures contracts"). A "sale" of a
futures contract means the acquisition of a contractual obligation to deliver
the securities or foreign currencies called for by the contract. A "purchase" of
a futures contract means the incurring of a contractual obligation to acquire
the securities or foreign currencies called for by the contract. The purchaser
of a futures contract on an index agrees to take or make delivery of an amount
of cash equal to the difference between a specified dollar multiple of the value
of the index on the expiration date of the contract ("current contract value")
and the price set in the contract. No physical delivery of the fixed-income
securities underlying the index is made. The Board of Trustees has adopted the
requirement that futures contracts and options on futures contracts only be used
as a hedge and not for speculation. In addition to this requirement, the Board
of Trustees has also adopted two percentage restrictions on the use of futures
contracts. The first restriction is that the Trust will not enter into any
futures contracts or options on futures contracts if immediately thereafter the
amount of margin deposits on all the futures contracts of the Trust and premiums
paid on options on futures contracts would exceed 5% of the market value of the
total assets of the Trust. The second restriction is that the aggregate market
value of the outstanding futures contracts purchased by the Trust not exceed 50%
of the market value of the total assets of the Trust. Neither of these
restrictions will be changed by the Board of Trustees without considering the
policies and concerns of the various applicable Federal and state regulatory
agencies. Additional information on the use, risks and costs of futures
contracts and options on futures contracts, is set forth at Appendix B of the
Statement of Additional Information.
Options on Foreign Currencies. The Trust may purchase and write put and call
options on foreign currencies. The writing of an option on a foreign currency
may constitute only a partial hedge and the Trust could be required to purchase
or sell foreign currencies at disadvantageous exchange rates, thereby incurring
losses. The purchase of an option on a foreign currency may constitute an
effective hedge against fluctuations in exchange rates although, in the event of
rate movements adverse to the Trust's position, it may forfeit the entire amount
of the premium plus related transaction costs. There is no specific percentage
limitation on the Trust's investments in options on foreign currencies.
Additional information on the use, risks and costs of options on foreign
currencies, is set forth at Appendix B of the Statement of Additional
Information.
Forward Foreign Currency Exchange Contracts. The Trust may purchase or sell
forward foreign currency exchange contracts ("forward contracts") to attempt to
minimize the risk to the Trust from adverse changes in the relationship between
the U.S. Dollar and other currencies. A forward contract is an obligation to
purchase or sell a specific currency for an agreed price at a future date which
is individually negotiated and privately traded by currency traders and their
customers. The Trust may enter into a forward contract, for example, when it
enters into a contract for the purchase or sale of a security denominated in a
foreign currency in order to "lock in" the U.S. Dollar price of the security
("transaction hedge"). Additionally, for example, when the Trust believes that a
foreign currency may suffer a substantial decline against the U.S. Dollar, it
may enter into a forward sale contract to sell an amount of that foreign
currency approximating the value of some or all of the Trust's portfolio
securities denominated in such foreign currency, or, when the Trust believes
that the U.S. Dollar may suffer a substantial decline against a foreign
currency, it may enter into a forward purchase contract to buy that foreign
currency for a fixed U.S. Dollar amount ("position hedge"). In this situation
the Trust may, in the alternative, enter into a forward contract to sell a
different foreign currency for a fixed U.S. Dollar amount where the Trust
believes that the U.S. Dollar amount value of the currency to be sold pursuant
to the forward contract will fall whenever there is a decline in the U.S. Dollar
value of the currency in which portfolio securities of the Trust are denominated
("cross-hedge"). The Trust's Custodian will place cash not available for
investment or liquid high-grade U.S. Government Securities in a segregated
account of the Trust having a value equal to the aggregate amount of the Trust's
commitments under forward contracts entered into with respect to position hedges
and cross-hedges. If the value of the securities placed in the segregated
account declines, additional cash or liquid high-grade U.S. Government
Securities will be placed in the
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account on a daily basis so that the value of the account will equal the amount
of the Trust's commitments with respect to such contracts. As an alternative to
maintaining all or part of the segregated account, the Trust may purchase a call
option permitting the Trust to purchase the amount of foreign currency being
hedged by a forward sale contract or the Trust may purchase a put option
permitting the Trust to sell the amount of foreign currency subject to a forward
purchase contract. Unanticipated changes in currency prices may result in poorer
overall performance for the Trust than if it had not entered into such
contracts.
The Trust may purchase or sell forward foreign currency exchange contracts.
While these contracts are not presently regulated by the Commodity Futures
Trading Commission ("CFTC"), the CFTC may in the future assert authority to
regulate forward contracts. In such event the Trust's ability to utilize forward
contracts may be restricted. Forward contracts will reduce the potential gain
from a positive change in the relationship between the U.S. Dollar and foreign
currencies. Unanticipated changes in currency prices may result in poorer
overall performance for the Trust than if it had not entered into such
contracts. The use of foreign currency forward contracts will not eliminate
fluctuations in the underlying U.S. Dollar equivalent value of the proceeds of
or rates of return on the Trust's foreign currency denominated portfolio
securities and the use of such techniques will subject the Trust to certain
risks.
The matching of the increase in value of a forward contract and the decline in
the U.S. Dollar equivalent value of the foreign currency denominated asset that
is the subject of the hedge generally will not be precise. In addition, the
Trust may not always be able to enter into foreign currency forward contracts at
attractive prices and this will limit the Trust's ability to use such contracts
to hedge its assets.
Options on U.S. and Foreign Government Securities. In an effort to increase
current income and to reduce fluctuations in net asset value, the Trust may
write covered put and call options on U.S. Government Securities and foreign
government securities that are traded on United States and foreign securities
exchanges. The Trust may also purchase put and call options. There are no
specific limitations on the Trust's writing and purchasing of options.
A put option gives the purchaser of such option, upon payment of a premium, the
right to deliver a specified amount of a security to the writer of the option on
or before a fixed date at a predetermined price. A call option gives the
purchaser of the option, upon payment of a premium, the right to call upon the
writer to deliver a specified amount of a security on or before a fixed date at
a predetermined price. A call option written by the Trust is "covered" if the
Trust owns the underlying security covered by the call or has an absolute and
immediate right to acquire that security without additional cash consideration
(or for additional cash consideration held in a segregated account by its
Custodian) upon conversion or exchange of other securities held in its
portfolio. A call option is also covered if the Trust holds a call on the same
security and in the same principal amount as the call written where the exercise
price of the call held (a) is equal to or less than the exercise price of the
call written or (b) is greater than the exercise price of the call written if
the difference in exercise price is maintained by the Trust in cash and liquid
high-grade U.S. Government Securities in a segregated account with its
Custodian. A put option written by the Trust is "covered" if the Trust maintains
cash not available for investment or liquid high-grade U.S. Government
Securities with a value equal to the exercise price in a segregated account with
its Custodian, or else holds a put on the same security and in the same
principal amount as the put written where the exercise price of the put held is
equal to or greater than the exercise price of the put written. The premium paid
by the purchaser of an option will reflect, among other things, the relationship
of the exercise price to the market price and volatility of the underlying
security, the remaining term of the option, supply and demand and interest
rates.
The Trust may write call options for cross-hedging purposes. A call option is
for cross-hedging purposes if the Trust does not own the underlying security,
and is designed to provide a hedge against a decline in value in another
security which the Trust owns or has the right to acquire. In such
circumstances, the Trust
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collateralizes its obligation under the option by maintaining in a segregated
account with its Custodian cash or liquid high-grade U.S. Government Securities
in an amount not less than the market value of the underlying security, marked
to market daily. The Trust would write a call option for cross-hedging purposes,
instead of writing a covered call option, when the premium to be received from
the cross-hedge transaction would exceed that which would be received from
writing a covered call option, while at the same time achieving the desired
hedge.
In purchasing a call option, the Trust would be in a position to realize a gain
if, during the option period, the price of the underlying security increased to
a price greater than the exercise price plus the premium paid by an amount in
excess of the premium paid. It would realize a loss if the price of the
underlying security did not increase during the period to the exercise price
plus the amount of the premium. In purchasing a put option, the Trust would be
in a position to realize a gain if, during the option period, the price of the
underlying security declined to a price below the exercise price, plus the
premium. If a put or call option purchased by the Trust were permitted to expire
without being sold or exercised, it would have no value and the Trust would
realize a loss in the amount of the premium paid, plus commission costs.
If a put option written by the Trust were exercised, the Trust would be
obligated to purchase the underlying security at the exercise price. If a call
option written by the Trust were exercised, the Trust would be obligated to sell
the underlying security at the exercise price. The risk involved in writing a
put option is that there could be a decrease in the market value of the
underlying security caused by rising interest rates or other factors. If this
occurred, the option could be exercised and the underlying security would then
be sold by the option holder to the Trust at a higher price than its current
market value. The risk involved in writing a call option is that there could be
an appreciation in the market value in the underlying security to a price higher
than the exercise price of the call option. If this occurred, the option could
be exercised and the underlying security would then be sold by the Trust at a
lower price than its current market value. These risks could be reduced by
entering into a closing transaction. The Trust retains the premium received from
writing a put or call option whether or not the option is exercised.
The Trust may purchase or write options on securities of the types in which it
is permitted to invest in privately negotiated transactions. The Trust will
effect such transactions only with investment dealers and other financial
institutions (such as commercial banks or savings and loan institutions) deemed
creditworthy by the Manager, and the Manager has adopted procedures for
monitoring the creditworthiness of such entities. Options purchased or written
by the Trust in negotiated transactions are illiquid and it may not be possible
for the Trust to effect a closing transaction at a time when the Manager
believes it would be advantageous to do so. See Appendix B of the Statement of
Additional Information for additional information.
The successful use of the foregoing currency-related management techniques draws
upon the Manager's skills with respect to such instruments. There can be no
assurance that the Manager will be successful in utilizing these techniques to
enhance the value or reduce the volatility of the Trust's investments.
Loans of Trust Securities. The Trust may make loans of its portfolio securities
under certain circumstances. With the approval of the Trustees of AIT and
subject to various conditions which may be imposed from time to time under
various securities regulations, the Trust may lend its portfolio securities to
qualified broker/dealers or other investors provided that such loans do not
exceed one-third of the value of the Trust's total assets at the time of the
most recent loan, the borrower deposits and maintains with the Trust at least
102% cash collateral and the portfolio securities loaned are "marked-to-market"
daily. There are risks of delay in recovery and loss of rights and collateral
should the borrower fail financially. The lending of securities is a common
practice in the securities industry. The Trust will engage in security loan
arrangements with the primary objective of increasing its income, but will do so
only to the extent consistent with its tax status as a regulated investment
company. The Trust will continue to be entitled to all interest earned on any
loaned securities.
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Repurchase Agreements. The Trust may enter into "repurchase agreements"
pertaining to U.S. Government Securities with creditworthy institutions as
determined by the Manager. There is no percentage restriction on the Trust's
ability to enter into repurchase agreements. A repurchase agreement arises when
a buyer such as the Trust purchases a security and simultaneously agrees to
resell it to the vendor at an agreed-upon future date, normally one day or a few
days later. The resale price is greater than the purchase price, reflecting an
agreed-upon interest rate which is effective for the period the buyer's money is
invested in the security and is related to the current market rate rather than
the coupon rate on the purchased security. Such agreements permit the Trust to
keep all of its assets at work while retaining "overnight" flexibility in
pursuit of longer-term investments. The Trust requires continual maintenance by
its Custodian for its account in the Federal Reserve/Treasury Book Entry System
of collateral in an amount equal to, or in excess of, the resale price and may
require physical delivery of such collateral in appropriate circumstances. In
the event of a vendor's bankruptcy, the Trust might be delayed in, or prevented
from, selling the collateral for the Trust's benefit. The Trustees of AIT have
established procedures, which are periodically reviewed by the Trustees,
pursuant to which the Manager monitors the creditworthiness of the institutions
with which the Trust enters into securities repurchase agreement transactions.
Dollar Rolls. The Trust may also enter into reverse dollar repurchase agreements
("dollar rolls") of mortgage-backed securities in which the Trust sells
securities for delivery in the current month and simultaneously contracts to
repurchase substantially similar (same type, coupon and maturity) securities on
a specified future date. During the roll period, the Trust forgoes principal and
interest paid on the mortgage-backed securities. The Trust is compensated by the
difference between the current sales price and the lower forward price for the
future purchase as well as the interest earned on the cash proceeds of the
initial sale. Cash or high quality liquid securities equal to the value of the
outstanding repurchase commitments are segregated from general investible funds
and will be marked to the market daily. The risk associated with dollar roll
transactions is that the securities may not be delivered and the Trust 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.
Illiquid Securities. The Trust will not invest in illiquid securities if
immediately after such investment more than 15% of the Trust's net assets (taken
at market value) would be invested in such securities. For this purpose,
illiquid securities include, among others: (a) direct placements or other
securities which are subject to legal or contractual restrictions on resale or
for which there is no readily available market (e.g., trading in the security is
suspended or, in the case of unlisted securities, market makers do not exist or
will not entertain bids or offers); (b) options or futures purchased by the
Trust over-the-counter; and (c) repurchase agreements not terminable within
seven days. Securities eligible for resale under Rule 144A under the Securities
Act of 1933, as amended, that have legal or contractual restrictions on resale
but have a readily available market are not deemed illiquid for purposes of this
limitation. The Manager will monitor the liquidity of such securities under the
supervision of the Trustees of AIT.
Trust Turnover. The Trust may engage in active short-term trading to benefit
from yield disparities among different issues of securities, to seek short-term
profits during periods of fluctuating interest rates or for other reasons. Such
trading will increase the Trust's rate of turnover and the incidence of
short-term capital gain taxable as ordinary income. The rate of portfolio
turnover for the period November 1, 1993 to September 30, 1994 and for the
fiscal year ended September 30, 1995 was 407% and 204%, respectively. Annual
Turnover is defined as the lesser of total purchases or total sales divided by
average portfolio value. A high rate of portfolio turnover involves
correspondingly greater expenses than a lower rate, which expenses are borne by
the Trust and its shareholders.
Portfolio Maturity. The Manager presently anticipates, as a general matter, that
less than 25% of the Trust's portfolio will be invested in short-term average
maturities and the remainder of the Trust's portfolio will be
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invested in intermediate term maturities. The Manager may, however, select
securities with different maturities and make different allocations among
securities based upon various investment considerations.
Temporary Defensive Positions. From time to time, the Manager may determine that
market or economic conditions are not advantageous to the Trust, and may
establish a defensive position to preserve capital by temporarily investing all
or part of its assets in short-term money market instruments, cash or cash
equivalents (including receivables on securities transactions) in U.S. dollars
or foreign currencies.
SPECIAL BORROWING CONSIDERATIONS
Borrowing. The Trust may, from time to time, incur indebtedness for the purpose
of acquiring additional portfolio investments (known as "leverage") when it
believes that the interest payments and other costs with respect to such
indebtedness will be exceeded by the anticipated total return (a combination of
income and appreciation) on such investments. Leverage creates an opportunity to
produce additional value to the Trust, but may also result in higher volatility
in the net asset value of the Trust's shares. Unless the income and
appreciation, if any, on assets acquired with borrowed funds or offering
proceeds exceed the cost of borrowing or issuing debt, the use of leverage will
diminish the investment performance of the Trust compared with what it would
have been without leverage. In an extreme case, if the Trust's current
investment income were not sufficient to meet the interest expense on
borrowings, it could be necessary for the Trust to liquidate certain of its
investments, thereby reducing the net asset value of the Trust's shares. The
amount of any such indebtedness, borrowing or issuance will depend upon market
or economic conditions existing at that time.
The Trust will be required to maintain specified asset coverage of at least 300%
with respect to any indebtedness as prescribed by the Investment Company Act of
1940. If at any time asset coverage falls below 300%, the Trust must, within
three days (not including Sundays and holidays), reduce the amount of its
borrowings until it has 300% coverage. The Trust 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.
The Trust may also borrow for temporary purposes, and not subject to the 300%
asset coverage limit described above, an amount not exceeding 5% of the total
assets of the Trust by issuing a note or other evidence of indebtedness. Such a
borrowing must be privately arranged and not be intended to be publicly
distributed. Such a borrowing will be presumed to be for temporary purposes if
repaid within 60 days.
While, as stated above, the Trust will borrow money for the purpose of acquiring
additional portfolio investments only when it believes that such borrowing will
produce additional value to the Trust, the interest cost on the capital raised
through leverage may exceed the total return realized on the assets purchased.
The Trust 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. Any such requirements would increase the cost of borrowing over
the stated interest rate.
Leverage is a speculative technique in that it will increase the Trust's
exposure to capital risk. There is no assurance that a leveraging strategy will
be successful during any period in which it is employed. The Trust may also
borrow to repurchase its shares, to meet redemption requests or to purchase
portfolio investments with the intent of repaying such indebtedness from the
proceeds of expected sales of shares. See "Management Fees."
Terms of Borrowings. The Trust may maintain borrowings from banks
unaffiliated with the Trust or the Manager in an amount representing up to
one-third of the Trust's total assets less liabilities (other than the
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amount borrowed). The terms upon which the Trust incurs indebtedness may provide
for a fixed or variable rate of interest, may be secured or unsecured, may
provide for periodic repayment or repayment in full upon maturity, and may
provide for repayments and reborrowing from time to time, and will otherwise
contain such terms and conditions as may be negotiated from time to time.
REVERSE REPURCHASE AGREEMENTS
The Trust may enter into reverse repurchase agreements. A reverse agreement is
an instrument under which the Trust may sell an underlying debt instrument and
simultaneously obtain the commitment of the purchaser to sell the security back
to the Trust at an agreed upon price on an agreed upon date. Reverse repurchase
agreements will be considered borrowing by the Trust and as such will be subject
to the restrictions on borrowing, including the requirement that the Trust may
not maintain borrowings in excess of 33 1/3% of the Trust's total assets as
further discussed under the subsection entitled "Terms of Borrowings."
Borrowings by the Trust creates an opportunity for greater total return, but at
the same time, increase exposure to capital risk.
The Trust will maintain in a segregated account with its custodian cash or
liquid high grade portfolio securities in an amount sufficient to cover its
obligations with respect to reverse repurchase agreements. The Trust will
receive payment for such securities only upon physical delivery or evidence of
book entry transfer by its custodian. Regulations of the SEC require either that
securities sold by the Trust under a reverse repurchase agreement be segregated
pending repurchase or that the proceeds be segregated on the Trust's books and
records pending repurchase. Reverse repurchase agreements could involve certain
risks in the event of default or insolvency of the other party, including
possible loss from delays or restrictions upon the Trust's ability to dispose of
the underlying securities. An additional risk is that the market value of
securities sold by the Trust under a reverse repurchase agreement could decline
below the price at which the Trust is obligated to repurchase them. The Trust
will utilize reverse repurchase agreements only when the total return to be
earned from the investment of the proceeds from the transaction is anticipated
to be greater than the interest expense of the reverse repurchase transaction.
ADDITIONAL INVESTMENT CONSIDERATIONS
Investing on an International Basis and in Countries with Smaller Capital
Markets. Investing on an international basis and in countries with smaller
capital markets involves certain risks not involved in domestic investments,
including fluctuations in foreign exchange rates, future political and economic
developments, and the possible imposition of exchange controls or other foreign
governmental laws or restrictions. Since the Trust will invest in securities
denominated or quoted in currencies other than the U.S. dollar, changes in
foreign currency exchange rates will affect the value of securities in the
portfolio and the unrealized appreciation or depreciation of investments insofar
as U.S. investors are concerned. In addition, with respect to certain foreign
countries, there is the possibility of expropriation of assets, confiscatory
taxation, political or social instability or diplomatic developments which could
affect investments in those countries. Moreover, individual foreign economies
may differ favorably or unfavorably from the U.S. economy in such respects as
growth of gross national product, rates of inflation, capital reinvestment,
resources, self-sufficiency and balance of payments position. Certain foreign
investments may also be subject to foreign withholding taxes. These risks are
often heightened for investments in smaller capital markets and in Latin
American countries.
Most of the Latin American securities held for the Trust will not be registered
with the Securities and Exchange Commission nor will the issuers thereof be
subject to the reporting requirements of such agency. Accordingly, there may be
less publicly available information about a foreign company than about a U.S.
company, and
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<PAGE>
such foreign companies may not be subject to accounting, auditing and financial
reporting standards and requirements comparable to those to which U.S. companies
are subject. As a result, traditional investment measurements as used in the
U.S., may not be applicable to certain smaller capital markets. Foreign
companies, and companies in smaller capital markets in particular, are not
generally subject to uniform accounting, auditing and financial reporting
standards or to practices and requirements comparable to those applicable to
domestic companies. Foreign markets also have different clearance and settlement
procedures, and in certain markets there have been times when settlements have
failed to keep pace with the volume of securities transactions, making it
difficult to conduct such transactions. Delays in settlement could result in
temporary periods when assets of the Trust are uninvested and no return is
earned thereon. The inability of the Trust to make intended security purchases
due to settlement problems could cause the Trust to miss attractive investment
opportunities. Inability to dispose of a portfolio security due to settlement
problems could result either in losses to the Trust due to subsequent declines
in the value of such portfolio security or, if the Trust has entered into a
contract to sell the security, could result in possible liability to the
purchasers. Brokerage commissions and other transaction costs on foreign
securities exchanges are generally higher than in the U.S. There is generally
less government supervision and regulation of exchanges, brokers and issuers in
foreign countries than there is in the United States.
The operating expense ratio of the Trust can be expected to be higher than that
of an investment company investing exclusively in U.S. securities since the
expenses of the Trust, such as management and advisory fees and custodial costs,
are higher.
Investing in Canada. The Canadian debt securities market is significantly
smaller than the U.S. debt securities market. In particular, the Canadian
mortgage-backed securities market is of recent origin, and, although continued
growth is anticipated, is less well developed and less liquid than its U.S.
counterpart. The Canadian economy has experienced little or no growth during
each of the past fiscal years, and gross domestic product (on an inflation
adjusted basis) has shown little or no growth or decline during such years.
Continued lack of economic growth could affect the Manager's determination of
the appropriate allocation of the Trust's investments within Canada and among
the United States, Canada and Latin American countries.
Investing in Latin American Securities Markets and Economies. The Latin American
securities markets are not as large as the U.S. securities markets and have
substantially less trading volume, resulting in a lack of liquidity and high
price volatility. There is also a high concentration of market capitalization
and trading volume in a small number of issuers representing a limited number of
industries, as well as a high concentration of investors and financial
intermediaries. Latin American brokers typically are fewer in number and less
capitalized than brokers in the U.S. These factors, combined with the U.S.
regulatory requirements for open-end funds and the restrictions on foreign
investments discussed below, result in potentially fewer investment
opportunities for the Trust and may have an adverse impact on the investment
performance of the Trust.
The Manager believes that investment opportunities may result in Latin America
from an evolving long-term international trend encouraging greater market
orientation and diminishing governmental intervention in economic affairs. The
Latin American economies have experienced considerable difficulties in the past
decade. Although there have been significant improvements in recent years, the
Latin American economies continue to experience significant problems, including
high inflation rates and high interest rates. The emergence of the Latin
American economies and securities markets will require continued economic and
fiscal discipline which has been lacking at times in the past, as well as stable
political and social conditions. Recovery may also be influenced by
international economic conditions, particularly those in the U.S., and by world
prices for oil and other commodities. There is no assurance that the economic
initiatives will be successful.
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Certain of the risks associated with international investments and investing in
smaller capital markets are heightened for investments in Latin American
countries. For example, some of the currencies of Latin American countries have
experienced steady devaluations relative to the U.S. dollar, and major
adjustments have been made in certain of such currencies periodically. In
addition, governments of many Latin American countries have exercised and
continue to exercise substantial influence over many aspects of the private
sector. In certain cases, the government owns or controls many companies,
including the largest in the country. Accordingly, government actions in the
future could have a significant effect on economic conditions in Latin American
countries, which could affect private sector companies and the Trust, as well as
the value of securities in the Trust's portfolio.
In addition to the relative lack of publicly available information about Latin
American issuers and the possibility that such issuers may not be subject to the
same accounting, auditing and financial reporting standards as U.S. companies,
inflation accounting rules in some Latin American countries require, for
companies that keep accounting records in the local currency, for both tax and
accounting purposes, that certain assets and liabilities be restated on the
company's balance sheet in order to express items in terms of currency of
constant purchasing power. Inflation accounting may indirectly generate losses
or profits for certain Latin American companies.
Satisfactory custodial services for investment securities may not be available
in some Latin American countries, which may result in the Trust incurring
additional costs and delays in transporting and custodying such securities
outside such countries.
Most Latin American countries have experienced substantial, and in some periods
extremely high, rates of inflation for many years. Inflation and rapid
fluctuations in inflation rates have had and may continue to have very negative
effects on the economies and securities markets of certain Latin American
countries.
Certain Latin American countries are among the largest debtors to commercial
banks and foreign governments. Trading in debt obligations ("sovereign debt")
issued or guaranteed by Latin American governments or their agencies and
instrumentalities ("governmental entities") involves a high degree of risk. The
governmental entity that controls the repayment of sovereign debt may not be
willing or able to repay the principal and/or interest when due in accordance
with the terms of such obligations. A governmental entity's willingness or
ability to repay principal and interest due in a timely manner may be affected
by, among other factors, its cash flow situation, the relative size of the debt
service burden to the economy as a whole, the governmental entity's dependence
on expected disbursements from third parties, the governmental entity's policy
toward the International Monetary Fund and the political constraints to which a
governmental entity may be subject. As a result, governmental entities may
default on their sovereign debt. Holders of sovereign debt (including the Trust)
may be requested to participate in the rescheduling of such debt and to extend
further loans to governmental entities. There is no bankruptcy proceeding by
which sovereign debt on which governmental entities have defaulted may be
collected in whole or in part.
Restrictions on Foreign Investments. Some Latin American countries prohibit or
impose substantial restrictions on investments in their capital markets by
foreign entities such as the Trust. As illustrations, certain countries may
require governmental approval prior to investments by foreign persons or limit
the amount of investment by foreign persons in a particular company or limit the
investment by foreign persons to only a specific class of securities of a
company which may have less advantageous terms than securities of the company
available for purchase by nationals. Certain countries may restrict investment
opportunities in issuers or industries deemed important to national interests.
Substantial limitations may exist in certain countries with respect to the
Trust's ability to repatriate investment income, capital or the proceeds of
sales of securities by foreign investors. For example, in Chile, with limited
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exceptions, invested capital cannot be repatriated for three years. The Trust
could be adversely affected by delays in, or a refusal to grant, any required
governmental approval for repatriation of capital, as well as by the application
to the Trust of any restrictions on investments. No more than 15% of the Trust's
net assets will be comprised, in the aggregate, of assets which are: (i) subject
to material legal restrictions on repatriation or; (ii) invested in illiquid
securities.
A number of Latin American countries, such as Chile and Brazil, have authorized
the formation of publicly traded closed-end investment companies to facilitate
indirect foreign investment in their capital markets. In accordance with the
Investment Company Act, the Trust may invest up to 10% of its total assets in
securities of investment companies, not more than 5% of which may be invested in
any one such company. This restriction on investments in securities of
investment companies may limit opportunities for the Trust to invest indirectly
in certain Latin American countries. Shares of certain investment companies may
at times be acquired only at market prices representing premiums to their net
asset values. If the Trust acquires shares in investment companies, shareholders
would bear both their proportionate share of expenses in the Trust (including
management and advisory fees) and, indirectly, the expenses of such investment
companies.
Currency Risks. Because Trust assets will be invested in fixed-income securities
denominated in the foreign currencies and because a portion of the Trust's
revenues will be received in currencies other than the U.S. Dollar, the U.S.
Dollar equivalent of the Trust's net assets and distributions would be adversely
affected by reductions in the value of certain foreign currencies relative to
the U.S. Dollar. These changes will also affect the Trust's income. If the value
of the foreign currencies in which the Trust receives income falls relative to
the U.S. Dollar between receipt of the income and making of Trust distributions,
the Trust may be required to liquidate securities in order to make distributions
if the Trust has insufficient cash in U.S. Dollars to meet the distribution
requirements that the Trust must satisfy to qualify as a registered investment
company for Federal income tax purposes. Similarly, if an exchange rate declines
between the time the Trust incurs expenses in U.S. Dollars and the time cash
expenses are paid, the amount of the currency required to be converted into U.S.
Dollars in order to pay expenses in U.S. Dollars could be greater than the
equivalent amount of such expenses in the currency at the time they were
incurred.
Some foreign currency values may be volatile. Although the Manager will attempt
to manage currency exchange rate risks, there is no assurance that the Manager
will be successful. In connection with the Manager's currency management, the
Trust may utilize certain currency related investment techniques, including
investments in the Cobertura market. However, currency risk management
instruments available for Mexican and other Latin and South American currencies
do not permit the degree of precision and flexibility in the management of
currency exposure as do instruments available in the more developed United
States foreign exchange markets. These transactions involve certain special
risks. See "Other Investment Policies" above.
Securities Ratings. The ratings of fixed-income securities by S&P, Moody's and
other major rating agencies are a generally accepted barometer of credit risk.
They are, however, subject to certain limitations from an investor's standpoint.
The rating of an issuer is heavily weighted by past developments and does not
necessarily reflect probable future conditions. There is frequently a lag
between the time a rating is assigned and the time it is updated. In addition,
there may be varying degrees of difference in credit risk of securities within
each rating category. Securities rated BBB- by S&P or Baa3 by Moody's are
considered to be investment grade. However, securities rated Baa by Moody's are
considered to have speculative characteristics. Sustained periods of
deteriorating economic conditions or rising interest rates are more likely to
lead to a weakening in the issuer's capacity to pay interest and repay principal
than in the case of higher-rated securities. See Appendix A in the Statement of
Additional Information for a description of such ratings.
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A substantial portion of the Trust's portfolio may comprise non-rated
securities. Non-rated securities will be considered for investment by the Trust
when the Manager believes that the financial condition of the issuers of such
securities, or the protection afforded by the terms of the securities
themselves, limit the risk to the Trust to a degree comparable to that of rated
securities that are consistent with the Trust's objective and policies.
Debt Securities. The net asset value of the Trust's shares will change as the
general levels of interest rates fluctuate. When interest rates decline, the
value of a portfolio primarily invested in debt securities can be expected to
rise. Conversely, when interest rates rise, the value of a portfolio primarily
invested in debt securities can be expected to decline.
Non-Diversified Status. The Trust is a "non-diversified" investment company,
which means the Trust is not limited in the proportion of its assets that may be
invested in the securities of a single issuer. However, the Trust intends to
conduct its operations so as to qualify as a "regulated investment company" for
purposes of the Internal Revenue Code of 1986, as amended (the "Code"), which
will relieve the Trust of any liability for Federal income tax to the extent its
earnings are distributed to shareholders. See "Distributions and Taxes -- U.S.
Federal Income Taxation of the Trust." To so qualify, among other requirements,
the Trust will limit its investments so that, at the close of each quarter of
the taxable year: (i) not more than 25% of the market value of the Trust's total
assets will be invested in the securities of a single issuer; and (ii) with
respect to 50% of the market value of its total assets, not more than 5% of the
market value of its total assets will be invested in the securities of a single
issuer and the Trust will not own more than 10% of the outstanding voting
securities of a single issuer. The Trust's investments in U.S. Government
Securities are not subject to these limitations. Because the Trust, as a
non-diversified investment company, may invest in a smaller number of individual
issuers than a diversified investment company, an investment in the Trust may,
under certain circumstances, present greater risk to an investor than investment
in a diversified company.
Debt securities which are issued or guaranteed by an agency, GSE or
instrumentality of the United States, including certificates issued by GNMA,
FNMA and FHLMC, are treated as U.S. Government Securities for purposes of the
diversification tests. However, securities issued or guaranteed by foreign
governments, their political subdivisions, agencies and instrumentalities are
not treated as U.S. Government Securities for purposes of the diversification
tests described in the preceding paragraph, but instead are subject to these
tests in the same manner as the securities of non-governmental issuers. In this
regard, securities insured or guaranteed by a foreign government, its political
subdivisions, agencies or instrumentalities may in certain circumstances be
treated as issued by a single issuer for purposes of these diversification
tests. Thus, in order to meet the diversification tests and thereby maintain its
status as a regulated investment company, the Trust will be required to
diversify the portfolio of Latin American Government Securities and Canadian
Government Securities in a manner which would not be necessary if the Trust had
made similar investments in U.S. Government Securities.
DISTRIBUTIONS AND TAXES
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DISTRIBUTIONS
Income dividends will be declared and paid monthly. The Trust intends to declare
or distribute sufficient dividends from its net investment income and/or net
capital gain income in an amount great enough to avoid imposition of the 4%
excise tax under the Code. See "United States Federal Income Taxation of the
Trust" below.
CHOOSING A DISTRIBUTION OPTION
When you buy shares of the Trust you may choose from the following distribution
options:
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(1) The Share Option reinvests your income dividends and/or capital gains
distributions, if any, in additional shares. If no option is selected, income
dividends (and capital gains, if any) will be reinvested in additional shares of
the Trust. Income dividends and/or capital gains will be reinvested at the net
asset value as of the reinvestment date for the distribution.
(2) With the Cash Option, you may receive income dividends and/or capital gains
distributions in cash.
(3) If you are also a shareholder in any of the other Astra Funds distributed by
the Distributor, the Transfer Option permits you to have income dividends and
capital gains distributions of the Trust automatically invested in shares of any
of those Astra Funds of which you are a shareholder at the applicable net asset
value. If you select this option, the minimum investment requirements for
additions to an existing account will be waived.
Once again, you must specify which option you desire when you place your order
or submit your application. The tax consequences of distributions (described
below) are the same whether you choose to receive them in cash or to reinvest
them in additional shares of the Trust or another Astra Fund.
If for any fiscal year of the Trust, the amount of distributions paid or deemed
paid for such year exceeds its investment company taxable income plus net
realized capital gains for such year, the amount of such excess would be treated
as a return of capital to all those shareholders who held shares of the Trust
during the year. In such case, each distribution paid or deemed paid for that
year would be treated, in the same proportion, in part as a distribution of
taxable income and in part as a return of capital. Shareholders would incur no
current Federal income tax on the portion of such distributions which are
treated as a return of capital, but each shareholder's basis in his Trust shares
would be reduced by that amount. This reduction of basis would operate to
increase the shareholder's capital gain (or decrease their capital loss) upon
subsequent redemption of his shares.
TAXES
United States Federal Income Taxation of the Trust. The Trust is registered as
an investment company under the 1940 Act and intends to qualify and to elect to
be taxed as a "regulated investment company" (or "RIC") under the Code. If the
Trust is to qualify for the special tax treatment afforded RICs under the Code,
it must meet various requirements: including (i) that at least 90% of the
Trust's gross income for the taxable year must be derived from dividends,
interest, and gains from the sale or other disposition of stocks, securities or
foreign currencies or from other income derived with respect to its business of
investing in stock, securities or currencies; (ii) that less than 30% of its
gross income must be derived from the sale or disposition of stock, securities,
options, futures, and certain foreign currencies (including certain options,
futures or forward contracts on foreign currencies) held for less than three
months; (iii) that at the end of each quarter of its taxable year, it meets
certain asset diversification requirements, including that not more than 25% of
the value of its assets be invested in the securities of any one issuer and at
least 50% of its assets be represented by cash, U.S. Government securities or
other securities limited in the case of any one issuer to not more than 5% of
the Trust's total assets and to not more than 10% of the outstanding voting
securities of each such issuer; and (iv) that it distribute each year at least
90% of its investment company taxable income (including interest, dividends and
net short-term capital gains in excess of net long-term capital losses) and 90%
of the Trust's net tax-exempt interest income.
As a RIC, the Trust will not be subject to U.S. Federal income tax on its
investment company taxable income and net capital gains (net long-term capital
gains in excess of the sum of net short-term capital losses and capital loss
carryforwards from prior years), if any, that it distributes to shareholders.
The Trust intends to distribute to its shareholders, at least annually,
substantially all of its investment company taxable income and net capital
gains. Provided that the Trust meets several notice and election requirements,
Section 855 of the Code permits the Trust to deduct from income certain
dividends paid after the close of the taxable year. Such
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"spillback" dividends must be declared prior to the time prescribed by law for
the filing of the Trust's income tax return and must be distributed by the Trust
in the twelve month period following the close of the taxable year. Shareholders
must include such distributions in income in the taxable year in which they are
made.
Amounts not distributed on a timely basis in accordance with a calendar-year
distribution requirement are subject to a non-deductible 4% excise tax. To
prevent imposition of the excise tax, the Trust must distribute during each
calendar year an amount equal to the sum of: (i) at least 98% of its ordinary
income (not taking into account any capital gains or losses) for the calendar
year, (ii) at least 98% of its capital gains in excess of its capital losses
(adjusted for certain ordinary losses) for the twelve-month period ending on
October 31 of the calendar year, and (iii) any ordinary income and capital gains
for previous years that were not distributed during those years. 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. To
prevent application of the excise tax, the Trust intends to make its
distributions in accordance with these distribution requirements.
If it qualifies for regulated investment company status, the Trust will send
written notices to shareholders annually regarding the tax status of all
distributions made during such year, the amount of undistributed net capital
gains and any applicable tax credits.
Taxation of Distributions. Dividends of investment company taxable income are
taxable to a shareholder as ordinary income whether paid in cash or reinvested
in additional shares. The portion of Trust dividends which qualify for the 70%
dividends-received deduction for a shareholder which is a U.S. corporation shall
not include dividends attributable to capital gains and shall not exceed amounts
designated annually to shareholders by the Trust.
Distributions of net capital gains, if any, which are designated by the Trust as
capital gain dividends are taxable to shareholders as long-term capital gains,
regardless of how long the shareholder has held the Trust's shares, and are not
eligible for the dividends-received deduction. The Board of Trustees of AIT
generally intends to distribute any net capital gains.
If the Trust should retain net capital gains, it will be subject to a tax of 35%
of the amount retained. The Trust expects to designate amounts retained, if any,
as undistributed capital gains in a notice to its shareholders who, if subject
to U.S. Federal income taxation on long-term capital gains: (i) will 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) will be
entitled to credit against their U.S. Federal income tax liabilities for their
proportionate shares of the tax paid by the Trust on the undistributed amount
and to claim refunds to the extent that their credits exceed their liabilities.
For U.S. federal income tax purposes, the adjusted basis of the Trust shares
owned by a shareholder of the Trust would be increased by an amount equal to 65%
of the amount of undistributed capital gains included in the shareholder's
income.
Taxation of Shareholders. For Federal income tax purposes, any ordinary income
dividends which a shareholder receives from the Trust, as well as any
distributions derived from the excess of net short-term capital gain over net
long-term capital loss, are treated as ordinary income whether a shareholder has
elected to receive them in cash or in additional shares. Distributions derived
from the excess of net long-term capital gain over net short-term capital loss
are treated as long-term capital gain regardless of the length of time a
shareholder has owned the Trust's shares and regardless of whether a shareholder
receives such distributions in cash or in additional shares.
Sale of Shares. In general, upon the sale or other disposition of shares of the
Trust, a shareholder will realize a capital gain or loss which will be long-term
or short-term, depending upon the shareholder's holding period for the shares.
However, if the shareholder sells Trust shares to the Trust, proceeds received
by the shareholder
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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 Trust 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 net long-term capital gain dividends
received by the shareholder with respect to such shares.
Foreign Withholding Taxes. Income received by the Trust from sources within
countries other than the United States ("foreign countries") may be subject to
withholding and other taxes imposed by such countries. If more than 50% of the
value of the Trust's total assets at the close of its taxable year consists of
securities of foreign corporations, the Trust will be eligible and intends to
elect to "pass-through" to shareholders the amount of foreign income and similar
taxes it has paid. Pursuant to this election, each of the Trust's shareholders
will be required to include in gross income (in addition to the full amount of
the taxable dividends actually received) its pro rata share of the foreign taxes
paid by the Trust. Each such shareholder will also be entitled either to deduct
(as an itemized deduction) its pro rata share of foreign taxes in computing its
taxable income or to claim a foreign tax credit against the shareholder's U.S.
Federal income tax liability, subject to limitations. No deduction for foreign
taxes may be claimed by a shareholder who does not itemize deductions, but such
a shareholder may be eligible to claim the foreign tax credit (see below). The
deduction for foreign taxes is not allowable in computing alternative minimum
taxable income. Each shareholder will be notified within 60 days after the close
of the Trust's taxable year whether the foreign taxes paid by the Trust will
"pass-through" for that year.
Generally, a credit for foreign taxes is subject to the limitation that it may
not exceed the shareholder's U.S. tax attributable to his or her foreign source
taxable income. For this purpose, if the pass-through election is made, the
source of the Trust's income flows through to its shareholders. Any gains from
the sale of securities by the Trust will be treated as derived from U.S. sources
and certain currency fluctuation gains, including fluctuation gains from foreign
currency-denominated debt securities, receivables and payables, will be treated
as ordinary income derived from U.S. sources. The limitation on the foreign tax
credit is applied separately to foreign source passive income (as defined for
purposes of the foreign tax credit), including the foreign source passive income
passed through by the Trust. Because of limitations imposed by the Code,
shareholders taxable in the United States may be unable to claim a credit for
the full amount of their proportionate share of the foreign taxes paid by the
Trust. The foreign tax credit also cannot be used to offset more than 90% of the
alternative minimum tax (as computed under the Code for purposes of this
limitation) imposed on corporations and individuals. If the Trust is not
eligible to elect to "pass through" to its shareholders its foreign taxes, the
foreign taxes it pays generally will reduce investment company taxable income.
Backup Withholding. The Trust may be required to withhold U.S. Federal income
tax at the rate of 31% of all taxable distributions payable to shareholders who
fail to provide the Trust with their correct taxpayer identification number or
to make required certifications, or where the Trust or the shareholder has been
notified by the Internal Revenue Service that the shareholder is subject to
backup withholding. Corporate shareholders and certain other shareholders
specified in the Code generally are exempt from such backup withholding. Backup
withholding is not an additional tax. Any amounts withheld may be credited
against the shareholder's U.S. Federal income tax liability.
Distributions may be subject to additional state, local and foreign taxes
depending on each shareholder's particular situation. Shareholders are advised
to consult their own tax advisers with respect to the particular tax
consequences to them of an investment in the Trust.
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SHAREHOLDER'S GUIDE
HOW TO BUY SHARES OF THE TRUST
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Shares of the Trust are made available through selected financial service firms
such as broker-dealer firms and banks ("Firms") who have signed agreements with
the Distributor, the Trust's principal underwriter. Shares may also be purchased
by check or wire directly to the Trust's Transfer Agent. The minimum initial
investment by a shareholder in Class A, Class B and Class C shares is $5,000
($2,000 for IRAs). The minimum subsequent investment is $250 for Classes A, B
and C, but these requirements may be changed or waived at any time at
management's discretion. Any order for the purchase of shares may be rejected in
whole or in part. The offering price of Class A is the net asset value next
determined after an order is received, plus a varying sales charge, depending on
the amount invested. The offering price of Class B and C shares is the net asset
value next determined after an order is received.
The sales charge applicable to shares of Class A is determined as follows:
SALES CHARGE
Dealer Reallowance
As % of Public As % of Net As % of
Offering Price Amount Invested Offering Price
-------------- --------------- -----------------
On purchases of:
$ 5,000 - $ 99,999 .... 3.50% 3.63% 3.50%
$ 100,000 - $249,999 .... 2.50% 2.56% 2.50%
$ 250,000 - $499,999 .... 2.00% 2.04% 2.00%
$ 500,000 - $749,999 .... 1.50% 1.52% 1.50%
$ 750,000 - $999,999 .... 1.00% 1.01% 1.00%
$1,000,000 and over* ..... NONE NONE NONE
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* On purchases of $1,000,000 and over, shares are acquired at net asset value
with no sales charge, but the Distributor, from its own assets, will pay
the selling firm .25% of the offering price.
The sales charge assessed upon the purchase of shares of Class A is not an
expense of Class A and has no effect on the net asset value of shares of Class
A. The Distributor will allow the selling Firms to retain 100% of the sales
charge. This may result in the selling firm being considered an underwriter
under the Securities Act of 1933, as amended.
In connection with sales of shares of Class B, the Distributor compensates the
Firms at a rate of 3.5% of purchase payments for shares subject to a contingent
deferred sales charge. In connection with Class C, the Distributor compensates
the Firms at a rate of 1.5% of the purchase payments for shares subject to the
contingent deferred sales charge. The Distributor will also pay the Firms a
trail or maintenance fee, which will be prorated and paid quarterly after the
first full year of investment, in an amount equal to an annual rate of 0.25% of
Class B and Class C's respective daily net assets owned by clients of such
Firms. In connection with sales of shares of Class C, the Distributor will also
compensate the Firms at a rate of 0.25% of the purchase payments of Class C
shares held for more than one year. Such compensation payments will be made from
the Distributor's own assets and may include amounts from the payment of the
sales commissions to the Distributor under the Distribution Plan. See
"Distribution Plans."
The Distributor, at its expense, may provide promotional incentives to Firms in
connection with sales of shares of the Trust and other funds in the Astra Group.
In some instances additional compensation or promotional
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incentives may be offered to Firms that have sold or may sell significant
amounts of shares during specified periods of time. Such compensation and
incentives may include, but are not limited to, cash, merchandise, trips and
financial assistance to Firms in connection with pre-approved conferences or
seminars, sales or training programs for invited sales personnel, payment for
travel expenses (including meals and lodging) incurred by sales personnel and
members of their families or other invited guests to various locations for such
seminars or training programs, seminars for the public, advertising and sales
campaigns regarding one or more of the Astra mutual funds and/or other events
sponsored by the Firms.
You will receive a confirmation of each new transaction in your account, which
will also show you the number of Trust shares you own and the number of shares
being held in safekeeping by the Trust's Transfer Agent for your account. You
may rely on these confirmations in lieu of certificates as evidence of your
ownership. Certificates representing shares of the Trust will not be issued
unless you request them in writing.
PURCHASES BY WIRE
Purchases by wire transfer should be directed to "Investors Fiduciary Trust Co.
ABA 101003621 for credit to Astra All-Americas Government Income Trust, Class A,
Class B or Class C (asapplicable) A/C #890752-443-9 for further credit to
shareholder A/C # ____________, Shareholder Name: _______________________."
For an initial purchase by Federal funds wire, you must first obtain an account
number by telephoning the Trust at (800) 441-7267. You may then instruct your
bank to wire funds as described above. After you have received an account number
and have wired funds, you must complete the application form that accompanies
this Prospectus and send it to:
DST Systems, Inc.
P.O. Box 419174
Kansas City, MO 64141
Attn: Order Department
This procedure is for the protection of shareholders. The Trust will not honor
orders for redemptions until it receives the proper authorizations. See the
Application included in this Prospectus.
For subsequent investments by wire, first telephone the Trust at (800) 441-7267
to obtain a wire reference number prior to transmission. This helps the Trust to
ensure the proper credit to your account.
PURCHASES THROUGH DEALER
Orders for purchase of shares placed through dealers will receive the net asset
value next computed following receipt of the order provided the dealer receives
the order prior to the close of the New York Stock Exchange and transmits it to
the Distributor prior to its close of business that same day (normally 3:00 p.m.
Pacific time). In order to establish an Individual Retirement Account whereby
Investors Fiduciary Trust Company acts as Custodian, (Classes A and B only)
dealers must provide the Trust's Transfer Agent with a completed IRA application
signed by the investor prior to settlement of such purchase orders. Dealers are
required to provide payment within three business days after placing an order.
DEALERS MAKING PAYMENT FOR CONFIRMED PURCHASES VIA FEDERAL FUNDS WIRE MUST
REFERENCE THE CONFIRMATION NUMBER TO ENSURE TIMELY CREDIT.
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PURCHASES BY CHECK
An initial investment made by check must be accompanied by an Application,
completed in its entirety. Additional shares of the Trust may also be purchased
by sending a check payable to the Trust, along with information regarding your
account, including the account number, to the Transfer Agent. All checks should
be drawn only on U.S. banks in U.S. funds, in order to avoid fees and delays. A
charge may be imposed if any check submitted for investment does not clear.
Third party checks, except those payable to an existing shareholder who is a
natural person (as opposed to a corporation or partnership), credit cards, and
cash will not be accepted. When purchases are made by check or periodic
automatic investment, redemptions will not be allowed until the investment being
redeemed has been in the account for 15 business days.
PRE-AUTHORIZED INVESTMENT PLAN
For your convenience, a pre-authorized investment plan (see "Pre-Authorized
Investment Plan" on the Additional Account Privileges Form) may be established
whereby your personal bank account is automatically debited and your Trust
Account is automatically credited with additional full and fractional shares
($100 subsequent minimum investment). For further information on pre-authorized
investment plans, please contact the Shareholder Servicing Agent. The minimum
investment requirements may be waived by the Trust for purchases made pursuant
to certain programs such as payroll deduction plans and retirement plans.
LETTER OF INTENT AND RIGHTS OF ACCUMULATION
CLASS A. An investor may immediately qualify for a reduced sales charge on a
purchase of shares of any Astra Fund which imposes an initial sales charge by
completing the Letter of Intent section of the Shareholder Application (the
"Letter of Intent" or "Letter"). By completing the Letter, the investor
expresses an intention to invest during the next 13 months a specified amount
which if made at one time would qualify for a reduced sales charge. At any time
within 90 days after the first investment which the investor wants to qualify
for the reduced sales charge, a signed Shareholder Application, with the Letter
of Intent section completed, may be filed with Class A. After the Letter of
Intent is filed, each additional investment made will be entitled to the sales
charge applicable to the level of investment indicated on the Letter of Intent
as described above. Sales charge reductions based upon purchases in more than
one investment in the Astra Funds will be effective only after notification to
the Distributor that the investment qualifies for a discount. The shareholder's
holdings in the Astra Funds acquired within 90 days before the Letter of Intent
is filed will be counted towards completion of the Letter of Intent but will not
be entitled to a retroactive downward adjustment of sales charge until the
Letter of Intent is fulfilled. Any redemptions made by the shareholder during
the 13-month period will be subtracted from the amount of the purchases for
purposes of determining whether the terms of the Letter of Intent have been
completed. If the Letter of Intent is not completed within the 13-month period,
there will be an upward adjustment of the sales charge as specified below,
depending upon the amount actually purchased (less redemptions) during the
period.
An investor acknowledges and agrees to the following provisions by completing
the Letter of Intent section of the Shareholder Application: A minimum initial
investment equal to 25% of the intended total investment is required. Five
percent (5%) of the amount of the total intended purchase will be held in escrow
(the "Escrow Shares"), in the form of shares, in the investor's name to assure
that the full applicable sales charge will be paid if the intended purchase is
not completed. The Escrow Shares will be included in the total shares owned as
reflected on the monthly statement; income and capital gain distributions on the
Escrow Shares will be paid as directed by the investor. The Escrow Shares will
not be available for redemption by the investor until the Letter of Intent has
been completed, or the higher sales charge paid. If the total purchases, less
redemptions, exceed the amount specified under the Letter and is an amount which
would qualify for a further quantity discount, a
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retroactive price adjustment will be made by the Distributor and the dealer with
whom purchases were made pursuant to the Letter of Intent to reflect such
further quantity discount on purchases made within 90 days before, and on those
made after filing the Letter. The resulting difference in offering price will be
applied to the purchase of additional shares at the applicable offering price.
If the total purchases, less redemptions, are less than the amount specified
under the Letter, the investor will remit to the Distributor an amount equal to
the difference in dollar amount of sales charge actually paid and the amount of
sales charge which would have applied to the aggregate purchases if the total of
such purchases had been made at a single time. Upon such remittance, the Escrow
Shares held for the investor's account will be released to the account in the
name of the investor or to the investor's order. If within 20 days after written
request such difference in sales charge is not paid, the redemption of an
appropriate number of Escrow Shares to realize such difference will be made. In
the event of a total redemption of the account prior to fulfillment of the
Letter of Intent, the additional sales charge due will be deducted from the
proceeds of the redemption and the balance will be forwarded to the investor. By
completing the Letter of Intent section of the Shareholder Application, an
investor grants to the Distributor a security interest in the Escrow Shares and
agrees to irrevocably appoint the Distributor as his attorney-in-fact with full
power of substitution to surrender for redemption any or all shares for the
purpose of paying any additional sales charge due. The investor or the
securities dealer must inform DST or the Distributor that this Letter is in
effect each time a purchase is made.
The value of all Class A shares plus shares of the other funds distributed by
the Distributor can be combined with a current purchase to determine the reduced
sales charge and applicable offering price of the current purchase. The reduced
sales charges apply to quantity purchases made at one time or on a cumulative
basis over any period of time by (i) an investor, (ii) the investor's spouse and
children under the age of majority, (iii) the investor's custodian accounts for
the benefit of a child under the Uniform Gift to Minors Act, (iv) a trustee or
other fiduciary of a single trust estate or a single fiduciary account
(including pension, profit-sharing and/or other employee benefit plans qualified
under Section 401 of the Code), by trust companies' registered investment
advisors, banks and bank trust departments for accounts which they exercise
exclusive investment discretionary authority and which are held in a fiduciary,
agency, advisory, custodial or similar capacity. The reduced sales charges also
apply, on a non-cumulative basis, to purchases made at one time by the customers
of a single dealer, in excess of $1 million.
Shares of Class A and other Astra Funds purchased and owned of record or
beneficially by a corporation, including employees of a single employer (or
affiliates thereof) including shares held by its employees, under one or more
retirement plans, can be combined with a current purchase to determine the
reduced sales charge and applicable offering price of the current purchase,
provided such transactions are not prohibited by one or more provisions of the
Employee Retirement Income Security Act or the Internal Revenue Code.
Individuals and employees should consult with their tax advisors concerning the
tax rules applicable to retirement plans before investing.
For purposes of Rights of Accumulation and the Letter of Intent privilege,
shares held by investors in Astra funds which impose a contingent deferred sales
charge ("CDSC"), may be combined with shares of Class A for a reduced sales
charge but will not affect any CDSC which may be imposed on the redemption of
shares of a fund which imposes a CDSC.
The Letter of Intent option may be modified or discontinued at any time.
COMBINED PURCHASE PRIVILEGE
The Combined Purchase Privilege is intended to allow qualifying investors a
reduced sales charge only in a Astra Fund which imposes an initial sales charge
and will not affect any CDSC which may be imposed on the redemption of shares of
Class B or Class C or the compensation to selling Firms on the sale of Class B
or Class C shares. Investors may qualify for the Combined Purchase Privilege by
combining purchases of shares of Class
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B or Class C with shares of any Astra Fund, which imposes an initial sales
charge. Shares of Class B or Class C may also be combined with shares of such
other Astra Funds, for purposes of completing a Letter of Intent.
SPECIAL PURCHASES AT NET ASSET VALUE (Class A Only)
Shares of Class A may be purchased at net asset value by persons who have,
within the previous 30 days, redeemed their shares of any Astra Fund which
imposes a sales charge. The amount which may be purchased at net asset value is
limited to an amount up to, but not exceeding, the net amount of redemption
proceeds. Such purchases may also be handled by a securities dealer, who may
charge the shareholder a fee for this service.
Shares of Class A may be purchased at net asset value where the amount invested
is documented to the Trust to be proceeds from the redemption (within 60 days of
the purchase of Class A shares) of shares of unrelated investment companies and
where the investor paid an initial sales charge.
Shares of Class A may also be purchased at net asset value by any charitable
organization, state, county or city, or any instrumentality, department,
authority or agency thereof which has determined that Class A is a legally
permissible investment and which is prohibited by applicable investment law from
paying a sales charge or commission in connection with the purchase of shares of
any registered management company ("an eligible governmental authority"). If an
investment by an eligible governmental authority at net asset value is made
through a dealer who has executed a selling group agreement with respect to the
Astra Funds, the Distributor may pay such dealer up to .25% of the offering
price.
Officers, trustees and bona-fide full time employees of the Trust and with
certain exceptions most officers, directors, and full-time employees of AMC, the
Distributor, Adviser, the Trust's service agents, or affiliated corporations
thereof or any trust, pension, profit-sharing, or other benefit plan for such
persons, broker-dealers, for their own accounts or for members of their families
(defined as current spouse, children, parents, grandparents, uncles, aunts,
siblings, nephews, nieces, step-relations, relations-at-law and cousins),
employees of such broker-dealers and discretionary advisory accounts of AMC, may
purchase shares of Class A at net asset value without a sales charge. Such a
purchaser is required to sign a letter stating that the purchase is for his own
investment purposes only and that the securities will not be resold except to
Class A. Relative to certain fee based Registered Investment Advisors,
Management may, under certain circumstances, allow such Advisors to make
investments on behalf of their clients at net asset value, without any
commission or concessions.
Additional terms concerning the offering of Class A's shares are included in the
Statement of Additional Information.
HOW TO REDEEM SHARES OF THE TRUST
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CLASS A. Shares of Class A are redeemed at 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.
CLASS B. Shares of Class B are redeemed at the net asset value next determined
after receipt of a redemption request in good form on any day the New York Stock
Exchange is open for business, reduced by the amount of any applicable
contingent deferred sales charge described below and the amount of any Federal
income tax required to be withheld.
If the shareholder holds his Class B shares for more than four years after their
purchase, he will not have to pay any charge when he redeems those shares.
Shares of Class B redeemed within the first four years of their purchase (except
shares acquired through the reinvestment of distributions) will be subject to a
contingent
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deferred sales charge. A contingent deferred sales charge is not imposed on: (a)
shares of Class B in the account which were purchased more than four years prior
to redemption; (b) all shares of Class B in the account acquired through
reinvestment of monthly distributions and capital gains distributions; and (c)
the increase, if any, of value of all other shares of Class B in the account
(namely those purchased within the four years preceding the redemption) over the
purchase price of such shares. Redemptions are processed in a manner to maximize
the amount of redemption which will not be subject to a contingent deferred
sales charge; i.e., each redemption will be assumed to have been made first from
the exempt amounts referred to in clauses (a), (b) and (c) above, and second
through liquidation of those shares in the account referred to in clause (c) on
a first-in-first-out basis. Any contingent deferred sales charge which is
required to be imposed on share redemptions for shares of Class B will be made
in accordance with the following schedule:
Year of Contingent
Redemption Deferred
After Purchase Sales Charge
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First ............................... 4%
Second .............................. 3%
Third ............................... 2%
Fourth .............................. 1%
Fifth and following ................. 0%
CLASS C. Shares of Class C are redeemed at the net asset value next determined
after receipt of a redemption request in good form on any day the New York Stock
Exchange is open for business, reduced by the amount of any applicable
contingent deferred sales charge described below and the amount of any Federal
income tax required to be withheld.
If the shareholder holds his Class C shares for more than one year after their
purchase, he will not have to pay any charge when he redeems those shares.
Shares of Class C redeemed within the first year of their purchase (except
shares acquired through the reinvestment of distributions) will be subject to a
contingent deferred sales charge of 11/2% of the original purchase price. A
contingent deferred sales charge is not imposed on: (a) shares of Class C in the
account which were purchased more than one year prior to redemption; (b) all
shares of Class C in the account acquired through reinvestment of monthly
distributions and capital gains distributions, and (c) the increase, if any, of
value of all other shares of Class C in the account (namely those purchased
within one year preceding the redemption) over the purchase price of such
shares. Redemptions are processed in a manner to maximize the amount of
redemption which will not be subject to a contingent deferred sales charge;
i.e., each redemption will be assumed to have been made first from the exempt
amounts referred to in clauses (a), (b) and (c) above, and second through
liquidation of those shares in the account referred to in clause (c) on a
first-in-first-out basis.
General. No contingent deferred sales charge will be payable in connection with
the redemption of shares of Class B or Class C purchased by officers, trustees
and bona fide full-time employees of the Trust, and with certain exceptions,
officers, directors and full-time employees and sales representatives of AMC,
the Distributor or affiliated companies thereof (or any trust, pension,
profit-sharing or other benefit of such persons), Adviser, broker-dealers having
sales agreements with the Distributor, all for their own accounts or for their
spouse and children, and employees of such broker-dealer firms (for their own
accounts only), and discretionary advisory accounts of AMC (if such purchasers
state in writing that the purchases are for their own investment purposes only
and the purchaser represents that the shares will be resold except to the
Trust).
No contingent deferred sales charge will be payable in connection with the
redemption of shares of Class B or Class C which were acquired via certain
exchange transactions as fully described in the Exchange Privilege Section of
this prospectus.
The contingent deferred sales charge will be waived for certain redemptions of
shares of Class B and Class C, including: (i) upon the death or permanent
disability of a shareholder; (ii) in connection with mandatory
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distributions from an IRA or other qualified retirement plan; (iii) in
connection with redemptions pursuant to the Trust's right to liquidate amounts
or charge an annual small account fee; and (iv) upon liquidation or dissolution
of the Trust. The contingent deferred sales charge will be waived in the case of
a redemption of shares of Class B and Class C following the death or permanent
disability of a shareholder if the redemption is made within one year of death
or initial determination of permanent disability. The waiver is available for
total or partial redemptions of shares of Class B or Class C owned by an
individual or an individual in joint tenancy (with rights of survivorship), but
only for redemptions of shares held at the time of death or initial
determination of permanent disability. The shareholder must notify the Trust's
Transfer Agent either directly or through the Distributor, at the time of
redemption, that the shareholder is entitled to a waiver of the contingent
deferred sales charge. The relevant information as requested in the Contingent
Deferred Sales Charge Waiver Form, included in this prospectus on page 49, must
be provided to the Trust's Transfer Agent at the time of the redemption request.
The waiver will be granted subject to confirmation of the Investor's
entitlement.
TYPES OF REDEMPTION
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. A suggested form of such certification is provided on
the application included in this Prospectus. A signature guarantee by an
eligible guarantor may be required as stipulated in Rule 17Ad-15(a)(2) under the
Securities Exchange Act of 1934. To determine whether a signature guarantee or
other documentation is required, shareholders may call the Trust's Shareholder
Servicing Agent at (800) 441-7267.
REDEMPTIONS 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
your redemption request but neither the Trust nor PDC impose any such charges
other than the contingent deferred sales charges described above in connection
with the redemption of shares of Class B and Class C.
EXPEDITED REDEMPTIONS
A shareholder may have the payment of redemption requests (of $5,000 or more)
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
shareholder may request a wire redemption by telephone or written request sent
to the Transfer Agent. For telephone redemptions, call the Transfer Agent at
(800) 441-7267. A shareholder must complete the "Expedited Redemptions" section
of the Application for this privilege to be applicable.
SYSTEMATIC WITHDRAWAL PLAN
A shareholder may elect to have regular monthly or quarterly payments in any
fixed amount in excess of $100 made to him or her, or to anyone else properly
designated as long as the account has a value of at least $10,000. During the
withdrawal period, a shareholder may purchase additional shares for deposit to
his or her account if the additional purchases are equal to at least one year's
scheduled withdrawals, or $1,200, whichever is greater.
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There are no separate charges to a shareholder under this plan. A number of full
and fractional shares equal in value to the amount of the requested payment will
be redeemed. Such redemptions are normally processed on the fifth business day
prior to the end of the month or quarter. Checks are then mailed on or about the
first of the following month. Shareholders who elect to have a Systematic
Withdrawal Plan must have all dividends and capital gains reinvested. To
establish systematic cash withdrawals, please complete the systematic cash
withdrawal section on the Additional Account Privileges Form.
A shareholder may change the amount, frequency, and payee, or terminate this
plan, by giving written notice to the Trust's Transfer Agent. As shares of the
Trust are redeemed under the plan, a shareholder may realize a capital gain or
loss to be reported for income tax purposes. A Systematic Withdrawal Plan may be
terminated or modified at any time upon written notice by you or the Trust.
GENERAL
Payment to shareholders for shares redeemed or repurchased will be made within
seven days after receipt by the Transfer Agent. The Trust may delay the mailing
of a redemption check until the check used to purchase the shares being redeemed
has cleared, which may take up to 15 days or longer. To reduce such delay, the
Trust recommends that all purchases be made by bank wire Federal funds. The
Trust may suspend the right of redemption under certain extraordinary
circumstances in accordance with the Rules of the SEC. Due to the relatively
high cost of handling small investments, the Trust reserves the right upon
30-days' written notice to redeem, at net asset value, the shares of any
shareholder whose account has a value of less than $5,000 other than as a result
of a decline in the net asset value per share.
SHAREHOLDER SERVICES AND PRIVILEGES
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EXCHANGE PRIVILEGE
CLASS A. Class A shares may be exchanged for shares of other Astra Funds which
do not have the same investment objective and which offer such privilege at the
relative net asset values per share at the time of the exchange, provided Class
A's shares have been held for a minimum of 30 days. The total value of shares
being exchanged must at least equal the minimum investment requirement of the
fund into which they are being exchanged.
Shares of the other funds distributed by the Distributor which do not have the
same investment objective and offer an exchange privilege may be exchanged for
Class A shares on the basis of relative net asset values if the required holding
period is satisfied as provided for in the Exchange Privilege section of the
respective funds' prospectuses.
CLASS B. Class B shares which have been held for a minimum of 30 days may be
exchanged for shares of any other Astra Fund which imposes a comparable
contingent deferred sales charge, excluding Astra Adjustable U.S. Government
Securities Trust I, Astra Adjustable Rate Securities Trust I and Astra
Short-Term Multi-Market Income Fund II, and offers an exchange privilege at the
then current net asset values of the respective funds and such exchanged shares
will not be subject to an amount of the otherwise applicable contingent deferred
sales charge at the time of such exchange, subject to such restrictions and
limitations as the Distributor may impose from time to time. However, shares
acquired as a result of such exchange and subsequently redeemed will be subject
to the then applicable contingent deferred sales charge if such shares were held
less than four years since the purchase of Class B shares.
Class B shares held for at least four years may be exchanged into any other
Astra Fund distributed by the Distributor which offers an exchange privilege at
the then current net asset value provided that the total value
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of shares being exchanged meets the minimum investment requirement of the fund
into which they are being exchanged. If such shares are subsequently redeemed
they will not be subject to a CDSC.
Shares of the other funds which impose a comparable contingent deferred sales
charge, excluding Astra Adjustable U.S. Government Securities Trust I, Astra
Adjustable Rate Securities Trust I and Astra Short-Term Multi-Market Income Fund
II, and offer an exchange privilege may be exchanged for Class B shares on the
basis of relative net asset values if the required holding period is satisfied
as provided for in the Exchange Privilege section of the respective funds'
prospectus, subject to such restrictions and limitations as the Distributor may
impose from time to time. If such shares are subsequently redeemed they will not
be subject to the CDSC.
CLASS C. Class C shares which have been held for a minimum of 30 days may be
exchanged for shares of any other Astra fund which imposes a comparable
contingent deferred sales charge and offers an exchange privilege at the then
current net asset values of the respective funds and such exchanged shares will
not be subject to an amount of the otherwise applicable contingent deferred
sales charge at the time of such exchange, subject to such restrictions and
limitations as the Distributor may impose from time to time. However, shares
acquired as a result of such exchange and subsequently redeemed will be subject
to the then applicable contingent deferred sales charge if such shares were held
less than one year since the purchase of Class C shares.
Class C shares held for at least one year may be exchanged into any other Astra
fund distributed by the Distributor which offers an exchange privilege at the
then current net asset value provided that the total value of shares being
exchanged meets the minimum investment requirement of the fund into which they
are being exchanged. If such shares are subsequently redeemed they will not be
subject to a CDSC.
Shares of the other funds which impose an initial sales charge and offer an
exchange privilege may be exchanged for Class C shares on the basis of relative
net asset values if the required holding period is satisfied as provided for in
the Exchange Privilege section of the respective funds' prospectus, subject to
such restrictions and limitations as the Distributor may impose from time to
time. If such shares are subsequently redeemed they will not be subject to the
CDSC.
General. The prospectuses of the other funds should be reviewed before effecting
any exchange. Shareholders should note that any such exchange, which may only be
made in states where shares of the other funds are qualified for sale, may
create a gain or loss to be recognized for Federal income tax purposes.
Exchanges may be authorized by telephone. Shareholders will automatically be
assigned this privilege unless they check the box on the Application which
indicates that they do not wish to have the privilege (see "Telephone Exchange
Privilege" section of Application). Shareholders who wish to authorize expedited
redemptions by telephone will need to specifically request this privilege. For
information concerning expedited redemptions and telephone exchange privileges,
see "Special Services" section of Application. In addition, if a shareholder
exchanges by mail the exchange will be effected upon receipt of written
instructions signed by all account owners and accompanied by any outstanding
share certificates properly endorsed, into an identically registered account.
The exchange privilege may be modified at any time or discontinued upon 60 days'
written notice to shareholders.
REINSTATEMENT PRIVILEGE
CLASS B AND CLASS C. If you have redeemed your Class B or Class C shares, you
may reinvest up to the full amount of the proceeds of such redemption, at net
asset value at the time of reinvestment. The amount of any contingent deferred
sales charge on the Class B or Class C shares will also be reinvested. Such
reinvested Class B or Class C shares will retain their original cost and
purchase date only for purposes of the contingent deferred sales charge.
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In order to exercise this privilege, a written order for the purchase of shares
must be received by the Trust's Transfer Agent, or be postmarked, within 30 days
after the date of redemption. This privilege can be used only once per calendar
year. If you incur a loss on the redemption and use the reinstatement privilege,
some or all of the loss may not be allowed as a tax deduction. See Statement of
Additional Information for further discussion.
RETIREMENT PLANS
Classes A and B have available prototype qualified retirement plans for both
corporations and self-employed individuals. The Trust also has available
prototype Individual Retirement Account ("IRA") plans (for both individuals and
employers) and Simplified Employee Pension ("SEP") plans as well as Section
403(b)(7) Tax-Sheltered Retirement Plans which are designed for employees of
public educational institutions and certain non-profit, tax-exempt
organizations. Investors Fiduciary Trust Company acts as the custodian under
these plans. For information, including the custodian's fees and forms necessary
to adopt the plans, see the Statement of Additional Information and call or
write the Distributor.
EXPEDITED REDEMPTION AND TELEPHONE EXCHANGE INFORMATION
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The Trust and its Transfer Agent will not be responsible for the authenticity of
phone instructions or losses, if any, resulting from unauthorized shareholder
transactions if the Trust or its Transfer Agent reasonably believe that such
instructions were genuine. The Trust and its Transfer Agent have established
procedures that the Trust believes are reasonably appropriate to confirm that
instructions communicated by telephone are genuine. These procedures include:
(i) recording telephone instructions for exchanges and expedited redemptions;
(ii) requiring the caller to give certain specific identifying information; and
(iii) providing written confirmations to shareholders of record not later than
five days following any such telephone transactions. If the Trust and its
Transfer Agent do not employ these procedures, they may be liable for any losses
due to unauthorized or fraudulent telephone instructions.
HOW THE TRUST VALUES ITS SHARES
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The net asset value and offering price of shares of the Trust is determined once
daily as of the close of trading on the New York Stock Exchange during the
Trust's "business day," which is any day on which the Exchange is open for
business. The net asset value of the Trust serves as the basis for the purchase
and redemption price of Trust shares.
CALCULATION OF NET ASSET VALUE
Net asset value for each class is calculated by dividing the value of the
Trust's portfolio securities, plus any cash or other assets less all
liabilities, by the number of shares outstanding for each class. If the
securities owned by the Trust increase in value, the value of the Trust shares
which the shareholders of each class own will increase. If the securities owned
by the Trust decrease in value, the value of the shareholder's shares will also
decline. In this way, shareholders participate in any change in the value of the
securities owned by the Trust. The securities held in the Trust's portfolio will
be valued by using market quotations, or independent pricing services which use
prices provided by market-makers or estimates of market values obtained from
yield data relating to instruments or securities with similar characteristics.
Securities for which reliable quotations or pricing services are not readily
available and all other assets will be valued at their respective fair value as
determined in good faith by, or under procedures established by, the Trustees of
AIT, which procedures may include the delegation of certain responsibilities
regarding valuation to the officers of AIT. The officers of AIT report, as
necessary, to the Trustees of AIT regarding portfolio valuation determination.
Foreign securities will be valued on the basis of
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quotations from the primary market in which they are traded and translated from
the local currency in U.S. Dollars using current exchange rates.
Short-term securities with less than 60 days remaining to maturity when acquired
by the Trust will be valued on an amortized cost basis by the Trust when the
Trustees of AIT have determined that amortized cost is fair value. If the Trust
acquires such securities with more than 60 days remaining to maturity, they will
be valued at current market value (using the mean of the bid and the asked
prices) until the 60th day prior to maturity, and will then be valued on an
amortized cost basis based upon the value on such date unless the Trustees of
AIT determine during such 60-day period that this amortized cost basis does not
represent fair value.
The Trust's portfolio securities, from time to time, may be listed on foreign
exchanges which trade on days when the NYSE is closed (such as Saturday). As a
result, the net asset value of the Trust may be affected by such trading on days
when shareholders have no access to the Trust.
PERFORMANCE
Advertisements, sales literature and communications to shareholders may contain
various measures of the Trust's performance including current yield, various
expressions of total return and current distribution rate. These may
occasionally cite statistics to reflect its volatility or risk.
The Trust may furnish average annual total return and total return quotations
calculated at net asset value and at maximum offering price for various periods.
Average annual total return figures as prescribed by the SEC represent the
average annual percentage change in value of $1,000 invested at the maximum
offering price for one, five, and 10-year periods, or a portion thereof, to the
extent applicable, through the end of the most recent calendar quarter, assuming
reinvestment of all distributions and deduction of any applicable contingent
deferred sales charge. For such purposes, total return equals the total of all
income and capital gain distributions paid to shareholders, assuming
reinvestment of all distributions, plus (or minus) the change in the value of
the original investment, expressed as a percentage of the purchase price.
Current yield reflects the income per share earned by the Trust's portfolio
investments. It is calculated by dividing the Trust's net investment income per
share during a recent 30-day period by the maximum offering price on the last
day of that period and annualizing the result.
Yield, which is calculated according to a formula prescribed by the SEC (see the
Statement of Additional Information), is not indicative of the dividends or
distributions which were or will be paid to the Trust's shareholders. Dividends
or distributions paid to shareholders are reflected in the current distribution
rate which may be quoted to shareholders. The current distribution rate is
computed by dividing the annualized amount of dividends per share paid by the
Trust during the past 30 days by the current offering price. The current
distribution rate differs from the current yield computation because it may
include distributions to shareholders from sources other than dividends and
interest, short-term capital gain and net equalization credits and is calculated
over a different period of time.
Advertisements and communications may compare the Trust's performance with that
of other mutual funds (except money market funds), as reported by Lipper
Analytical Services, Inc. or similar independent services or financial
publications. From time to time, advertisements and other Trust materials and
communications may cite statistics to reflect the Trust's performance over time,
utilizing comparisons to indexes including any of a number of foreign fixed
income indexes and to indexes based on U.S. Treasury securities and those
derived from a calculated measure such as a cost of funds index or a moving
average of mortgage rates. Commonly used indexes include the one, three, five,
10 and 30-year constant maturity Treasury rates, the three-month and 180-day
Treasury bill rate, rates on longer-term Treasury certificates, the 11th
District Federal Home Loan Bank Cost of Funds, the National Median Cost of
Funds, the one-month, three-month, six-month or one-year London Interbank
Offered Rate (LIBOR), the prime lending rate of one or several banks,
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or commercial paper rates. Some indexes, such as the one-year constant maturity
Treasury rate, closely mirror changes in market interest rate levels, while
others tend to lag behind changes in market rate levels and tend to be somewhat
less volatile.
In addition, advertisements and other communications may cite current and
compounded yield and distribution rates. Quotations of historical total returns,
yields and distribution rates are not indicative of future dividend income or
total return, but are an indication of the return to shareholders only for the
limited historical period used. The Trust's yield, total return or distribution
rate will depend on the particular investments in its portfolio, its total
operating expenses and other conditions. For further information, including the
formulas and discussions of the yield and total return calculations see the
Statement of Additional Information.
In each case, performance figures are based upon past performance, reflect all
recurring charges against Trust income and, as appropriate, may or may not
assume the payment of the applicable maximum sales load or contingent deferred
sales charge on the purchase or redemption of shares. The investment results of
the Trust, like all others, will fluctuate over time; thus, performance figures
should not be considered to represent what an investment may earn in the future
or what the Trust's yield, distribution rate or total return may be in any
future period.
THE ASTRA GROUP
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Atlas Holdings Group, Inc. ("Atlas Group") is a financial services holding
company and has its principal business address at 9595 Wilshire Boulevard, Suite
1001, Beverly Hills, California 90212. It comprises several affiliated
companies, including AMC and the Distributor (whose principal business address
is 750 B Street, Suite 2350, San Diego, California 92101), which provide
advisory, distribution and administrative services to the Trust. Atlas Group is
a Delaware corporation of which Palomba Weingarten, Chairman of the Board of
Trustees of AIT, is the majority stockholder and Chief Executive Officer.
AMC provides a number of mutual funds, and may provide other personal and
institutional accounts, with portfolio management services. It maintains a staff
of experienced investment personnel and support facilities. Current assets under
management are approximately $150 million.
The Distributor distributes shares for all of Atlas Group's mutual funds. AMC
and the Distributor are wholly-owned subsidiaries of Atlas Holdings Group, Inc.
These companies are part of the umbrella name "Astra Group."
PORTFOLIO MANAGER
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Robert Womack, Jr. is the Portfolio Manager for the Trust. Mr. Womack is also
president of the Trust and manages Astra Short-Term Multi-Market Income Fund I
and II, both series of Astra Global Investment Series. Additionally, Mr. Womack
is a member of the investment management committee responsible for the
management of Astra Institutional Adjustable U.S. Government Securities
Portfolio and Astra Institutional Adjustable Rate Securities Portfolio, series
of Astra Institutional Securities Trust.
Mr. Womack joined AMC in July 1995 from the Pilgrim America Group, where from
1993 to June 1995 he was a portfolio manager responsible for managing the
Pilgrim America Government Securities Income Fund (formerly Pilgrim GNMA Fund)
and was a member of the investment committee of the Pilgrim All-Americas
Government Income Trust.
Prior to joining the Pilgrim Group, Mr. Womack worked for World Savings and Loan
Association in Oakland, California, where from 1989 to 1993, his
responsibilities included managing a $2.5 billion mortgage-backed securities
portfolio, a $250 million government and mortgage-backed securities mutual fund,
the institution's
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futures, options and interest rate swap portfolios, as well as its $1 billion
short-term investment portfolio. Prior to that he worked as a financial analyst
for the Federal Home Loan Bank of San Francisco for 2 1/2 years.
Mr. Womack earned an MBA from Southern Methodist University in 1986 and a
Bachelor's degree in business administration from Baylor University.
MANAGEMENT FEES
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For furnishing the Trust with investment advice and investment management
services with respect to the Trust's assets, furnishing requisite office space
and personnel, and in general supervising and managing the Trust's investments
subject to the ultimate supervision and direction of AIT's Trustees, AMC is paid
a fee of .65% of the Trust's average daily gross assets. This fee, together with
the administrative fee paid to Atlas Group (discussed below), is higher than
that paid by many other investment companies, but is comparable to the fees of
other investment companies that invest in securities of foreign countries.
The Trust is responsible for the payment of all other operating expenses,
including fees and expenses in connection with membership in investment company
organizations, brokerage fees and commissions, legal, auditing and accounting
expenses, expenses of registering shares under Federal and state securities
laws, expenses related to the distribution of the Trust's shares (see
"Distribution Plans"), insurance expenses, taxes or governmental fees, fees and
expenses of the custodian, transfer agent and accounting and pricing agent of
the Trust, fees and expenses of members of the Board of Trustees who are not
interested persons of the Trust, the cost of preparing and distributing
prospectuses, statements, reports and other documents to shareholders, expenses
of shareholders' meetings and proxy solicitations, and such extraordinary or
nonrecurring expenses as may arise including litigation to which the Trust may
be a party and indemnification of the Trust's officers and Trustees with respect
thereto. Pursuant to the Investment Management Agreement between AMC and the
Trust, AMC will reduce its aggregate fees for any fiscal year, or reimburse the
Trust, to the extent required, so that the Trust's expenses do not exceed the
expense limitations applicable to the Trust under the securities laws or
regulations of those states or jurisdictions in which the Trust's shares are
registered or qualified for sale. Expenses for purposes of these expense
limitations include the management fee, but exclude brokerage commissions and
fees, taxes, interest and extraordinary expenses such as litigation, paid or
incurred by the Trust. In addition, the state with the most restrictive expense
limitation allows the Trust to exclude distribution expenses.
The Trust's ability to increase indebtedness for the purpose of acquiring
additional portfolio investments (known as leverage) will have the additional
effect of raising the Trust's gross assets, thereby increasing the total amount
of the management fee. The Manager recognizes the possible conflict of interest
associated with this additional effect of leveraging, but will borrow money only
when and to the extent it believes that the interest payments and other costs
with respect to such indebtedness will be exceeded by the anticipated total
return (a combination of income and appreciation) on such investments. See
"Special Borrowing Considerations."
The Trustees of AIT establish the Trust's investment policies and supervise and
review the operations and management of the Trust. See "Trustees and Officers"
in the Statement of Additional Information for a complete description of the
Trustees of AIT.
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ADMINISTRATIVE FEES
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Pursuant to an administration agreement ("Administration Agreement"), Atlas
Group supervises the overall administration of the Trust. These administrative
services include supervising the preparation and filing of all documents
required for compliance by the Trust with applicable laws and regulations,
supervising the maintenance of books and records, and other general and
administrative responsibilities. For providing these services, Atlas Group
receives a fee from the Trust of 0.10% per annum of its average daily net
assets.
Under a sub-administration agreement between Atlas Group and PFPC Inc. ("PFPC"),
PFPC provides certain administrative services to the Trust, subject to the
supervision of the Board of Trustees of AIT. Such services include regulatory
compliance, assistance in the preparation and filing of post-effective
amendments to AIT's registration statement with the Securities and Exchange
Commission (the "Commission"), preparation of annual, semi-annual and other
reports to shareholders and the Commission, filing of federal and state income
tax returns, preparation of financial and management reports, preparation of
board meeting materials, preparation and filing of blue sky registrations and
monitoring compliance with the amounts and conditions of each state
qualification. In consideration of the services provided under the
sub-administration agreement, Atlas Group (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.
DISTRIBUTION PLANS
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The Trust finances activities which are primarily intended to result in the sale
of Trust shares and has adopted a Distribution Plan pursuant to Rule 12b-1 under
the 1940 Act (the "Plan") for each class of shares. Rule 12b-1 permits mutual
funds, such as the Trust, to finance distribution activities and bear expenses
associated with the distribution of its shares provided that any payments made
by the fund are made pursuant to a written plan adopted in accordance with Rule
12b-1.
CLASS A. Class A's Plan provides that it will pay up to a maximum of .25% per
annum of Class A's daily net assets for expenses incurred in the distribution of
Class A's shares.
Class A's Plan provides that it shall continue in effect for as long as such
continuance is approved at least annually by the vote of a majority of the
Trustees of AIT and a majority of the Trustees of AIT who are not interested
persons of AIT and who have no direct or indirect financial interest in the
operation of the Plan or any agreements related to the Plan (the "Rule 12b-1
Trustees"). The Plan may be terminated at any time by a vote of a majority of
the Rule 12b-1 Trustees, or by a vote of a majority of the outstanding voting
securities of Class A.
The Plan will only make payments for expenses actually incurred by the
Distributor. The Plan provides that unreimbursed expenses may be carried over
from year to year, provided however, that in accordance with a policy adopted by
AIT's Board of Trustees, if the Distributor has not yet been reimbursed for such
expenses, such expenses may not be carried over for more than three years from
the date when they were incurred. The Distributor may include as an expense a
portion of its overhead, including out of pocket costs. In the event the Plan is
terminated in accordance with its terms, the obligation of Class A to make
payments to the Distributor pursuant to the Plan will cease and Class A will not
be required to make any payments for expenses incurred after the date such Plan
terminates.
Pursuant to the Plan, the Distributor will be entitled to reimbursement (up to
the maximum of .25% per annum of Class A's average daily net assets) for its
actual expenses incurred in the distribution and promotion of Class A's shares,
including the printing of prospectuses, Statements of Additional Information and
reports used for sales purposes, advertisements, expenses for preparation and
printing of sales literature and other distribution
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related expenses, including any distribution or service fees paid to securities
dealers or institutions who have executed a distribution or service agreement
with the Distributor.
The Trust may, in its absolute discretion, suspend, discontinue or limit the
offering of its Class A shares at any time. In determining whether any such
action should be taken, the Trust's management intends to consider all relevant
factors, including, without limitation, the size of Class A, the investment
climate and market conditions and the volume of sales and redemptions of Class A
shares. The Plan may continue in effect and payments may be made under the Plan
following any such suspension, discontinuance or limitation of the offering of
Class A shares. However, Class A is not contractually obligated to continue its
Plan for any particular period of time. Suspension of the offering of Class A
shares would not, of course, affect a shareholder's ability to redeem his
shares.
CLASS B AND CLASS C. The Class B and Class C Plans provide for two categories of
payments. First, the Plans provide daily compensation to the principal
underwriter for its distribution services and facilities ("daily compensation").
Pursuant to the Plans, but subject to the .75% limitation described below, Class
B and Class C will pay the principal underwriter daily compensation in the form
of: (i) sales commissions equal to 5% of the amount received by Class B and 4%
of the amount received by Class C, for each share sold (excluding reinvestment
of dividends and distributions) ("Underwriter's Sales Commissions") and (ii) an
interest fee calculated by applying the rate of 1% over the prime rate then
reported in The Wall Street Journal to the outstanding balance of Uncovered
Distribution Charges of the principal underwriter (as described below). The
principal underwriter currently expects to pay sales commissions to dealers at
the time of sale of up to 3.5% for Class B and 1.5% for Class C of the purchase
price of the shares sold by such dealer. See "How to Buy Shares of the Trust."
The principal underwriter will use its own funds or funds facilitated by the
principal underwriter (which may be borrowed or otherwise financed) to pay such
sales commissions. In addition to the daily compensation to the principal
underwriter, the Plans also provide for the payment to the principal underwriter
of a trail or maintenance fee, accrued daily and paid monthly, in an amount
equal to an annual rate of .25% of Class B and Class C's respective daily net
assets, which may be paid to dealers at an annual rate not to exceed .25% of
Class B and Class C's respective daily net assets owned by clients of the
dealers.
Because the payment of the Underwriter's Sales Commissions and interest fees to
the principal underwriter in the form of daily compensation is subject to the
.75% limitation in the Plans, it will take the principal underwriter a number of
years to recoup the sales commissions paid to dealers and its other sales
expenses from the daily compensation payments received by it from Class B and
Class C pursuant to the Plans. Such daily compensation will be accrued daily (at
the rate of 1/365 of .75% of Class B and Class C's respective net assets) and
paid monthly, but will be automatically discontinued during any period in which
there are no outstanding Uncovered Distribution Charges under the respective
Plans. Notwithstanding the discontinuation of Uncovered Distribution Charges,
Class B and Class C may continue to pay the .25% trail or maintenance fee.
Uncovered Distribution Charges are calculated daily and, briefly, are equivalent
on any given day to all unpaid Underwriter's Sales Commissions (Underwriter's
Sales Commissions previously due less amounts received pursuant to the Plans),
the interest fee to which the principal underwriter is entitled under the Plans
less all contingent deferred sales charges previously paid to the principal
underwriter, and an amount equal to the aggregate of all Exchange-In Charges
less all Exchange-Out Charges (as described below) since the inception of the
respective Plan through and including the day next preceding the date of
calculation.
For purposes of calculating Uncovered Distribution Charges, the Exchange-Out
Charge with respect to any day shall equal the product of Uncovered Distribution
Charges of the Trust on the next preceding day multiplied by a fraction. The
numerator of such fraction shall be equal to the net asset value of shares of
the Trust exchanged for the shares of all other mutual funds: (i) for which the
Underwriter serves as principal underwriter; (ii) which has substantially the
same contingent deferred sales charge structure and distribution plan; and (iii)
which has been designated by the Trustees of the Trust as subject to this
provision for the purpose
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of calculating Exchange-Out Charges and Exchange-In Charges ("Comparable
Funds"). The denominator of such fraction shall equal the aggregate net asset
value of the Trust as of the day next preceding the day of calculation. For
purposes of calculating Uncovered Distribution Charges, the Exchange-In Charge
with respect to any day shall equal the aggregate of the product of Uncovered
Distribution Charges of each Comparable Fund, any shares of which are exchanged
for shares of the Trust on the next preceding day, multiplied by a fraction. The
numerator of such fraction shall be equal to the net asset value of the shares
exchanged. The denominator of such fraction shall equal the aggregate net asset
value of the Comparable Fund as of the day next preceding the day of
calculation.
The amount of daily compensation payable to the principal underwriter with
respect to each day will be accrued on such day as a liability of Class B and
Class C and will accordingly reduce Class B's and Class C's respective net
assets upon such accrual. However, in accordance with generally accepted
accounting principles, Class B and Class C do not accrue future daily
compensation as a liability of Class B or Class C or reduce Class B's or Class
C's current net assets in respect of daily compensation which may become payable
under the Plans in the future because the standards for accrual of a liability
under such accounting principles have not been satisfied. As of September 30,
1995, the net assets of the Trust's Class B Shares and Class C Shares were
$15,194,572 and $3,170,633, respectively. The amount of the Uncovered
Distribution Charges as of September 30, 1995 was $228,384 for Class B and
$170,728 for Class C Plans, respectively. Notwithstanding the existence of such
Uncovered Distribution Charges, the amount of daily compensation payable on each
day is limited to 1/365 of .75% of Class B's or Class C's respective net assets
on such day. The level of Class B's or Class C's respective net assets changes
each day and depends upon the amount of sales and redemptions of Class B or
Class C shares, the changes in the value of the Trust's portfolio investments,
the respective expenses of Class B or Class C accrued on such day, income on
portfolio investments accrued on such day, and dividends and distributions
declared by Class B or Class C.
The Plans provide that Class B and Class C will make no daily compensation
payments to the principal underwriter during any period in which there are no
outstanding Uncovered Distribution Charges of the principal underwriter. Such
daily compensation will be paid to the principal underwriter whenever there
exist Uncovered Distribution Charges under the Plans.
The Plans provide that they shall continue in effect from year to year provided
that a majority of the Trustees of AIT, including a majority of the Trustees who
are not "interested persons" of AIT (as defined in the Investment Company Act)
and who have no direct or indirect financial interest in the operation of the
Plan or any agreement related to the Plan (the "Rule 12b-1 Trustees"), vote
annually to continue the Plans. The Plans may be terminated at any time by vote
of a majority of the Rule 12b-1 Trustees or a majority of the outstanding shares
of Class B or Class C. The Plans provide that Class B and Class C, on
termination of the respective Plan, will continue to make daily compensation
payments to the Distributor (but only with respect to sales that occurred prior
to the termination of the respective Plan) until the earlier of (a) four years
after the date of such termination or (b) such time as there exist no Uncovered
Distribution Charges under the respective Plan. The amounts and purposes of
expenditures under the Plans must be reported to the 12b-1 Trustees quarterly.
Furthermore, any continuance of daily compensation payments after termination of
the respective Plan is subject to the continuance in effect by the Rule 12b-1
Trustees of the Underwriting Agreement, and such payments would cease upon
termination of the Underwriting Agreement (unless such payments were made in
accordance with another underwriting agreement entered into by the parties). The
Plans may be terminated by vote of a majority of the Rule 12b-1 Trustees, but in
deciding whether to purchase shares of Class B or Class C, investors should
consider that daily compensation payments could continue until such time as
there are no Uncovered Distribution Charges under the Plans.
Periods with a high level of sales of Class B shares accompanied by a low level
of redemptions of Class B shares resulting in the imposition of contingent
deferred sales charges will tend to increase the time during
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which there will exist Uncovered Distribution Charges of the principal
underwriter. Conversely, periods with a low level of sales of Class B shares
accompanied by a high level of early redemptions of Class B shares resulting in
the imposition of contingent deferred sales charges will tend to reduce the time
during which there will exist Uncovered Distribution Charges of the principal
underwriter. The same principle applies to sales of Class C shares.
Because of the .75% limitation on the amount of daily compensation paid to the
principal underwriter during any fiscal year, a high level of sales of Class B
shares during the first few years of the Trust's operations would cause a large
portion of the daily compensation attributable to a sale of Class B shares to be
accrued and paid by Class B to the principal underwriter in fiscal years
subsequent to the years in which such shares were sold. This spreading of
Underwriter's Sales Commissions payment under the plan over an extended period
would result in the incurrence and payment of increased interest fees under the
Plans. The same principle applies to sales of Class C shares.
The Plans authorize payments which may be equivalent, on an aggregate basis
during any fiscal year of the Trust, of up to 1% of Class B's and Class C's
respective average daily net assets for such year. The Trust believes that the
rate of these payments may be higher than the rate of payments made under
distribution plans adopted by many other investment companies pursuant to Rule
12b-1. It is anticipated that the Astra organization will benefit by reason of
the operation of the Plan through increases in the Trust's assets (thereby
increasing the advisory fees paid to AMC) resulting from sale of Class B and
Class C shares and through daily compensation and contingent deferred sales
charges paid to the principal underwriter. The Astra organization may be
considered to have realized a profit under the Plans if at any point in time the
aggregate amount of all daily compensation and contingent deferred sales charge
payments previously made to the principal underwriter have exceeded the total
expenses previously incurred by such organization in distributing shares of
Class B or Class C. It is anticipated that Class B and Class C will benefit by
having the continuous cash flow resulting from the sale of new shares which will
be used to meet shareholder redemptions and to take advantage of buying
opportunities without having to make unwarranted liquidations of portfolio
securities.
The Trust may, in its absolute discretion, suspend, discontinue or limit the
offering of the Class B or Class C shares at any time. In determining whether
any such action should be taken, the Trust's management intends to consider all
relevant factors, including, without limitation, the size of Class B and Class
C, the investment climate and market conditions, the volume of sales and
redemptions of Class B and Class C shares, and the amount of Uncovered
Distribution Charges of the principal underwriter. The Plans may continue in
effect and payments may be made under the respective Plan following any such
suspension, discontinuance or limitation of the offering of Class B or Class C
shares. However, Class B and Class C are not contractually obligated to continue
the respective Plan for any particular period of time. Suspension of the
offering of Class B or Class C shares would not, of course, affect a
shareholder's ability to redeem his shares.
See the Statement of Additional Information for a further description of the
respective Distribution Plans.
GENERAL INFORMATION
- ------------
The Trust is a non-diversified series of AIT which was organized as a
Massachusetts business trust on December 23, 1991. The Trust consists of an
unlimited number of shares of beneficial interest without par value divided into
three classes, designated Class A, Class B and Class C. Class A, Class B and
Class C shares represent an interest in the same assets of the Trust and are
identical in all respects except that Class B and Class C shares bear a greater
amount of expenses related to the distribution of such shares than do Class A
shares, and that each class has exclusive voting rights with respect to matters
relating to its own distribution arrangements.
All shares of the Trust have equal voting rights. In the event of dissolution or
liquidation, holders of the Trust's shares will receive pro rata, subject to the
rights of creditors, proceeds of the sale of the assets held. There are
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no preemptive or conversion rights applicable to any of the shares. 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.
Generally, there will not be annual meetings of shareholders. Shareholders may
remove Trustees from office by votes cast at a meeting of shareholders or by
written consent. If requested by shareholders of at least 10% of the outstanding
shares of AIT, AIT will call a meeting of shareholders for the purpose of voting
upon the question of removal of the Trustee or Trustees and will assist in
communications with other shareholders as required by Section 16(c) of the 1940
Act.
As used in this Prospectus, the term "majority vote" means the affirmative vote
of: (a) more than 50% of the outstanding shares; or (b) 67% or more of the
shares present at a meeting if more than 50% of the outstanding shares 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 the Trust. However, the Declaration of Trust
disclaims shareholder liability for acts or obligations of the Trust and
requires that notice of such disclaimer be given to all parties in each
agreement, obligation or instrument entered into or executed by the Trust or the
Trustees, and each party thereto must expressly waive all rights of action
directly against shareholders. The Declaration of Trust provides for
indemnification out of the Trust's property for all loss and expense of any
shareholder of the Trust held liable on account of being or having been a
shareholder. Thus, the risk of a shareholder incurring financial loss on account
of shareholder liability is limited to circumstances in which the Trust 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 the Trust
of the Trustees and officers of the Trust except with respect to any matter as
to which any such person did not act in good faith in the reasonable belief that
his action was in or not opposed to the best interests of the Trust. Such person
may not be indemnified against any liability to the Trust or the Trust
shareholders to which he would otherwise be subject by reason of willful
misfeasance, bad faith, gross negligence, or reckless disregard of the duties
involved in the conduct of his office. The Declaration of Trust also authorizes
the purchase of liability insurance on behalf of Trustees and officers.
OTHER INFORMATION
Investors in the Trust will be informed of its progress through periodic
reports. Financial statements certified by independent public accountants will
be submitted to shareholders at least annually. A copy of a current list of
investments comprising the Trust's portfolio as of the close of business on the
last day of each month may be obtained by written request to the Trust, together
with a stamped, self-addressed envelope.
This Prospectus is not an offering of the securities herein described in any
state in which such offering may not lawfully be made. No salesman, dealer or
other person is authorized to give any information or make any representation
other than those contained in this Prospectus or the Statement of Additional
Information.
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[ASTRA ASTRA ALL-AMERICAS GOVERNMENT INCOME TRUST
LOGO] NEW ACCOUNT APPLICATION
- -------------------------------------------------------------------------------
INITIAL INVESTMENT
PLEASE MAIL THE COMPLETED
APPLICATION TO:
DST SYSTEMS, INC.
P.O. BOX 419174
KANSAS CITY, MO 64141
For accounts established
via Federal Funds wire,
please mail the completed
application to:
DST Systems, Inc.
Attn: Order Dept.
P.O. Box 419174
Kansas City, MO 64141
Please check the box next to the Class in which you are investing. If no
selection is made, your investment may be delayed.
[ ] (210) Astra All-Americas Government Income Trust--Class A
[ ] (211) Astra All-Americas Government Income Trust--Class B*
[ ] (212) Astra All-Americas Government Income Trust--Class C*
[ ] Establish the account specified below with the enclosed check for $ ________
payable to Astra All-Americas Government Income Trust. Minimum initial
investment is $5,000 for Class A, Class B and Class C shares ($2,000
for IRAs).
[ ] Payment has been made by Dealer purchase on ______________, $_______________
(Date) (Amount)
________________________________
(Order Number)
[ ] Payment has been made by Fed. funds wire #_______________ on _______________
(Reference No.) (Date)
_______________, $______________
(Account No.) (Amount)
- --------------------------------------------------------------------------------
ACCOUNT
REGISTRATION
Joint Tenancy will be
assumed unless
otherwise noted.
Full Name/Corporate Name **Social Security or Taxpayer I.D. #
_____________________________________ _______________________________________
Co-owner (if applicable) [ ] Check this box if awaiting TIN
________________________________________________________________________________
Street Address
________________________________________________________________________________
City, State, Zip
________________________________________________________________________________
[ ] Check this box if you are not a United States citizen and indicate the
country in which you are a citizen _________________________________________
- --------------------------------------------------------------------------------
DISTRIBUTION
INSTRUCTIONS
If you wish your cash
distributions
electronically credited
to your bank account,
please attach a voided
check for this account.
If no box is checked, all distributions will be reinvested in additional shares
of the Trust.
INCOME DIVIDENDS: (elect one)
[ ] Reinvest dividends [ ] Pay dividends in cash
[ ] Use Dividend Transfer Option
CAPITAL GAINS DISTRIBUTION: (elect one)
[ ] Reinvest capital gains [ ] Pay capital gains in cash
If you wish to utilize the Dividend Transfer Option, please designate the Astra
Fund account you wish to have your dividends reinvested in:
_______________________________ ___________________________________________
Fund Name Existing Acct. No.
[ ] Check this box if you wish your cash distributions to be sent to a payee
or address other than that listed in the "ACCOUNT REGISTRATION" section
above and indicate the payee and address below:
______________________________________________________________________________
Payee
______________________________________________________________________________
Street Address
______________________________________________________________________________
Account Number if Applicable
______________________________________________________________________________
City, State and Zip Code
______________________________________________________________________________
- --------------------------------------------------------------------------------
*SHARES MAY BE SUBJECT TO A CONTINGENT DEFERRED SALES CHARGE.
**THE TRUST RESERVES THE RIGHT TO REJECT ANY APPLICATION THAT DOES NOT FURNISH A
CERTIFIED TIN, OR DOES NOT INDICATE THAT A TIN HAS BEEN APPLIED FOR BY
CHECKING THE "AWAITING TIN" BOX ON THE APPLICATION.
- -----
43
<PAGE>
- --------------------------------------------------------------------------------
SPECIAL SERVICES:
EXPEDITED
REDEMPTIONS
Please indicate a commer-
cial bank and ATTACH A
VOIDED CHECK for this
account. "FOR DEALER
ONLY" section must be
completed.
TELEPHONE EXCHANGE
PRIVILEGE--Telephone
exchanges may be made by
calling DST Systems,
Inc. at (800) 441-7267 before
the close of the NYSE on any
business day the NYSE is
open.
I (we) authorize the Trust's Transfer Agent to act upon telephone or wire
instructions from any person to have amounts redeemed from my (our) account in
the Trust and:
[ ] WIRED to the bank account designated below. ($5,000 minimum)
Name of Bank Branch
______________________________________________________________________________
Bank Address
______________________________________________________________________________
______________________________________________________________________________
Name of Account Account Number
______________________________________________________________________________
You will automatically be assigned this privilege unless you instruct the Trust
otherwise by checking the box below. Shares may only be exchanged between
accounts with identical registrations. Any certificates for shares must be
deposited prior to any exchange of such shares. Certain Restrictions apply to
this privilege. Please read the Prospectus carefully.
[ ] I do not wish to have Telephone Exchange Privilege.
- --------------------------------------------------------------------------------
OTHER SERVICES
READ THE PROSPECTUS FOR
FURTHER DETAILS ON RIGHTS
OF ACCUMULATION AND
LETTERS OF INTENT, OR
CALL (800) 441-7267
FIVE PERCENT OF THE DOLLAR
AMOUNT OF THE LETTER OF
INTENT WILL BE HELD IN
ESCROW UNTIL THE INTENDED
PURCHASE HAS BEEN
COMPLETED.
[ ] RIGHTS OF ACCUMULATION
I apply for reduced sales charges, subject to the Transfer Agent's
confirmation of the following eligible holdings:
Fund Shareholder Registration Account No.
---- ------------------------ -----------
___________________ _______________________________ __________________
___________________ _______________________________ __________________
[ ] LETTER OF INTENT (Class A only)
I intend to invest over a 13-month period beginning _____________________
[ ] $100,000 [ ] $250,000 [ ] $500,000
[ ] $750,000 [ ] $1,000,000 or over
Existing account information:
Fund Shareholder registration Account No.
---- ------------------------ -----------
___________________ _______________________________ __________________
___________________ _______________________________ __________________
- --------------------------------------------------------------------------------
- -----
44
<PAGE>
- --------------------------------------------------------------------------------
CERTIFICATION AND
SIGNATURE
Cross out (2) if it is not
correct.
All Co-owners must sign if
the account is held by
Co-owners.
The account owners or their representatives certify that they have the power and
authority to establish this account and select the privileges requested, subject
to the terms outlined in the Prospectus. Atlas Holdings Group, Inc. or any
subsidiary, affiliate or agent or their officers, directors or employees will
not be liable for any loss, expense or cost for acting upon any instructions or
inquiries believed genuine. The account owners certify that the current
Prospectus for the Trust selected has been received and read and that the
authorizations hereon shall continue until the Trust receives written notice of
a modification signed by all appropriate parties or a termination signed by any
party. This account is subject to the terms of the Fund's Prospectus, as amended
from time to time, and the terms herein set forth, and subject to acceptance by
the Trust and to the laws of California. All terms shall be binding upon the
representatives, successors, and assigns of the account owners.
Under penalties of perjury, the undersigned hereby certify (1) that the Social
Security or Taxpayer I.D. Number above is correct and (2) that the account owner
is not subject to backup withholding because (a) the undersigned is exempt from
backup withholding, or (b) the undersigned have not been notified of being
subject to backup withholding as a result of a failure to report all interest or
dividends, or (c) the I.R.S. has provided notification that the account owner is
no longer subject to backup withholding.
Corporations, trusts and partnerships hereby certify that each of the persons
listed below have been duly elected, and are now legally holding the offices set
forth opposite his/her name and have the authority to make this authorization.
Please print titles with signatures if signing on behalf of a business or trust
to establish this account.
All persons signing as representatives warrant as individuals that each person
signing is an authorized representative of the account owner, that the account
and privileges selected have been duly authorized, that all signatures hereon
are genuine and that the persons indicated hereon are authorized to sign. It is
understood that the Trust, Astra Fund Distributors Corp. and the Transfer Agent
may rely on these authorizations until revoked or amended by written notice
delivered by registered mail to the Trust.
Authorized Signature Title (if applicable)
______________________________________________________________________________
Authorized Signature Title
______________________________________________________________________________
Authorized Signature Title
______________________________________________________________________________
Date
________________________________
Telephone Number:
Home: (___)_______________
Other: (___)_______________
- --------------------------------------------------------------------------------
FOR DEALER ONLY:
(Please Print)
The undersigned ("Dealer") agrees to all applicable provisions in this
Application and the additional Dealer Agreement, guarantees the signature of and
representations by the Shareholder, agrees to notify Astra Fund Distributors
Corp. of any purchases made under a Letter of Intent or Right of Accumulation,
and represents that this Application is properly executed by a signer authorized
to guarantee signatures for the Dealer.
Dealer's name ______________________________________________
Main office address ______________________________________________
Authorized signature of dealer X_____________________________________________
Branch Address ______________________________________________
City _____________ State ________ Zip Code ________
Representative No. and last name ___________________ Telephone Number _________
- --------------------------------------------------------------------------------
- -----
45
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
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46
<PAGE>
[LOGO] ASTRA ALL-AMERICAS GOVERNMENT INCOME TRUST
ADDITIONAL ACCOUNT PRIVILEGES
______________________________________________________________________________
SYSTEMATIC
WITHDRAWAL
PLAN
PLEASE MAIL THE
COMPLETED FORM TO:
DST Systems, Inc.
P.O. Box 419174
Kansas City, MO 64141
If you wish your SWP
payments to be electronically
credited to your bank account,
please attach a voided check.
I (we) authorize the Trust's Transfer Agent, to liquidate shares in and withdraw
cash from my account 5 business days prior to the beginning ________________
(month) to provide [ ] Monthly or [ ] Quarterly Systematic Withdrawal Plan
payments ("SWP") in the amount of $_____________ ($100 minimum) to the
registered shareholder or to the following designated payee:
Full Name/Corporate Name
______________________________________________________________________________
Name of Payee or Payee Bank Bank Account Number (if any)
______________________________________________________________________________
Street Address
______________________________________________________________________________
City, State, Zip
______________________________________________________________________________
Authorized Signature(s)
- --------------------------------------------------------------------------------
PRE-AUTHORIZED
INVESTMENT PLAN
PLEASE ATTACH A VOIDED
CHECK FOR THIS ACCOUNT
Mail the completed
form to the above
address
I (we) authorize the Trust's Transfer Agent, to draw checks or issue debit
instructions on the bank account provided below, beginning on the [ ] 5th and/or
[ ] 20th of ___________________ (month) and on the same day each month
thereafter in the amount of $_________________ ($100 minimum) to purchase
additional shares of the Trust:
Full Name/Corporate Name Bank Account Number
______________________________________________________________________________
Name of Bank Branch
______________________________________________________________________________
Address
______________________________________________________________________________
City, State, Zip
______________________________________________________________________________
Authorized Signature(s)
- -------------------------------------------------------------------------------
DETACH HERE AND RETURN THIS TO YOUR BANK IF YOU ARE
ESTABLISHING A PRE-AUTHORIZED INVESTMENT PLAN
(AUTHORIZATION TO HONOR CHECKS OR DEBIT INSTRUCTIONS DRAWN BY DST SYSTEMS, INC.,
ON BEHALF OF ASTRA ALL-AMERICAS GOVERNMENT INCOME TRUST
FOR AUTOMATIC PURCHASE PLAN)
Please PRINT
Name of
Depositor
(as shown on
bank records)_______________________________
Bank
Account
Number_______________________________
Name
of Bank_______________________________
Address
of Bank_______________________________
City, State and
Zip Code
of Bank_______________________________
As a convenience, I (we) hereby request and authorize you to pay and charge to
my (our) account checks or debit instructions drawn on my (our) account by DST
Systems, Inc., the Trust's Agent and payable to the order of the Trust provided
there are sufficient collected funds in said account to pay the same upon
presentation. I (we) agree that your rights with respect to each such check or
debit instructions shall be the same as if it were a check drawn on you and
signed personally by me (us). This authority is to remain in effect until
revoked in writing and until you actually receive such notice I (we) agree that
you shall be fully protected in honoring any such checks or debit instructions.
I (we) further agree that if any such check or debit instructions be dishonored,
whether with or without cause and whether intentionally or inadvertently, you
shall be under no liability whatsoever.
Signature(s) of Depositor(s) (signed exactly as shown on bank records)
X_____________________________________________________________________________
X_____________________________________________________________________________
___________________________________________________________ 19________________
Date Signed
- -----
47
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
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48
<PAGE>
ASTRA ALL-AMERICAS GOVERNMENT INCOME TRUST
CONTINGENT DEFERRED SALES CHARGE WAIVER FORM
(TO BE COMPLETED ONLY IF THE UNDERSIGNED BELIEVES THAT HE IS ENTITLED
TO A WAIVER OF THE CONTINGENT DEFERRED SALES CHARGE.)
If you believe you are entitled to a waiver of the Contingent Deferred
Sales Charge in accordance with the terms set forth in the prospectus, you must
complete this Contingent Deferred Sales Charge Waiver Form and send it to the
Trust's Transfer Agent at its address shown herein. The waiver will only be
granted upon confirmation of your entitlement.
Check the item below which the undersigned is relying upon for a waiver of
the Contingent Deferred Sales Charge and send any required documents specified
therein:
[ ] Redemption is made upon the death or permanent disability of shareholder.
(Enclose either a certified death certificate or certification of permanent
disability (see below), whichever is appropriate).
[ ] Waiver of the fee is hereby requested for the following reason:
___________________________________________________________________________
___________________________________________________________________________
___________________________________________________________________________
Signature _________________________________________________________________
(Exactly as on Account Registration)
DATE ______________________________________________________________________
Name(s) ___________________________________________________________________
___________________________________________________________________________
(Please Print)
MAIL THE COMPLETED WAIVER FORM TO:
DST SYSTEMS, INC.
P.O. BOX 419174
KANSAS CITY, MO 64141
DEFINITION OF DISABILITY
An individual will be considered disabled if he meets the definition
thereof in Section 72(m)(7) of the Internal Revenue Code, which in pertinent
part defines a person as disabled if such person is unable to engage in any
substantial gainful activity by reason of any medically determinable physical or
mental impairment which can be expected to result in death or to be of long
continued and indefinite duration.
CERTIFICATION OF DISABILITY
I ______________________ certify that _________________________________________
Physician Name Investor/Patient
is under the regular care of ____________________________________ and is unable
Licensed Physician
to perform the material duties of his or her regular occupation or employment;
or is unable to engage in any substantial gainful activity by reason of a
physical or mental impairment which may result in death or be of continued and
indefinite duration. Date of Determination of Disability ________________.
Physician Signature _______________________ Date ______________________________
- -----
49
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
- ------
50
<PAGE>
IMPORTANT INFORMATION REGARDING COMPLETION OF THE SUBSTITUTE FORM W-9
- ---------------------------
The Fund, and other payers, must, according to IRS regulations, withhold
20% of reportable dividends (whether paid or accrued) and redemption payments if
a shareholder fails to provide a taxpayer identification number, and a
certification that he is not subject to backup withholding in the Substitute
Form W-9 included as a part of this Letter of Transmittal.
(Section references are to the Internal Revenue Code, as amended).
BACKUP WITHHOLDING
You are subject to backup withholding if:
(1) You fail to furnish your taxpayer identification number to the Fund in the
manner required, OR
(2) The Internal Revenue Service notifies the Fund that you furnished an
incorrect taxpayer identification number, OR
(3) You are notified that you are subject to backup withholding under section
3406(a)(1)(C), OR
(4) For an interest or dividend account opened after December 31, 1983, you fail
to certify to the payer that you are not subject to backup withholding under (3)
above, or fail to certify your taxpayer identification number.
For payments other than interest or dividends, you are subject to backup
withholding only if (1) or (2) above applies.
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain FORM SS-5, application for a Social Security Number Card, or FORM
SS-4, application for Employer Identification Number, at the local office of the
Social Security Administration or the Internal Revenue Service and apply for a
number. Write "applied for" in the space provided for a taxpayer identification
number on the application. Circle paragraph 3(b) of the Shareholder
Certification section.
WHAT NUMBER TO GIVE
Give the social security number or employer identification number of the record
owner of the account. If the account belongs to you as an individual, give your
social security number. If the account is in more than one name or is not in the
name of the actual owner, see the chart below for guidelines on which number to
report in completing the account registration section:
1 List first and circle the name of the person whose number you furnish.
2 Circle the minor's name and furnish the minor's social security number.
3 Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
4 Show the name of the owner.
5 List first and circle the name of the legal trust, estate, or pension trust.
NOTE: If no name is circled when there is more than one name, the number will be
considered to be that of the first name listed.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you fail
to furnish your taxpayer identification number to a payer, you are subject to a
penalty of $50 for each such failure unless your failure is due to reasonable
cause and not to willful neglect.
(2) FAILURE TO REPORT CERTAIN DIVIDEND AND INTEREST PAYMENTS.--If you fail to
include any portion of an includible payment for interest, dividends, or
patronage dividends in gross income, such failure will be treated as being due
to negligence and will be subject to a penalty of 5% on any portion of an
underpayment attributable to that failure unless there is clear and convincing
evidence to the contrary.
(3) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(4) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.--Falsifying certifications or
affirmations may subject you to criminal penalties including fines and/or
imprisonment.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Certain payees are specifically exempted from backup withholding on ALL
payments. Write "exempt payee" after paragraph (3) of the Shareholder
Certification section if your account falls into one of the following
categories. We will still need your taxpayer identification number.
o A corporation
o A financial institution.
o An organization exempt from tax under section 501(a), or an individual
retirement plan.
o A registered dealer in securities or commodities registered in the U.S. or a
possession of the U.S.
o A real estate investment trust.
o A common trust fund operated by a bank under section 584(a).
o An exempt charitable remainder trust, or a non-exempt trust described in
section 4947(a)(1).
o An entity registered at all times under the Investment Company Act of 1940.
Payments of DIVIDENDS not generally subject to backup withholding include the
following:
o Payments to nonresident aliens subject to withholding under section 1441.
o Payments to partnerships NOT engaged in a trade or business in the U.S. and
which have at least one nonresident partner.
PRIVACY ACT NOTICE.--Section 6109 requires most recipients of dividend,
interest, or other payments to give taxpayer identification numbers to payers
who must report the payments to the IRS. IRS uses the numbers for identification
purposes. Payers must be given the numbers whether or not recipients are
required to file tax returns. Beginning January 1, 1984, payers must generally
withhold 31% of taxable interest, dividend, and certain other payments to a
payee who does not furnish a taxpayer identification number to a payer. Certain
penalties may also apply.
================================================================================
<TABLE>
<CAPTION>
<S> <C>
GUIDELINES FOR DETERMINING GIVE THE
PROPER NUMBER SOCIAL SECURITY
FOR THIS TYPE OF ACCOUNT: NUMBER OF--
1. An individual's account The individual
2. Two or more individuals (joint The actual owner of the account or,
account) if combined funds any one of
the individuals(superior1)
3. Husband and wife (joint account) The actual owner of the account or,
if joint funds, either person(superior1)
4. Custodian account to a minor The minor(superior2)
(Uniform Gift to Minors Act)
5. Adult and minor The adult or if the minor is the only
contributor, the minor(superior1)
6. Account in the name of guardian or The ward, minor, or incompetent
committee for a designated ward, person(superior3)
minor or incompetent person
7. a. The usual revocable savings trust The grantor-trustee(superior5)
account (grantor is also trustee)
b. So-called trust account that is The actual owner(superior1)
not a legal or valid trust under
state law
8. Sole proprietorship account The owner(superior1)
GIVE THE EMPLOYER
IDENTIFICATION
FOR THIS TYPE OF ACCOUNT: NUMBER OF--
9. A valid trust, estate or pension Legal entity (Do not furnish the
trust identifying number of the personal
representative or trustee unless the
legal entity itself is not designated in
the account title.)(superior5)
10. Corporate account The corporation
11. Religious, charitable, or The organization
educational organization account
12. Partnership account held in the The partnership
name of the business
13. Association, club or other The organization
tax-exempt organization
14. A broker or registered nominee The broker or nominee
15. Account with the Department of The public entity
Agriculture in the name of a
public entity (such as a State or
local government, school district,
or prison) that receives
agricultural program payments
</TABLE>
- ------
51
<PAGE>
ASTRA LOGO
=================================== ===================================
750 B Street ASTRA
Suite 2350 ALL-AMERICAS
San Diego, California 92101 GOVERNMENT
INCOME TRUST
- ----------------------------------- -----------------------------------
ASTRA ALL AMERICAS GOVERNMENT PROSPECTUS
INCOME TRUST JULY 22, 1996
INVESTMENT MANAGER
Astra Management Corporation
750 B Street
Suite 2350
San Diego, California 92101
(619) 238-7100
PRINCIPAL UNDERWRITER
Astra Fund Distributors Corp.
750 B Street
Suite 2350
San Diego, California 92101
(619) 238-7100
SHAREHOLDER SERVICING AGENT
DST Systems, Inc.
P.O. Box 419174
Kansas City, Missouri 64141 [ART]
(800) 441-7267
TRANSFER AGENT
Investor Fiduciary Trust Company
c/o DST Systems, Inc.
P.O. Box 419174
Kansas City, Missouri 64141
CUSTODIAN
PNC Bank, National Association
Airport Business Center
200 Stevens Drive
Lester, Pennsylvania 19113
LEGAL COUNSEL
Jorden Burt Berenson & Johnson LLP
1025 Thomas Jefferson Street, N.W.
Suite 400 East
Washington, DC 20007
AUDITORS
Tait, Weller & Baker
Two Penn Center Plaza
Philadelphia, Pennsylvania 19102
AAG 796 2 AST607004 (Copyright) 1996 Atlas Holdings Group, Inc.
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
JULY 22, 1996
ASTRA ALL-AMERICAS GOVERNMENT INCOME TRUST
750 B Street
Suite 2350
San Diego, California 92101
(800) 219-1080
Astra All-Americas Government Income Trust (the "Trust") is a
non-diversified series of Astra Institutional Trust ("AIT"), an open-end
management investment company (mutual fund). The Trust seeks the highest level
of current income, consistent with what the Trust's portfolio manager, Astra
Management Corporation ("AMC" or the "Manager"), considers to be reasonable
investment risk, available through investment in a portfolio of (i) debt
securities issued or guaranteed by the governments of the United States and
other North and South American countries ("Western Hemisphere Government
Securities"), and (ii) investment grade debt instruments (including interests in
foreign bank loans) issued by corporations in those countries. These securities
and debt instruments are denominated in the U.S. Dollar and the currencies of
other North and South American countries.
Not less than 65% of the Trust's portfolio will consist of Western
Hemisphere Government Securities. The Trust will invest not more than 25% of the
value of its assets in the Government Securities of Canada or any one Latin
American country. The Trust may utilize certain currency-related investment
techniques.
The prospectus for the Trust, dated July 22, 1996 (the "Prospectus"), which
provides the basic information you should know before investing in the Trust,
may be obtained without charge from the Trust at the address listed above. This
Statement of Additional Information is not a prospectus. It contains information
in addition to and more detailed than set forth in the Prospectus. It is
intended to provide you additional information regarding the activities and
operations of the Trust and should be read in conjunction with the Prospectus.
1
<PAGE>
TABLE OF CONTENTS
GENERAL INFORMATION AND HISTORY............................................ 3
INVESTMENT OBJECTIVE AND POLICIES.......................................... 3
INVESTMENT RESTRICTIONS.................................................... 10
TRUSTEES AND OFFICERS...................................................... 11
MANAGEMENT OF THE TRUST.................................................... 12
EXECUTION OF PORTFOLIO TRANSACTIONS........................................ 14
ADDITIONAL REDEMPTION INFORMATION.......................................... 15
PRICE OF THE SHARES IS DETERMINED DAILY.................................... 17
SHAREHOLDER SERVICES AND PRIVILEGES........................................ 18
FEDERAL TAX TREATMENT OF DIVIDENDS AND DISTRIBUTIONS....................... 18
INVESTMENT RETURN INFORMATION.............................................. 23
GENERAL INFORMATION........................................................ 25
FINANCIAL STATEMENTS....................................................... 28
2
<PAGE>
GENERAL INFORMATION AND HISTORY
Astra Institutional Trust ("AIT"), an open-end management investment
company, was originally formed as Pilgrim State Tax-Free Trust. When originally
formed, Pilgrim State Tax-Free Trust, a Massachusetts business trust, had three
series: Pilgrim California Tax-Free Fund, Pilgrim Florida Tax-Free Fund and
Pilgrim New York Tax-Free Fund. The Declaration of Trust, dated December 16,
1991, was filed with the Commonwealth of Massachusetts on December 23, 1991.
Pursuant to a vote of Trustees on July 14, 1993, Pilgrim State Tax-Free Trust
changed its name to Pilgrim Institutional Trust ("PIT"). The Amendment to the
Declaration of Trust was filed with the Commonwealth of Massachusetts on August
11, 1993. The name change had no ramifications with respect to the investment
objective and policies, investment restrictions, or general operations of
Pilgrim State Tax-Free Trust. On August 9, 1993, the Trustees of PIT approved
the creation of one additional series of PIT: Pilgrim All-Americas Government
Income Trust.
On December 7, 1994, Pilgrim Group Inc. ("PGI"), Pilgrim Management
Corporation ("PMC"), Palomba Weingarten, Chairman and Chief Executive Officer of
PMC, and certain of PGI's affiliated companies entered into an Acquisition
Agreement with Express America Holdings Corporation ("Express America") pursuant
to which the Companies sold to Express America certain identified assets of the
Companies. Pursuant to the terms of the Acquisition Agreement, Express America
did not acquire the assets of Pilgrim All-Americas Government Income Trust. On
March 17, 1995, the Trustees approved an amendment to the Declaration of Trust
changing the name of PIT to Astra Institutional Trust ("AIT"). The Amendment to
the Declaration of Trust was filed with the commonwealth of Massachusetts on
April 10, 1995. Effective as of April 10, 1995, Pilgrim All-Americas Government
Income Trust changed its name to Astra All-Americas Government Income Trust, a
series of AIT. The name change had no ramifications with respect to the
investment objectives and policies, investment restrictions, or general
operations of Astra All-Americas Government Income Trust.
INVESTMENT OBJECTIVE AND POLICIES
The following discussion pertaining to investments by the Trust supplements
the discussion of the investment objective of the Trust set forth in the
Prospectus under the heading "How The Trust Works."
The Trust may invest its assets in Western Hemisphere Government Securities
and investment grade corporate debt securities of issuers in North and South
American countries. Such corporate debt securities in which the Trust may invest
will be considered investment grade or higher (i.e., securities rated at least
BBB- by Standard & Poor's Corporation ("S&P"), at least Baa3 by Moody's
Investors Service, Inc. ("Moody's"), or similar grade ratings by other major
rating services or, if not so rated, of equivalent investment quality as
determined by the Trust's Manager. Securities rated BBB- by S&P or Baa3 by
Moody's are considered to be investment grade, however, securities rated Baa by
Moody's are considered to have speculative characteristics. Sustained periods of
deteriorating economic conditions or rising interest rates are more likely to
lead to a weakening in the issuer's capacity to pay interest and repay principal
than in the case of higher-rated securities. A description of ratings by S&P and
Moody's is set forth at Appendix A.
The Trust's Manager will actively manage the Trust's assets in relation to
market conditions and general economic conditions in the United States and
elsewhere in North and South America, and will adjust the Trust's investments in
Western Hemisphere Government Securities based on its perception of which
Western Hemisphere Government Securities will best enable the Trust to achieve
its investment objective of seeking the highest level of current income
consistent with what the Trust's Manager considers to be reasonable investment
risk. In this regard, subject to the limitations described above, the percentage
of assets invested in a particular country or denominated in a particular
currency will vary in accordance with the assessment of the Trust's Manager of
the relative yield and appreciation potential of such securities and the
relationship of the country's currency to the U.S. Dollar.
3
<PAGE>
U.S. GOVERNMENT SECURITIES.
U.S. Government Securities include obligations backed by the full faith and
credit of the United States Treasury, which include, Treasury bills, notes, and
bonds and mortgage participation certificates guaranteed by GNMA. Other U.S.
Government securities are instruments not backed by the full faith and credit of
the U.S. Government, but instead are backed only by the credit of the agency,
instrumentality, Government Sponsored Enterprise ("GSE"), or by the
discretionary authority of the U.S. Government to purchase the issuing entity's
obligations. A portion of the Trust's assets may be invested in collateralized
mortgage obligations or "CMOs."
Collateralized Mortgage Obligations--General. The Trust may invest in CMOs
that are collateralized by mortgage-backed securities issued or guaranteed by
agencies, GSEs or instrumentalities of the U.S. Government (e.g., GNMA
Certificates, FHLMC Participation Certificates, or FNMA Certificates). CMOs
issued by agencies, GSEs or instrumentalities of the U.S. Government are
considered U.S. Government Securities in determining compliance with the Trust's
percentage of U.S. Government Securities requirements. CMOs backed by FNMA and
FHLMC are not supported by the full faith and credit of the U.S. Government;
however, their close relationship with the U.S. Government makes them, in the
opinion of the Manager, high quality securities with minimal credit risks.
CMOs are debt obligations issued by a special purpose entity or trust
collateralized either by mortgage-backed loans or mortgage pass-through
securities (such collateral collectively being called "Mortgage Assets").
Mortgage pass-through securities are securities which provide monthly payments
to the certificate holders, consisting of both interest and principal payments,
which, in effect, "pass-through" the monthly interest and principal payments
made on underlying mortgage loans. Payments of principal and interest on the
Mortgage Assets and any reinvestment income thereon provide the funds to pay
debt service on the CMOs.
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. The market value of
the Trust's debt securities (including mortgage securities) will change in
response to interest rate changes and other factors.
Mortgage securities present investment characteristics that differ from
traditional debt securities. The major differences between traditional debt
securities and mortgage-backed pass-through securities include the fact that
interest payments and principal repayments on such mortgage-backed pass-through
securities are made more frequently (usually monthly), and principal may be
prepaid at any time because the underlying mortgage loans or other assets
generally may be prepaid at any time. These differences can result in
significantly greater price and yield volatility than is the case with
traditional debt securities. As a result, if the mortgage-backed securities are
purchased at a premium, a prepayment rate that is faster than expected will
reduce both the market value and the yield to maturity from that which was
anticipated, while a prepayment rate that is slower than expected will have the
opposite effect of increasing yield to maturity and market value. Conversely, if
mortgage-backed securities are purchased at a discount, faster than expected
prepayments will increase, while slower than expected prepayments will reduce,
yield to maturity and market value. In addition, amounts available for
reinvestment are likely to be greater during periods of declining interest rates
due to increased prepayments and, as a result, are likely to be reinvested at
lower interest rates than during periods of rising interest rates. As mentioned
above, CMOs of different classes are generally retired in sequence as the
underlying mortgage loans in the mortgage pool are repaid. In the event of
sufficient early prepayments on such mortgages, the class or series of CMO first
to mature generally will be retired prior to its maturity. Thus, the early
retirement of
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a particular class or series of CMO held by the Trust would have the same effect
as the prepayment of mortgages underlying a mortgage-backed pass-through
security.
U.S. Government Guaranteed Mortgage-Related Securities--General. Mortgages
backing the U.S. Government guaranteed mortgage-related securities purchased by
the Trust include, among others, conventional 30-year fixed rate mortgages,
graduated payment mortgages and 15-year mortgages. All of these mortgages can be
used to create pass-through securities. A pass-through security is formed when
mortgages are pooled together and undivided interests in the pool or pools are
sold. The cash flow from the mortgages is passed through to the holders of the
securities in the form of periodic payments of interest, principal and
prepayments (net of a service fee). Prepayments occur when the holder of an
individual mortgage prepays the remaining principal before the mortgage's
scheduled maturity date. As a result of the pass-through of prepayments of
principal on the underlying securities, mortgage-backed securities are often
subject to more rapid prepayment of principal than their stated maturity would
indicate. Because the prepayment characteristics of the underlying mortgages
vary, it is not possible to predict accurately the realized yield or average
life of a particular issue of pass-through certificates. Prepayment rates are
important because of their effect on the yield and price of the securities.
Accelerated prepayments adversely impact yields for pass-throughs purchased at a
premium (i.e., a price in excess of principal amount) and may involve additional
risk of loss of principal because the premium may not have been fully amortized
at the time the obligation is repaid. The opposite is true for pass-throughs
purchased at a discount. The Trust may purchase mortgage-related securities at a
premium or at a discount. Principal and interest payments on the
mortgage-related securities are government guaranteed to the extent described
below. Such guarantees do not extend to the value or yield of the
mortgage-related securities themselves or of the Trust's shares.
GNMA Certificates. Certificates of the Government National Mortgage
Association ("GNMA Certificates") are mortgage-backed securities, which evidence
an undivided interest in a pool or pools of mortgages issued by lenders such as
mortgage bankers, commercial banks and savings and loan associations. Each
mortgage loan included in the pool is either insured by the Federal Housing
Administration ("FHA") or guaranteed by the Veterans Administration ("VA"). GNMA
Certificates that the Trust purchases are the "modified pass-through" type,
which entitle the holder to receive timely payment of all interest and principal
payments due on the mortgage pool, net of fees paid to the "issuer" and GNMA,
regardless of whether or not the mortgagor actually makes the payment.
The National Housing Act authorizes GNMA to guarantee the timely payment of
principal and interest on securities backed by a pool of mortgages insured by
the FHA or guaranteed by the VA. The GNMA guarantee is backed by the full faith
and credit of the United States. The GNMA is also empowered to borrow without
limitation from the U.S. Treasury if necessary to make any payments required
under its guarantee.
The average life of a GNMA Certificate is likely to be substantially
shorter than the original maturity of the mortgages underlying the securities.
Prepayments of principal by mortgagors and mortgage foreclosures will usually
result in the return of the greater part of principal investment long before the
maturity of the mortgages in the pool. Foreclosures impose no risk to principal
investment because of the GNMA guarantee, except to the extent that the Trust
has purchased the certificates above par in the secondary market.
FHLMC Securities. The Federal Home Loan Mortgage Corporation ("FHLMC") was
created in 1970 through enactment of Title III of the Emergency Home Finance Act
of 1970. Its purpose is to promote development of a nationwide secondary market
in conventional residential mortgages.
FHLMC issues two types of mortgage pass-through securities ("FHLMC
Certificates"), mortgage participation certificates ("PCs") and guaranteed
mortgage certificates ("GMCs"). PCs resemble GNMA Certificates in that each PC
represents a pro rata share of all interest and principal payments made and owed
on the underlying pool. FHLMC guarantees timely monthly payment of interest on
PCs and the ultimate payment of principal.
GMCs also represent a pro rata interest in a pool of mortgages. However,
these instruments pay interest semi-annually and return principal once a year in
guaranteed minimum payments. The expected
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average life of these securities is approximately ten years. The FHLMC guarantee
is not backed by the full faith and credit of the United States.
FNMA Securities. The Federal National Mortgage Association ("FNMA") was
established in 1938 to create a secondary market in mortgages insured by the
FHA.
FNMA issues guaranteed mortgage pass-through certificates ("FNMA
Certificates"). FNMA Certificates resemble GNMA Certificates in that each FNMA
Certificate represents a pro rata share of all interest and principal payments
made and owed on the underlying pool. FNMA guarantees timely payments of
interest and principal on FNMA Certificates. The FNMA guarantee is not backed by
the full faith and credit of the United States.
Federal Farm Credit System Notes and Bonds. These notes and bonds are
issued by a cooperatively owned nationwide system of banks and associations
supervised by the Farm Credit Administration, an independent agency of the U.S.
Government. These notes and bonds are not guaranteed by the U.S. Government.
Maritime Administration Bonds. These bonds are issued and provided by the
Department of Transportation of the U.S. Government and are guaranteed by the
U.S. Government.
FHA Debentures. Such debentures are issued by the FHA and are guaranteed by
the U.S. Government.
Federal Home Loan Bank Notes and Bonds. These notes and bonds are issued by
the Federal Home Loan Bank System and are not guaranteed by the U.S. Government.
Student Loan Marketing Association ("Sallie Mae") Notes and Bonds. Sallie
Mae notes and bonds are issued by the Student Loan Marketing Association.
BRADY BONDS.
"Brady Bonds" are debt securities issued in exchange of outstanding
commercial bank loans to Latin American public and private entities in
connection with sovereign debt restructurings under a plan introduced by former
U.S. Secretary of the Treasury, Nicholas F. Brady known as the Brady Plan.
Agreements implemented under the Brady Plan are designed to reduce the debt
service burden of heavily indebted nations, in exchange for various forms of
credit enhancement coupled with economic policy reforms designed to improve the
debtor country's ability to service its external obligations. The Brady Plan
only sets forth the guiding principles for debt reduction and economic reform,
emphasizing that solutions must be negotiated on a case by case basis between
debtor nations and their creditors. As a result, the financial packages offered
by each country differ.
Debt reduction is generally carried out through the exchange of outstanding
commercial bank debt for various types of bonds, which may include (i) bonds
issued at 100% of face value of such debt, (ii) bonds issued at a discount to
face value of such debt carrying a floating market rate of interest ("discount
bonds"), (iii) bonds bearing a below market rate of interest which increases
over time, and (iv) bonds issued in exchange for the advancement of new money by
existing lenders. Credit enhancement may take the form of collateralizing
principal with U.S. Treasury zero coupon bonds with a maturity equal to the
final maturity of such bonds. Collateral purchases are financed by the
International Monetary Fund ("IMF"), the World Bank and the debtor nation's
reserves. In addition, the first two or three interest payments on certain types
of Brady Bonds may be collateralized by cash or securities agreed upon by
creditors.
As a pre-condition to issuing Brady Bonds, debtor nations are generally
required to agree to the implementation of certain domestic monetary and fiscal
reform with the World Bank or the IMF. Such reforms have included the
liberalization of trade and foreign investments, the privatization of
state-owned enterprises and the setting of targets for public spending and
borrowing. These policies and programs seek to improve the debtor's ability to
service its external obligations and promote its growth and development.
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Brady Bonds have been issued by Argentina, Brazil, Costa Rica, Ecuador,
Mexico, Uruguay and Venezuela and may be issued by other Latin American
countries. In excess of $100 billion in aggregate principal amount of Brady
Bonds have been issued to date, the largest proportion having been issued by
Argentina, Mexico and Venezuela. Several other countries, notably Brazil, Panama
and Dominican Republic, are currently negotiating or have reached agreement with
their creditors in sovereign debt restructuring that will result in the issuance
of Brady Bonds. Brady Bonds are issued in various currencies (primarily the U.S.
dollar) and are actively traded in the OTC secondary market for debt of Latin
American issuers. Because of the large size of most Brady Bond issuers, Brady
Bonds are generally highly liquid instruments.
The Trust may invest in either collateralized or uncollateralized Brady
Bonds. U.S. dollar-denominated collateralized Brady Bonds, which generally have
maturities of up to 30 years and may be fixed rate "par" bonds or floating rate
"discount" bonds, are collateralized in full as to principal by U.S. Treasury
zero coupon bonds having the same maturity as the Brady Bonds. Interest payments
on such bonds generally are collateralized by cash or securities in an amount
that, in the case of fixed rate bonds, is equal to at least one year of rolling
interest payments or, in the case of floating rate bonds, initially is equal to
at least one year's rolling interest payments based on the applicable interest
rate at that time and is adjusted at regular intervals thereafter. Brady Bonds
are often viewed as having three or four valuation components: the
collateralized repayment of principal at final maturity; the collateralized
interest payments; the uncollateralized interest payments; and any
uncollateralized repayment of principal at maturity (these uncollateralized
amounts constituting the "residual risk"). In light of the residual risk of
Brady Bonds and the history of defaults by Latin American public and private
entities with respect to their commercial bank loans, investments in Brady Bonds
may be viewed as speculative. In the case of "discount bonds," the collateral
for interest is adjusted at regular intervals to allow for changes in interest
rates. Brady Bonds issued by Mexico and Venezuela are rated Ba3 and Ba1,
respectively, by Moody's. However, investors should recognize that Brady Bonds
have been issued only recently, and accordingly they do not have a long payment
history.
Most Mexican Brady Bonds issued to date have principal repayments at final
maturity fully collateralized by U. S. Treasury zero coupon bonds (or comparable
collateral in other currencies) and interest coupon payments collateralized on
an 18-month rolling-forward basis by funds held in escrow by an agent for the
bondholders. A significant portion of the Venezuelan Brady Bonds issued to date
have principal repayments at final maturity collateralized by U. S. Treasury
zero coupon bonds (or comparable collateral in other currencies) and/or interest
coupon payments collateralized on a 14-month rolling-forward basis by securities
held by the Federal Reserve Bank of New York as collateral agent.
The Trust is not limited with respect to the percentage of its Brady Bond
investments that may be issued by any specific country, except to the extent
necessary to satisfy the asset diversification requirement described under
"Taxes -- United States Federal Income Taxation of the Trust."
ILLIQUID SECURITIES.
The Trust has adopted the following investment policy which may be changed
by the vote of the Board of Trustees:
The Trust will not invest in illiquid securities if immediately after such
investment more than 15% of the Trust's net assets (taken at market value) would
be invested in such securities. Although this policy may be changed by the Board
of Trustees, in no event will the Trust invest a greater percentage of its
assets in illiquid securities than is permitted by applicable SEC
interpretations (currently 15%). For this purpose, illiquid securities include,
among others, (a) securities that are illiquid by virtue of the absence of a
readily available market or legal or contractual restriction on resale, (b)
options purchased by the Trust over-the-counter and the cover for options
written by the portfolio over-the-counter and (c) repurchase agreements not
terminable within seven days.
Historically, illiquid securities have included securities subject to
contractual or legal restrictions on resale because they have not been
registered under the Securities Act of 1933, as amended (the "Securities Act"),
securities which are otherwise not readily marketable and repurchase agreements
having a maturity of longer than seven days. Securities which have not been
registered under the
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Securities Act are referred to as private placements or restricted securities
and are purchased directly from the issuer or in the secondary market. Mutual
funds do not typically hold a significant amount of these restricted or other
illiquid securities because of the potential for delays on resale and
uncertainty in valuation. Limitations on resale may have an adverse effect on
the marketability of portfolio securities and a mutual fund might be unable to
dispose of restricted or other illiquid securities promptly or at reasonable
prices and might thereby experience difficulty satisfying redemptions within
seven days. A mutual fund might also have to register such restricted securities
in order to dispose of them resulting in additional expense and delay. Adverse
market conditions could impede such a public offering of securities.
In recent years, however, a large institutional market has developed for
certain securities that are not registered under the Securities Act including
repurchase agreements, commercial paper, foreign securities, municipal
securities and corporate bonds and notes. Institutional investors depend on an
efficient institutional market in which the unregistered security can be readily
resold or on an issuer's ability to honor a demand for repayment. The fact that
there are contractual or legal restrictions on resale to the general public or
to certain institutions may not be indicative of the liquidity of such
investments.
The Trust may invest up to 10% of its total assets in restricted securities
issued under Section 4(2) of the Securities Act, which exempts from registration
"transactions by an issuer not involving any public offering." Section 4(2)
instruments are restricted in the sense that they can only be resold through the
issuing dealer and only to institutional investors, i.e., they cannot be resold
to the general public without registration.
Rule 144A under the Securities Act allows a broader institutional trading
market for securities otherwise subject to restriction on resale to the general
public. Rule 144A establishes a "safe harbor" from the registration requirements
of the Securities Act for resales of certain securities to qualified
institutional buyers. An insufficient number of qualified institutional buyers
interested in purchasing certain restricted securities held by the Trust,
however, could affect adversely the marketability of such portfolio securities
and the Trust might be unable to dispose of such securities promptly or at
reasonable prices. Rule 144A has already produced enhanced liquidity for many
restricted securities, and market liquidity for such securities may continue to
expand as a result of this regulation and the consequent inception of the PORTAL
System sponsored by the National Association of Securities Dealers, Inc., an
automated system for the trading, clearance and settlement of unregistered
securities of domestic and foreign issuers.
The Manager, acting under the supervision of the Board of Trustees, will
monitor the liquidity of restricted securities in the Trust that are eligible
for resale pursuant to Rule 144A. In reaching liquidity decisions, the Manager
will consider, among other things, the following factors: (1) the frequency of
the trades and quotes for the security; (2) the number of dealers making
quotations to purchase or sell the security; (3) the number of other potential
purchasers of the security; (4) the number of dealers undertaking to make a
market in the security; (5) the nature of the security and the nature of the
marketplace for the security (e.g., the time needed to dispose of the security,
the method of soliciting offers and the mechanics of the transfer); and (6) any
applicable SEC interpretation or position with respect to such type of
securities.
OTHER INVESTMENT POLICIES.
As described in the Prospectus, the Trust may utilize currency related
investment techniques to protect against, and potentially benefit from,
fluctuations in currency exchange rates. The Trust intends to utilize currency
management instruments, including privately negotiated currency-related
agreements, as they may become available and are economically advantageous.
Additional information on the use, risks and costs of futures contracts, options
on futures contracts, options on foreign currencies and the like is set forth at
Appendix B.
Repurchase Agreements. The Trust may enter into "repurchase agreements"
pertaining to U.S. Government Securities with creditworthy institutions as
determined by the Manager. There is no percentage restriction on the Trust's
ability to enter into repurchase agreements. A repurchase agreement arises when
a buyer purchases a security and simultaneously agrees to resell it to the
vendor at an agreed-upon future date, normally one day or a few days later. The
resale price is greater than the
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purchase price, reflecting an agreed-upon interest rate which is effective for
the period of time the buyer's money is invested in the security and which is
related to the current market rate rather than the coupon rate on the purchased
security. Such agreements permit the Trust to keep all of its assets at work
while retaining "overnight" flexibility in pursuit of longer-term investments.
The Trust requires continual maintenance by its Custodian for its account in the
Federal Reserve/Treasury Book Entry System of collateral in an amount equal to,
or in excess of, the resale price and may require physical delivery of such
collateral in appropriate circumstances. In the event of a vendor's bankruptcy,
the Trust might be delayed in, or prevented from, selling the collateral for the
Trust's benefit. The Trustees of AIT have established procedures, which are
periodically reviewed by the Trustees, pursuant to which the Manager monitors
the creditworthiness of the institutions with which the Trust enters into
securities repurchase transactions.
Lending of Trust Securities. As noted in the Prospectus, the Trust may lend
its portfolio securities in order to generate additional income. The Trust may
pay reasonable administration and custodial fees in connection with a loan and
may pay a negotiated portion of the income earned on the cash to the borrower or
placing broker. Loans are subject to termination at the option of the Trust or
the borrower at any time, including when termination is necessary to enable the
Trust to be the record owner for each dividend paid by the issuer thereof. The
Trust 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.
RISK FACTORS
Political and Economic Risks. Investing in securities of non-U.S. companies
may entail additional risks due to the potential political and economic
instability of certain countries and the risks of expropriation,
nationalization, confiscation or the imposition of restrictions on foreign
investment and on repatriation of capital invested. In the event of such
expropriation, nationalization or other confiscation by any country, the Trust
could lose its entire investment in any such country.
In addition, even though opportunities for investment may exist in North
and South American countries, any change in the leadership or policies of the
governments of those countries or in the leadership or policies of any other
government which exercises a significant influence over those countries, may
halt the expansion of or reverse the liberalization of foreign investment
policies now occurring and thereby eliminate any investment opportunities which
may currently exist.
Religious, Political and Ethnic Instability. Certain countries in which the
Trust may invest may have vocal minorities that advocate radical religious or
revolutionary philosophies or support ethnic independence. Any disturbance on
the part of such individuals could carry the potential for wide-spread
destruction or confiscation of property owned by individuals and entities
foreign to such country and could cause the loss of the Trust's investment in
those countries.
Foreign Investment Restrictions. Certain countries prohibit or impose
substantial restrictions on investments in their capital markets by foreign
entities such as the Trust. As illustrations, certain countries require
governmental approval prior to investments by foreign persons or limit the
amount of investment by foreign persons in a particular company or limit the
investment by foreign persons to only a specific class of securities of a
company that may have less advantageous terms than securities of the company
available for purchase by nationals. Moreover, the national policies of certain
countries may restrict investment opportunities in issuers or industries deemed
sensitive to national interests. In addition, some countries require
governmental approval for the repatriation of investment income, capital or the
proceeds of securities sales by foreign investors. The Trust could be adversely
affected by delays in, or a refusal to grant, any required governmental approval
for repatriation, as well as by the application to it of other restrictions on
investments.
Currency Fluctuations. Because the Trust under normal circumstances will
invest a portion of its total assets in the securities of foreign issuers which
are denominated in foreign currencies, the strength or weakness of the U.S.
dollar against such foreign currencies will account for part of the Trust's
investment performance. A decline in the value of any particular currency
against the U.S. dollar will cause a decline in the U.S. dollar value of the
Trust's holdings of securities denominated in such currency and, therefore, will
cause an overall decline in the Trust's net asset value and any net investment
income and capital
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gains to be distributed in U.S. dollars to shareholders of the Trust. The rate
of exchange between the U.S. dollar and other currencies is determined by
several factors including the supply and demand for particular currencies,
central bank efforts to support particular currencies, the movement of interest
rates, the pace of business activity in certain other countries and the U.S.,
and other economic and financial conditions affecting the world economy.
Although the Trust values its assets daily in terms of U.S. dollars, the
Trust does not intend to convert its holdings of foreign currencies into U.S.
dollars on a daily basis. The Trust will do so from time to time, and investors
should be aware of the costs of currency conversion. Although foreign exchange
dealers do not charge a fee for conversion, they do realize a profit based on
the difference (the "spread") between the prices at which they are buying and
selling various currencies. Thus, a dealer may offer to sell a foreign currency
to the Trust at one rate, while offering a lesser rate of exchange should the
Trust desire to sell that currency to the dealer.
INVESTMENT RESTRICTIONS
The following investment restrictions which have been adopted by the Trust
are fundamental and cannot be changed without approval by the vote of a majority
of the outstanding voting securities of the Trust, as defined in the Investment
Company Act of 1940, as amended (the "1940 Act"). (All policies not specifically
identified in this Statement of Additional Information or the Prospectus as
fundamental may be changed without a vote of the shareholders.)
The Trust may not:
1. Borrow money, except if after each borrowing there is asset coverage of
at least 300% as defined in the 1940 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. In addition, the Trust may
borrow from a bank for temporary or emergency purposes in amounts not
exceeding 5% of its total assets (not including the amount borrowed).
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. This limitation does not apply to investments or
obligations guaranteed as to principal by the U.S. Government or any of
its agencies or instrumentalities.
3. Pledge, mortgage or hypothecate its assets, except to the extent
necessary to secure permitted borrowings and to the extent related to
the deposit of assets in escrow in connection with (a) the writing of
put and call options, (b) the purchase of securities on a forward
commitment or delayed-delivery basis and (c) collateral and initial or
variation margin arrangements with respect to currency transactions,
options, futures contracts, including those relating to indexes, and
options on futures contracts or indexes.
4. Purchase securities on margin, except for such short-term credits as
are necessary for the clearance of transactions, but the Trust may make
margin deposits in connection with transactions in currencies, options,
futures and options on futures.
5. Make short sales of securities, except short sales against-the-box, or
maintain a short position.
6. Underwrite any issue of securities issued by others, except to the
extent that the sale of portfolio securities by the Trust may be deemed
to be underwriting.
7. Purchase, hold or deal in real estate or oil and gas interests,
although the Trust may purchase and sell securities that are secured by
real estate or interests therein and may purchase mortgage-related
securities and may hold and sell real estate acquired for the Trust as
a result of the ownership of securities.
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8. Invest in commodities except that the Trust may purchase and sell
futures contracts, including those relating to securities, currencies,
indexes, and options on futures contracts or indexes and currencies
underlying or related to any such futures contracts, and purchase and
sell currencies (and options thereon) or securities on a forward
commitment or delayed-delivery basis.
9. Lend any funds or other assets except through the purchase of all or a
portion of an issue of securities or obligations of the type in which
it may invest; however, the Trust may lend portfolio securities in an
amount not to exceed one-third of the value of the Trust's total
assets. Any loans of portfolio securities will be made according to
guidelines established by the SEC and the Board of Trustees.
10. Issue any senior security (as such term is defined in Section 18(f) of
the 1940 Act), except as permitted herein and in Investment Restriction
Nos. 1, 3, 4 and 8. Obligations under interest rate swaps will not be
treated as senior securities for purposes of this restriction so long
as they are covered in accordance with applicable regulatory
requirements. 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.
TRUSTEES AND OFFICERS
Responsibility for management of the Trust is vested in its Board of
Trustees. The Trustees in turn appoint officers of the Trust to supervise
actively the day-to-day operations of the Trust. The shareholders of the Trust
may elect Trustees at any meeting of shareholders called by the Trustees for
that purpose. Each Trustee serves during the continuance of the Trust until the
earliest of a Trustee's death, resignation or removal until the next meeting of
shareholders called for the purpose of electing Trustees.
The affiliations and principal occupations during the past five years of
the Trustees and the principal officers of the Trust are set forth below.
PALOMBA WEINGARTEN, CHAIRMAN OF THE BOARD AND TRUSTEE+ (53)
9595 Wilshire Boulevard, Beverly Hills, California 90212. Chairman of the
Board, Director and Chief Executive Officer of Atlas Holdings Group, Inc.,
the parent of Astra Fund Distributors Corp. and Astra Management Corp.
("AMC"), the Trust's distributor and investment manager, respectively.
Chairman of the Board and Trustee of Astra Global Investment Series, Astra
Strategic Investment Series, and Astra Institutional Securities 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 Securities Trust.
GARRY D. PEARSON, TRUSTEE (47)
150 North Myers Street, Los Angeles, California 90033. Vice President of
ColorGraphics, a printing company located in Los Angeles, since January
1996. Formerly, Senior Vice President of George Rice & Sons, a printing
company located in Los Angeles, California, from July 1994 to December
1995. Formerly Vice President and Partner in Anderson Lithograph, a
printing company located in Los Angeles, California, from 1983 to 1994.
Trustee of Astra Global Investment Series, Astra Institutional Securities
Trust and Astra Strategic Investment Series.
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AL BURTON, TRUSTEE (68)
2300 Coldwater Canyon, Beverly Hills, California 90210. President of Al
Burton Productions from 1992 to present. Executive Producer of First Run
Syndication for Castle Rock Entertainment Inc. from 1992 to 1995. Executive
Producer-Consultant for Universal Television from 1982 to 1992; Director of
Pilgrim America MagnaCap Fund, Inc., Pilgrim America Government Securities
Fund, and Pilgrim Regional BankShares Inc.; Trustee of Pilgrim Prime Rate
Trust, Astra Global Investment Series, Astra Strategic Investment Series
and Astra Institutional Securities Trust.
ROBERT R. WOMACK, JR., PRESIDENT + (32)
750 B Street, Suite 2350, San Diego, California 92101. President of AMC,
Astra Fund Distributors Corp., Astra Strategic Investment Series, Astra
Institutional Securities Trust and Astra 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 Corp. From
March 1989 to June 1993, Portfolio Manager for World Savings and Loan
Association in Oakland, California.
JOHN R. ELERDING, SENIOR VICE PRESIDENT, SECRETARY, TREASURER AND
CHIEF FINANCIAL OFFICER+ (44)
750 B Street, Suite 2350, San Diego, California 92101. Senior Vice
President, Secretary, Treasurer and Chief Financial Officer of AMC and
Astra Fund Distributors Corp. Senior Vice President, Secretary, Treasurer
and Chief Financial Officer of Astra Global Investment Series, Astra
Institutional Securities Trust and Astra Strategic Investment Series. From
January 1994 to September 1994, Chief Financial Officer at the investment
banking firm of Investment Securities Corp. in San Francisco, California.
From 1991 to August 1993, investment manager and assistant to the Chief
Operating Officer at Robertson Stephens & Company in San Francisco,
California.
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+ Interested person of AIT and the Trust as defined in the 1940 Act.
The officers and Trustees of AIT, as a group, owned of record and
beneficially less than 1% of the outstanding shares of the Trust as of December
31, 1995. The Trustees of the Trust who are not affiliated with or interested
persons of AMC may receive fees for attendance at Trustees' meetings, (during
the fiscal year ended September 30, 1995, $5,942 was paid in such fees) while
officers of the Trust receive no compensation directly from AMC for performing
the duties of their offices. However, those officers and Trustees of the Trust
who are affiliated with AMC may be considered to have received remuneration
indirectly because AMC receives management fees from the Trust.
MANAGEMENT OF THE TRUST
Management Agreement
The Trustees of AIT establish the Trust's investment policies and supervise
and review the operations and management of the Trust. For furnishing the Trust
with investment advice and investment management services with respect to the
Trust's assets, furnishing requisite office space and personnel, and in general
supervising and managing the Trust's investments subject to the ultimate
supervision and direction of AIT's Trustees, AMC is paid a fee of .65% of the
Trust's average daily gross assets. As of September 30, 1995, the Trust's total
gross assets were $20,787,619. During the period November 1,
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1993 (commencement of operations) to September 30, 1994 and the fiscal year
ended September 30, 1995, AMC received $131,967 and $156,848, respectively, in
compensation under its management agreement with the Trust. During the same
periods, AMC voluntarily agreed to limit the Trust's aggregate operating expense
resulting in waivers of expenses in the amounts of $276,355 and $104,678,
respectively.
The Trust pays its own operating expenses, which are not assumed by AMC,
including the following: expenses incurred in connection with the issuance,
registration and transfer of its shares; fees and costs of its custodian,
transfer and shareholder servicing agents; costs of pricing and calculating its
daily net asset value and of maintaining its books of account required by the
1940 Act; expenditures in connection with meetings of the Trust's shareholders;
salaries of officers and fees and expenses of Trustees who are not employees of
or affiliated with AMC; insurance premiums on property or personnel of the Trust
which inure to the Trust's benefit; salaries of personnel of the Trust who are
involved in maintaining registration of its shares under state securities laws;
the cost of preparing and printing reports and proxy statements of the Trust for
distribution to its shareholders; preparing and sending prospectuses and
statements of additional information to existing shareholders; trade association
dues; legal and accounting fees; and fees and expenses of registering and
maintaining registration of its shares for sale under Federal and applicable
state securities laws.
AMC will reduce its aggregate fees for any fiscal year, or reimburse the
Trust, to the extent required so that the Trust's aggregate expenses do not
exceed the most restrictive expense limitation applicable to the Trust under the
securities laws or regulations of those states or jurisdictions in which the
Trust's shares are registered or qualified for sale. Currently, the most
restrictive of such expense limitations would require AMC to reduce its fees, or
to reimburse the Trust, to the extent required so that the Trust's expenses, as
described above, for any fiscal year do not exceed 2-1/2% of the first $30
million of the Trust's average daily net assets, 2% of the next $70 million of
the Trust's average net assets, and 1-1/2% of the Trust's remaining average net
assets. Expenses for purposes of this expense limitation include the management
fee, but exclude distribution expenses, brokerage commissions and fees, taxes,
interest, and extraordinary expenses such as those for litigation, paid or
incurred by the Trust. The expense limitation may change to reflect changes in
the expense limitations of the state having the most restrictive limitation in
which shares of the Trust are registered for sale.
The Management Agreement for the Trust is currently in effect until October
29, 1996, and will be continued in effect from year to year thereafter so long
as such continuation is approved at least annually (i) by the Trustees of the
Trust, or the vote of a majority of the outstanding voting securities of the
Trust, and (ii) 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 Trust or AMC upon 60 days' written
notice, and is automatically terminated in the event of its assignment as
defined in the 1940 Act.
Administrative and Sub-Administrative Agreements
Administrative services are provided to the Trust by Atlas Holdings Group,
Inc. ("Atlas Group") pursuant to an Administration Agreement, dated October 29,
1993 (the "Administration Agreement"). Atlas Group supervises the overall
administration of the Trust. Administrative services that Atlas Group provides
include supervising the preparation and filing of all documents required for
compliance by the Trust with applicable laws and regulations, supervising the
maintenance of books and records and other general and administrative
responsibilities. As compensation for its services thereunder, Atlas Group is
paid a fee equivalent to 0.10% per annum of the Trust's average daily net
assets. For the period November 1, 1993 (commencement of operations) to
September 30, 1994 and the fiscal year ended
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September 30, 1995 the Trust paid $15,035 and $21,383 to Atlas Group (formerly
Pilgrim Group, Inc.) pursuant to the Administration Agreement.
Under a sub-administration agreement between Atlas Group and PFPC Inc.
("PFPC"), PFPC provides certain administrative services to the Trust, subject to
the supervision of the Board of Trustees of AIT. Such services include
regulatory compliance, assistance in the preparation and filing of
post-effective amendments to AIT's registration statement with the Securities
and Exchange Commission (the "Commission"), preparation of annual, semi-annual
and other reports to shareholders and the Commission, filing of federal and
state income tax returns, preparation of financial and management reports,
preparation of board meeting materials, preparation and filing of blue sky
registrations and monitoring compliance with the amounts and conditions of each
state qualification. In consideration of the services provided under the
sub-administration agreement, Atlas Group (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.
The Atlas Group
AMC is a wholly-owned subsidiary of Atlas Group, a Delaware corporation of
which Mrs. Weingarten is the majority stockholder and Chief Executive Officer.
AMC also acts as the investment manager to Astra Institutional Adjustable U.S.
Government Securities Portfolio, Astra Institutional Adjustable Rate Securities
Portfolio (series of Astra Institutional Securities Trust), Astra Short Term
Multi-Market Income Fund and Astra Short Term Multi-Market Income Fund II
(series of Astra Global Investment Series), all of which are open-end investment
companies. As of the date of this Statement of Additional Information, total
assets under management of AMC were approximately $150 million.
EXECUTION OF PORTFOLIO TRANSACTIONS
In all purchases and sales of securities for the Trust, the primary
consideration is to obtain the most favorable price and execution available.
Pursuant to the Management Agreement, AMC determines, subject to the
instructions of and review by the Trustees of the Trust, which securities are to
be purchased and sold by the Trust and which brokers are to be eligible to
execute portfolio transactions of the Trust. 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 their best efforts to
choose a broker capable of providing the brokerage services necessary to obtain
the most favorable price and execution available. The full range and quality of
brokerage services available will be considered in making these determinations,
such as the size of the order, the difficulty of execution, the operations
facilities of the firm involved, the firm's risk in positioning a block of
securities, and other factors. In those instances where it is reasonably
determined that more than one broker can offer the brokerage services needed to
obtain the most favorable price and execution available, consideration may be
given to those brokers which supply research and statistical information to the
Trust and/or AMC, and provide other services in addition to execution services.
AMC considers such information, which is in addition to and not in lieu of the
services required to be performed by AMC under its agreement with the Trust, to
be useful in varying degrees, but of indeterminable value. The placement of
portfolio brokerage with broker-dealers who have sold shares of the Trust is
subject to rules adopted by the National Association of Securities Dealers, Inc.
Provided officers of the Trust are satisfied that the Trust is receiving the
most favorable price and execution available, the Trust may also consider the
sale of its shares as a factor in the selection of broker-dealers to execute its
portfolio transactions.
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While it will continue to be the Trust's general policy to seek first to
obtain the most favorable price and execution available, in selecting a broker
to execute portfolio transactions for the Trust, the Trust may also give weight
to the ability of a broker to furnish brokerage and research services to the
Trust or AMC, even if the specific services were not imputed just to the Trust
and were useful to AMC in advising other clients. In negotiating commissions
with a broker, the Trust may therefore pay a higher commission than would be the
case if no weight were given to the furnishing of these supplemental services,
provided that the amount of such commission has been determined in good faith by
the Trust 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 Trust or assist AMC in carrying out its responsibilities
to the Trust. The standard of reasonableness is to be measured in light of AMC's
overall responsibilities to the Trust.
For the period November 1, 1993 (commencement of operations) to September
30, 1994 and the fiscal year ended September 30, 1995, total brokerage
commissions paid by the Trust amounted to approximately $1,430 and $0,
respectively. The Trust does not intend to effect any brokerage transaction in
its portfolio securities with any broker-dealer affiliated directly or
indirectly with AMC, except for any sales of portfolio securities pursuant to a
tender offer, in which event AMC will offset against the management fee a part
of any tender fees which legally may be received by such affiliated
broker-dealer.
Although investment decisions for the Trust are made independently from
those of the other Astra Funds, it is possible that at times identical
securities will be selected for purchase or sale by more than one of such funds.
However, the position of each fund in the same issuer may vary and the length of
time that each fund may choose to hold its investment in the same issuer may
likewise vary. To the extent any of these funds seeks to acquire the same
security at the same time, one or more of the funds may not be able to acquire
as large a portion of such security as it desires, or it may have to pay a
higher price for such security. Similarly, any of the funds may not be able to
obtain as high a price for, or as large an execution of, an order to sell any
particular security if any of the other funds desires to sell the same security
at the same time. If more than one of such funds simultaneously purchases or
sells the same security, each day's transaction in such security will be
averaged as to price and allocated between such funds in accordance with the
total amount of such security being purchased or sold by each of such funds. It
is recognized that in some cases this system could have a detrimental effect on
the price or value of the security insofar as AIT is concerned.
ADDITIONAL REDEMPTION INFORMATION
Reinstatement Privilege
Shares of Class B or Class C may be sold at net asset value, with credit
for any contingent deferred sales charges paid on the redeemed Class B or Class
C shares to persons who have redeemed their shares of the Class B or Class C
within the previous 30 days. The amount of any contingent deferred sales charge
related to the prior redemption of Class B shares will be credited to the
shareholder's account and reinvested.
The reinstatement privilege may be used only once per calendar year. In
order to exercise this privilege, a written order for the purchase of shares
must be received by the Transfer Agent, or be postmarked, within 30 days after
the date of redemption. If the shareholder has realized a gain on the
redemption, the transaction is taxable and any reinstatement will not alter any
applicable Federal capital gains tax. If there has been a loss on the redemption
and a subsequent reinstatement pursuant to this privilege, some or all of the
loss may not be allowed as a tax deduction depending upon the amount reinstated,
although such disallowance is added to the tax basis of the shares acquired upon
the reinstatement.
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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 the Trust may suspend the right of redemption or
postpone the date of payment during any period when: (a) trading on the New York
Stock Exchange ("Exchange") is restricted as determined by the SEC or the
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 the Trust not reasonably practicable;
or (c) for such other period as the SEC may permit for the protection of the
Trust's shareholders. At various times, the Trust may be requested to redeem its
shares for which it has not yet received good payment. Accordingly, the Trust
may delay the mailing of a redemption check until such time as it determines
that it has received good funds for the purchase of the shares being redeemed,
which may take up to 15 days or longer.
The value of shares on redemption or repurchase may be more or less than
the investor's cost, depending upon the market value of the portfolio securities
at the time of redemption or repurchase.
Contingent Deferred Sales Charge
A contingent deferred sales charge will be imposed on any redemption or
repurchase of shares of Class B and Class C which reduces the current value of
the investor's shares of Class B and Class C to an amount which is lower than
the dollar amount of all payments by the investor for the purchase of Class B
shares during the preceding four years and Class C shares during the preceding
one year. However, no such charge will be imposed to the extent that the net
asset value of the shares redeemed does not exceed (a) the current net asset
value of shares purchased more than four years (Class B) and one year (Class C)
prior to the redemption or repurchase, plus (b) the current net asset value of
shares purchased through reinvestment of dividends or distributions, plus (c)
increases in the net asset value of the investor's shares above the total amount
of payments for the purchase of Trust shares made during the preceding four
years in the case of Class B and one year in the case of Class C. Accordingly,
investors may redeem, without incurring any contingent deferred sales charge,
amounts equal to any net increase in the value of their shares above the amount
of their purchase payments made within the past four years in the case of Class
B and one year in the case of Class C, and amounts equal to the current value of
shares purchased through reinvestment of dividends or distributions. The
contingent deferred sales charge will be imposed on any redemptions within four
years in the case of Class B and one year in the case of Class C of purchase
which are in excess of these amounts. The amount of any contingent deferred
sales charge will be paid to or for the account of the Distributor.
Waiver of Contingent Deferred Sales Charge
No contingent deferred sales charge will be payable in connection with the
redemption of shares of the Trust purchased by officers, directors and bona fide
full-time employees of the Trust, and with certain exceptions, officers,
directors and full-time employees and sales representatives of AMC, the
Distributor or affiliated companies thereof (or any trust, pension,
profit-sharing or other benefit plan for such persons), broker-dealers having
sales agreements with the Distributor, all for their own accounts or for their
spouse and children, and employees of such broker-dealer firms (for their own
accounts only) and discretionary advisory accounts of AMC (if such purchasers
state in writing that the purchases are for their own investment purposes only
and the purchaser represents that the shares will not be resold except to the
Trust).
The contingent deferred sales charge is waived or reduced for certain
redemptions of shares of the Trust (i) upon the death or permanent disability of
a stockholder; (ii) in connection with mandatory distributions from an IRA or
other qualified retirement plan; (iii) in connection with redemptions pursuant
to
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the Trust's right to liquidate accounts or charge an annual small account fee;
and (iv) upon liquidation or dissolution of the Trust. The contingent deferred
sales charge will be waived in the case of a redemption of shares of the Trust
following the death or permanent disability of a shareholder if the redemption
is made within one year of death or initial determination of permanent
disability. The waiver is available for total or partial redemptions of shares
of the Trust owned by an individual or an individual in joint tenancy (with
rights of survivorship), but only for redemptions of shares of the Trust held at
the time of death or initial determination of permanent disability. The waiver
does not apply in the case of a tax-free rollover or transfer of assets, other
than one following a separation from services. The shareholder must notify the
Transfer Agent either directly or through the Distributor, at the time of
redemption, that the shareholder is entitled to waiver of the contingent
deferred sales charge. The waiver will be granted subject to confirmation of the
investor's entitlement.
PRICE OF THE SHARES IS DETERMINED DAILY
If the securities owned by the Trust increase in value, the value of the
Trust shares which the shareholders of each class own will increase. If the
securities owned by the Trust decrease in value, the value of the shareholder's
shares will also decline. As noted in the Prospectus, the net asset value and
offering price of shares of the Trust will be determined once each "business
day" as of the close of trading on the New York Stock Exchange (currently 4:00
p.m., Eastern Time), 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, respectively.
The Trust will invest in foreign securities, and as a result, the
calculation of the Trust's net asset value may not take place contemporaneously
with the determination of the prices of certain of the portfolio securities used
in the calculation. Portfolio securities of the Trust which are traded both on
an exchange and in the over-the-counter market will be valued according to the
broadest and most representative market. All assets and liabilities initially
expressed in foreign currency values will be converted into U.S. dollar values
at the mean between the bid and offered quotations of the currencies against
U.S. dollars as last quoted by any recognized dealer. When portfolio securities
are traded, the valuation will be the last reported sale price on the day of
valuation. If there is no such reported sale or the valuation is based on the
over-the-counter market, the securities will be valued at the last available bid
price or at the mean between bid and asked prices, as determined by the
Trustees. As of the date of this Statement of Additional Information, such
securities will be valued by the latter method. Securities for which reliable
quotations are not readily available and all other assets will be valued at
their respective fair market value as determined in good faith under procedures
established by the Board of Trustees of AIT.
All liabilities incurred or accrued (including written call options) are
deducted from the total assets. The resulting net assets are divided by the
number of shares of the Trust outstanding at the time of the valuation and the
result (adjusted to the nearest cent) is the net asset value per share. For
purposes of determining the Trust's net asset value per share, all assets and
liabilities initially expressed in foreign currencies will be converted into
U.S. Dollars at the mean of the bid and asked prices of such currencies against
the U.S. Dollar last quoted by a major bank which is a regular participant in
the institutional foreign exchange markets or on the basis of a pricing service
which takes into account the quotes provided by a number of such major banks.
Orders received by the Trust's Transfer Agent 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 Trusts' Transfer Agent prior to 3:00 p.m. (Pacific Time) on that day.
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SHAREHOLDER SERVICES AND PRIVILEGES
The Trust's shareholders have the privilege of reinvesting both income
dividends and capital gains distributions, if any, in additional full or
fractional shares of the Trust at the net asset value in effect at the
reinvestment date. The management of AIT has made arrangements with its Transfer
Agent to have all income dividends and capital gains distributions which are
declared by the Trust automatically reinvested for the account of each
shareholder unless a shareholder elects in writing to the Trust or the Transfer
Agent to have such dividends or distribution paid to him in cash. In the absence
of such election, each purchase of shares of the Trust 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 the Trust at the
applicable net asset value in effect at the close of business on the
reinvestment date. A shareholder may at any time request that dividends and/or
capital gains distributions be paid to him in cash.
Every shareholder will receive a confirmation of each new transaction in
his account, which will also show the total number of Trust shares owned by the
shareholder and the number of shares being held in safekeeping by the Transfer
Agent for the account of the shareholders and a cumulative record of his account
for the entire year. Shareholders may rely on these statements in lieu of
certificates. Certificates representing shares of the Trust will not be issued
unless the shareholder requests them in writing.
FEDERAL TAX TREATMENT OF DIVIDENDS AND DISTRIBUTIONS
The following is only a summary of certain additional tax considerations
generally affecting the Trust and its shareholders that are not described in the
Prospectus. No attempt is made to present a detailed explanation of the tax
treatment of the Trust or its shareholders, and the discussion here and in the
Prospectus is not intended as a substitute for careful tax planning.
Qualification as a Regulated Investment Company. The Trust has elected to
be taxed as a regulated investment company under Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code"). As a regulated investment
company, the Trust is not subject to Federal income tax on the portion of its
net investment income (i.e., its taxable interest, dividends and other taxable
ordinary income, net of expenses) and net realized capital gain (i.e., the
excess of capital gains over capital losses) that it distributes to
shareholders, provided that it distributes at least 90% of its investment
company taxable income (i.e., net investment income and the excess of net
short-term capital gain over net long-term capital loss) and at least 90% of its
tax-exempt income (net of expenses allocable thereto) for the taxable year (the
"Distribution Requirement"), and satisfies certain other requirements of the
Code that are described below. The Trust will be subject to tax at regular
corporate rates on any income or gains that it does not distribute.
In addition to satisfying the Distribution Requirement, the Trust must: (i)
derive at least 90% of its gross income from dividends, interest, certain
payments with respect to securities loans, gains from the sale or other
disposition of stock or securities or foreign currencies (to the extent such
currency gains are ancillary to the Trust's principal business of investing in
stock or securities) and other income (including but not limited to 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 (ii) 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"). Certain foreign
currency gains, including those derived from options, futures and forwards, will
not be characterized as Short-Short Gain, however, if they are directly related
to the Trust's investment in stock or securities (or options or futures
thereon). Because of the Short-Short Gain Test, the Trust may have to limit the
sale of appreciated securities it has held for less than three months.
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However, the Short-Short Gain Test will not prevent the Trust from disposing of
investments at a loss, since the recognition of a loss before the expiration of
the three-month holding period is disregarded. Interest (including original
issue discount) received by the Trust at maturity or upon the disposition of a
security held for less than three months will not be treated as gross income
derived from the sale or other disposition of such security within the meaning
of the Short-Short Gain Test. However, income that is attributable to realized
market appreciation will be treated as gross income from the sale or other
disposition of securities for this purpose.
For purposes of determining whether capital gain or loss recognized by the
Trust on the disposition of an asset is long-term gain or loss or short-term
gain or loss, the holding period of the asset may be affected if (i) the asset
is used to close a "short sale" (which includes for certain purposes the
acquisition of a put option) or is substantially identical to another asset so
used, (ii) the asset is otherwise held by the Trust as part of a "straddle," or
(iii) the asset is stock and the Trust grants certain call options with respect
thereto. However, for purposes of the Short-Short Gain Test, the holding period
of the asset disposed of is reduced only under clause (i), above.
Certain debt securities purchased by the Trust 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 the Trust actually receives cash, original issue discount income which
the Trust is deemed to have earned is subject to the Distribution Requirement.
Generally, the amount of original issue discount included in the income of the
Trust each year is determined on the basis of a constant yield to maturity that
takes into account the compounding of accrued interest.
In addition, the Trust may purchase debt securities at a discount that
exceeds any original issue discount that remained on the securities at the time
the Trust purchased the securities. This additional discount represents market
discount for income tax purposes. For a debt security purchased after April 30,
1993, which had an original maturity date of more than one year from the date of
issue and having market discount, the gain realized on disposition will be
treated as interest to the extent it does not exceed the accrued market discount
on the security (unless the Trust elects for all its debt securities having a
fixed maturity date of more than one year from the date of issue to include
market discount in income in taxable years to which it is attributable).
Generally, market discount accrues on a daily basis. The Trust may be required
to capitalize, rather than deduct currently, part or all of any net direct
interest expense on indebtedness incurred or continued to purchase or carry any
debt security having market discount (unless the Trust makes the election to
include market discount in income as it accrues).
At the close of each quarter of its taxable year, at least 50% of the value
of the Trust's assets must consist of cash and cash items, U.S. Government
securities, securities of other regulated investment companies, and securities
of other issuers (as to which a Trust has not invested more than 5% of the value
of its total assets in securities of such issuer and the Trust does not hold
more than 10% of the outstanding voting securities of such issuer), and no more
than 25% of the value of its total assets may be invested in the securities of
any one issuer (other than U.S. Government securities and securities of other
regulated investment companies), or in two or more issuers which the Trust
controls and which are engaged in the same or similar trades or businesses (the
"Asset Diversification Test").
If for any taxable year the Trust does not qualify as a regulated
investment company, all of its taxable income (including its net capital gain)
will be subject to tax at regular corporate rates without any deduction for
distributions to shareholders, and such distributions will be taxable as
ordinary dividends to the extent of the current and accumulated earnings and
profits of the Trust. In such event, such distributions generally will be
eligible for the dividends-received deduction in the case of corporate
shareholders.
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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.
U.S. 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 will (i) reduce its capital gain net income
by the amount of any net ordinary loss for any calendar year and (ii) 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).
The Trust intends to make sufficient distributions or deemed distributions
of its ordinary taxable income and capital gain net income prior to the end of
each calendar year to avoid liability for the excise tax. However, investors
should note that the Trust may in certain circumstances be required to liquidate
portfolio investments to make sufficient distributions to avoid excise tax
liability.
Currency Fluctuations -- "Section 988" Gains or Losses. Under the Code, the
Trust will account for its income and deduction in U.S. dollars and thus may
realize gains or losses attributable to fluctuations in exchange rates which
occur between the time the Trust accrues interest or other receivables or
accrues expenses or other liabilities denominated in a foreign currency and the
time the Trust actually collects such receivables or pays such liabilities. Such
gains or losses are generally treated as ordinary income or ordinary loss.
Similarly, on a disposition of debt securities denominated in a foreign currency
or on a disposition of forward contracts and certain futures contracts and
options, the portion of any gains or losses attributable to fluctuations in the
value of foreign currency between the date of acquisition of the security or
contract and the date of disposition are also treated as ordinary gain or loss.
These gains or losses are referred to under the Code as "Section 988" gains or
losses. The recognition of Section 988 gains may increase the amount of income
that the Trust must distribute in order to qualify for treatment as a RIC and to
prevent application of an excise tax on undistributed income. Alternatively, the
recognition of Section 988 losses may affect the taxability of the distributions
made by the Trust. For example, if the foreign exchange losses of the Trust were
to exceed the Trust's other investment company taxable income during a taxable
year, the distributions that were made by the Trust for that taxable year would
be recharacterized in whole or in part as a return of capital to shareholders
for Federal income tax purposes, rather than as an ordinary dividend, thus
reducing each shareholder's basis in his Trust shares. If the amount of such
return of capital distributions to any shareholder exceeded his basis for his
shares, the excess would be treated as gain from the sale of Trust shares.
Option, Futures Contracts, and Forward Foreign Currency Contracts. Certain
listed options, regulated futures contracts and forward foreign currency
contracts are designated as "section 1256 contracts" for Federal income tax
purposes. Section 1256 contracts held by the Trust at the end of each taxable
year will be "marked to market" and treated for Federal income tax purposes as
though sold for fair market value on the last business day of such taxable year.
Gain or loss realized by the Trust on section 1256 contracts other than forward
foreign currency contracts will be considered 60% long-term and 40% short-term
capital gain or loss unless the Trust elects to have the gain or loss it
realizes on these contracts taxed as "section 988" gains or losses. Gain or loss
realized by the Trust on forward foreign currency contracts will be treated as
section 988 gain or loss and will therefore be characterized entirely as
ordinary
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income or loss, as described above. The Trust can elect to exempt its section
1256 contracts which are part of a "mixed straddle" (as described below) from
the application of section 1256.
The Treasury Department has the authority to issue regulations that would
permit or require the Trust either to integrate a foreign currency hedging
transaction with the investment that is hedged and treat the two as a single
transaction, or otherwise to treat the hedging transaction in a manner that is
consistent with the hedged investment. The regulations recently issued under
this authority generally should not apply to the type of hedging transactions in
which the Trust intends to engage.
With respect to over-the-counter put and call options, gain or loss
realized by the Trust upon the lapse or sale of such options held by the Trust
will be either long-term or short-term capital gain or loss depending upon the
Trust's holding period with respect to such option. However, gain or loss
realized upon the lapse or closing out of such options that are written by the
Trust will be treated as short-term capital gain or loss. In general, if the
Trust exercises an option, or if an option that the Trust has written is
exercised, gain or loss on the option will not be separately recognized but the
premium received or paid will be included in the calculation of gain or loss
upon disposition of the property underlying the option.
Gain or loss realized by the Trust on the lapse or sale of put and call
options on foreign currencies which are traded over-the-counter or on certain
foreign exchanges will be treated as section 988 gain or loss and will therefore
be characterized as ordinary income or loss, as described above. The amount of
such gain or loss shall be determined by subtracting the amount paid, if any,
for or with respect to the option (including any amount paid by the Trust upon
termination of an option written by the Trust) from the amount received, if any,
for or with respect to the option (including any amount received by the Trust
upon termination of an option held by the Trust). In general, if the Trust
exercises such an option on a foreign currency, or if such an option that the
Trust has written is exercised, gain or loss on the option will be recognized in
the same manner as if the Trust had sold the option (or paid another person to
assume the Trust's obligation to make delivery under the option) on the date on
which the option is exercised, for the fair market value of the option. The
foregoing rules will also apply to other put and call options which have as
their underlying property foreign currency and which are traded over-the-counter
or on certain foreign exchanges to the extent gain or loss with respect to such
options is attributable to fluctuations in foreign currency exchange rates.
Hedging Transactions. Certain hedging transactions which the Trust may
undertake may result in "straddles" for U.S. Federal income tax purposes. The
straddle rules under the Code may affect the character of gains (or losses)
realized by the Trust. In addition, losses realized by the Trust on positions
that are part of a straddle may be deferred under the straddle rules, rather
than being taken into account in calculating the taxable income for the taxable
year in which the losses are realized. Because only a few regulations
implementing the straddle rules have been promulgated, the tax consequences to
the Trust of hedging transactions are not entirely clear. The hedging
transactions may increase the amount of ordinary income and short-term capital
gain realized by the Trust which is taxed as ordinary income when distributed to
shareholders. Because application of the straddle rules may affect the character
of gains or losses, defer losses and/or accelerate the recognition of gains or
losses from the affected straddle positions, the amount which must be
distributed by the Trust to its shareholders and which will be taxed to
shareholders of the Trust as ordinary income or long-term capital gain, may be
increased or decreased by such hedging transactions. The qualification
requirements under the regulated investment company provisions of the Code may
limit the extent to which the Trust will be able to engage in transactions in
options, futures contracts and forward contracts.
Buying a Dividend. 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
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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 the Trust that do not constitute ordinary income dividends
or capital gain dividends will be treated as a return of capital to the extent
of (and will reduce) the shareholder's tax basis in his shares; any excess will
be treated as gain from the sale of the shareholder's shares, as discussed
below.
Foreign Shareholders. Taxation of a shareholder who, as to the United
States, is a nonresident alien individual, foreign trust or estate, foreign
corporation, or foreign partnership ("foreign shareholder"), depends on whether
the income from the Trust is "effectively connected" with a U.S. trade or
business carried on by such shareholder.
If the income from the Trust is not effectively connected with a U.S. trade
or business carried on by the foreign shareholder, ordinary income dividends
will be subject to U.S. withholding tax at the rate of 30% (or lower treaty
rate, if applicable) upon the gross amount of the dividend. Such foreign
shareholders would generally be exempt from U.S. Federal income tax on gains
realized on the sale of shares of the Trust and on capital gain dividends and
amounts retained by the Trust that are designated as undistributed capital
gains.
If the income from the Trust is effectively connected with a U.S. trade or
business carried on by a foreign individual or corporate shareholder, then
ordinary income dividends, capital gain dividends, and any gains realized upon
the sale of shares of the Trust will be subject to U.S. federal income tax at
the respective rates applicable to U.S. citizens and residents or domestic
corporations.
In the case of foreign noncorporate shareholders, the Trust may be required
to withhold U.S. federal income tax on distributions that are otherwise exempt
from withholding tax (or taxable at a reduced treaty rate) unless such
shareholders furnish the Trust with proper notification of their foreign status.
The tax consequences to a foreign shareholder entitled to claim the
benefits of an applicable tax treaty may differ from those described herein.
Foreign shareholders are urged to consult their own tax advisers with respect to
the particular tax consequences to them of an investment in the Trust, including
the applicability of foreign taxes.
Distributions may be subject to additional state, local and foreign taxes
depending on each shareholder's particular situation. Shareholders are advised
to consult their own tax advisers with respect to the particular tax
consequences to them of an investment in the Trust.
Effect of Future Legislation; Local Tax Considerations
The foregoing general discussion of U.S. Federal income tax consequences is
based on the Code and the regulations issued thereunder as in effect on the date
of this Statement of Additional Information. Future legislative or
administrative changes or court decisions may significantly change the
conclusions expressed herein, and any such changes or decisions may have a
retroactive effect with respect to the transactions contemplated herein.
Rules of state and local taxation of ordinary income dividends and capital
gain dividends from regulated investment companies often differ from the rules
for U.S. Federal income taxation described above. Shareholders are urged to
consult their tax advisers as to the consequences of federal, state and local
tax rules affecting investment in the Trust.
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INVESTMENT RETURN INFORMATION
For purposes of quoting and comparing the performance of the Trust to that
of other mutual funds and to other relevant market indices in advertisements or
in reports to shareholders, performance may be stated in terms of total return
and yield. Under the rules of the SEC ("SEC Rules"), funds advertising
performance must include total return quotes calculated according to the
following formula:
P (1 + T ) SUP{N}=ERV
Where: P = a hypothetical initial payment of $1,000
T = average annual total return
n = number of years (1, 5 or 10)
ERV = ending redeemable value of a hypothetical
$1,000 payment made at the beginning of the 1,
5 or 10 year periods at the end of the 1, 5 or
10 year periods (or fractional portion
thereof).
Under the foregoing formula, the time periods used in advertising will be
based on rolling calendar quarters, updated to the last day of the most recent
quarter prior to submission of the advertising for publication, and will cover
1, 5 and 10 year periods or a shorter period dating from the effectiveness of
the Trust's Registration Statement. In calculating the ending redeemable value,
all dividends and distributions by the Trust are assumed to have been reinvested
at net asset value as described in the Prospectus on the reinvestment dates
during the period. Total return, or "T" in the formula above, is computed by
finding the average annual compounded rates of return over the 1, 5 and 10 year
periods (or fractional portion thereof) that would equate the initial amount
invested to the ending redeemable value, including any applicable contingent
deferred sales charge. Any recurring account charges that might in the future be
imposed by the Trust would be included at that time.
The Trust may also from time to time include in such advertising a total
return figure that is not calculated according to the formula set forth above in
order to compare more accurately the performance of the Trust with other
measures of investment return. For example, in comparing the Trust's total
return with data published by Lipper Analytical Services, Inc., or with the
performance of the Standard & Poor's 500 Stock Index of the Dow Jones Industrial
Average, the Trust calculates its aggregate total return for the specified
periods of time by assuming the investment of $10,000 in Trust shares and
assuming the reinvestment of each dividend or other distribution at net asset
value on the reinvestment date. Percentage increases are determined by
subtracting the initial value of the investment from the ending value and by
dividing the remainder by the beginning value. Class B and Class C do not, for
these purposes, deduct any amount representing contingent deferred sales
charges. As appropriate, Class B and Class C will, however, disclose the maximum
contingent deferred sales charge and will also disclose that the performance
data does not reflect contingent deferred sales charges and that inclusion of
contingent deferred sales charges would reduce the performance quoted. Such
alternative total return information will be given no greater prominence in such
advertising than the information prescribed under SEC Rules.
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For the fiscal year ended September 30, 1995, the average annual compounded
rate of return was - 8.97%, -9.02% and -7.16% for the Trust's Class A, Class B
and Class C Shares, respectively.
For the period November 1, 1993 (the commencement of operations) to
September 30, 1995, the average annual compounded rate of return was -5.50% and
- -4.37%for the Trust's Class B and Class C Shares, respectively. For the period
February 28, 1994 (the commencement of sales of Class A Shares) to September 30,
1995, the average compound rate of return was -7.32% for the Trust's Class A
Shares.
In addition to the total return quotations discussed above, the Trust may
advertise its yield based on a thirty-day (or one month) period ended on the
date of the most recent balance sheet included in its Registration Statement,
computed by dividing the net investment income per share earned during the
period by the maximum offering price per share on the last day of the period,
according to the following formula:
YIELD = 2[({a-b}OVER{cd} + 1) SUP 6 -1]
Where: a = dividends and interest earned during the period.
b = expenses accrued for the period (net of reimbursements).
c = the average daily number of shares outstanding
during the period that were entitled to receive
dividends.
d = the maximum offering price per share on the last day
of the period.
Under this formula, interest earned on debt obligations for purposes of "a"
above, is calculated by (i) computing the yield to maturity of each obligation
held by the Trust based on the market value of the obligation (including actual
accrued interest) at the close of business on the last day of each month, or,
with respect to obligations purchased during the month, the purchase price (plus
actual accrued interest), (ii) dividing that figure by 360 and multiplying the
quotient by the market value of the obligation (including actual accrued
interest as referred to above) to determine the interest income on the
obligation that is in the Trust's portfolio (assuming a month of thirty days),
and (iii) computing the total of the interest earned on all debt obligations and
all dividends accrued on all equity securities during the thirty-day or one
month period. In computing dividends accrued, dividend income is recognized by
accruing 1/360 of the stated dividend rate of a security each day that the
security is in the Trust's portfolio. For purposes of "b" above, Rule 12b-1 Plan
expenses, as applicable, are included among the expenses accrued for the period.
Any amounts representing sales charges will not be included among these
expenses; however, the Trust will disclose the maximum sales charge as well as
any amount or specific rate of any nonrecurring account charges. Undeclared
earned income, computed in accordance with generally accepted accounting
principles, may be subtracted from the maximum offering price calculation
required pursuant to "d" above.
The Trust may also from time to time advertise its yield based on a
thirty-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
thirty-day or one month period) will be given no greater prominence than the
information prescribed under SEC Rules. In addition, all advertisements
containing performance data of any kind will include a legend disclosing that
such
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performance data represents past performance and that the investment return and
principal value of an investment will fluctuate so that an investor's shares,
when redeemed, may be worth more or less than their original cost.
The yields as of September 30, 1995, based on a 30-day base period for
Class A, Class B and Class C were 8.89%, 8.49% and 8.52%, respectively.
GENERAL INFORMATION
Underwriting Agreement
Astra Fund Distributors Corp. ("the Distributor") is the Trust's principal
underwriter and distributor. The underwriting agreement between AIT and the
Distributor with respect to the distribution of shares of the Trust (the
"Underwriting Agreement") is in effect until October 29, 1996, and thereafter
continues from year to year if approved at least annually (i) by the Trustees of
AIT or by the vote of a majority of the outstanding voting securities of the
Trust and (ii) by a majority of the Trustees of AIT who are not parties to the
Underwriting Agreement or interested persons of any such party, cast in person
at a meeting called for the purpose of voting on such approval. The Underwriting
Agreement may be terminated without penalty by either party on sixty days'
written notice and shall be automatically terminated in the event of its
assignment as defined in the 1940 Act. The Distributor is a wholly-owned
subsidiary of Atlas Holdings Group, Inc.
The sales charges retained by the Distributor and the commissions allowing
to selling dealers are not expenses of the Trust and have no effect on the net
asset value of any of the classes of the Trust's shares.
During the period November 1, 1993 (the commencement of operations) to
September 30, 1995, the Distributor did not receive any commissions on the sale
of Class B and Class C Shares.
For the period of February 28, 1994 (the commencement of sales of Class A
Shares) to September 30, 1995, the Distributor received commissions, after
allowance to dealers, in the aggregate of $19 for the sale of Class A shares.
During the same period, the Distributor retained nothing (zero) as a retail
dealer in the Trust's shares.
Distribution Expenses
The distribution plans (the "Plans") for the Trust's Class A, Class B and
Class C Shares are described in the Prospectus and are designated to meet the
requirements of Rule 12b-1 under the 1940 Act. In that regard, the Board of
Trustees of AIT has determined that a consistent cash flow resulting from the
sale of new shares is necessary and appropriate to meet redemptions and to take
advantage of buying opportunities without having to make unwarranted
liquidations of portfolio securities. The Board, therefore, determined that it
will likely benefit the Trust to have monies available for the direct
distribution activities of the Distributor in promoting the sale of the Trust's
shares. The Board of Trustees, including the non-interested Trustees, concluded
that, in the exercise of their reasonable business judgment and in light of
their fiduciary duties, there is a reasonable likelihood that the Plans will
benefit the Trust and its respective shareholders.
The Plans have been approved by AIT's Board of Trustees, including all of
the trustees who are non-interested persons as defined in the 1940 Act, and by
the Trust's initial shareholder. The Plans must be renewed annually by AIT's
Board of Trustees, including a majority of the trustees who are non-interested
persons of AIT and who have no direct or indirect financial interest in the
operation of the Plans, cast in person at a meeting called for that purpose. It
is also required that the selection and nomination of such
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Trustees be done by the non-interested Trustees. The Plans and any distribution
or service agreement may be terminated at any time, without any penalty, by such
Trustees or by a vote of a majority of a Trust's outstanding shares on sixty
days' written notice. The Distributor or any dealer or other firm may also
terminate their respective distribution or service agreement at any time upon
written notice.
The Plans and any distribution or service agreement may not be amended to
increase materially the amount spent for distribution expenses or in any other
material way without approval by a majority of the Trust's outstanding shares,
and all material amendments to the Plans or any distribution or service
agreement shall be approved by the non-interested Trustees, cast in person at a
meeting called for the purpose of voting on any such amendment.
The Distributor is required to report in writing to the Board of Trustees
of AIT at least quarterly on the monies reimbursed to it under the Plans, as
well as to furnish the Board with such other information as may reasonably be
requested in connection with the payments made under the Plans in order to
enable the Board to make an informed determination of whether the Plans should
be continued.
Pursuant to the Class A Plan, for the fiscal year ended September 30, 1995,
the Distributor was reimbursed $736 for distribution costs incurred under the
Class A Plan.
Pursuant to the Class B and Class C Plans, for the fiscal year ended
September 30, 1995, the Distributor received daily compensation payments in the
amounts of $130,843 and $27,917, respectively. In addition, during the same
period, the Distributor received $43,455 and $9,267 in maintenance fees for the
Class B and Class C Plans, respectively. As of September 30, 1995, the Trust's
Class B Shares had total net assets of $15,194,572 and Uncovered Distribution
Charges aggregated $228,384. For the same period, the Trust's Class C Shares had
total net assets of $3,170,633 and Uncovered Distribution Charges aggregated
$170,728.
Miscellaneous
The Agreement and Declaration of Trust, dated December 23, 1991, as amended
on August 11, 1993 and April 10, 1995, 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 AIT without par value. Class A, Class B and
Class C shares of the Trust represent an interest in the same assets of the
Trust and are identical in all respects except that Class B and Class C shares
bear the expenses of higher distribution fees resulting from the deferred sales
arrangement and that each class has exclusive voting rights with respect to
matters relating to its own distribution arrangements. The Trust received an
order from the Securities and Exchange Commission permitting the issuance and
sale of multiple classes of shares on February 25, 1994.
Each share of the Trust has one vote and shares equally in dividends and
distributions when and if declared by the Trustees of AIT and in the Trust's net
assets upon liquidation. All shares, when issued, are fully paid and
non-assessable. There are no preemptive, conversion, or exchange rights. Shares
of AIT do not have cumulative voting rights and, as such, holders of at least
50% of the shares voting for Trustees can elect all Trustees and the remaining
shareholders would not be able to elect any Trustees. As used in the Prospectus,
the term "majority vote" means the affirmative vote of (a) more than 50% of the
outstanding shares of the Trust or AIT (as appropriate) or (b) 67% or more of
the shares present at a meeting if more than 50% of the outstanding shares of
the Trust or AIT (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 AIT
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,
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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 AIT is vested with the Trustees.
The Trustees approve all significant agreements between AIT and persons or
companies furnishing services to AIT. The day-to-day operations of the Trust are
delegated to officers of AIT subject to the investment objective and policies of
AIT, the general supervision of Trustees, and the applicable laws of The
Commonwealth of Massachusetts.
Generally, there will not be annual meetings of shareholders. Shareholders
may remove trustees from office by votes cast at a meeting of shareholders or by
written consent.
Under Massachusetts law, under certain circumstances, shareholders of a
Massachusetts business trust could be deemed to have the same type of personal
liability for the obligations of the Trust as does a partner of a partnership.
However, numerous investment companies registered under the Investment Company
Act of 1940 have been formed as Massachusetts business trusts and the Trust is
not aware of an instance where such result has occurred. In addition, the
Agreement and Declaration of Trust disclaims shareholder liability for acts or
obligations of the Trust and requires that notice of such disclaimer be given in
each agreement, obligation or instrument entered into or executed by the Trust
or the Trustees. The Agreement and Declaration of Trust also provides for the
indemnification out of the Trust property for all losses and expenses of any
shareholder held personally liable for the obligations of the Trust. Moreover,
it provides that the Trust will, upon request, assume the defense of any claim
made against any shareholder for any act or obligation of the Trust and satisfy
any judgment thereon. As a result, and particularly because the Trust assets are
readily marketable and ordinarily substantially exceed liabilities, management
believes that the risk of shareholder liability is slight and limited to
circumstances in which the Trust itself would be unable to meet its obligations.
Management believes that, in view of the above, the risk of personal liability
is remote.
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 AIT of the
Trustees and officers of AIT 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 AIT. Such person may not be
indemnified against any liability to AIT or the Trust's shareholders to which he
would otherwise be subjected by reason of willful misfeasance, bad faith, gross
negligence, or reckless disregard of the duties involved in the conduct of his
office. The Declaration of Trust also authorizes the purchase of liability
insurance on behalf of Trustees and officers.
CUSTODIAN, FOREIGN SUB-CUSTODIAN AND TRANSFER AGENT--The cash and
securities owned by AIT are held by PNC Bank, National Association ("PNC Bank"),
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.
With respect to the foreign cash and securities in the Trust's portfolio, the
Trust is a party to a sub-custodian agreement between PNC Bank and Chase
Manhattan Bank, N.A. DST Systems Inc. acts as the Trust's transfer agent and
dividend disbursing agent.
INDEPENDENT ACCOUNTANTS--The Trust's independent public accountant is Tait,
Weller & Baker, Two Penn Center Plaza, Philadelphia, Pennsylvania 19102.
LEGAL COUNSEL--Certain legal matters for AIT are passed upon by Jorden Burt
Berenson & Johnson LLP, 1025 Thomas Jefferson Street, N.W., Suite 400 East,
Washington, D.C. 20007.
OTHER INFORMATION--AIT is registered with the Securities and Exchange
Commission as a management investment company. Such registration does not
involve supervision of the management or
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policies of AIT. The Prospectus and this Statement of Additional Information
omit certain of the information contained in the Registration Statement filed
with the SEC, and copies of such information may be obtained from the SEC upon
payment of the prescribed fee or examined at the SEC in Washington, D.C. without
charge.
Investors in the Trust will be kept informed of the status of their
investment through periodic reports showing diversification of the Trust's
portfolio, statistical data, and other selected data. 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 Trust's
portfolio as of the close of business on the last day of each month may be
obtained by written request to the Trust, together with a stamped,
self-addressed envelope.
The Prospectus is not an offering of the securities herein described in any
state in which the offering is unauthorized. No salesman, dealer or other person
is authorized to give any information or make any representations other than
those contained in the Prospectus.
FINANCIAL STATEMENTS
The financial statements of the Trust for the fiscal year ended September
30, 1995 (audited) and for the semi-annual period ended March 31, 1996
(unaudited) are incorporated herein by reference to the Trust's 1995 Annual
Report to Shareholders and the Trusts Semi-Annual Report to Shareholders dated
March 31, 1996, respectively. A copy of the Trust's Annual Report and
Semi-Annual Report may be obtained without charge by contacting the Trust's
Shareholder Servicing Agent at (800) 441-7267.
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APPENDIX A
BOND RATINGS
STANDARD & POOR'S BOND RATINGS
A Standard & Poor's Corporation ("S&P") corporate debt rating is a current
assessment of the creditworthiness of an obligor with respect to a specific
obligation. Debt rated "AAA" has the highest rating assigned by S&P. Capacity to
pay interest and repay principal is extremely strong. Debt rated "AA" has a very
strong capacity to pay interest and to repay principal and differs from the
highest rated issues only in small degree. Debt rated "A" has a strong capacity
to pay interest and repay principal, although it is somewhat more susceptible to
the adverse effects of changes in circumstances and economic conditions than a
debt of a higher rated category. Debt rated "BBB" is regarded as having an
adequate capacity to pay interest and repay principal. Whereas it normally
exhibits adequate protection parameters, adverse economic conditions, or
changing circumstances are more likely to lead to a weakened capacity to pay
interest and to repay principal for debt in this category than for higher rated
categories.
Debt rated "BB," "B," "CCC" or "CC" is regarded, on balance, as
predominately speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. "BB" indicates the
lowest degree of speculation and "CC" the highest degree of speculation. While
such debt will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposures to adverse
conditions. The rating "C" is reserved for income bonds on which no interest is
being paid. Debt rated "D" is in default and payments of interest and/or
repayment of principal is in arrears.
The ratings from "AA" to "B" may be modified by the addition of a plus or
minus sign to show relative standing within the major rating categories.
MOODY'S BOND RATINGS
Excerpts from Moody's description of its corporate bond ratings: Aaa -
judged to be the best quality, carry the smallest degree of investment risk; Aa
- - judged to be of high quality by all standards; A - possess many favorable
investment attributes and are to be considered as higher medium grade
obligation; Baa - considered as medium grade obligations, i.e., they are neither
highly protected nor poorly secured and have speculative characteristics as
well; Ba, B, Caa, Ca, C - protection of interest and principal payments is
questionable; Ba indicated some speculative elements while Ca represents a high
degree of speculation and C represents the lowest rated class of bonds; Caa, Ca
and C bonds may be in default. Moody's applies numerical modifiers 1, 2 and 3 in
each generic rating classification from Aa to B in its corporate bond rating
system. The modifier 1 indicates that the security ranks in the higher end of
its generic rating category; the modifier 2 indicates a mid-range ranking; and
the modifier 3 indicates that the issue ranks at the lower end of its generic
rating category.
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APPENDIX B
FUTURES CONTRACTS AND OPTIONS ON
FUTURES CONTRACTS AND FOREIGN CURRENCIES
OPTIONS ON U.S. AND FOREIGN GOVERNMENT SECURITIES
The Trust may write and purchase put and call options on U.S. Government
Securities and foreign government securities that are traded on United States
and foreign securities.
The writer of an option has no control when the underlying securities must
be sold, in the case of a call option, or purchased, in the case of a put
option, since with regard to certain options, the writer may be assigned an
exercise notice at any time prior to the termination of the obligation. Whether
or not an option expires unexercised, the writer retains the amount of the
premium. If a call option is exercised, the writer experiences a profit or loss
from the sale of the underlying security. If a put option is exercised, the
writer must fulfill the obligation to purchase the underlying security at the
exercise price, which will usually exceed the then market value of the
underlying security.
The writer of an option that wishes to terminate its obligation may effect
a "closing purchase transaction." This is accomplished by buying an option of
the same series as the option previously written. The effect of the purchase is
that the writer's position will be cancelled by the clearing corporation.
However, a writer may not effect a closing purchase transaction after being
notified of the exercise of an option. Likewise, an investor who is the holder
of an option may liquidate its position by effecting a "closing sale
transaction." This is accomplished by selling an option of the same series as
the option previously purchased. There is no guarantee that either a closing
purchase or a closing sale transaction can be effected.
Effecting a closing transaction will permit the cash or proceeds from the
concurrent sale of any securities subject to the option to be used for other
Trust investments. If the Trust desires to sell a particular security from its
portfolio on which it has written a call option, it will effect a closing
transaction prior to or concurrent with the sale of the security.
The Trust will realize a profit from a closing transaction if the price of
the purchase transaction is less than the premium received from writing the
option or the price received from a sale transaction is more than the premium
paid to purchase the option; the Trust will realize a loss from a closing
transaction if the price of the purchase transaction is more than the premium
received from writing the option or the price received from a sale transaction
is less than the premium paid to purchase the option. Because increases in the
market of a call option will generally reflect increases in the market price of
the underlying security, any loss resulting from the repurchase of a call option
is likely to be offset in whole or in part by appreciation of the underlying
security owned by the Trust.
An option position may be closed out only where there exists a secondary
market for an option of the same series. If a secondary market does not exist,
it might not be possible to effect closing transactions in particular options
with the result that the Trust would have to exercise the options in order to
realize any profit. If the Trust is unable to effect a closing purchase
transaction in a secondary market, it will not be able to sell the underlying
security until the option expires or it delivers the underlying security upon
exercise. Reasons for the absence of a liquid secondary market include the
following: (i) there may be insufficient trading interest in certain options,
(ii) restrictions may be imposed by a national securities exchange ("Exchange")
on opening transactions or closing transactions or both, (iii) trading halts,
suspensions or other restrictions may be imposed with respect to particular
classes or series of options or underlying securities, (iv) unusual or
unforeseen circumstances may interrupt normal operations on an Exchange, (v) the
facilities of an Exchange or the Options Clearing Corporation may not at all
times be
30
<PAGE>
adequate to handle current trading volume, or (vi) one or more Exchanges could,
for economic or other reasons, decide or be compelled at some future date to
discontinue the trading of options (or a particular class or series of options),
in which event the secondary market on that Exchange (or in that class or series
of options) would cease to exist, although outstanding options on that Exchange
that had been issued by the Options Clearing Corporation as a result of trades
on that Exchange would continue to be exercisable in accordance with their
terms.
The Trust may write options in connection with buy-and-write transactions;
that is, the Trust may purchase a security and then write a call option against
that security. The exercise price of the call the Trust determines to write will
depend upon the expected price movement of the underlying security. The exercise
price of a call option may be below ("in-the-money"), equal to ("at-the-money")
or above ("out-of-the-money") the current value of the underlying security at
the time the option is written. Buy-and-write transactions using in-the-money
call options may be used when it is expected that the price of the underlying
security will remain flat or decline moderately during the option period.
Buy-and-write transactions using at-the-money call options may be used when it
is expected that the price of the underlying security will remain fixed or
advance moderately during the option period. Buy-and-write transactions using
out-of-the-money call options may be used when it is expected that the premiums
received from writing the call option plus the appreciation in the market price
of the underlying security up to the exercise price will be greater than the
appreciation in the price of the underlying security alone. If the call options
are exercised in such transactions, the Trust's maximum gain will be the premium
received by it for writing the option, adjusted upwards or downwards by the
difference between the Trust's purchase price of the security and the exercise
price. If the options are not exercised and the price of the underlying security
declines, the amount of such decline will be offset in part, or entirely, by the
premium received.
The writing of covered put options is similar in terms of risk/return
characteristics to buy-and-write transactions. If the market price of the
underlying security rises or otherwise is above the exercise price, the put
option will expire worthless and the Trust's gain will be limited to the premium
received. If the market price of the underlying security declines or otherwise
is below the exercise price, the Trust may elect to close the position or take
delivery of the security at the exercise price and the Trust's return will be
the premium received from the put options minus the amount by which the market
price of the security is below the exercise price. Out-of-the-money,
at-the-money, and in-the-money put options may be used by the Trust in the same
market environments that call options are used in equivalent buy-and-write
transactions.
The Trust may purchase put options to hedge against a decline in the value
of its portfolio. By using put options in this way, the Trust will reduce any
profit it might otherwise have realized in the underlying security by the amount
of the premium paid for the put option and by transaction costs.
The Trust may purchase call options to hedge against an increase in the
price of securities that the Trust anticipates purchasing in the future. The
premium paid for the call option plus any transaction costs will reduce the
benefit, if any, realized by the Trust upon exercise of the option, and, unless
the price of the underlying security rises sufficiently, the option may expire
worthless to the Trust.
FUTURES CONTRACTS
The Trust may enter into contracts for the purchase or sale for future
delivery of fixed-income securities or foreign currencies, or contracts based on
financial indices including any index of U.S. Government Securities or foreign
government securities. U.S. futures contracts have been designed by exchanges
which have been designated "contracts markets" by the Commodity Futures Trading
Commission ("CFTC"), and must be executed through a futures commission merchant,
or brokerage firm, which is a member of the relevant contract market. Futures
contracts trade on a number of exchange
31
<PAGE>
markets, and, through their clearing corporations, the exchanges guarantee
performance of the contracts as between the clearing members of the exchange.
The Trust will enter into futures contracts which are based on debt securities
that are backed by the full faith and credit of the U.S. Government, such as
long-term U.S. Treasury Bonds, Treasury Notes, Government National Mortgage
Association modified pass-through mortgage-backed securities and three-month
U.S. Treasury Bills. The Trust may also enter into futures contracts which are
based on bonds issued by entities other than the U.S. government.
At the same time a futures contract is purchased or sold, the Trust must
allocate treasury bills as an escrow deposit. It is expected that the escrow
deposit would be approximately 1-1/2% to 5% of a contract's face value. Daily
thereafter, the futures contract is valued and the payment of "variation margin"
may be required, since each day the Trust would provide or receive cash that
reflects any decline or increase in the contract's value.
At the time of delivery of securities pursuant to such a contract,
adjustments are made to recognize differences in value arising from the delivery
of securities with a different interest rate from that specified in the
contract. In some (but not many) cases, securities called for by a futures
contract may not have been issued when the contract was written.
Although futures contracts by their terms call for the actual delivery or
acquisition of securities, in most cases the contractual obligation is fulfilled
before the date of the contract without having to make or take delivery of the
securities. The offsetting of a contractual obligation is accomplished by buying
(or selling, as the case may be) on a commodities exchange an identical futures
contract calling for delivery in the same month. Such a transaction, which is
effected through a member of an exchange, cancels the obligation to make or take
delivery of the securities. Since all transactions in the futures market are
made, offset or fulfilled through a clearinghouse associated with the exchange
on which the contracts are traded, the Trust will incur brokerage fees when it
purchases or sells futures contracts.
The purpose of the acquisition or sale of a future contract, in the case of
a portfolio, such as the portfolio of the Trust, which holds or intends to
acquire fixed-income securities, is to attempt to protect the Trust from
fluctuations in interest or foreign exchange rates without actually buying or
selling fixed-income securities or foreign currency. For example, if interest
rates were expected to increase, the Trust might enter into futures contracts
for the sale of debt securities. Such a sale would have much the same effect as
selling an equivalent value of debt securities owned by the Trust. If interest
rates did increase, the value of the debt securities in the portfolio would
decline, but the value of the futures contracts to the fund would increase at
approximately the same rate, thereby keeping the net asset value of the Trust
from declining as much as it otherwise would have. The Trust could accomplish
similar results by selling debt securities and investing in bonds with short
maturities when interest rates are expected to increase. However, since the
futures market is more liquid than the cash market, the use of futures contracts
as an investment technique allows the Trust to maintain a defensive position
without having to sell its portfolio securities.
Similarly, when it is expected that interest rates may decline, futures
contracts may be purchased to attempt to hedge against anticipated purchases of
debt securities at higher prices. Since the fluctuations in the value of futures
contracts should be similar to those of debt securities, the Trust could take
advantage of the anticipated rise in the value of debt securities without
actually buying them until the market had stabilized. At that time, the futures
contracts could be liquidated and the Trust could then buy debt securities on
the cash market. To the extent the Trust enters into futures contracts for this
purpose, the assets in the segregated asset account maintained to cover the
Trust's obligations with respect to such futures contracts will consist of cash,
cash equivalents or high quality liquid debt securities from its portfolio in an
amount equal to the difference between the market value of such futures
contracts and the aggregate value of the initial escrow and variation margin
payments made by the Trust with respect to such futures contracts.
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<PAGE>
The ordinary spreads between prices in the cash and futures markets, due to
differences in the nature of those markets, are subject to distortions. First,
all participants in the futures markets are subject to initial deposit (escrow)
and variation margin requirements. Rather than meeting additional variation
margin requirements, investors may close futures contracts through offsetting
transactions which could distort the normal relationship between the cash and
futures markets. Second, the liquidity of the futures market depends on
participants entering into offsetting transactions rather than making or taking
delivery. To the extent participants decide to make or take delivery, liquidity
in the futures market could be reduced, thus producing distortion. Third, from
the point of view of speculators, the margin deposit (escrow) requirements in
the futures market are less onerous than margin requirements in the securities
market. Therefore, increased participation by speculators in the futures market
may cause temporary price distortions. Due to the possibility of distortion, a
correct forecast of general interest rate trends by the Adviser may still not
result in a successful transaction.
In addition, futures contracts entail risks. Although the Trust believes
that use of such contracts will benefit the Trust, if the Manager's investment
judgment about the general direction of interest rates is incorrect, the Trust's
overall performance would be poorer than if it had not entered into any such
contracts. For example, if the Trust has hedged against the possibility of an
increase in interest rates which would adversely affect the price of debt
securities held in its portfolio and interest rates decrease instead, the Trust
will lose part or all of the benefit of the increased value of its debt
securities which it has hedged because it will have offsetting losses in its
futures positions. In addition, in such situations, if the Trust has
insufficient cash, it may have to sell debt securities from its portfolio to
meet daily variation margin requirements. Such sales of bonds may be, but will
not necessarily be, at increased prices which reflect the rising market. The
Trust may have to sell securities at a time when it may be disadvantageous to do
so.
OPTIONS ON FUTURES CONTRACTS
The Trust intends to purchase and write options on futures contracts for
hedging purposes. The purchase of a call option on a futures contract is similar
in some respects to the purchase of a call option on an individual security.
Depending on the pricing of the option compared to either the price of the
futures contract upon which it is based or the price of the underlying debt
securities, it may or may not be less risky than ownership of the futures
contract or underlying debt securities. As with the purchase of futures
contracts, when the Trust is not fully invested it may purchase a call option on
a futures contract to hedge against a market advance due to declining interest
rates.
The writing of a call option on a futures contract constitutes a partial
hedge against declining prices of the security or foreign currency which is
deliverable upon exercise of the futures contract. If the futures price at
expiration of the option is below the exercise price, the Trust will retain the
full amount of the option premium which provides a partial hedge against any
decline that may have occurred in the Trust's portfolio holdings. The writing of
a put option on a futures contract constitutes a partial hedge against
increasing prices of the security or foreign currency which is deliverable upon
exercise of the futures contract. If the futures price at expiration of the
option is higher than the exercise price, the Trust will retain the full amount
of the option premium which provides a partial hedge against any increase in the
price of securities which the Trust intends to purchase. If a put or call option
the Trust has written is exercised, the Trust will probably incur a loss, which
will be reduced by the amount of the premium it receives. Depending on the
degree of correlation between changes in the value of its portfolio securities
and changes in the value of its futures positions, the Trust's losses from
existing options on futures may to some extent be reduced or increased by
changes in the value of portfolio securities.
The purchase of a put option on a future contract is similar in some
respects to the purchase of protective put options on portfolio securities. For
example, the Trust may purchase a put option on a futures contract to hedge the
Trust's portfolio against the risk of rising interest rates.
33
<PAGE>
The amount of risk the Trust assumes when it purchases an option on a
futures contract is the premium paid for the option plus related transaction
costs. In addition to the correlation risks discussed above, the purchase of an
option also entails the risk that changes in the value of the underlying futures
contract will not be fully reflected in the value of the option purchased.
OPTIONS ON FOREIGN CURRENCIES
The Trust may purchase and write options on foreign currencies for hedging
purposes in a manner similar to that in which futures contracts on foreign
currencies, or forward contracts, will be utilized. For example, a decline in
the U.S. Dollar value of a foreign currency in which portfolio securities are
denominated will reduce the U.S. Dollar value of such securities, even if their
value in the foreign currency remains constant. In order to protect against such
diminutions in the value of portfolio securities, the Trust may purchase put
options on the foreign currency. If the value of the currency does decline, the
Trust will have the right to sell such currency for a fixed amount in U.S.
Dollars and will thereby offset, in whole or in part, the adverse effect on its
portfolio which otherwise would have resulted.
Conversely, where a rise in the U.S. Dollar value of a currency in which
securities to be acquired are denominated is projected, thereby increasing the
cost of such securities, the Trust may purchase call options thereon. The
purchase of such options could offset, at least partially, the effects of the
adverse movements in exchange rates. As in the case of other types of options,
however, the benefit to the Trust deriving from purchases of foreign currency
options will be reduced by the amount of the premium and related transaction
costs. In addition, where currency exchange rates do not move in the direction
or to the extent anticipated, the Trust could sustain losses on transactions in
foreign currency options which would require it to forego a portion or all of
the benefits of advantageous changes in such rates.
The Trust may write options on foreign currencies for the same types of
hedging purposes. For example, where the Trust anticipates a decline in the U.S.
Dollar value of foreign currency denominated securities due to adverse
fluctuations in exchange rates it could, instead of purchasing a put option,
write a call option on the relevant currency. If the expected decline occurs,
the option will most likely not be exercised, and the diminution in value of
portfolio securities will be offset by the amount of the premium received.
Similarly, instead of purchasing a call option to hedge against an
anticipated increase in the U.S. Dollar cost of securities to be acquired, the
Trust could write a put option on the relevant currency which, if rates move in
the manner projected, will expire unexercised and allow the Trust to hedge such
increased cost up to the amount of the premium. As in the case of other types of
options, however, the writing of a foreign currency option will constitute only
a partial hedge up to the amount of the premium, and only if rates move in the
expected direction. If this does not occur, the option may be exercised and the
Trust would be required to purchase or sell the underlying currency at a loss
which may not be offset by the amount of the premium. Through the writing of
options on foreign currencies, the Trust also may be required to lose all or a
portion of the benefits which might otherwise have been obtained from favorable
movements in exchange rates.
The Trust intends to write covered call options on foreign currencies. A
call option written on a foreign currency by the Trust is "covered" if the Trust
owns the underlying foreign currency covered by the call or has an absolute and
immediate right to acquire that foreign currency without additional cash
consideration (or for additional cash consideration held in a segregated account
by its Custodian) upon conversion or exchange of other foreign currency held in
its portfolio. A call option is also covered if the Trust has a call on the same
foreign currency and in the same principal amount as the call written where the
exercise price of the call held (a) is equal to or less than the exercise price
of the call written or (b) is greater than
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<PAGE>
the exercise price of the call written if the difference is maintained by the
Trust in cash or liquid high-grade Government Securities in a segregated account
with its Custodian.
The Trust also intends to write call options on foreign currencies that are
not covered for cross-hedging purposes. A call option on a foreign currency is
for cross-hedging purposes if it is not covered, but is designed to provide a
hedge against a decline in the U.S. Dollar value of a security which the Trust
owns or has the right to acquire and which is denominated in the currency
underlying the option due to an adverse change in the exchange rate. In such
circumstances, the Trust collateralizes the option by maintaining in a
segregated account with the Trust's Custodian, cash or liquid high-grade
Government Securities in an amount not less than the value of the underlying
foreign currency in U.S. Dollars marked to market daily.
ADDITIONAL RISKS OF OPTIONS ON FUTURES CONTRACTS
FORWARD CONTRACTS AND OPTIONS ON FOREIGN CURRENCIES
Unlike transactions entered into by the Trust in futures contracts, options
on foreign currencies and forward contracts are not traded on contract markets
regulated by the CFTC or (with the exception of certain foreign currency
options) by the SEC. To the contrary, such instruments are traded through
financial institutions acting as market-makers, although foreign currency
options are also traded on certain national securities exchanges, such as the
Philadelphia Stock Exchange and the Chicago Board Options Exchange, subject to
SEC regulation. Similarly, options on currencies may be traded over-the-counter.
In an over-the-counter trading environment, many of the protections afforded to
exchange participants will not be available. For example, there are no daily
price fluctuation limits, and adverse market movements could therefore continue
to an unlimited extent over a period of time. Although the purchaser of an
option cannot lose more than the amount of the premium plus related transaction
costs, this entire amount could be lost. Moreover, the option writer and a
trader of forward contracts could lose amounts substantially in excess of their
initial investments, due to the margin and collateral requirements associated
with such positions.
Options on foreign currencies traded on national securities exchanges are
within the jurisdiction of the SEC, as are other securities traded on such
exchanges. As a result, many of the protections provided to traders on organized
exchanges will be available with respect to such transactions. In particular,
all foreign currency option positions entered into on a national securities
exchange are cleared and guaranteed by the Options Clearing Corporation ("OCC"),
thereby reducing the risk of counterparty default. Further, a liquid secondary
market in options traded on a national securities exchange may be more readily
available than in the over-the-counter market, potentially permitting the Trust
to liquidate open positions at a profit prior to exercise or expiration, or to
limit losses in the event of adverse market movements.
The purchase and sale of exchange-traded foreign currency options, however,
is subject to the risks of the availability of a liquid secondary market
described above, as well as the risks regarding adverse market movements,
margining of options written, the nature of the foreign currency market,
possible intervention by governmental authorities and the effects of other
political and economic events. In addition, exchange-traded options on foreign
currencies involve certain risks not presented by the over-the-counter market.
For example, exercise and settlement of such options must be made exclusively
through the OCC, which has established banking relationships in applicable
foreign countries for this purpose. As a result, the OCC may, if it determines
that foreign governmental restrictions or taxes would prevent the orderly
settlement of foreign currency option exercises, or would result in undue
burdens on the OCC or its clearing member, impose special procedures on exercise
and settlement, such as technical changes in the mechanics of delivery of
currency, the fixing of dollar settlement prices or prohibitions on exercise.
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<PAGE>
In addition, options on U.S. Government Securities, futures contracts,
options on futures contracts, forward contracts and options on foreign
currencies may be traded on foreign exchanges. Such transactions are subject to
the risk of governmental actions affecting trading in or the prices of foreign
currencies or securities. The value of such positions also could be adversely
affected by (i) other complex foreign political and economic factors, (ii)
lesser availability than in the United States of data on which to make trading
decisions, (iii) delays in the Trust's ability to act upon economic events
occurring in foreign markets during nonbusiness hours in the United States, (iv)
the imposition of different exercise and settlement terms and procedures and
margin requirements than in the United States, and (v) lesser trading volume.
36
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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 and Report of
Independent Certified Public Accountants for Astra
All-Americas Government Income Trust (formerly known
as Pilgrim All-Americas Government Income Trust) for
the fiscal year ended September 30, 1995 are
incorporated herein by reference to Registrant's
Annual Report to Shareholders dated Spetember 30,
1995 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:
0000950110-95-000814) on November 30, 1995.
Unaudited Financial Statements for Astra All-Americas
Government Income Trust (formerly known as Pilgrim
All-Americas Government Income Trust) for the period
ended March 31, 1996 are incorporated herein by
reference to Registrant's Semi-Annual Report to
Shareholders dated March 31, 1996 which was filed
with, and accepted by, the U.S. Securities and
Exchange Commission via EDGAR on Form Type N-30D
(with an accession number 0000950115-96-000845) on
June 6, 1996.
In Part C: None.
(b) Exhibits
1(a) - Agreement and Declaration of Trust.1/
1(b) - Amendment to Agreement and Declaration of Trust.5/
1(c) - Amendment to Agreement and Declaration of Trust.7/
2(a) - By-laws.1/
2(b) - Name Change Amendment to By-laws.8/
3 - Not applicable.
4 - Specimen share certificates.6/
5(a) - Form of Management Agreement between Pilgrim State Tax-Free
Trust and Pilgrim Management Corporation.2/
5(b) - Form of Advisory Agreement.2/
5(c) - Form of Management Agreement between Pilgrim All-Americas
Government Income Trust and Pilgrim Management Corporation.6/
5(d) - Form of Name Change Amendment to Management Agreement.8/
6(a) - Form of Underwriting Agreement between Pilgrim State Tax-Free
Trust and Pilgrim Distributors Corp.2/
6(b) - Form of Underwriting Agreement between Pilgrim All-Americas
Government Income Trust and Pilgrim Distributors Corp.6/
6(c) - Form of Underwriter's Dealer Agreement.3/
6(d) - Form of Name Change Amendment to Underwriting Agreement.8/
7 - Not applicable.
8(a) - Form of Custody Agreement.2/
8(b) - Form of Custody Agreement for Pilgrim All-Americas Government
Income Trust.6/
8(c) - Custodian Services Agreement.8/
8(d) - Sub-Custodian Agreement.8/
9(a) - Form of Transfer Agency Agreement.2/
9(b) - Form of Transfer Agency Agreement for Pilgrim All-Americas
Government Income Trust.6/
9(c) - Form of Administration Agreement for Pilgrim State-Tax Free
Trust.4/
9(d) - Form of Administration Agreement for Pilgrim All-Americas
Government Income Trust.6/
9(e) - Form of Name Change Amendment to Administration Agreement.8/
9(f) - Form of Sub-Administration Agreement with Astra Institutional
Trust.7/
C-1
<PAGE>
9(g) - Sub-Administration Agreement.8/
9(h) - Accounting Services Agreement.8/
10 - Consent of Counsel.8/
11 - Consent of Independent Public Accountants.8/
12 - Not applicable.
13 - Not applicable.
14 - Not applicable.
15(a) - Form of Rule 12b-1 Distribution Plans for Pilgrim State
Tax-Free Trust.2/
15(b) - Form of Rule 12b-1 Distributions Plans for Pilgrim
All-Americas Government Income Trust.6/
15(c) - Forms of Name Change Amendments to Rule 12b-1 Distribution
Plans for Class A, Class B and Class C.8/
16 - Not applicable.
17 - Financial Data Schedule.8/
18 - Not Applicable.
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT
None.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES
The following information is given as of the date indicated:
Number of Record Holders
Title of Class as of June 30, 1996
------------------------------ ------------------------
Astra All-Americas Government Income Trust:
Class A Shares - 41
Class B Shares - 580
Class C Shares - 27
ITEM 27. INDEMNIFICATION
Incorporated by reference to Post-Effective Amendment No. 1 to this
Registration Statement, filed January 29, 1993.
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
Certain of the officers and directors of the Registrant's investment
adviser also serve as officers and/or directors for other Astra investment
companies and with Atlas Holdings Group, Inc. and subsidiaries.
For additional information, please see Parts A and B.
- ----------------
1/ Incorporated herein by reference to Registrant's initial registration
statement on Form N-1A, filed December 20, 1991.
2/ Incorporated herein by reference to Pre-Effective Amendment No. 1, filed
May 21, 1992.
3/ Incorporated herein by reference to Pre-Effective Amendment No. 2, filed
December 16, 1992.
4/ Incorporated herein by reference to Post-Effective Amendment No. 1, filed
January 29, 1993.
5/ Incorporated herein by reference to Post-Effective Amendment No. 2, filed
August 16, 1993.
6/ Incorporated herein by reference to Post-Effective Amendment No. 3, filed
October 14, 1993.
7/ Incorporated herein by reference to Post-Effective Amendment No. 6, filed
July 18, 1995.
8/ Filed herewith.
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ITEM 29. PRINCIPAL UNDERWRITERS
(a) Astra Fund Distributors Corp., the Registrant's principal underwriter,
also serves as principal underwriter for Astra Strategic Investment Series and
Astra Global Investment Series.
(b) The following information is furnished with respect to the officers
and directors of Astra Fund Distributors Corp., the Registrant's principal
underwriter:
Name and Principal Positions and Offices Positions and Offices
Business Address* with Principal Underwriter with Registrant
- ----------------- -------------------------- ---------------------
Robert R. Womack, Jr. President President and Portfolio
Manager
John R. Elerding Senior Vice President, Senior Vice President,
Treasurer, Secretary and Treasurer, Secretary and
Chief Financial Officer Chief Financial Officer
(c) Not Applicable. The Registrant's principal underwriter is an affiliated
person of the Registrant.
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS
The accounts, books or other documents required to be maintained by Section
31(a) of the Investment Company Act of 1940 will be kept by the Registrant, its
Investment Manager or its Shareholder Servicing Agent.
ITEM 31. MANAGEMENT SERVICES
There are no management-related service contracts not discussed in Parts A
and B.
ITEM 32. UNDERTAKINGS
(1) Registrant hereby undertakes (a) to assist shareholders with any
communications made by them in accordance with the provisions of Section 16 of
the Investment Company Act of 1940 and (b) to call a meeting of shareholders, if
requested by holders of at least 10% of the Registrant's outstanding shares, for
the purpose of voting upon the questions of removal of a Trustee or Trustees.
(2) Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's latest annual report to
shareholders upon request and without charge.
- -------------------------
* The principal business address for each of the persons listed is: 750 B
Street, Suite 2350, San Diego, California 92101.
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SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this post-effective amendment to its
Registration Statement pursuant to Rule 485(b) under the Securities Act of 1933
and has duly caused this Amendment to its Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of Beverly
Hills and the State of California, on the 21st day of May, 1996.
ASTRA INSTITUTIONAL TRUST
/s/ PALOMBA WEINGARTEN
----------------------------
Palomba Weingarten,
Chairman
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to its Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signatures Title Date
- ---------- ----- ----
/s/ PALOMBA WEINGARTEN Chairman of the Board May 21, 1996
- -------------------------- and Trustee
Palomba Weingarten
/s/ ROBERT R. WOMACK, JR. President May 21, 1996
- -------------------------
Robert R. Womack, Jr.
/s/ JOHN R. ELERDING Senior Vice President, May 21, 1996
- ------------------------- Chief Financial Officer,
John R. Elerding Secretary and Treasurer
/s/ AL BURTON Trustee May 21, 1996
- ------------------------
Al Burton
/s/ FELICE R. CUTLER Trustee May 21, 1996
- ------------------------
Felice R. Cutler
/s/ GARRY D. PEARSON Trustee May 21, 1996
- ------------------------
Garry D. Pearson
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EXHIBITS
Exhibit Description
- ------- -----------
2(b) - Name Change Amendment to By-laws
5(d) - Form of Name Change Amendment to Management Agreement
6(d) - Form of Name Change Amendment to Underwriting Agreement
8(c) - Custodian Services Agreement
8(d) - Sub-Custodian Agreement
9(e) - Form of Name Change Amendment to Administration Agreement
9(g) - Sub-Administration Agreement
9(h) - Accounting Services Agreement
10 - Consent of Counsel
11 - Consent of Independent Public Accountants
15(c) - Forms of Name Change Amendments to Rule 12b-1 Distribution plan
for Class A, Class B and Class C.
17 - Financial Data Schedule
EXHIBIT 2(B)
AMENDMENT TO THE BY-LAWS OF ASTRA INSTITUTIONAL TRUST
(FORMERLY PILGRIM INSTITUTIONAL TRUST)
The By-laws are hereby amended to change all references to the name
"Pilgrim" to "Astra," including the name of the Trust to "Astra Institutional
Trust."
As adopted at a meeting of
the Board of Trstees on
April 10, 1995
EXHIBIT 5(D)
FORM OF AMENDED AND RESTATED INVESTMENT MANAGEMENT AGREEMENT
BETWEEN
ASTRA INSTITUTIONAL TRUST
(FORMERLY PILGRIM INSTITUTIONAL TRUST)
AND
ASTRA MANAGEMENT COMPANY
(FORMERLY PILGRIM MANAGEMENT CORPORATION)
The Investment Management Agreement dated October 12, 1993, between Pilgrim
Institutional Trust, on behalf of Pilgrim All-Americas Government Income Trust,
and Pilgrim Management Corporation (the "Agreement") is hereby amended to change
the names of the parties to Astra Institutional Trust, Astra All-Americas
Government Income Trust and Astra Management Company, effective April 10, 1995.
ASTRA INSTITUTIONAL TRUST, on
behalf of Astra All-Americas
Government Income Trust
By:
--------------------------------------
Palomba Weingarten, President
ATTEST:
- ----------------------------
ASTRA MANAGEMENT COMPANY
By:
-------------------------------------
ATTEST:
- -----------------------------
EXHIBIT 6(D)
FORM OF AMENDMENT TO UNDERWRITING AGREEMENT
BETWEEN
ASTRA INSTITUTIONAL TRUST
(FORMERLY PILGRIM INSTITUTIONAL TRUST)
AND
ASTRA FUNDS DISTRIBUTORS CORP.
(FORMERLY PILGRIM DISTRIBUTORS CORP.)
Gentlemen:
Pursuant to the terms of the Underwriting Agreement dated October 13, 1993
between you and us, we hereby amend such Underwriting Agreement to change the
names of the Pilgrim Institutional Trust to Astra Institutional Trust and
Pilgrim Distributors Corp. to Astra Fund Distributors Corp., effective April 10,
1995.
Very truly yours,
ASTRA INSTITUTIONAL TRUST
on behalf of Astra All-Americas
Government Income Trust
By:
-------------------------------------
Its:
------------------------------------
Agreed to and Accepted:
ASTRA FUND DISTRIBUTORS CORP.
By:
----------------------------------
EXHIBIT 8(C)
CUSTODIAN SERVICES AGREEMENT
THIS AGREEMENT is made as of September 5, 1995 by and between PNC BANK,
NATIONAL ASSOCIATION, a national banking association ("PNC Bank"), and ASTRA
INSTITUTIONAL TRUST, a Massachusetts business trust (the "Fund").
W I T N E S S E T H:
WHEREAS, the Fund is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act");
and
WHEREAS, the Fund wishes to retain PNC Bank to provide custodian services
to its investment portfolios listed on Exhibit A attached hereto and made a part
hereof, as such Exhibit A may be amended from time to time (each a "Portfolio"),
and PNC Bank wishes to furnish custodian services, either directly or through an
affiliate or affiliates, as more fully described herein.
NOW, THEREFORE, In consideration of the premises and mutual covenants
herein contained, and intending to be legally bound hereby, the parties hereto
agree as follows:
1. DEFINITIONS. AS USED IN THIS AGREEMENT:
(a) "1933 Act" means the Securities Act of 1933, as amended.
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(b) "1934 Act" means the Securities Exchange Act of 1934, as amended.
(c) "Authorized Person" means any officer of the Fund and any other
person duly authorized by the Fund's Board of Trustees to give Oral and
Written Instructions on behalf of the Fund and listed on the Authorized
Persons Appendix attached hereto and made a part hereof or any amendment
thereto as may be received by PNC Bank. An Authorized Person's scope of
authority may be limited by the Fund by setting forth such limitation in
the Authorized Persons Appendix.
(d) "Book-Entry System" means Federal Reserve Treasury book-entry
system for United States and federal agency securities, its successor or
successors, and its nominee or nominees and any book-entry system
maintained by an exchange registered with the SEC under the 1934 Act.
(e) "CEA" means the Commodities Exchange Act, as amended.
(f) "Oral Instructions" mean oral instructions received by PNC Bank
from an Authorized Person or from a person reasonably believed by PNC Bank
to be an Authorized Person.
(g) "PNC Bank" means PNC Bank, National Association or a subsidiary or
affiliate of PNC Bank, National Association.
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(h) "SEC" means the Securities and Exchange Commission.
(i) "Securities Laws" mean the 1933 Act, the 1934 Act, the 1940 Act
and the CEA.
(j) "Shares" mean the shares of beneficial interest of any series or
class of the Fund.
(k) "Property" means:
(i) any and all securities and other investment items which the
Fund may from time to time deposit, or cause to be
deposited, with PNC Bank or which PNC Bank may from time to
time hold for the Fund;
(ii) all income in respect of any of such securities or other
investment items;
(iii) all proceeds of the sale of any of such securities or
investment items; and
(iv) all proceeds of the sale of securities issued by the Fund,
which are received by PNC Bank from time to time, from or on
behalf of the Fund.
(k) "Written Instructions" mean written instructions signed by two
Authorized Persons and received by PNC Bank. The instructions may be
delivered by hand, mail, tested telegram, cable, telex or facsimile sending
device.
2. APPOINTMENT. The Fund hereby appoints PNC Bank to provide custodian
services to the Fund, on behalf of each of its investment portfolios (each, a
"Portfolio"), and PNC Bank accepts such
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appointment and agrees to furnish such services.
3. DELIVERY OF DOCUMENTS. The Fund has provided or, where applicable, will
provide PNC Bank with the following:
(a) certified or authenticated copies of the resolutions of the
Fund's Board of Trustees, approving the appointment of PNC Bank
or its affiliates to provide services;
(b) a copy of the Fund's most recent effective registration
statement;
(c) a copy of each Portfolio's advisory agreements;
(d) a copy of the distribution agreement with respect to each class
of Shares;
(e) a copy of each Portfolio's administration agreement if PNC Bank
is not providing the Portfolio with such services;
(f) copies of any shareholder servicing agreements made in respect of
the Fund or a Portfolio; and
(g) certified or authenticated copies of any and all amendments or
supplements to the foregoing.
4
<PAGE>
4. COMPLIANCE WITH LAWS.
PNC Bank undertakes to comply with all applicable requirements of the
Securities Laws and any laws, rules and regulations of governmental authorities
having jurisdiction with respect to the duties to be performed by PNC Bank
hereunder. Except as specifically set forth herein, PNC Bank assumes no
responsibility for such compliance by the Fund or any Portfolio.
5. INSTRUCTIONS.
(a) Unless otherwise provided in this Agreement, PNC Bank shall act
only upon Oral and Written Instructions.
(b) PNC Bank shall be entitled to rely upon any Oral and Written
Instructions it receives from an Authorized Person (or from a person
reasonably believed by PNC Bank to be an Authorized Person) pursuant to
this Agreement. PNC Bank may assume that any Oral or Written Instructions
received hereunder are not in any way inconsistent with the provisions of
organizational documents of the Fund or of any vote, resolution or
proceeding of the Fund's Board of Trustees or of the Fund's shareholders,
unless and until PFPC receives Written Instructions to the contrary.
(c) The Fund agrees to forward to PNC Bank Written Instructions
confirming Oral Instructions (except where such Oral Instructions are given
by PNC Bank or its affiliates) so that PNC
5
<PAGE>
Bank receives the Written Instructions by the close of business on the same
day that such Oral Instructions are received. The fact that such confirming
Written Instructions are not received by PNC Bank shall in no way
invalidate the transactions or enforceability of the transactions
authorized by the Oral Instructions. Where Oral or Written Instructions
reasonably appear to have been received from an Authorized Person, PNC Bank
shall incur no liability to the Fund in acting upon such Oral or Written
Instructions provided that PNC Bank's actions comply with the other
provisions of this Agreement.
6. RIGHT TO RECEIVE ADVICE.
(a) Advice of the Fund. If PNC Bank is in doubt as to any action it
should or should not take, PNC Bank may request directions or advice,
including Oral or Written Instructions, from the Fund.
(b) Advice of Counsel. If PNC Bank shall be in doubt as to any
question of law pertaining to any action it should or should not take, PNC
Bank may request advice at its own cost from such counsel of its own
choosing (who may be counsel for the Fund, the Fund's investment adviser or
PNC Bank, at the option of PNC Bank).
(c) Conflicting Advice. In the event of a conflict between directions,
advice or Oral or Written Instructions PNC Bank
6
<PAGE>
receives from the Fund, and the advice it receives from counsel, PNC Bank
shall be entitled to rely upon and follow the advice of counsel. In the
event PNC Bank so relies on the advice of counsel, PNC Bank remains liable
for any action or omission on the part of PNC Bank which constitutes
willful misfeasance, bad faith, gross negligence or reckless disregard by
PNC Bank of any duties, obligations or responsibilities set forth in this
Agreement.
(d) Protection of PNC Bank. PNC Bank shall be protected in any action
it takes or does not take in reliance upon directions, advice or Oral or
Written Instructions it receives from the Fund or from counsel and which
PNC Bank believes, in good faith, to be consistent with those directions,
advice or Oral or Written Instructions. Nothing in this section shall be
construed so as to impose an obligation upon PNC Bank (i) to seek such
directions, advice or Oral or Written Instructions, or (ii) to act in
accordance with such directions, advice or Oral or Written Instructions
unless, under the terms of other provisions of this Agreement, the same is
a condition of PNC Bank's properly taking or not taking such action.
Nothing in this subsection shall excuse PNC Bank when an action or omission
on the part of PNC Bank constitutes willful misfeasance, bad faith, gross
negligence or
7
<PAGE>
reckless disregard by PNC Bank of any duties, obligations or
responsibilities set forth in this Agreement.
7. RECORDS; VISITS. The books and records pertaining to the Fund and any
Portfolio, which are in the possession or under the control of PNC Bank, shall
be the property of the Fund. Such books and records shall be prepared and
maintained as required by the 1940 Act and other applicable securities laws,
rules and regulations. The Fund and Authorized Persons shall have access to such
books and records at all times during PNC Bank's normal business hours. Upon the
reasonable request of the Fund, copies of any such books and records shall be
provided by PNC Bank to the Fund or to an authorized representative of the Fund,
at the Fund's expense.
8. CONFIDENTIALITY. PNC Bank agrees on its own behalf and that of its
employees to keep confidential all records of the Fund and information relating
to the Fund and its shareholders (past, present and future), unless the release
of such records or information is otherwise consented to, in writing, by the
Fund. The Fund agrees that such consent shall not be unreasonably withheld and
may not be withheld where PNC Bank may be exposed to civil or criminal contempt
proceedings or when required to divulge such information or records to duly
constituted authorities.
8
<PAGE>
9. COOPERATION WITH ACCOUNTANTS. PNC Bank shall cooperate with the Fund's
independent public accountants and shall take all reasonable action in the
performance of its obligations under this Agreement to ensure that the necessary
information is made available to such accountants for the expression of their
opinion, as required by the Fund.
10. DISASTER RECOVERY. PNC Bank shall enter into and shall maintain in
effect with appropriate parties one or more agreements making reasonable
provisions for emergency use of electronic data processing equipment to the
extent appropriate equipment is available. In the event of equipment failures,
PNC Bank shall, at no additional expense to the Fund, take reasonable steps to
minimize service interruptions. PNC Bank shall have no liability with respect to
the loss of data or service interruptions caused by equipment failure provided
such loss or interruption is not covered by PNC Bank's own willful misfeasance,
bad faith, gross negligence or reckless disregard of its duties or obligations
under this Agreement.
11. COMPENSATION. As compensation for custody services rendered by PNC Bank
during the term of this Agreement, the Fund, on behalf of each of the
Portfolios, will pay to PNC Bank a fee or fees as may be agreed to in writing
from time to time by the Fund
9
<PAGE>
and PNC Bank.
12. INDEMNIFICATION. The Fund, on behalf of each Portfolio, agrees to
indemnify and hold harmless PNC Bank and its affiliates from all taxes, charges,
expenses, assessments, claims and liabilities (including, without limitation,
liabilities arising under the Securities Laws and any state and foreign
securities and blue sky laws, and amendments thereto, and expenses, including
(without limitation) attorneys' fees and disbursements, arising directly or
indirectly from any action or omission to act which PNC Bank takes (i) at the
request or on the direction of or in reliance on the advice of the Fund or (ii)
upon Oral or Written Instructions. Neither PNC Bank, nor any of its affiliates,
shall be indemnified against any liability (or any expenses incident to such
liability) arising out of PNC Bank's or its affiliates' own willful misfeasance,
bad faith, gross negligence or reckless disregard of its duties under this
Agreement.
13. RESPONSIBILITY OF PNC BANK.
(a) PNC Bank shall be under no duty to take any action on behalf of
the Fund or any Portfolio except as specifically set forth herein or as may
be specifically agreed to by PNC Bank in writing. PNC Bank shall be
obligated to exercise care and diligence in the performance of its duties
hereunder, to act in
10
<PAGE>
good faith and to use its best efforts, within reasonable limits, in
performing services provided for under this Agreement. PNC Bank shall be
liable for any damages arising out of PNC Bank's failure to perform its
duties under this agreement to the extent such damages arise out of PNC
Bank's willful misfeasance, bad faith, gross negligence or reckless
disregard of its duties under this Agreement.
(b) Without limiting the generality of the foregoing or of any other
provision of this Agreement, (i) PNC Bank shall not be under any duty or
obligation to inquire into and shall not be liable for (A) the validity or
invalidity or authority or lack thereof of any Oral or Written Instruction,
notice or other instrument which conforms to the applicable requirements of
this Agreement, and which PNC Bank reasonably believes to be genuine; or
(B) subject to section 10, delays or errors or loss of data occurring by
reason of circumstances beyond PNC Bank's control, including acts of civil
or military authority, national emergencies, fire, flood, catastrophe, acts
of God, insurrection, war, riots or failure of the mails, transportation,
communication or power supply.
(c) Notwithstanding anything in this Agreement to the contrary, PNC
Bank shall have no liability to the Fund or to any
11
<PAGE>
Portfolio for any consequential, special or indirect losses or damages
which the Fund may incur or suffer by or as a consequence of PNC Bank's
performance of the services provided hereunder, whether or not the
likelihood of such losses or damages was known by PNC Bank.
14. DESCRIPTION OF SERVICES.
(a) Delivery of the Property. The Fund will deliver or arrange for
delivery to PNC Bank, all the Property owned by the Portfolios, including
cash received as a result of the distribution of Shares, during the period
that is set forth in this Agreement. PNC Bank will not be responsible for
such property until actual receipt.
(b) Receipt and Disbursement of Money. PNC Bank, acting upon Written
Instructions, shall open and maintain separate accounts in the Fund's name
using all cash received from or for the account of the Fund, subject to the
terms of this Agreement. In addition, upon Written Instructions, PNC Bank
shall open separate custodial accounts for each separate series or
Portfolio of the Fund (collectively, the "Accounts") and shall hold in the
Accounts all cash received from or for the Accounts of the Fund
specifically designated to each separate series or Portfolio.
PNC Bank shall make cash payments from or for the Accounts of
12
<PAGE>
a Portfolio only for:
(i) purchases of securities in the name of a Portfolio or PNC
Bank or PNC Bank's nominee as provided in sub-section (j)
and for which PNC Bank has received a copy of the broker's
or dealer's confirmation or payee's invoice, as appropriate;
(ii) purchase or redemption of Shares of the Fund delivered to
PNC Bank;
(iii) payment of, subject to Written Instructions, interest,
taxes, administration, accounting, distribution, advisory,
management fees or similar expenses which are to be borne by
a Portfolio;
(iv) payment to, subject to receipt of Written Instructions, the
Fund's transfer agent, as agent for the shareholders, an
amount equal to the amount of dividends and distributions
stated in the Written Instructions to be distributed in cash
by the transfer agent to shareholders, or, in lieu of paying
the Fund's transfer agent, PNC Bank may arrange for the
direct payment of cash dividends and distributions to
shareholders in accordance with procedures mutually agreed
upon from time to time by and among the Fund, PNC Bank and
the Fund's transfer agent.
(v) payments, upon receipt Written Instructions, in connection
with the conversion, exchange or surrender of securities
owned or subscribed to by the Fund and held by or delivered
to PNC Bank;
(vi) payments of the amounts of dividends
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<PAGE>
received with respect to securities sold short;
(vii) payments made to a sub-custodian pursuant to provisions in
sub-section (c) of this Section; and
(viii) payments, upon Written Instructions, made for other proper
Fund purposes.
PNC Bank is hereby authorized to endorse and collect all checks, drafts or
other orders for the payment of money received as custodian for the Accounts.
(c) Receipt of Securities; Subcustodians.
(i) PNC Bank shall hold all securities received by it for the
Accounts in a separate account that physically segregates
such securities from those of any other persons, firms or
corporations, except for securities held in a Book-Entry
System. All such securities shall be held or disposed of
only upon Written Instructions of the Fund pursuant to the
terms of this Agreement. PNC Bank shall have no power or
authority to assign, hypothecate, pledge or otherwise
dispose of any such securities or investment, except upon
the express terms of this Agreement and upon Written
Instructions, accompanied by a certified resolution of the
Fund's Board of Trustees, authorizing the transaction. In no
case may any member of the Fund's Board of Trustees, or any
officer, employee or agent of the Fund withdraw any
securities.
At PNC Bank's own expense and for its own convenience, PNC
Bank may enter into sub-custodian agreements with other
United States banks or trust companies to perform duties
described in this sub-section (c). Such bank
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<PAGE>
or trust company shall have an aggregate capital, surplus
and undivided profits, according to its last published
report, of at least one million dollars ($1,000,000), if it
is a subsidiary or affiliate of PNC Bank, or at least twenty
million dollars ($20,000,000) if such bank or trust company
is not a subsidiary or affiliate of PNC Bank. In addition,
such bank or trust company must be qualified to act as
custodian and agree to comply with the relevant provisions
of the 1940 Act and other applicable rules and regulations.
Any such arrangement will not be entered into without prior
written notice to the Fund.
PNC Bank shall remain responsible for the performance of all
of its duties as described in this Agreement and shall hold
the Fund and each Portfolio harmless from its own acts or
omissions, under the standards of care provided for herein,
or the acts and omissions of any sub-custodian chosen by PNC
Bank under the terms of this sub-section (c).
(d) Transactions Requiring Instructions. Upon receipt of Oral or
Written Instructions and not otherwise, PNC Bank, directly or through the
use of the Book-Entry System, shall:
(i) deliver any securities held for a Portfolio against the
receipt of payment for the sale of such securities;
(ii) execute and deliver to such persons as may be designated in
such Oral or Written Instructions, proxies, consents,
authorizations, and any other instruments whereby the
authority of a Portfolio as owner of any securities may be
exercised;
15
<PAGE>
(iii) deliver any securities to the issuer thereof, or its agent,
when such securities are called, redeemed, retired or
otherwise become payable; provided that, in any such case,
the cash or other consideration is to be delivered to PNC
Bank;
(iv) deliver any securities held for a Portfolio against receipt
of other securities or cash issued or paid in connection
with the liquidation, reorganization, refinancing, tender
offer, merger, consolidation or recapitalization of any
corporation, or the exercise of any conversion privilege;
(v) deliver any securities held for a Portfolio to any
protective committee, reorganization committee or other
person in connection with the reorganization, refinancing,
merger, consolidation, recapitalization or sale of assets of
any corporation, and receive and hold under the terms of
this Agreement such certificates of deposit, interim
receipts or other instruments or documents as may be issued
to it to evidence such delivery;
(vi) make such transfer or exchanges of the assets of the
Portfolios and take such other steps as shall be stated in
said Oral or Written Instructions to be for the purpose of
effectuating a duly authorized plan of liquidation,
reorganization, merger, consolidation or recapitalization of
the Fund;
(vii) release securities belonging to a Portfolio to any bank or
trust company for the purpose of a pledge or hypothecation
to secure any loan incurred by the Fund on behalf of that
Portfolio; provided, however, that securities shall be
released only upon payment
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<PAGE>
to PNC Bank of the monies borrowed, except that in cases
where additional collateral is required to secure a
borrowing already made subject to proper prior
authorization, further securities may be released for that
purpose; and repay such loan upon redelivery to it of the
securities pledged or hypothecated therefor and upon
surrender of the note or notes evidencing the loan;
(viii) release and deliver securities owned by a Portfolio in
connection with any repurchase agreement entered into on
behalf of the Fund, but only on receipt of payment therefor;
and pay out moneys of the Fund in connection with such
repurchase agreements, but only upon the delivery of the
securities;
(ix) release and deliver or exchange securities owned by the Fund
in connection with any conversion of such securities,
pursuant to their terms, into other securities;
(x) release and deliver securities owned by the fund for the
purpose of redeeming in kind shares of the Fund upon
delivery thereof to PNC Bank; and
(xi) release and deliver or exchange securities owned by the Fund
for other corporate purposes.
PNC Bank must also receive a certified resolution describing
the nature of the corporate purpose and the name and address
of the person(s) to whom delivery shall be made when such
action is pursuant to sub-paragraph d.
(e) Use of Book-Entry System. The Fund shall deliver to
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PNC Bank certified resolutions of the Fund's Board of Trustees approving,
authorizing and instructing PNC Bank on a continuous basis, to deposit in
the Book-Entry System all securities belonging to the Portfolios eligible
for deposit therein and to utilize the Book-Entry System to the extent
possible in connection with settlements of purchases and sales of
securities by the Portfolios, and deliveries and returns of securities
loaned, subject to repurchase agreements or used as collateral in
connection with borrowings. PNC Bank shall continue to perform such duties
until it receives Written or Oral Instructions authorizing contrary
actions.
PNC Bank shall administer the Book-Entry System as follows:
(i) With respect to securities of each Portfolio which are
maintained in the Book-Entry System, the records of PNC Bank
shall identify by Book-Entry or otherwise those securities
belonging to each Portfolio. PNC Bank shall furnish to the
Fund a detailed statement of the Property held for each
Portfolio under this Agreement at least monthly and from
time to time and upon written request.
(ii) Securities and any cash of each Portfolio deposited in the
Book-Entry System will at all times be segregated from any
assets and cash controlled by PNC Bank in other than a
fiduciary or custodian capacity but may be commingled with
other assets held in such capacities. PNC Bank and its
sub-custodian, if any, will pay out money only upon receipt
of securities and will deliver
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<PAGE>
securities only upon the receipt of money.
(iii) All books and records maintained by PNC Bank which relate
to the Fund's participation in the Book-Entry System will at
all times during PNC Bank's regular business hours be open
to the inspection of Authorized Persons, and PNC Bank will
furnish to the Fund all information in respect of the
services rendered as it may require.
PNC Bank will also provide the Fund with such reports on its own system of
internal control as the Fund may reasonably request from time to time.
(f) Registration of Securities. All Securities held for a Portfolio
which are issued or issuable only in bearer form, except such securities
held in the Book-Entry System, shall be held by PNC Bank in bearer form;
all other securities held for a Portfolio may be registered in the name of
the Fund on behalf of that Portfolio, PNC Bank, the Book-Entry System, a
sub-custodian, or any duly appointed nominees of the Fund, PNC Bank,
Book-Entry System or sub-custodian. The Fund reserves the right to instruct
PNC Bank as to the method of registration and safekeeping of the securities
of the Fund. The Fund agrees to furnish to PNC Bank appropriate instruments
to enable PNC Bank to hold or deliver in proper form for transfer, or to
register in the name of its nominee or in the name of the Book-Entry
System, any securities which it
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<PAGE>
may hold for the Accounts and which may from time to time be registered in
the name of the Fund on behalf of a Portfolio.
(g) Voting and Other Action. Neither PNC Bank nor its nominee shall
vote any of the securities held pursuant to this Agreement by or for the
account of a Portfolio, except in accordance with Written Instructions. PNC
Bank, directly or through the use of the Book-Entry System, shall execute
in blank and promptly deliver all notices, proxies and proxy soliciting
materials to the registered holder of such securities. If the registered
holder is not the Fund on behalf of a Portfolio, then Written or Oral
Instructions must designate the person who owns such securities.
(h) Transactions Not Requiring Instructions. In the absence of
contrary Written Instructions, PNC Bank is authorized to take the following
actions:
(i) Collection of Income and Other Payments.
(A) collect and receive for the account of each Portfolio,
all income, dividends, distributions, coupons, option
premiums, other payments and similar items, included or
to be included in the Property, and, in addition,
promptly advise each Portfolio of such receipt and
credit such income, as collected, to each Portfolio's
custodian account;
(B) endorse and deposit for collection,
20
<PAGE>
in the name of the Fund, checks, drafts, or other
orders for the payment of money;
(C) receive and hold for the account of each Portfolio all
securities received as a distribution on the
Portfolio's securities as a result of a stock dividend,
share split-up or reorganization, recapitalization,
readjustment or other rearrangement or distribution of
rights or similar securities issued with respect to any
securities belonging to a Portfolio and held by PNC
Bank hereunder;
(D) present for payment and collect the amount payable upon
all securities which may mature or be called, redeemed,
or retired, or otherwise become payable on the date
such securities become payable; and
(E) take any action which may be necessary and proper in
connection with the collection and receipt of such
income and other payments and the endorsement for
collection of checks, drafts, and other negotiable
instruments.
(ii) Miscellaneous Transactions.
(A) deliver or cause to be delivered Property against
payment or other consideration or written receipt
therefor in the following cases:
(1) for examination by a broker or dealer selling for
the account of a Portfolio in accordance with
street delivery custom;
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<PAGE>
(2) for the exchange of interim receipts or temporary
securities for definitive securities; and
(3 for transfer of securities into the name of the
Fund on behalf of a Portfolio or PNC Bank or
nominee of either, or for exchange of securities
for a different number of bonds, certificates, or
other evidence, representing the same aggregate
face amount or number of units bearing the same
interest rate, maturity date and call provisions,
if any; provided that, in any such case, the new
securities are to be delivered to PNC Bank.
(B) Unless and until PNC Bank receives Oral or Written
Instructions to the contrary, PNC Bank shall:
(1) pay all income items held by it which call for
payment upon presentation and hold the cash
received by it upon such payment for the account of
each Portfolio;
(2) collect interest and cash dividends received, with
notice to the Fund, to the account of each
Portfolio;
(3) hold for the account of each Portfolio all stock
dividends, rights and similar securities issued
with respect to any securities held by PNC Bank;
and
(4) execute as agent on behalf of the Fund all
necessary ownership
22
<PAGE>
certificates required by the Internal Revenue Code
or the Income Tax Regulations of the United States
Treasury Department or under the laws of any state
now or hereafter in effect, inserting the Fund's
name, on behalf of a Portfolio, on such certificate
as the owner of the securities covered thereby, to
the extent it may lawfully do so.
(i) Segregated Accounts.
(i) PNC Bank shall upon receipt of Written or Oral Instructions
establish and maintain a segregated accounts on its records
for and on behalf of each Portfolio. Such accounts may be
used to transfer cash and securities, including securities
in the Book-Entry System:
(A) for the purposes of compliance by the Fund with the
procedures required by a securities or option exchange,
providing such procedures comply with the 1940 Act and
any releases of the SEC relating to the maintenance of
segregated accounts by registered investment companies;
and
(B) Upon receipt of Written Instructions, for other proper
corporate purposes.
(ii) PNC Bank shall arrange for the establishment of IRA
custodian accounts for such shareholders holding Shares
through IRA accounts, in accordance with the Fund's
prospectuses, the Internal Revenue Code of 1986, as amended
(including regulations promulgated thereunder), and with
such other procedures as are mutually agreed upon from time
to time by and among the Fund, PNC Bank
23
<PAGE>
and the Fund's transfer agent.
(j) Purchases of Securities. PNC Bank shall settle purchased
securities upon receipt of Oral or Written Instructions from the Fund or
its investment advisers that specify:
(i) the name of the issuer and the title of the securities,
including CUSIP number if applicable;
(ii) the number of shares or the principal amount purchased and
accrued interest, if any;
(iii) the date of purchase and settlement;
(iv) the purchase price per unit;
(v) the total amount payable upon such purchase;
(vi) the Portfolio involved; and
(vii) the name of the person from whom or the broker through whom
the purchase was made. PNC Bank shall upon receipt of
securities purchased by or for a Portfolio pay out of the
moneys held for the account of the Portfolio the total
amount payable to the person from whom or the broker through
whom the purchase was made, provided that the same conforms
to the total amount payable as set forth in such Oral or
Written Instructions.
(k) Sales of Securities. PNC Bank shall settle sold securities upon
receipt of Oral or Written Instructions from the Fund that specify:
(i) the name of the issuer and the title of the security,
including CUSIP number if
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<PAGE>
applicable;
(ii) the number of shares or principal amount sold, and accrued
interest, if any;
(iii) the date of trade and settlement;
(iv) the sale price per unit;
(v) the total amount payable to the Fund upon such sale;
(vi) the name of the broker through whom or the person to whom
the sale was made; and
(vii) the location to which the security must be delivered and
delivery deadline, if any; and
(viii) the Portfolio involved.
PNC Bank shall deliver the securities upon receipt of the total amount
payable to the Portfolio upon such sale, provided that the total amount payable
is the same as was set forth in the Oral or Written Instructions. Subject to the
foregoing, PNC Bank may accept payment in such form as shall be satisfactory to
it, and may deliver securities and arrange for payment in accordance with the
customs prevailing among dealers in securities.
(l) Reports; Proxy Materials.
(i) PNC Bank shall furnish to the Fund the following reports:
(A) such periodic and special reports as the Fund may reasonably
request;
25
<PAGE>
(B) a monthly statement summarizing all transactions and entries
for the account of each Portfolio, listing each Portfolio
securities belonging to each Portfolio with the adjusted
average cost of each issue and the market value at the end
of such month and stating the cash account of each Portfolio
including disbursements;
(C) the reports required to be furnished to the Fund pursuant to
Rule 17f-4; and
(D) such other information as may be agreed upon from time to
time between the Fund and PNC Bank.
(ii) PNC Bank shall transmit promptly to the Fund any proxy statement,
proxy material, notice of a call or conversion or similar
communication received by it as custodian of the Property. PNC
Bank shall be under no other obligation to inform the Fund as to
such actions or events.
(m) Collections. All collections of monies or other property in respect, or
which are to become part, of the Property (but not the safekeeping thereof upon
receipt by PNC Bank) shall be at the sole risk of the Fund. If payment is not
received by PNC Bank within a reasonable time after proper demands have been
made, PNC Bank shall notify the Fund in writing, including copies of all demand
letters, any written responses, memoranda of all oral responses and shall await
instructions from the Fund. PNC Bank shall not be obliged to take legal action
for collection unless and
26
<PAGE>
until reasonably indemnified to its satisfaction. PNC Bank shall
also notify the Fund as soon as reasonably practicable whenever
income due on securities is not collected in due course and shall
provide the Fund with periodic status reports of such income
collected after a reasonable time.
15. DURATION AND TERMINATION. This Agreement shall continue until
terminated by the Fund or by PNC Bank on sixty (60) days' prior written notice
to the other party. In the event this Agreement is terminated (pending
appointment of a successor to PNC Bank or vote of the shareholders of the Fund
to dissolve or to function without a custodian of its cash, securities or other
property), PNC Bank shall not deliver cash, securities or other property of the
Portfolios to the Fund. It may deliver them to a bank or trust company of PNC
Bank's choice, having an aggregate capital, surplus and undivided profits, as
shown by its last published report, of not less than twenty million dollars
($20,000,000), as a custodian for the Fund to be held under terms similar to
those of this Agreement. PNC Bank shall not be required to make any such
delivery or payment until full payment shall have been made to PNC Bank of all
of its fees, compensation, costs and expenses. PNC Bank shall have a security
interest in and shall have a right of setoff against the Property as security
for the
27
<PAGE>
payment of such fees, compensation, costs and expenses.
16. NOTICES. All notices and other communications, including Written
Instructions, shall be in writing or by confirming telegram, cable, telex or
facsimile sending device. Notice shall be addressed (a) if to PNC Bank at
Airport Business Center, International Court 2, 200 Stevens Drive, Lester,
Pennsylvania 19113, marked for the attention of the Custodian Services
Department (or its successor) (b) if to the Fund, at Astra Management Corp.,
Symphony Towers, 750 B Street, Suite 2350, San Diego, CA 92101; or (c) if to
neither of the foregoing, at such other address as shall have been given by like
notice to the sender of any such notice or other communication by the other
party. If notice is sent by confirming telegram, cable, telex or facsimile
sending device, it shall be deemed to have been given immediately. If notice is
sent by first-class mail, it shall be deemed to have been given five days after
it has been mailed. If notice is sent by messenger, it shall be deemed to have
been given on the day it is delivered.
17. AMENDMENTS. This Agreement, or any term hereof, may be changed or
waived only by a written amendment, signed by the party against whom enforcement
of such change or waiver is sought.
18. DELEGATION; ASSIGNMENT. PNC Bank may assign its rights
28
<PAGE>
and delegate its duties hereunder to any wholly-owned direct or indirect
subsidiary of PNC Bank, National Association or PNC Bank Corp., provided that
(i) PNC Bank gives the Fund thirty (30) days' prior written notice; (ii) the
delegate (or assignee) agrees with PNC Bank and the Fund to comply with all
relevant provisions of the 1940 Act; and (iii) PNC Bank and such delegate (or
assignee) promptly provide such information as the Fund may request, and respond
to such questions as the Fund may ask, relative to the delegation (or
assignment), including (without limitation) the capabilities of the delegate (or
assignee).
19. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
20. FURTHER ACTIONS. Each party agrees to perform such further acts and
execute such further documents as are necessary to effectuate the purposes
hereof.
21. MISCELLANEOUS.
(a) Entire Agreement. This Agreement embodies the entire agreement and
understanding between the parties and supersedes all prior agreements and
understandings relating to the subject matter hereof, provided that the
parties may embody in one or more separate documents their agreement, if
any, with respect to
29
<PAGE>
delegated duties and Oral Instructions.
(b) Captions. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect.
(c) Governing Law. This Agreement shall be deemed to be a contract
made in Pennsylvania and governed by Pennsylvania law, without regard to
principles of conflicts of law.
(d) Partial Invalidity. If any provision of this Agreement shall be
held or made invalid by a court decision, statute, rule or otherwise, the
remainder of this Agreement shall not be affected thereby.
(e) Successors and Assigns. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective
successors and permitted assigns.
(f) Facsimile Signatures. The facsimile signature of any party to this
Agreement shall constitute the valid and binding execution hereof by such
party.
30
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
PNC BANK, NATIONAL ASSOCIATION
By: /s/ JOHN FOSTER
----------------------------------
Title: VP
-------------------------------
ASTRA INSTITUTIONAL TRUST
By: /s/ JOHN R. ELERDING
----------------------------------
Title: Chief Financial Officer
-------------------------------
31
<PAGE>
EXHIBIT A
THIS EXHIBIT A, dated as of ___________________________, 1995, is Exhibit A
to that certain Custodian Services Agreement dated as of
_________________________ , 1995 between PNC Bank, National Association and
Astra Institutional Trust.
PORTFOLIOS
Astra All-American Government Income Trust
32
<PAGE>
AUTHORIZED PERSONS APPENDIX
NAME (TYPE) SIGNATURE
- ------------------------------------ ----------------------------------
- ------------------------------------ ----------------------------------
- ------------------------------------ ----------------------------------
- ------------------------------------ ----------------------------------
- ------------------------------------ ----------------------------------
- ------------------------------------ ----------------------------------
33
EXHIBIT 8(D)
SUB-CUSTODIAN AGREEMENT
AGREEMENT dated as of September 5, 1995 among THE CHASE MANHATTAN BANK,
N.A. ("Bank"), ASTRA INSTITUTIONAL TRUST (the "Fund") and PNC BANK, NATIONAL
ASSOCIATION ("Company").
WITNESSETH:
WHEREAS, Company has entered into a Custodian Agreement with the Fund, a
Massachusetts business trust registered under the Investment Company Act of
1940, as amended (the "Investment Company Act"), to provide certain custody
services; and
WHEREAS, the Company and the Fund wish to retain Bank to provide certain
sub-custodian services to the Company and the Fund for the benefit of the Fund,
and Bank is willing to furnish such services;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. Custody Account. (a) The Bank agrees to establish and maintain (a) a
separate custody account for each investment portfolio of the Fund ("Custody
Account") for any and all stocks, shares, bonds, debentures, notes, mortgages or
other obligations for the payment of money and any certificates, receipts,
warrants or other instruments representing rights to receive, purchase or
<PAGE>
subscribe for the same or evidencing or representing any other rights or
interests therein and other similar property (hereinafter called "Securities")
from time to time received by the Bank or any sub-custodian (as defined in the
second paragraph of Section 3 hereof) for the account of the particular
investment portfolio of the Fund; and (b) a separate deposit account or accounts
in the name of each investment portfolio of the Fund ("Deposit Account") for any
and all cash and cash equivalents in any currency received by the Bank or any
sub-custodian for the account of the particular investment portfolio of the
Fund, which cash shall not be subject to withdrawal by draft or check. The term
"Property" as used herein shall mean all Securities, cash, cash equivalents and
other assets of the Fund.
(b) The Bank shall be responsible for providing information to the
Fund to enable the Fund to determine that the Bank and each sub-custodian
is an eligible foreign custodian, qualified U.S. bank or overseas branch of
a qualified U.S. bank in accordance with the definitions thereof set forth
herein.
2. Maintenance of Property Abroad. Securities in a Custody Account shall be
held in the country or other jurisdiction as shall be specified from time to
time in Instructions (as defined in Section 9 hereof), provided that such
country or other jurisdiction
2
<PAGE>
shall be one in which the principal trading market for such Securities is
located or the country or other jurisdiction in which such Securities are to be
presented for payment or are acquired for the Custody Account, and cash in a
Deposit Account shall be credited to an account in such country or other
jurisdiction in which such cash may be legally deposited or is the legal
currency for the payment of public or private debts. Cash may be held pursuant
to Instructions in either interest or non-interest bearing accounts as may be
available for the particular currency. To the extent Instructions are issued and
the Bank can comply with such Instructions, the Bank is authorized to maintain
cash balances on deposit for the Fund with itself or one of its affiliates at
such reasonable rates of interest as may from time to time be paid on such
accounts, or in non-interest bearing accounts as the Fund may direct, if
acceptable to the Bank.
3. Eligible Foreign Custodians and Securities Depositories. The Trustees of
the Fund authorize the Bank to hold the Securities in the Custody Account(s) and
the cash in the Deposit Account(s) in custody and deposit accounts,
respectively, which have been established by the Bank with one of its branches,
a branch of a qualified U.S. bank, an eligible foreign custodian or an eligible
foreign securities depository; provided, however, that the Trustees
3
<PAGE>
of the Fund have approved the use of, and the Bank's contract with, such
eligible foreign custodian or eligible foreign securities depository by
resolution, and Instructions to such effect have been provided to the Bank.
Furthermore, if a Bank's branch, a branch of a qualified U.S. bank or an
eligible foreign custodian is selected to act as the Bank's sub-custodian to
hold any Property, such entity is authorized to hold such Property in its
account with any eligible foreign securities depository in which it participates
so long as such foreign securities depository has been approved by the Trustees
of the Fund. For purposes of this Agreement (a) "qualified U.S. bank" shall mean
a qualified U.S. bank as defined in Rule 17f-5 under the Investment Company Act,
("Rule 17f-5"); (b) "eligible foreign custodian" shall mean a qualified banking
institution or trust company incorporated or organized under the laws of a
country other than the United States as defined by Rule 17f-5; (c) "eligible
foreign securities depository" shall mean a securities depository or clearing
agency, incorporated or organized under the laws of a country other than the
United States, which operates (i) the central system, or in specific markets a
system that is the subject of a then currently viable and favorable "no-action
letter" that has been issued to Chase Manhattan Bank, N.A. by the staff of the
Securities and Exchange Commission, for
4
<PAGE>
handling of securities or equivalent book-entries in that country or (ii) a
transnational system for the central handling of securities or equivalent
book-entries.
Hereinafter the term "sub-custodian" will refer to any Bank branch, any
branch of a qualified U.S. bank, any eligible foreign custodian or any eligible
foreign securities depository with which the Bank has entered into an agreement
of the type contemplated hereunder regarding Securities and/or cash held in or
to be acquired for a Custody Account or a Deposit Account.
If, after the initial approval of the sub-custodians by the Trustees of the
Fund in connection with this Agreement, the Bank wishes to appoint other
sub-custodians to hold the Fund's Property, it will so notify the Company and
the Fund and will provide them with information reasonably necessary to
determine any such new sub-custodian's eligibility under Rule 17f-5, including a
copy of the proposed agreement with such sub-custodian. The Fund shall within 30
days after receipt of such notice give a written approval or disapproval of the
proposed action.
If the Bank intends to remove any sub-custodian previously approved, it
shall so notify the Fund and the Company and shall move the Property deposited
with such sub-custodian to another sub-custodian previously approved or to a new
sub-custodian,
5
<PAGE>
provided that the appointment of any new sub-custodian will be subject to the
requirements set forth in the preceding paragraph. The Bank shall take steps as
may be required to remove any sub-custodian which has ceased to meet the
requirements of Rule 17f-5.
4. Use of Sub-Custodians. With respect to Property which is maintained by
the Bank in the physical custody of a sub-custodian pursuant to Section 3:
(a) The Bank will identify on its books as belonging to the particular
investment portfolio of the Fund any Property held by such sub-custodian.
(b) In the event that a sub-custodian permits any of the Securities
placed in its care to be held in an eligible foreign securities depository,
such sub-custodian will be required by its agreement with the Bank to
identify on its books such Securities as being held for the account of the
Bank as a custodian for its customers.
(c) Any Securities in a Custody Account held by a sub-custodian of the
Bank will be subject only to the instructions of the Bank or its agents;
and any Securities held in an eligible foreign securities depository for
the account of a sub-custodian will be subject only to the instructions of
such sub-custodian.
6
<PAGE>
(d) The Bank will only deposit Securities in an account with a
sub-custodian which includes exclusively the assets held by the Bank for
its customers, and the Bank will cause such account to be designated by
such sub-custodian as a special custody account for the exclusive benefit
of customers of the Bank.
(e) Any agreement the Bank shall enter into with a sub-custodian with
respect to the holding of Securities shall be consistent with Rule 17f-5
and shall require that (i) the Securities are not subject to any right,
charge, security interest, lien or claim of any kind in favor of such
sub-custodian or its creditors except for a claim of payment for its safe
custody or administration and (ii) beneficial ownership of such Securities
is freely transferable without the payment of money or value other than for
safe custody or administration; provided, however, that the foregoing shall
not apply to the extent that any of the above-mentioned rights, charges,
etc. result from any compensation or other expenses arising with respect to
the safekeeping of Securities pursuant to such agreement.
(f) The Bank shall allow independent public accountants of the Fund
such reasonable access to the records of the Bank relating to Property held
in a Custody Account and a Deposit Account as required by such accountants
in connection with their
7
<PAGE>
examination of the books and records pertaining to the affairs of the Fund.
The Bank shall, subject to restrictions under applicable law, also obtain
from any sub-custodian with which the Bank maintains the physical
possession of any Property an undertaking to permit independent public
accountants of the Fund such reasonable access to the records of such
sub-custodian as may be required in connection with their examination of
the books and records pertaining to the affairs of the Fund or to supply a
verifiable confirmation of the contents of such records. The Bank shall
furnish the Fund and the Company such reports (or portions thereof) of the
Bank's external auditors as relate directly to the Bank's system of
internal accounting controls applicable to the Bank's duties under this
Agreement.
(g) The Bank will supply to the Fund, care of its investment adviser,
and the Company at least monthly a statement in respect to any Property in
a Custody and a Deposit Account held by each sub-custodian, including an
identification of the entity having possession of such Property, and the
Bank will send to the Fund and the Company an advice or notification of any
transfers of Property to or from the Custody Account and Deposit Account,
indicating, as to Property acquired for an investment portfolio of the
Fund, the identity of the entity having physical possession of
8
<PAGE>
such Property. In the absence of the filing in writing with the Bank by the
Company of exceptions or objections to any such statement within sixty (60)
days of the Company's receipt of such statement, or within sixty (60) days
after the date that a material defect is reasonably discoverable, the
Company shall be deemed to have approved such statement; and in such case
or upon written approval of the Company of any such statement the Bank
shall, to the extent permitted by law and provided the Bank has met the
standard of care in Section 12 hereof, be released, relieved and discharged
with respect to all matters and things set forth in such statement as
though such statement has been settled by the decree of a court of
competent jurisdiction in an action in which the Fund and all persons
having any equity interest in the Fund were parties.
(h) The Bank shall provide to the Company and to the Trustees of the
Fund on an annual basis a report confirming the Bank's belief that it and
each of the sub-custodians is an eligible foreign custodian, a qualified
U.S. bank or branch of a qualified U.S. bank, as defined herein. The Bank
shall also provide such relevant information regarding the Securities and
other assets, any sub-custodian, any foreign country or itself as may be
reasonably requested from time to time by the Company or the Fund.
9
<PAGE>
(i) The Bank hereby warrants to the Fund and the Company that in its
opinion, after due inquiry, the established procedures to be followed by
each of its branches, each branch of a qualified U.S. bank, each eligible
foreign custodian and each eligible foreign securities depository holding
Securities or cash of the Fund pursuant to this Agreement afford protection
for such Securities or cash at least equal to that afforded by the Bank's
established procedures with respect to similar Securities or cash held by
the Bank (and its securities depositories) in New York.
(j) The Bank hereby warrants to the Fund and the Company that as of
the date of this Agreement it is maintaining a Bankers Blanket Bond and
hereby agrees to notify the Fund and the Company in the event its Bankers
Blanket Bond is cancelled or otherwise lapses.
5. Deposit Account Payments. Subject to the provisions of Section 7, the
Bank shall make, or cause its sub-custodian to make, payments of cash credited
to a Deposit Account only:
(a) in connection with the purchase of Securities for the particular
investment portfolio of the Fund involved and the delivery of such
Securities to, or the crediting of such Securities to the particular
Custody Account of, the Bank or its sub-custodian, each such payment to be
made at prices as confirmed
10
<PAGE>
by Instructions from Authorized Persons (as defined in Section 10 hereof);
(b) for the purchase or redemption of shares of the capital stock of
the particular investment portfolio of the Fund involved and the delivery
to, or crediting to the account of, the Bank or its sub-custodian of such
shares to be so purchased or redeemed;
(c) for the payment for the account of the particular investment
portfolio of the Fund involved of dividends, interest, taxes, management or
supervisory fees, capital distributions or operating expenses;
(d) for the payments to be made in connection with the conversion,
exchange or surrender of Securities held in a Custody Account;
(e) for other proper corporate purposes of the particular investment
portfolio of the Fund involved; or
(f) upon the termination of this Custody Agreement as hereinafter set
forth.
All payments of cash for a purpose permitted by subsection (a), (b), (c) or
(d) of this Section 5 will be made only upon receipt by the Bank of
Instructions from Authorized Persons which shall specify the purpose for
which the payment is to be made and the
11
<PAGE>
applicable subsection of this Section 5. In the case of any payment to be
made for the purpose permitted by subsection (e) of this Section 5, the
Bank must first receive a certified copy of a resolution of the Trustees of
the Fund adequately describing such payment, declaring such purpose to be a
proper corporate purpose, and naming the person or persons to whom such
payment shall be made. Any payment pursuant to subsection (f) of this
Section 5 will be made in accordance with Section 17 hereof. In the event
that any payment for an investment portfolio of the Fund made under this
Section 5 exceeds the funds available in that investment portfolio's
Deposit Account, the Bank may, in its discretion, advance the Fund on
behalf of that investment portfolio an amount equal to such excess and such
advance shall be deemed a loan from the Bank to that investment portfolio
payable on demand, bearing interest at the rate of interest customarily
charged by the Bank on similar loans. If the Bank causes a Deposit Account
to be credited on the payable date for interest, dividends or redemptions,
the particular investment portfolio of the Fund involved will promptly
return to the Bank any such amount or property so credited upon oral or
written notification that neither the Bank nor its sub-custodian can
collect such amount or property in the ordinary course of business. The
Bank or its sub-custodian, as the case may
12
<PAGE>
be, shall have no duty or obligation to institute legal proceedings, file a
claim or proof of claim in any insolvency proceeding or take any other
action with respect to the collection of such amount or property beyond its
ordinary collection procedures.
6. Custody Account Transactions. Subject to the provisions of Section 7,
Securities in a Custody Account will be transferred, exchanged or delivered by
the Bank or its sub-custodians only:
(a) upon sale of such Securities for the particular investment
portfolio of the Fund involved and receipt by the Bank or its sub-custodian
of payment therefor, each such payment to be in the amount confirmed by
Instructions from Authorized Persons;
(b) when such Securities are called, redeemed or retired, or otherwise
become payable;
(c) in exchange for or upon conversion into other Securities alone or
other Securities and cash pursuant to any plan of merger, consolidation,
reorganization, recapitalization or readjustment;
(d) upon conversion of such Securities pursuant to their terms into
other Securities;
(e) upon exercise of subscription, purchase or other similar rights
represented by such Securities;
13
<PAGE>
(f) for the purpose of exchanging interim receipts or temporary
Securities for definitive Securities;
(g) for the purpose of redeeming in kind shares of the capital stock
of the particular investment portfolio of the Fund involved against
delivery to the Bank or its sub-custodian of such shares to be redeemed;
(h) for other proper corporate purposes of the particular investment
portfolio of the Fund involved; or
(i) upon the termination of this Custody Agreement as hereinafter set
forth.
All transfers, exchanges or deliveries of Securities in a Custody Account
for a purpose permitted by either subsection (a), (b), (c), (d), (e) or (f) of
this Section 6 will be made, except as provided in Section 8 hereof, only upon
receipt by the Bank of Instructions from Authorized Persons which shall specify
the purpose of the transfer, exchange or delivery to be made and the applicable
subsection of this Section 6. In the case of any transfer or delivery to be made
for the purpose permitted by subsection (g) of this Section 6, the Bank must
first receive Instructions from Authorized Persons specifying the shares held by
the Bank or its sub-custodian to be so transferred or delivered and naming the
person or persons to whom transfers or delivery of such
14
<PAGE>
shares shall be made. In the case of any transfer, exchange or delivery to be
made for the purpose permitted by subsection (h) of this Section 6, the Bank
must first receive a certified copy of a resolution of the Trustees of the Fund
adequately describing such transfer, exchange or delivery, declaring such
purpose to be a proper corporate purpose, and naming the person or persons to
whom delivery of such Securities shall be made. Any transfer or delivery
pursuant to subsection (i) of this Section 6 will be made in accordance with
Section 17 hereof.
7. Custody Account Procedures. With respect to any transaction involving
Securities held in or to be acquired for a Custody Account, the Bank in its
discretion may cause the Deposit Account for the particular investment portfolio
of the Fund involved to be credited on the contractual settlement date with the
proceeds of any sale or exchange of Securities from the particular Custody
Account and to be debited on the contractual settlement date for the cost of
Securities purchased or acquired for the particular Custody Account. The Bank
may reverse any such credit or debit if the transaction with respect to which
such credit or debit was made fails to settle within a reasonable period,
determined by the Bank in its discretion, after the contractual settlement date,
except that if any Securities delivered pursuant
15
<PAGE>
to this Section 7 are returned by the recipient thereof, the Bank may cause any
such credits and debits to be reversed at any time. With respect to any
transactions as to which the Bank does not determine so to credit or debit the
particular Deposit Account, the proceeds from the sale or exchange of Securities
will be credited and the cost of such Securities purchased or acquired will be
debited to the particular Deposit Account on the date such proceeds or
Securities are received by the Bank.
Notwithstanding the preceding paragraph, settlement and payment for
Securities received for, and delivery of Securities out of, a Custody Account
may be effected in accordance with the customary or established securities
trading or securities processing practices and procedures in the jurisdiction or
market in which the transaction occurs, including, without limitation,
delivering Securities to the purchaser thereof or to a dealer therefor (or an
agent for such purchaser or dealer) against a receipt with the expectation of
receiving later payment for such Securities from such purchaser or dealer.
8. Actions of the Bank. Until the Bank receives Instructions from
Authorized Persons to the contrary, the Bank will, or will instruct its
sub-custodian, to:
(a) present for payment any Securities in a Custody
16
<PAGE>
Account which are called, redeemed or retired or otherwise become payable and
all coupons and other income items which call for payment upon presentation to
the extent that the Bank or sub-custodian is aware of such opportunities for
payment, and hold cash received upon presentation of such Securities in
accordance with the provisions of Sections 2, 3 and 4 hereof;
(b) in respect of Securities in a Custody Account, execute in the name
of the Fund on behalf of the particular investment portfolio involved such
ownership and other certificates as may be required to obtain payments in
respect thereof;
(c) exchange interim receipts or temporary Securities in a Custody
Account for definitive Securities;
(d) (if applicable) convert monies received with respect to Securities
of foreign issue into United States dollars or any other currency necessary
to effect any transaction involving the Securities whenever it is
practicable to do so through customary banking channels, using any method
or agency available, including, but not limited to, the facilities of the
Bank, its subsidiaries, affiliates or sub-custodians;
(e) (if applicable) appoint brokers and agents for any transaction
involving the Securities in a Custody Account, including, without
limitation, affiliates of the Bank or any
17
<PAGE>
sub-custodian; and
(f) reclaim taxes withheld by foreign issuers where reclaim is
possible, provided that Bank has been provided with all documentation it
may require.
9. Instructions. As used in this Agreement, the term "Instructions" means
instructions of the Fund or the Company received by the Bank via telephone,
telex, TWX, facsimile transmission, bank wire or other teleprocess or electronic
instruction system acceptable to the Bank which the Bank believes in good faith
to have been given by Authorized Persons or which are transmitted with proper
testing or authentication pursuant to terms and conditions which the Bank may
specify.
Any Instructions delivered to the Bank by telephone shall promptly
thereafter be confirmed in writing by an Authorized Person (which confirmation
may bear the facsimile signature of such Authorized Person), but the particular
investment portfolio of the Fund involved and the Company will hold the Bank
harmless for the Company's or the Fund's failure to send such confirmation in
writing, to the extent such investment portfolio of the Fund or the Company is
responsible for such failure. Unless otherwise expressly provided, all
Instructions shall continue in full force and effect until cancelled or
superseded. If the Bank requires
18
<PAGE>
test arrangements, authentication methods or other security devices to be used
with respect to Instructions, any Instructions given by the Fund or the Company
thereafter shall be given and processed in accordance with such terms and
conditions for the use of such arrangements, methods or devices as the Bank may
put into effect and modify from time to time. The Fund and the Company shall
safeguard any testkeys, identification codes or other security devices which the
Bank shall make available to them. The Bank may electronically record any
Instructions given by telephone, and any other telephone discussions, with
respect to a Custody Account.
10. Authorized Persons. As used in this Agreement, the term "Authorized
Persons" means such officers or such agents of the Fund or the Company as have
been designated by a resolution of the Board of Trustees of the Fund, a
certified copy of which has been provided to the Bank, to act on behalf of the
Fund in the performance of any acts which Authorized Persons may do under this
Agreement. Such persons shall continue to be Authorized Persons until such time
as the Bank receives Instructions from Authorized Persons that any such officer
or agent is no longer an Authorized Person.
11. Nominees. Securities in a Custody Account which are ordinarily held in
registered form may be registered in the name of
19
<PAGE>
the Bank's nominee or, as to any Securities in the possession of an entity other
than the Bank, in the name of such entity's nominee. The particular investment
portfolio of the Fund involved agrees to hold any such nominee harmless from any
liability as a holder of record of such Securities, but not if such liability is
a result of such nominee's negligence. The Bank may without notice to the
Company or the Fund cause any such Securities to cease to be registered in the
name of any such nominee and to be registered in the name of the Fund. In the
event that any Securities registered in the name of the Bank's nominee or held
by one of its sub-custodians and registered in the name of such sub-custodian's
nominee are called for partial redemption by the issuer of such Security, the
Bank may allot, or cause to be allotted, the called portion to the respective
beneficial holders of such class of security in any manner the Bank deems to be
fair and equitable.
12. Standard of Care.
(a) The Bank shall be obligated to perform only such duties as are set
forth in this Agreement or expressly contained in Instructions given to
Bank which are consistent with the provisions of this Agreement.
(i) The Bank will use reasonable care with respect to its
obligations under this Agreement and the safekeeping of
Property. The Bank shall
20
<PAGE>
be liable to the Fund and the Company for any loss which
shall occur as the result of the failure of a sub-custodian
or an eligible foreign securities depository to exercise
reasonable care with respect to the safekeeping of such
Property to the same extent that the Bank would be liable to
the Fund and the Company if the Bank were holding such
Property in New York. In the event of any loss to the Fund
or the Company by reason of the failure of the Bank or its
sub-custodian or an eligible foreign securities depository
to exercise reasonable care, the Bank shall be liable to the
Fund or the Company only to the extent of the Fund's or
Company's direct damages and expenses to be determined based
on, but not limited to, the market value of the Property
which is the subject of the loss at the date of discovery of
such loss and without reference to any special conditions or
circumstances.
(ii) The Bank will not be responsible for any act, omission,
default or for the solvency of any broker or agent (other
than as provided herein) which it or a sub-custodian
appoints and uses unless such appointment and use were made
or done negligently or in bad faith.
(iii) The Bank shall be indemnified by, and without liability to,
the particular investment portfolio of the Fund involved and
the Company for any action taken or omitted by the Bank
whether pursuant to Instructions or otherwise within the
scope of this Agreement if such act
21
<PAGE>
or omission was in good faith and without negligence. In
performing its obligations under this Agreement, the Bank
may rely on the genuineness of any document which it
believes in good faith and without negligence to have been
validly executed. The Fund and the Company shall idemnify
the Bank only to the extent of the Bank's direct damages and
expenses, without reference to any special conditions or
circumstances.
(iv) The Fund, on behalf of the particular investment portfolio
of the Fund involved, agrees to cause such investment
portfolio to pay for and hold the Bank harmless from any
liability or loss resulting from the imposition or
assessment of any taxes or other governmental charges, and
any related expenses with respect to income from or Property
in such investment portfolio's Custody Account and Deposit
Account.
(v) The Bank shall be entitled to rely, and may act upon the
advice of counsel (who may be counsel for the Fund or the
Company) on all matters and shall be without liability for
any action reasonably taken or omitted in good faith and
without negligence pursuant to such advice.
(vi) The Bank need not maintain any insurance for the exclusive
benefit of the Fund or Company.
(vii) Without limiting the foregoing, the Bank shall not be
liable for any loss which results from:
1) the general risk of investing, or
2) subject to Section 12(a)(i) hereof, investing or
holding Property in a particular country including, but
not limited to, losses resulting from nationalization,
expropriation or other governmental actions; regulation
of the
22
<PAGE>
banking or securities industry; currency restrictions,
devaluations or fluctuations; and market conditions
which prevent the orderly execution of securities
transactions or affect the value of Property.
(viii) No party shall be liable to the other for any loss due to
forces beyond its control including but not limited to
strikes or work stoppages, acts of war or terrorism,
insurrection, revolution, nuclear fusion, fission or
radiation, or acts of God.
(b) Consistent with and without limiting the first paragraph of this
Section 12, it is specifically acknowledged that the Bank shall have no
duty or responsibility to:
(i) Question Instructions or make any suggestions to the Fund,
Company or an Authorized Person regarding such Instructions;
(ii) Supervise or make recommendations with respect to
investments or the retention of Securities;
(iii) Subject to Section 3 and Section 12(a)(ii) hereof, evaluate
or report to the Fund, Company or an Authorized Person regarding the
financial condition of any broker, agent or other party to which
Securities are delivered or payments are made pursuant to this
Agreement; or
(iv) Review or reconcile trade confirmations received from
brokers.
(c) The Bank shall provide to the Fund, on an annual basis, a report
confirming that the arrangements hereunder remain in compliance with the
rules of the Securities and Exchange
23
<PAGE>
Commission governing such arrangements.
13. Compliance with Securities and Exchange Commission Rules and Orders.
Except to the extent the Bank has specifically agreed pursuant to this Agreement
or in an exemptive order to comply with a condition of Rule 17f-5 or any
interpretation or exemptive order promulgated thereunder by or under the
authority of the Securities and Exchange Commission, the Fund shall be solely
responsible to assure that the maintenance of Securities and cash under this
Agreement complies with such Rule 17f-5.
14. Corporate Action. Whenever the Bank or its sub-custodian receives
information concerning the Securities which requires discretionary action by the
beneficial owner of the Securities (other than a proxy), such as subscription
rights, bonus issues, stock repurchase plans and rights offerings, or legal
notices or other material intended to be transmitted to securities holders
("Corporate Actions"), the Bank will give the Company notice of such Corporate
Actions to the extent that the Bank's central corporate actions department has
actual knowledge of a Corporate Action in time to notify its customers.
When a rights entitlement or a fractional interest resulting from a rights
issue, stock dividend, stock split or similar Corporate Action is received which
bears an expiration date, the
24
<PAGE>
Bank or its sub-custodians will endeavor to obtain Instructions from the Fund,
Company or its Authorized Person, but if Instructions are not received in time
for the Bank to take timely action, or actual notice of such Corporate Action
was received too late to seek Instructions, the Bank is authorized to sell such
rights entitlement or fractional interest and to credit the applicable Deposit
Account with the proceeds and to take any other action it deems, in good faith,
to be appropriate in which case, provided it has met the standard of care in
Section 12 hereof, it shall be held harmless by the particular investment
portfolio of the Fund involved for any such action.
The Bank will deliver proxies to the Company or its designated agent
pursuant to special arrangements which may have been agreed to in writing
between the parties hereto. Such proxies shall be executed in the appropriate
nominee name relating to Securities in a Custody Account registered in the name
of such nominee but without indicating the manner in which such proxies are to
be voted; and where bearer Securities are involved, proxies will be delivered in
accordance with instructions from Authorized Persons.
15. Fees and Expenses. The Company agrees to pay to the Bank from time to
time such compensation for its services pursuant to this Agreement as may be
mutually agreed upon in writing from time
25
<PAGE>
to time and the Bank's out-of-pocket or incidental expenses, including (but
without limitation) reasonable legal fees. The Fund shall reimburse the Company
for the entirety of such amount. The Fund hereby agrees on behalf of its
respective investment portfolios to cause the particular investment portfolio of
the Fund involved to hold the Bank harmless from any liability or loss resulting
from any taxes or other governmental charges, and any expenses related thereto,
which may be imposed, or assessed with respect to such investment portfolio's
Custody Account and also agrees on behalf of its respective investment
portfolios to cause the particular investment portfolio of the Fund involved to
hold the Bank, its sub-custodians, and their respective nominees harmless from
any liability as a record holder of Securities in such investment portfolio's
Custody Account. The Bank is authorized to charge any account of the particular
investment portfolio of the Fund involved for such items and the Bank shall have
a lien on Securities in such investment portfolio's Custody Account and on cash
in such investment portfolio's Deposit Account for any amount owing to the Bank
in connection with such investment portfolio from time to time under this
Agreement.
16. Effectiveness. This Agreement shall be effective on the date first
noted above.
26
<PAGE>
17. Termination. This Agreement may be terminated by the Fund, the Company
or the Bank by 60 days' written notice to the other parties, sent by registered
mail, provided that any termination by the Company shall be authorized by a
resolution of the Trustees of the Fund, a certified copy of which shall
accompany such notice of termination, and provided further, that such resolution
shall specify the names of persons to whom the Bank shall deliver the Securities
in each Custody Account and to whom the cash in each Deposit Account shall be
paid. If notice of termination is given by the Bank, the Fund or the Company
shall, within 60 days following the giving of such notice, deliver to the Bank a
certified copy of a resolution of the Trustees of the Fund specifying the names
of the persons to whom the Bank shall deliver such Securities and cash, after
deducting therefrom any amounts which the Bank reasonably determines to be owed
to it under Section 15 hereof. If within 60 days following the giving of a
notice of termination by the Bank, the Bank does not receive from the Fund or
the Company a certified copy of a resolution of the Trustees of the Fund
specifying the names of the persons to whom the cash in each Deposit Account
shall be paid and to whom the Securities in each Custody Account shall be
delivered, the Bank, at its election, may deliver such Securities and pay such
cash to a bank or trust
27
<PAGE>
company doing business in the State of New York and qualified as a custodian
under the Investment Company Act of 1940 (and having aggregate capital, surplus
and undivided profits of at least U.S. $20,000,000) to be held and disposed of
pursuant to the provisions of this Agreement, or may continue to hold such
Securities and cash until a certified copy of one or more resolutions as
aforesaid is delivered to the Bank. The obligations of the parties hereto
regarding the use of reasonable care, indemnities and payment of fees and
expenses shall survive the termination of this Agreement, and the obligations of
each investment portfolio of the Fund to indemnify and/or hold harmless other
persons or entities under this Agreement shall be the several (and not the joint
or joint and several) obligation of each investment portfolio of the Fund.
18. Notices. Any notice or other communication from the Fund or the Company
to the Bank is to be sent to the office of the Bank at 4 Chase MetroTech Center,
18th Floor, Brooklyn, NY 11245, or such other address as may hereafter be given
to the Fund or the Company in accordance with the notice provisions hereunder,
and any notice from the Bank to the Fund or the Company is to be mailed postage
prepaid, addressed to the Fund and to the Company at the addresses appearing
below, or as the same may hereafter be changed on the Bank's records in
accordance with notice hereunder from the
28
<PAGE>
Fund or the Company.
19. Governing Law and Successors and Assigns. This Agreement shall be
governed by the law of the State of New York and shall not be assignable by any
party, but shall bind the successors and assigns of the Fund, the Company and
the Bank.
20. Headings. The headings of the paragraphs hereof are included for
convenience of reference only and do not form a part of this Agreement.
21. Counterpart Execution. This Agreement may be executed in any number of
counterparts with the same effect as if all parties hereto had signed the same
document. All counterparts shall be construed together and shall constitute one
agreement.
22. Confidentiality. Bank agrees on behalf of itself and its employees to
treat confidentially all records and other information relative to the Fund and
its prior, present, or potential shareholders, and relative to the Company and
its prior, present, or potential customers, except, after prior notification to
and approval in writing by the Fund or the Company, which approval shall not be
unreasonably withheld and may not be withheld where Bank may be exposed to civil
or criminal contempt proceedings for failure to comply, when requested to
divulge such information by duly constituted authorities, or when so requested
by the Fund or
29
<PAGE>
the Company.
23. Records. The books and records pertaining to the Fund, which are in the
possession or under the control of the Bank, shall be the property of the Fund.
Such books and records shall be prepared and maintained as required by the
Investment Company Act of 1940 and other applicable securities laws, rules and
regulations. The Fund and Authorized Persons shall have access to such books and
records at all times during the Bank's normal business hours. Upon the
reasonable request of the Fund, copies of any such books and records shall be
provided by the Bank to the Fund or to an authorized representative of the Fund,
at the Fund's own expense.
24. Limitations on the Obligations of the Fund. The obligations of the Fund
are not binding upon any of the Trustees, shareholders, officers, employees or
agents of the Fund individually but are binding only upon the assets and
property of the Fund or one or more of its investment portfolios.
30
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their officers designated below on the day and year first above
written.
PNC BANK, NATIONAL ASSOCIATION
By: /s/ John Foster
--------------------------------
Address for record:
Airport Business Center
200 Stevens Drive
Lester, PA 19113
THE CHASE MANHATTAN BANK, N.A.
By: /s/ Kevin P. Norton
--------------------------------
Address for record:
4 Chase Metro Tech Center
18th Floor
Brooklyn, N.Y. 11245
ASTRA INSTITUTIONAL TRUST
By: /s/ John R. Elerding
--------------------------------
Address for record:
c/o Astra Management Corp.
Symphony Towers
750 B Street
Suite 2350
San Diego, CA 92101
31
EXHIBIT 9(E)
FORM OF AMENDED AND RESTATED ADMINISTRATION AGREEMENT
BETWEEN
ASTRA INSTITUTIONAL TRUST
(FORMERLY PILGRIM INSTITUTIONAL TRUST)
AND
ATLAS FINANCIAL GROUP, INC.
(FORMERLY PILGRIM GROUP, INC.)
Pursuant to the terms of this Administration Agreement between Pilgrim
Institutional Trust, whose series is known as Pilgrim All-Americas Government
Income Trust, and Pilgrim Group, Inc. (the "Agreement"), we hereby amend this
Agreement to change the names of the parties to ASTRA INSTITUTIONAL TRUST, whose
series is now known as ASTRA ALL-AMERICAS GOVERNMENT INCOME TRUST, and ATLAS
FINANCIAL GROUP, INC., respectively, effective April 10, 1995.
ASTRA STRATEGIC INVESTMENT SERIES
By:
---------------------------------------
Palomba Weingarten
ATLAS FINANCIAL GROUP, INC.
By:
---------------------------------------
EXHIBIT 9(G)
SUB-ADMINISTRATION SERVICES AGREEMENT
THIS AGREEMENT is made as of September 5, 1995 by and between ATLAS
HOLDINGS GROUP, INC. (the "Company") and PFPC INC., a Delaware corporation
("PFPC"), which is an indirect wholly owned subsidiary of PNC Bank Corp.
W I T N E S S E T H :
WHEREAS, ASTRA INSTITUTIONAL TRUST, a Massachusetts business trust (the
"Fund") is registered as an open-end management investment company under the
Investment Company Act of 1940, as amended (the "1940 Act");
WHEREAS, the Company has been appointed by the Fund as Administrator of the
Fund; and
WHEREAS, the Company wishes to retain PFPC to provide administration
services for the benefit of the Fund's investment portfolios listed on Exhibit A
attached hereto and made a part hereof, as such Exhibit A may be amended from
time to time (each a "Portfolio"), and PFPC wishes to furnish such services.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, and intending to be legally bound hereby the parties hereto
agree as follows:
1. DEFINITIONS. AS USED IN THIS AGREEMENT:
1
<PAGE>
(a) "1933 Act" means the Securities Act of 1933, as amended.
(b) "1934 Act" means the Securities Exchange Act of 1934, as amended.
(c) "Authorized Person" means any officer of the Fund and any other
person duly authorized by the Fund's Board of Trustees to give Oral and
Written Instructions on behalf of the Fund and listed on the Authorized
Persons Appendix attached hereto and made a part hereof or any amendment
thereto as may be received by PFPC. An Authorized Person's scope of
authority may be limited by setting forth such limitation in the Authorized
Persons Appendix.
(d) "CEA" means the Commodities Exchange Act, as amended.
(e) "Oral Instructions" mean oral instructions received by PFPC from
an Authorized Person or from a person reasonably believed by PFPC to be an
Authorized Person.
(f) "SEC" means the Securities and Exchange Commission.
(g) "Securities Laws" means the 1933 Act, the 1934 Act, the 1940 Act
and the CEA.
(h) "Shares" mean the shares of beneficial interest of any series or
class of the Fund.
2
<PAGE>
(i) "Written Instructions" mean written instructions signed by an
Authorized Person and received by PFPC. The instructions may be delivered
by hand, mail, tested telegram, cable, telex or facsimile sending device.
2. APPOINTMENT. The Company hereby appoints PFPC to provide administration
services for the benefit of each of the Portfolios, in accordance with the terms
set forth in this Agreement. PFPC accepts such appointment and agrees to furnish
such services.
3. DELIVERY OF DOCUMENTS. The Company has provided or, where applicable,
will provide PFPC with the following:
(a) certified or authenticated copies of the resolutions of the
Fund's Board of Trustees, approving the appointment of PFPC or
its affiliates to provide services to each Portfolio and
approving this Agreement;
(b) a copy of Fund's most recent effective registration statement;
(c) a copy of each Portfolio's advisory agreement or agreements;
(d) a copy of the distribution agreement with respect to each class
of Shares representing an interest in a Portfolio;
(e) a copy of any additional administration agreement with respect to
a Portfolio;
(f) a copy of any shareholder servicing agreement made in respect of
the Fund or a Portfolio; and
(f) copies (certified or authenticated, where applica-
3
<PAGE>
ble) of any and all amendments or supplements to the foregoing.
4. COMPLIANCE WITH RULES AND REGULATIONS. PFPC undertakes to comply with
all applicable requirements of the Securities Laws, and any laws, rules and
regulations of governmental authorities having jurisdiction with respect to the
duties to be performed by PFPC hereunder. Except as specifically set forth
herein, PFPC assumes no responsibility for such compliance by the Fund or any
Portfolio.
5. INSTRUCTIONS.
(a) Unless otherwise provided in this Agreement, PFPC shall act only
upon Oral and Written Instructions.
(b) PFPC shall be entitled to rely upon any Oral and Written
Instructions it receives from an Authorized Person (or from a person
reasonably believed by PFPC to be an Authorized Person) pursuant to this
Agreement. PFPC may assume that any Oral or Written Instruction received
hereunder is not in any way inconsistent with the provisions of
organizational documents or this Agreement or of any vote, resolution or
proceeding of the Fund's Board of Trustees or of the Fund's shareholders,
unless and until PFPC receives Written Instructions to the contrary.
(c) The Company agrees to forward to PFPC Written
4
<PAGE>
Instructions confirming Oral Instructions (except where such Oral
Instructions are given by PFPC or its affiliates) so that PFPC receives the
Written Instructions by the close of business on the same day that such
Oral Instructions are received. The fact that such confirming Written
Instructions are not received by PFPC shall in no way invalidate the
transactions or enforceability of the transactions authorized by the Oral
Instructions. Where Oral or Written Instructions reasonably appear to have
been received from an Authorized Person, PFPC shall incur no liability to
the Fund or the Company in acting upon such Oral or Written Instructions
provided that PFPC's actions comply with the other provisions of this
Agreement.
6. RIGHT TO RECEIVE ADVICE.
(a) Advice of the Fund. If PFPC is in doubt as to any action it should
or should not take, PFPC may request directions or advice, including Oral
or Written Instructions, from the Company or the Fund.
(b) Advice of Counsel. If PFPC shall be in doubt as to any question of
law pertaining to any action it should or should not take, PFPC may request
advice at its own cost from such counsel of its own choosing (who may be
counsel for the Company, the Fund, the Fund's investment adviser or PFPC,
at the option of PFPC).
5
<PAGE>
(c) Conflicting Advice. In the event of a conflict between directions,
advice or Oral or Written Instructions PFPC receives from the Company or
the Fund and the advice PFPC receives from counsel, PFPC may rely upon and
follow the advice of counsel. In the event PFPC so relies on the advice of
counsel, PFPC remains liable for any action or omission on the part of PFPC
which constitutes willful misfeasance, bad faith, gross negligence or
reckless disregard by PFPC of any duties, obligations or responsibilities
set forth in this Agreement.
(d) Protection of PFPC. PFPC shall be protected in any action it takes
or does not take in reliance upon directions, advice or Oral or Written
Instructions it receives from the Company, the Fund or from counsel and
which PFPC believes, in good faith, to be consistent with those directions,
advice and Oral or Written Instructions. Nothing in this section shall be
construed so as to impose an obligation upon PFPC (i) to seek such
directions, advice or Oral or Written Instructions, or (ii) to act in
accordance with such directions, advice or Oral or Written Instructions
unless, under the terms of other provisions of this Agreement, the same is
a condition of PFPC's properly taking or not taking such action. Nothing in
this subsection shall excuse PFPC when an action or omission on the part of
PFPC constitutes willful
6
<PAGE>
misfeasance, bad faith, gross negligence or reckless disregard by PFPC of
any duties, obligations or responsibilities set forth in this Agreement.
7. RECORDS; VISITS.
(a) The books and records pertaining to the Fund and the Portfolios
which are in the possession or under the control of PFPC shall be the
property of the Company or the Fund as the Company may direct. Such books
and records shall be prepared and maintained as required by the 1940 Act
and other applicable securities laws, rules and regulations. The Company,
the Fund and their Authorized Persons shall have access to such books and
records at all times during PFPC's normal business hours. Upon the
reasonable request of the Company, copies of any such books and records
shall be provided by PFPC to the Fund, the Company or to an Authorized
Person, at the Company's expense.
(b) PFPC shall keep the following records:
(i) all books and records with respect to each Portfolio's books
of account;
(ii) records of each Portfolio's securities transactions;
(iii) all other books and records as PFPC is required to
maintain pursuant to Rule 31a-1 of the 1940 Act in
connection with the services provided hereunder.
8. CONFIDENTIALITY. PFPC agrees on its own behalf and that
7
<PAGE>
of its employees to keep confidential all records of the Company and the Fund
and information relating to the Fund and its shareholders (past, present and
future), unless the release of such records or information is otherwise
consented to, in writing, by the Company or the Fund. The Company agrees that
such consent shall not be unreasonably withheld and may not be withheld where
PFPC may be exposed to civil or criminal contempt proceedings or when required
to divulge such information or records to duly constituted authorities.
9. LIAISON WITH ACCOUNTANTS. PFPC shall act as liaison with the Fund's
independent public accountants and shall provide account analyses, fiscal year
summaries, and other audit-related schedules with respect to each Portfolio.
PFPC shall take all reasonable action in the performance of its duties under
this Agreement to assure that the necessary information is made available to
such accountants for the expression of their opinion, as required by the
Company.
10. DISASTER RECOVERY. PFPC shall enter into and shall maintain in effect
with appropriate parties one or more agreements making reasonable provisions for
emergency use of electronic data processing equipment to the extent appropriate
equipment is available. In the event of equipment failures, PFPC shall, at no
8
<PAGE>
additional expense to the Company, take reasonable steps to minimize service
interruptions. PFPC shall have no liability with respect to the loss of data or
service interruptions caused by equipment failure, provided such loss or
interruption is not caused by PFPC's own willful misfeasance, bad faith, gross
negligence or reckless disregard of its duties or obligations under this
Agreement.
11. COMPENSATION. As compensation for services rendered by PFPC during the
term of this Agreement, the Company will pay to PFPC a fee or fees as may be
agreed to in writing by the Company and PFPC.
12. INDEMNIFICATION. The Company agrees to indemnify and hold harmless PFPC
and its affiliates from all taxes, charges, expenses, assessments, claims and
liabilities (including, without limitation, liabilities arising under the
Securities Laws and any state or foreign securities and blue sky laws, and
amendments thereto), and expenses, including (without limitation) attorneys'
fees and disbursements arising directly or indirectly from any action or
omission to act which PFPC takes (i) at the request or on the direction of or in
reliance on the advice of the Company or the Fund or (ii) upon Oral or Written
Instructions. Neither PFPC, nor any of its affiliates', shall be indemnified
against any liability
9
<PAGE>
(or any expenses incident to such liability) arising out of PFPC's or its
affiliates' own willful misfeasance, bad faith, gross negligence or reckless
disregard of its duties and obligations under this Agreement. Any amounts
payable by the Fund hereunder shall be satisfied only against the relevant
Portfolio's assets and not against the assets of any other investment portfolio
of the Fund.
13. RESPONSIBILITY OF PFPC.
(a) PFPC shall be under no duty to take any action on behalf of the
Company, the Fund or any Portfolio except as specifically set forth herein
or as may be specifically agreed to by PFPC in writing. PFPC shall be
obligated to exercise care and diligence in the performance of its duties
hereunder, to act in good faith and to use its best efforts, within
reasonable limits, in performing services provided for under this
Agreement. PFPC shall be liable for any damages arising out of PFPC's
failure to perform its duties under this Agreement to the extent such
damages arise out of PFPC's willful misfeasance, bad faith, gross
negligence or reckless disregard of such duties.
(b) Without limiting the generality of the foregoing or of any other
provision of this Agreement, (i) PFPC shall not be liable for losses beyond
its control, provided that PFPC has acted
10
<PAGE>
in accordance with the standard of care set forth above; and (ii) PFPC
shall not be liable for (A) the validity or invalidity or authority or lack
thereof of any Oral or Written Instruction, notice or other instrument
which conforms to the applicable requirements of this Agreement, and which
PFPC reasonably believes to be genuine; or (B) subject to Section 10,
delays or errors or loss of data occurring by reason of circumstances
beyond PFPC's control, including acts of civil or military authority,
national emergencies, labor difficulties, fire, flood, catastrophe, acts of
God, insurrection, war, riots or failure of the mails, transportation,
communication or power supply.
(c) Notwithstanding anything in this Agreement to the contrary,
neither PFPC nor its affiliates shall be liable to the Company, the Fund or
to any Portfolio for any consequential, special or indirect losses or
damages which the Company, the Fund or any Portfolio may incur or suffer by
or as a consequence of PFPC's or any affiliate's performance of the
services provided hereunder, whether or not the likelihood of such losses
or damages was known by PFPC or its affiliates.
14. DESCRIPTION OF ADMINISTRATION SERVICES ON A CONTINUOUS BASIS.
PFPC will perform the following administration services
11
<PAGE>
with respect to each Portfolio:
(i) Prepare quarterly broker security transactions summaries;
(ii) Prepare monthly security transaction listings;
(iii) Supply various normal and customary Portfolio and Fund
statistical data as requested on an ongoing basis;
(iv) Coordinate the preparation and filing of the Fund's Federal
and state tax returns;
(v) Coordinate the preparation and filing of the Fund's Form
N-SAR and Rule 24f-2 Notices;
(vi) Assist in the preparation and coordinate the production and
filing of the Fund's annual, semi-annual, and quarterly
shareholder reports;
(vii) Assist in the preparation of registration statements and
other filings relating to the registration of Shares;
(viii) Assist in monitoring each Portfolio's status as a
regulated investment company under Sub-chapter M of the
Internal Revenue Code of 1986, as amended;
(ix) Assist in coordinating the contractual relationships and
communications between the Fund and its contractual service
providers; and
(x) Assist in monitoring the Fund's state blue sky registration
and compliance with the amounts and conditions of each state
qualification.
12
<PAGE>
15. DESCRIPTION OF ADDITIONAL REGULATORY COMPLIANCE AND ADMINISTRATION
SERVICES.
PFPC will perform the following services with respect to each Portfolio.
(i) Assist the investment adviser in monitoring the Fund's compliance
with certain investment restrictions, limited to
after-transactions testing regarding the following procedures:
- Industry Diversification
- Issuer Diversification
- State Diversification
- Country Diversification
- Limitation of International Holdings;
(ii) Assist management in developing a response to the Securities and
Exchange Commission staff's routine examinations;
(iii) Assist in the preparation of Post Effective Amendments to the
Funds Registration Statement on Form N-1A;
(iv) Monitor various SEC and IRS regulatory developments affecting
investment companies;
(v) Coordinate the administrative details of preparing for the Fund's
Board Meeting, including the preparation of the Administration
report and coordination of reports and related materials from the
adviser, distributor, transfer agent and custodian, etc.;
(vi) Provide the Fund with signatories which may be authorized by the
Fund to facilitate certain required regulatory filings and the
processing of invoices;
13
<PAGE>
(vii) Monitor the maintenance of Directors' and Officers' insurance
and Fidelity Bond insurance coverage on behalf of the Fund;
(viii) Coordinate with fund management, independent auditors and
printers for the preparation of shareholder reports;
(ix) Prepare and distribute operational reports to management by the
tenth business day after receiving all applicable reports from
outside vendors; and
(x) Maintain a monthly "task list" calendar noting required
completion dates.
16. DURATION AND TERMINATION. This Agreement shall continue until
terminated by either party on sixty (60) days' prior written notice to the other
party.
17. NOTICES. All notices and other communications, including Written
Instructions, shall be in writing or by confirming telegram, cable, telex or
facsimile sending device. If notice is sent by confirming telegram, cable, telex
or facsimile sending device, it shall be deemed to have been given immediately.
If notice is sent by first-class mail, it shall be deemed to have been given
three days after it has been mailed. If notice is sent by messenger, it shall be
deemed to have been given on the day it is delivered. Notices shall be addressed
(a) if to PFPC, at 400 Bellevue Parkway, Wilmington, Delaware 19809; (b) if to
the
14
<PAGE>
Company, at Atlas Holdings Group, Inc., 9595 Wilshire Boulevard, Beverly Hills,
CA 90212; or (c) if to neither of the foregoing, at such other address as shall
have been provided by like notice to the sender of any such notice or other
communication by the other party.
18. AMENDMENTS. This Agreement, or any term thereof, may be changed or
waived only by written amendment, signed by the party against whom enforcement
of such change or waiver is sought.
19. DELEGATION; ASSIGNMENT. PFPC may assign its rights and delegate its
duties hereunder to any wholly-owned direct or indirect subsidiary of PNC Bank,
National Association or PNC Bank Corp., provided that (i) PFPC gives the Company
thirty (30) days' prior written notice; (ii) the delegate (or assignee) agrees
with PFPC and the Company to comply with all relevant provisions of the 1940
Act; and (iii) PFPC and such delegate (or assignee) promptly provide such
information as the Company may request, and respond to such questions as the
Company may ask, relative to the delegation (or assignment), including (without
limitation) the capabilities of the delegate (or assignee).
20. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
15
<PAGE>
21. FURTHER ACTIONS. Each party agrees to perform such further acts and
execute such further documents as are necessary to effectuate the purposes
hereof.
22. MISCELLANEOUS.
(a) Entire Agreement. This Agreement embodies the entire agreement and
understanding between the parties and supersedes all prior agreements and
understandings relating to the subject matter hereof, provided that the
parties may embody in one or more separate documents their agreement, if
any, with respect to delegated duties and Oral Instructions.
(b) Captions. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect.
(c) Governing Law. This Agreement shall be deemed to be a contract
made in Delaware and governed by Delaware law, without regard to principles
of conflicts of law.
(d) Partial Invalidity. If any provision of this Agreement shall be
held or made invalid by a court decision, statute, rule or otherwise, the
remainder of this Agreement shall not be affected thereby.
(e) Successors and Assigns. This Agreement shall be
16
<PAGE>
binding upon and shall inure to the benefit of the parties hereto and their
respective successors and permitted assigns.
(f) Facsimile Signatures. The facsimile signature of any party to this
Agreement shall constitute the valid and binding execution hereof by such
party.
17
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
PFPC INC.
By: /s/ Stephen M. Wynne
----------------------------------
Title: Executive Vice President
-------------------------------
ATLAS HOLDINGS GROUP, INC.
By: /s/ John R. Elerding
----------------------------------
Title: Chief Financial Officer
-------------------------------
18
<PAGE>
EXHIBIT A
THIS EXHIBIT A, dated as of September 5, 1995, is Exhibit A to that certain
Administration Services Agreement dated as of September 5, 1995 between PFPC
Inc. and Atlas Holdings Group, Inc.
PORTFOLIOS OF ASTRA INSTITUTIONAL TRUST
Astra All-American Government Income Trust
19
<PAGE>
AUTHORIZED PERSONS APPENDIX
NAME (TYPE) SIGNATURE
- -------------------------------- --------------------------------------
- -------------------------------- --------------------------------------
- -------------------------------- --------------------------------------
- -------------------------------- --------------------------------------
- -------------------------------- --------------------------------------
- -------------------------------- --------------------------------------
20
EXHIBIT 9(H)
ACCOUNTING SERVICES AGREEMENT
THIS AGREEMENT is made as of September 5, 1995 by and between ASTRA
INSTITUTIONAL TRUST, a Massachusetts business trust (the "Fund"), and PFPC Inc.,
a Delaware corporation ("PFPC"), which is an indirect wholly owned subsidiary of
PNC Bank Corp.
W I T N E S S E T H :
WHEREAS, the Fund is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940 Act");
and
WHEREAS, the Fund wishes to retain PFPC to provide accounting services to
its investment portfolios listed on Exhibit A attached hereto and made a part
hereof, as such Exhibit A may be amended from time to time (each a "Portfolio"),
and PFPC wishes to furnish such services.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
herein contained, and intending to be legally bound hereby the parties hereto
agree as follows:
1. DEFINITIONS. AS USED IN THIS AGREEMENT:
(a) "1933 Act" means the Securities Act of 1933, as amended.
(b) "1934 Act" means the Securities Exchange Act of
<PAGE>
1934, as amended.
(c) "Authorized Person" means any officer of the Fund and any other
person duly authorized by the Fund's Board of Trustees to give Oral and
Written Instructions on behalf of the Fund and listed on the Authorized
Persons Appendix attached hereto and made a part hereof or any amendment
thereto as may be received by PFPC. An Authorized Person's scope of
authority may be limited by the Fund by setting forth such limitation in
the Authorized Persons Appendix.
(d) "CEA" means the Commodities Exchange Act, as amended.
(e) "Oral Instructions" mean oral instructions received by PFPC from
an Authorized Person or from a person reasonably believed by PFPC to be an
Authorized Person.
(f) "SEC" means the Securities and Exchange Commission.
(g) "Securities Laws" means the 1933 Act, the 1934 Act, the 1940 Act
and the CEA.
(h) "Shares" mean the shares of beneficial interest of any series or
class of the Fund.
(i) "Written Instructions" mean written instructions signed by an
Authorized Person and received by PFPC. The instructions may be delivered
by hand, mail, tested telegram, cable, telex
2
<PAGE>
or facsimile sending device.
2. APPOINTMENT. The Fund hereby appoints PFPC to provide accounting
services to the each of the Portfolios, in accordance with the terms set forth
in this Agreement. PFPC accepts such appointment and agrees to furnish such
services.
3. DELIVERY OF DOCUMENTS. The Fund has provided or, where applicable, will
provide PFPC with the following:
(a) certified or authenticated copies of the resolutions of the
Fund's Board of Trustees, approving the appointment of PFPC or
its affiliates to provide services to each Portfolio and
approving this Agreement;
(b) a copy of Fund's most recent effective registration statement;
(c) a copy of each Portfolio's advisory agreement or agreements;
(d) a copy of the distribution agreement with respect to each class
of Shares representing an interest in a Portfolio;
(e) a copy of any additional administration agreement with respect to
a Portfolio;
(f) a copy of any shareholder servicing agreement made in respect of
the Fund or a Portfolio; and
(f) copies (certified or authenticated, where applicable) of any and
all amendments or supplements to the foregoing.
4. COMPLIANCE WITH RULES AND REGULATIONS.
PFPC undertakes to comply with all applicable requirements of
3
<PAGE>
the Securities Laws, and any laws, rules and regulations of governmental
authorities having jurisdiction with respect to the duties to be performed by
PFPC hereunder. Except as specifically set forth herein, PFPC assumes no
responsibility for such compliance by the Fund or any Portfolio.
5. INSTRUCTIONS.
(a) Unless otherwise provided in this Agreement, PFPC shall act only
upon Oral and Written Instructions.
(b) PFPC shall be entitled to rely upon any Oral and Written
Instructions it receives from an Authorized Person (or from a person
reasonably believed by PFPC to be an Authorized Person) pursuant to this
Agreement. PFPC may assume that any Oral or Written Instruction received
hereunder is not in any way inconsistent with the provisions of
organizational documents or this Agreement or of any vote, resolution or
proceeding of the Fund's Board of Trustees or of the Fund's shareholders,
unless and until PFPC receives Written Instructions to the contrary.
(c) The Fund agrees to forward to PFPC Written Instructions
confirming Oral Instructions (except where such Oral Instructions are given
by PFPC or its affiliates) so that PFPC receives the Written Instructions
by the close of business on the same day that such Oral Instructions are
received. The fact that
4
<PAGE>
such confirming Written Instructions are not received by PFPC shall in no
way invalidate the transactions or enforceability of the transactions
authorized by the Oral Instructions. Where Oral or Written Instructions
reasonably appear to have been received from an Authorized Person, PFPC
shall incur no liability to the Fund in acting upon such Oral or Written
Instructions provided that PFPC's actions comply with the other provisions
of this Agreement.
6. RIGHT TO RECEIVE ADVICE.
(a) Advice of the Fund. If PFPC is in doubt as to any action it should
or should not take, PFPC may request directions or advice, including Oral
or Written Instructions, from the Fund.
(b) Advice of Counsel. If PFPC shall be in doubt as to any question of
law pertaining to any action it should or should not take, PFPC may request
advice at its own cost from such counsel of its own choosing (who may be
counsel for the Fund, the Fund's investment adviser or PFPC, at the option
of PFPC).
(c) Conflicting Advice. In the event of a conflict between directions,
advice or Oral or Written Instructions PFPC receives from the Fund and the
advice PFPC receives from counsel, PFPC may rely upon and follow the advice
of counsel. In the event PFPC so relies on the advice of counsel, PFPC
remains liable for
5
<PAGE>
any action or omission on the part of PFPC which constitutes willful
misfeasance, bad faith, gross negligence or reckless disregard by PFPC of
any duties, obligations or responsibilities set forth in this Agreement.
(d) Protection of PFPC. PFPC shall be protected in any action it takes
or does not take in reliance upon directions, advice or Oral or Written
Instructions it receives from the Fund or from counsel and which PFPC
believes, in good faith, to be consistent with those directions, advice and
Oral or Written Instructions. Nothing in this section shall be construed so
as to impose an obligation upon PFPC (i) to seek such directions, advice or
Oral or Written Instructions, or (ii) to act in accordance with such
directions, advice or Oral or Written Instructions unless, under the terms
of other provisions of this Agreement, the same is a condition of PFPC's
properly taking or not taking such action. Nothing in this subsection shall
excuse PFPC when an action or omission on the part of PFPC constitutes
willful misfeasance, bad faith, gross negligence or reckless disregard by
PFPC of any duties, obligations or responsibilities set forth in this
Agreement.
7. RECORDS; VISITS.
6
<PAGE>
(a) The books and records pertaining to the Fund and the Portfolios
which are in the possession or under the control of PFPC shall be the
property of the Fund. Such books and records shall be prepared and
maintained as required by the 1940 Act and other applicable securities
laws, rules and regulations. The Fund and Authorized Persons shall have
access to such books and records at all times during PFPC's normal business
hours. Upon the reasonable request of the Fund, copies of any such books
and records shall be provided by PFPC to the Fund or to an Authorized
Person, at the Fund's expense.
(b) PFPC shall keep the following records:
(i) all books and records with respect to each Portfolio's books
of account;
(ii) records of each Portfolio's securities transactions;
(iii) all other books and records as PFPC is required to maintain
pursuant to Rule 31a-1 of the 1940 Act in connection with
the services provided hereunder.
8. CONFIDENTIALITY. PFPC agrees on its own behalf and that of its employees
to keep confidential all records of the Fund and information relating to the
Fund and its shareholders (past, present and future), unless the release of such
records or information is otherwise consented to, in writing, by the Fund. The
Fund agrees that such consent shall not be unreasonably
7
<PAGE>
withheld and may not be withheld where PFPC may be exposed to civil or criminal
contempt proceedings or when required to divulge such information or records to
duly constituted authorities.
9. LIAISON WITH ACCOUNTANTS. PFPC shall act as liaison with the Fund's
independent public accountants and shall provide account analyses, fiscal year
summaries, and other audit-related schedules with respect to each Portfolio.
PFPC shall take all reasonable action in the performance of its duties under
this Agreement to assure that the necessary information is made available to
such accountants for the expression of their opinion, as required by the Fund.
10. DISASTER RECOVERY. PFPC shall enter into and shall maintain in effect
with appropriate parties one or more agreements making reasonable provisions for
emergency use of electronic data processing equipment to the extent appropriate
equipment is available. In the event of equipment failures, PFPC shall, at no
additional expense to the Fund, take reasonable steps to minimize service
interruptions. PFPC shall have no liability with respect to the loss of data or
service interruptions caused by equipment failure, provided such loss or
interruption is not caused by PFPC's own willful misfeasance, bad faith, gross
negligence or reckless
8
<PAGE>
disregard of its duties or obligations under this Agreement.
11. COMPENSATION. As compensation for services rendered by PFPC during the
term of this Agreement, the Fund, on behalf of each Portfolio, will pay to PFPC
a fee or fees as may be agreed to in writing by the Fund and PFPC.
12. INDEMNIFICATION. The Fund, on behalf of each Portfolio, agrees to
indemnify and hold harmless PFPC and its affiliates from all taxes, charges,
expenses, assessments, claims and liabilities (including, without limitation,
liabilities arising under the Securities Laws and any state or foreign
securities and blue sky laws, and amendments thereto), and expenses, including
(without limitation) attorneys' fees and disbursements arising directly or
indirectly from any action or omission to act which PFPC takes (i) at the
request or on the direction of or in reliance on the advice of the Fund or (ii)
upon Oral or Written Instructions. Neither PFPC, nor any of its affiliates',
shall be indemnified against any liability (or any expenses incident to such
liability) arising out of PFPC's or its affiliates' own willful misfeasance, bad
faith, gross negligence or reckless disregard of its duties and obligations
under this Agreement. Any amounts payable by the Fund hereunder shall be
satisfied only against the relevant Portfolio's assets and not against the
assets of any other investment portfolio
9
<PAGE>
of the Fund.
13. RESPONSIBILITY OF PFPC.
(a) PFPC shall be under no duty to take any action on behalf of the
Fund or any Portfolio except as specifically set forth herein or as may be
specifically agreed to by PFPC in writing. PFPC shall be obligated to
exercise care and diligence in the performance of its duties hereunder, to
act in good faith and to use its best efforts, within reasonable limits, in
performing services provided for under this Agreement. PFPC shall be liable
for any damages arising out of PFPC's failure to perform its duties under
this Agreement to the extent such damages arise out of PFPC's willful
misfeasance, bad faith, gross negligence or reckless disregard of such
duties.
(b) Without limiting the generality of the foregoing or of any other
provision of this Agreement, (i) PFPC shall not be liable for losses beyond
its control, provided that PFPC has acted in accordance with the standard
of care set forth above; and (ii) PFPC shall not be liable for (A) the
validity or invalidity or authority or lack thereof of any Oral or Written
Instruction, notice or other instrument which conforms to the applicable
requirements of this Agreement, and which PFPC reasonably believes to be
genuine; or (B) subject to Section 10, delays or errors or
10
<PAGE>
loss of data occurring by reason of circumstances beyond PFPC's control,
including acts of civil or military authority, national emergencies, labor
difficulties, fire, flood, catastrophe, acts of God, insurrection, war,
riots or failure of the mails, transpor tation, communication or power
supply.
(c) Notwithstanding anything in this Agreement to the contrary,
neither PFPC nor its affiliates shall be liable to the Fund or to any
Portfolio for any consequential, special or indirect losses or damages
which the Fund or any Portfolio may incur or suffer by or as a consequence
of PFPC's or any affiliate's performance of the services provided
hereunder, whether or not the likelihood of such losses or damages was
known by PFPC or its affiliates.
14. DESCRIPTION OF ACCOUNTING SERVICES ON A CONTINUOUS BASIS.
PFPC will perform the following accounting services with respect to each
Portfolio:
(i) Journalize investment, capital share and income and expense
activities;
(ii) Verify investment buy/sell trade tickets when received from
the investment adviser for a Portfolio (the "Adviser") and
transmit trades to the Fund's custodian (the "Custodian")
for proper settlement;
(iii) Maintain individual ledgers for investment securities;
11
<PAGE>
(iv) Maintain historical tax lots for each security;
(v) Reconcile cash and investment balances of the Fund with the
Custodian, and provide the Adviser with the beginning cash
balance available for investment purposes;
(vi) Update the cash availability throughout the day as required
by the Adviser;
(vii) Post to and prepare the Statement of Assets and Liabilities
and the Statement of Operations;
(viii) Calculate various contractual expenses (e.g., advisory and
custody fees);
(ix) Monitor the expense accruals and notify an officer of the
Fund of any proposed adjustments;
(x) Control all disbursements and authorize such disbursements
upon Written Instructions;
(xi) Calculate capital gains and losses;
(xii) Determine net income;
(xiii) Obtain security market quotes from independent pricing
services approved by the Adviser, or if such quotes are
unavailable, then obtain such prices from the Adviser, and
in either case calculate the market value of each
Portfolio's Investments;
(xiv) Transmit or mail a copy of the daily portfolio valuation to
the Adviser;
(xv) Compute net asset value;
(xvi) As appropriate, compute yields, total return, expense
ratios, portfolio turnover
12
<PAGE>
rate, and, if required, portfolio average dollar-weighted
maturity; and
(xvii) Prepare a monthly financial statement, which will include
the following items:
Schedule of Investments
Statement of Assets and Liabilities
Statement of Operations
Statement of Changes in Net Assets
Cash Statement
Schedule of Capital Gains and Losses.
15. DURATION AND TERMINATION. This Agreement shall continue until
terminated by either party on sixty (60) days' prior written notice to the other
party.
16. NOTICES. All notices and other communications, including Written
Instructions, shall be in writing or by confirming telegram, cable, telex or
facsimile sending device. If notice is sent by confirming telegram, cable, telex
or facsimile sending device, it shall be deemed to have been given immediately.
If notice is sent by first-class mail, it shall be deemed to have been given
three days after it has been mailed. If notice is sent by messenger, it shall be
deemed to have been given on the day it is delivered. Notices shall be addressed
(a) if to PFPC, at 400 Bellevue Parkway, Wilmington, Delaware 19809; (b) if to
the Fund, at Astra Management Corp., Symphony Towers, 750 B Street, Suite 2350,
San Diego, CA 92101; or (c) if to neither of the foregoing,
13
<PAGE>
at such other address as shall have been provided by like notice to the sender
of any such notice or other communication by the other party.
17. AMENDMENTS. This Agreement, or any term thereof, may be changed or
waived only by written amendment, signed by the party against whom enforcement
of such change or waiver is sought.
18. DELEGATION; ASSIGNMENT. PFPC may assign its rights and delegate its
duties hereunder to any wholly-owned direct or indirect subsidiary of PNC Bank,
National Association or PNC Bank Corp., provided that (i) PFPC gives the Fund
thirty (30) days' prior written notice; (ii) the delegate (or assignee) agrees
with PFPC and the Fund to comply with all relevant provisions of the 1940 Act;
and (iii) PFPC and such delegate (or assignee) promptly provide such information
as the Fund may request, and respond to such questions as the Fund may ask,
relative to the delegation (or assignment), including (without limitation) the
capabilities of the delegate (or assignee).
19. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
20. FURTHER ACTIONS. Each party agrees to perform such further acts and
execute such further documents as are necessary to
14
<PAGE>
effectuate the purposes hereof.
21. MISCELLANEOUS.
(a) Entire Agreement. This Agreement embodies the entire agreement and
understanding between the parties and supersedes all prior agreements and
understandings relating to the subject matter hereof, provided that the parties
may embody in one or more separate documents their agreement, if any, with
respect to delegated duties and Oral Instructions.
(b) Captions. The captions in this Agreement are included for convenience
of reference only and in no way define or delimit any of the provisions hereof
or otherwise affect their construction or effect.
(c) Governing Law. This Agreement shall be deemed to be a contract made in
Delaware and governed by Delaware law, without regard to principles of conflicts
of law.
(d) Partial Invalidity. If any provision of this Agreement shall be held or
made invalid by a court decision, statute, rule or otherwise, the remainder of
this Agreement shall not be affected thereby.
(e) Successors and Assigns. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors and
permitted assigns.
15
<PAGE>
(f) Facsimile Signatures. The facsimile signature of any party to this
Agreement shall constitute the valid and binding execution hereof by such party.
16
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first above written.
PFPC INC.
By: /s/ Stephen M. Wynne
---------------------------------
Title: Executive Vice President
------------------------------
ASTRA INSTITUTIONAL TRUST
By: /s/ John R. Elerding
---------------------------------
Title: Chief Financial Officer
------------------------------
17
<PAGE>
EXHIBIT A
THIS EXHIBIT A, dated as of ____________________, 1995, is Exhibit A to
that certain Accounting Services Agreement dated as of _________________, 1995
between PFPC Inc. and Astra Institutional Trust.
PORTFOLIOS
Astra All-American Government Income Trust
18
<PAGE>
AUTHORIZED PERSONS APPENDIX
NAME (TYPE) SIGNATURE
- ----------------------------------- ------------------------------------
- ----------------------------------- ------------------------------------
- ----------------------------------- ------------------------------------
- ----------------------------------- ------------------------------------
- ----------------------------------- ------------------------------------
- ----------------------------------- ------------------------------------
19
EXHIBIT 10
JORDEN BURT BERENSON & JOHNSON LLP
1025 THOMAS JEFFERSON STREET, N.W.
SUITE 400-EAST
WASHINGTON, D.C. 20007-0805
(202) 965-8100
July 12, 1996
Astra Institutional Trust
750 B Street
Suite 2350
San Diego, California 92101
Ladies and Gentlemen:
We hereby consent to the reference to our name under the caption "Legal
Counsel" in the Statement of Additional Information of Astra All-Americas
Government Income Trust, a series of Astra Institutional Trust, contained in
Post-Effective Amendment No. 7 to the Registration Statement on Form N-1A (File
No. 33-44901) filed by Astra Institutional Trust with the Securities and
Exchange Commission under the Securities Act of 1933 and the Investment Company
Act of 1940.
Very truly yours,
/S/ JORDEN BURT BERENSON & JOHNSON LLP
--------------------------------------
Jorden Burt Berenson & Johnson LLP
EXHIBIT 11
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We have issued our report dated October 20, 1995 accompanying the
September 30, 1995 financial statements of Astra All-Americas Government Income
Trust which are incorporated by reference in Part B of Post-Effective Amendment
No. 7 to this Registration Statement and Prospectus. We consent to the use of
the aforementioned reports in the Registration Statement and Prospectus.
/s/ TAIT, WELLER & BAKER
--------------------
Tait, Weller & Baker
Philadelphia, Pennsylvania
July 18, 1996
EXHIBIT 15(C)
FORM OF AMENDED AND RESTATED DISTRIBUTION PLAN OF
ASTRA ALL-AMERICAS GOVERNMENT INCOME TRUST
(FORMERLY PILGRIM ALL-AMERICAS GOVERNMENT INCOME TRUST)
CLASS A
We hereby amend this Distribution Plan to reflect a change in the name of
the fund from Pilgrim All-Americas Government Income Trust, Class A to ASTRA
ALL-AMERICAS GOVERNMENT INCOME TRUST, CLASS A, effective April 10, 1995, and we
further amend this Distribution Plan to reflect a change in the name of the
underwriter from Pilgrim Distributors Corp. to ASTRA FUND DISTRIBUTORS CORP.,
effective April 10, 1995.
ASTRA ALL-AMERICAS GOVERNMENT INCOME TRUST,
CLASS A
By:
------------------------------------------
ASTRA FUND DISTRIBUTORS CORP.
By:
------------------------------------------
<PAGE>
EXHIBIT 15(C)
FORM OF AMENDED AND RESTATED DISTRIBUTION PLAN OF
ASTRA ALL-AMERICAS GOVERNMENT INCOME TRUST
(FORMERLY PILGRIM ALL-AMERICAS GOVERNMENT INCOME TRUST)
CLASS B
We hereby amend this Distribution Plan to reflect a change in the name of
the fund from Pilgrim All-Americas Government Income Trust, CLASS B to ASTRA
ALL-AMERICAS GOVERNMENT INCOME TRUST, CLASS B, effective April 10, 1995, and we
further amend this Distribution Plan to reflect a change in the name of the
underwriter from Pilgrim Distributors Corp. to ASTRA FUND DISTRIBUTORS CORP.,
effective April 10, 1995.
ASTRA ALL-AMERICAS GOVERNMENT INCOME TRUST,
CLASS B
By:
------------------------------------------
ASTRA FUND DISTRIBUTORS CORP.
By:
------------------------------------------
<PAGE>
EXHIBIT 15(C)
FORM OF AMENDED AND RESTATED DISTRIBUTION PLAN OF
ASTRA ALL-AMERICAS GOVERNMENT INCOME TRUST
(FORMERLY PILGRIM ALL-AMERICAS GOVERNMENT INCOME TRUST)
CLASS C
We hereby amend this Distribution Plan to reflect a change in the name of
the fund from Pilgrim All-Americas Government Income Trust, CLASS C to ASTRA
ALL-AMERICAS GOVERNMENT INCOME TRUST, CLASS C, effective April 10, 1995, and we
further amend this Distribution Plan to reflect a change in the name of the
underwriter from Pilgrim Distributors Corp. to ASTRA FUND DISTRIBUTORS CORP.,
effective April 10, 1995.
ASTRA ALL-AMERICAS GOVERNMENT INCOME TRUST,
CLASS C
By:
------------------------------------------
ASTRA FUND DISTRIBUTORS CORP.
By:
------------------------------------------
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000882419
<NAME> ASTRA INSTITUTIONAL TRUST
<SERIES>
<NUMBER> 011
<NAME> ALL-AMERICAS GOVERNMENT INCOME TRUST-CLASS A
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> SEP-30-1995
<INVESTMENTS-AT-COST> 15,544,379
<INVESTMENTS-AT-VALUE> 15,834,057
<RECEIVABLES> 4,800,776
<ASSETS-OTHER> 152,786
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 20,787,619
<PAYABLE-FOR-SECURITIES> 2,067,412
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 139,369
<TOTAL-LIABILITIES> 2,206,781
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 20,955,854
<SHARES-COMMON-STOCK> 36,009
<SHARES-COMMON-PRIOR> 52,752
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (2,664,694)
<OVERDISTRIBUTION-GAINS> 0
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