As filed with the Securities and Exchange Commission on August 22, 1994
1933 Act Registration No. 33-57740
1940 Act Registration No. 811-7464
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / X /
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Pre-Effective Amendment No. / /
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Post-Effective Amendment No. 2 / X /
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and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 / X /
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Amendment No. 4 / X /
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(Check appropriate box or boxes)
THE PANAGORA FUNDS
(Exact name of registrant as specified in Charter)
260 Franklin Street
Boston, Massachusetts 02110
(Address of Principal Executive Offices)
Registrant's Telephone Number,
including Area Code: 617-439-6300
Copy to:
Richard A. Crowell Joseph P. Barri, Esq.
PanAgora Asset Management, Inc. Hale and Dorr
260 Franklin Street Sixty State Street
Boston, Massachusetts 02110 Boston, Massachusetts 02109
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate box):
X immediately upon filing pursuant to paragraph (b), or
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on August 22, 1994 pursuant to paragraph (b)
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60 days after filing pursuant to paragraph (a), or
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on ___________ pursuant to paragraph (a) of Rule 485
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The Registrant has previously filed a declaration of indefinite
registration of its shares of beneficial interest pursuant to Rule 24f-2 under
the Investment Company Act of 1940, as amended. The Registrant filed the notice
required by Rule 24f-2 for its most recent fiscal year on July 29, 1994.
The Index to Exhibits is located at page ______.
Page 1 of ______ total pages.
<PAGE>
CROSS REFERENCE SHEET
(as required by Rule 495)
THE PANAGORA FUNDS
N-1A ITEM NO. LOCATION
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PART A
Item 1. Cover Page Cover Page
Item 2. Synopsis Investor Summary
Item 3. Condensed Financial Information Expense Information;
Financial Highlights
Item 4. General Description of Cover Page; Investor
Registrant Summary; Investment
Objectives and
Policies;Description of
Securities and Investment
Techniques and Related Risks;
Additional Investment
Information; Organization and
Shares of the Trust
Item 5. Management of the Fund Management of the Trust
Item 6. Capital Stock and Other Dividends, Distributions and
Securities Taxes; Organization and
Shares of the Trust
Item 7. Purchase of Securities Being Purchase of Shares; Net
Offered Asset Value
Item 8. Redemption or Repurchase Redemption of Shares
Item 9. Pending Legal Proceedings Not Applicable
PART B
Item 10. Cover Page Cover Page
Item 11. Table of Contents Table of Contents
Item 12. General Information and History Not Applicable
<PAGE>
N-1A ITEM NO. LOCATION
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Item 13. Investment Objectives and Additional Information on
Policies Fund Investments and
Strategies and Related Risks;
Investment Restrictions
Item 14. Management of the Fund Trustees and Officers
Item 15. Control Persons and Principal Trustees and Officers
Holders of Securities
Item 16. Investment Advisory and Other Investment Advisory and
Services Other Services;
Miscellaneous
Item 17. Brokerage Allocation and Other Portfolio Transactions
Practices
Item 18. Capital Stock and Other General Information About
Securities the Trust
Item 19. Purchase, Redemption and Purchase and Redemption
Pricing of Securities Being Information; Net Asset Value
Offered
Item 20. Tax Status Taxes
Item 21. Underwriters Investment Advisory and
Other Services
Item 22. Calculation of Performance Date Performance Information
Item 23. Financial Statements Financial Statements
PART C
Information required to be included in Part C is set forth under the appropriate
Item, so numbered, in Part C to this Registration Statement.
<PAGE>
THE PANAGORA FUNDS
P. O. Box 1537
Boston, Massachusetts 02205-1537
The PanAgora Funds (the "Trust") is a diversified open-end management
investment company that currently consists of three investment series (the
"Funds"). PanAgora Asset Management, Inc. (the "Adviser" or "PanAgora")
serves as investment adviser to the Funds. Funds Distributor, Inc. serves
as the Trust's distributor.
Each Fund has a different investment objective which is described in
detail in this Prospectus and in the Statement of Additional Information of
the Trust. The following descriptions summarize the investment objectives
of the Funds:
PanAgora Asset Allocation Fund. The Fund's investment objective is
to maximize total return, consisting of capital appreciation and current
income. The Fund attempts to achieve its objective by actively allocating
assets among U.S. equity securities, investment grade fixed-income
securities and cash and cash equivalents based on the Adviser's proprietary
asset allocation disciplines. When the Adviser determines that domestic
capital markets are fairly priced relative to each other and relative to
corresponding risks, the Fund will invest approximately 70% of its assets
in equity securities, 25% in fixed-income securities and 5% in cash and
cash equivalents. However, as market conditions warrant, the Adviser
typically allocates the Fund's assets among asset classes without regard to
the stated percentages.
PanAgora Global Fund. The Fund's investment objective is to maximize
total return, consisting of capital appreciation and current income. The
Fund attempts to achieve its objective by actively allocating assets among
global equity, fixed-income and currency markets based on the Adviser's
proprietary asset allocation disciplines. When the Adviser determines that
global capital markets are fairly priced relative to each other and
relative to corresponding risks, the Fund will invest approximately 70% of
its assets in equity securities and 30% in fixed-income securities.
However, as market conditions warrant, the Adviser typically allocates the
Fund's assets among asset classes and markets without regard to the stated
percentages.
PanAgora International Equity Fund. The Fund's primary investment
objective is to maximize total return, consisting primarily of capital
appreciation. Current income is a secondary objective. The Fund attempts
to achieve its objectives by actively allocating assets among international
equity markets based on the Adviser's proprietary asset allocation
disciplines. When the Adviser determines that international equity markets
are fairly priced relative to each other, the Fund's investments in
international equity markets will be generally weighted in accordance with
the Morgan Stanley Capital International-Europe Australia Far East Index.
PROSPECTUS August 22, 1994
TABLE OF CONTENTS
Page
Investor Summary... 3
Expense Information 5
Financial Highlights 6
Investment Objectives and Polices 7
Description of Securities and Investment Techniques
and Related Risks.. 11
Additional Investment
Information................................................................
................ 18
Management of the Trust 19
Purchase of Shares... 21
Redemption of Shares 23
Net Asset Value...... 24
Dividends, Distribution and Taxes 24
Organization and Shares of the Trust 26
Performance Information 26
This Prospectus provides information about the Trust and each Fund
that investors should know before investing in the Trust. Investors should
carefully read this Prospectus and retain it for future reference. For
investors seeking more detailed information, the Statement of Additional
Information dated August 22, 1994, as amended or supplemented from time to
time, is available upon request without charge by calling 1-800-423-6041.
The Statement of Additional Information, which is incorporated by reference
into this Prospectus, has been filed with the Securities and Exchange
Commission. Not all of the Funds are available in certain states. Please
call the phone number listed above to determine availability in a
particular state.
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.
[cover page continued]
INVESTOR SUMMARY
The following summary is qualified in its entirety by the more
detailed information appearing elsewhere in this Prospectus.
The PanAgora Funds
The Trust, a diversified open-end management investment company
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), currently consists of three investment series, the PanAgora Asset
Allocation Fund, PanAgora Global Fund and PanAgora International Equity
Fund (collectively, the "Funds"). The Funds commenced investment
operations on June 1, 1993.
Investor Profile
Primarily designed for institutional investors seeking to maximize
total return, the Funds are particularly suitable for the investment of
funds held by educational, religious and charitable organizations, banks
and trust companies acting in a fiduciary, advisory, agency, custodial or
other similar capacity as well as corporations, employee benefit plans,
insurance companies, investment counselors, municipalities, investment
bankers and brokers and other fiduciaries.
Investment Objectives and Policies
The investment objective of each of the PanAgora Asset Allocation
Fund and the PanAgora Global Fund is to maximize total return, consisting
of capital appreciation and current income. In order to achieve its
investment objective, the PanAgora Asset Allocation Fund actively allocates
its assets among U.S. equity securities, investment grade fixed-income
securities and cash and cash equivalents. In order to achieve its
investment objective, the PanAgora Global Fund actively allocates its
assets among global equity, fixed-income and currency markets. The
PanAgora International Equity Fund's investment objective is to maximize
total return, consisting primarily of capital appreciation. Current income
is a secondary objective. In order to achieve its investment objective,
the Fund actively allocates its assets among international equity markets.
When the Adviser determines that international equity markets are fairly
priced relative to each other, the Fund's investments in international
equity markets will be generally weighted in accordance with the Morgan
Stanley Capital International-Europe Australia Far East Index.
Each Fund's assets are actively allocated among asset classes and
markets in accordance with its investment objectives and policies by the
Adviser, utilizing its proprietary asset allocation disciplines.
Underlying the Adviser's proprietary asset allocation disciplines is the
belief that investment opportunities (i.e., return) are primarily derived
from asset class and market selections. Investment opportunities arising
from individual security selection, while important, are viewed as
secondary to opportunities arising from asset class and market selections.
For more complete information on each Fund's investment objective and
policies, including the Adviser's proprietary asset allocation disciplines,
see "Investment Objectives and Policies."
Management
PanAgora Asset Management, Inc. serves as investment adviser to each
of the Funds and is paid an advisory fee at an annual rate of 0.60% of the
PanAgora Asset Allocation Fund's average daily net assets, 0.70% of the
PanAgora Global Fund's average daily net assets and 0.80% of the PanAgora
International Equity Fund's average daily net assets. The advisory fee
paid by the PanAgora International Equity Fund is higher than the advisory
fee paid by most investment companies. Funds Distributor, Inc. serves as
distributor of the shares of each of the Funds. Investors Bank & Trust
Company serves as the Funds' Administrator, Transfer Agent and Custodian.
See "Management of the Trust."
Purchasing Shares
The minimum initial purchase for each Fund is $100,000 and the
minimum additional investment is $2,500. The Funds do not impose any sales
charge or redemption fees, nor do they bear any fees pursuant to a plan of
distribution under Rule 12b-1. The public offering price of shares of each
Fund is the net asset value per share next determined after receipt and
acceptance of the purchase order at the Transfer Agent in proper form. See
"Purchase of Shares."
Redeeming Shares
Fund shares may be redeemed at the net asset value per share of the
Fund next determined after receipt by the Transfer Agent of a redemption
request in proper form. See "Redemption of Shares."
Dividends and Reinvestment
Each Fund intends to pay quarterly dividends from its net investment
income and may make distributions from net short-term capital gains at the
end of each quarter, if earned. Distributions from net long-term capital
gains, if any, will be paid annually. Additional distributions may be made
if necessary for a Fund to avoid federal income or excise taxes. Any
dividends and distribution payments will be reinvested, at net asset value,
in additional full and fractional shares of a Fund unless the shareholder
notifies the Transfer Agent in writing requesting payments in cash. See
"Dividends, Distributions and Taxes."
Risk Factors
None of the Funds above constitutes a complete investment program.
In addition, there can, of course, be no assurance that a Fund will achieve
its investment objectives. All investments involve risks; however,
investors should be aware of the following general observations. The
market value of the fixed-income securities in which the PanAgora Asset
Allocation and Global Funds may invest may vary inversely in response to
changes in prevailing interest rates. The foreign securities in which the
PanAgora Global and International Equity Funds may invest, including the
foreign securities of issuers located in developing countries, may be
subject to certain risks in addition to those inherent in U.S. investments.
The Funds may make certain investments and employ certain investment
techniques that involve other risks, including entering into repurchase and
reverse repurchase agreements, lending portfolio securities, purchasing and
selling options, entering into futures contracts and related options and
engaging in certain currency hedging techniques. Finally, in the event a
Fund has a high rate of portfolio turnover, the Fund will incur
correspondingly higher transaction costs. These risks are fully described
under "Description of Securities and Investment Techniques and Related
Risks" and "Additional Investment Information."
EXPENSE INFORMATION
PanAgor
a
Asset
Allocat
ion
Fund
PanAgora
Global
Fund
PanAgor
a
Inter-
nationa
l
Equity
Fund
Shareholder Transaction Expenses
Maximum Sales Charge Imposed on
Purchases...................
None
None
None
Maximum Sales Charge Imposed on
Reinvested Dividends....
None
None
None
Deferred Sales Charge Imposed on
Redemptions.................
None
None
None
Annual Fund Operating Expenses
(as a percentage of average daily net
assets)
Advisory
Fees*......................................
...............
0.60%
0.70%
0.80%
Other
Expenses**.................................
...................
0.30%
0.30%
0.30%
Total Fund Operating
Expenses**.....................
0.90%
1.00%
1.10%
_________________________
* During the fiscal year ended May 31, 1994, the Adviser agreed not to
impose its advisory fee and to limit the expenses of each Fund to the
extent necessary to limit Total Fund Operating Expenses of each Fund, on an
annualized basis, as follows: 0.90% of the average daily net assets of the
PanAgora Asset Allocation Fund; 1.00% of the average daily net assets of
the PanAgora Global Fund; and 1.10% of the average daily net assets of the
PanAgora International Equity Fund. This voluntary agreement may be
terminated or modified by the Adviser in its sole discretion at any time.
The purpose of this policy is to enhance a Fund's total return during the
period when, because of its smaller size, fixed expenses have a more
significant impact on total return. Had the Adviser not agreed to the
above expense limitation, the Total Fund Operating Expenses of PanAgora
Asset Allocation Fund, PanAgora Global Fund and PanAgora International
Equity Fund would have been 8.96%, 1.53% and 2.42%, respectively.
Hypothetical Expense Example:
Investors would pay the following expenses on a $1,000 investment assuming
a 5% annual return and redemption at the end of each time period:
1 Year 3 Years 5 Years 10 Years
PanAgora Asset Allocation Fund $ 9 $29 $50 $111
PanAgora Global Fund $10 $32 $55 $122
PanAgora International Equity Fund $11 $35 $61 $134
The purpose of the table and hypothetical expense example is to
assist investors in understanding the various direct and indirect costs and
expenses that an investment in a Fund will bear. The costs and expenses
included in the table and hypothetical example are based on estimated fees
and expenses for the fiscal year ending May 31, 1994. The hypothetical
expense example above assumes reinvestment of all dividends and
distributions and that the percentage amounts listed under "Estimated
Annual Fund Operating Expenses" remain the same each year.
The hypothetical expense example is designed for information purposes
only, and should not be considered a representation of future Fund expenses
or return. Actual Fund expenses and return vary from year to year and may
be higher or lower than those shown.
For further information regarding advisory and administration fees,
and other expenses of the Funds, see "Management of the Trust.
FINANCIAL HIGHLIGHTS
The following financial highlights are derived from the Trust's
audited financial statements included in the Trust's 1994 Annual Report
to Shareholders. The 1994 Annual Report to Shareholders is incorporated
by reference into the Statement of Additional Information, and is
available without charge by calling 1-800-423-6041. The following data
should be read in conjunction with such financial statements, related
notes, and other financial information incorporated by reference in the
Statement of Additional Information. The Funds' Annual Report has been
audited by Coopers & Lybrand, independent accountants, whose report
appears in the Funds' Annual Report.
PanAgora
Asset
Allocation
Fund
Year ended
May 31, 1994*
PanAgora
Global Fund
Year ended
May 31, 1994*
PanAgora
International
Equity Fund
Year ended
May 31, 1994*
Operating Performance:
Net asset value, beginning of
period...........................
$10.00
$10.00
$10.00
Income from Investment Operations:
Net investment
income+................................
....
0.14
0.11
0.11
Net realized and unrealized
gain/(loss)
........on
investments++..........................
.............
0.02
0.76
0.89
Total from investment
operations......................
0.16
0.87
1.00
Distributions:
Dividends from net investment
income...................
(0.10)
(0.10)
(0.03)
Distributions from capital
gains..........................
Total from investment
operations.......................
Net asset value, end of
period.................................
.
(0.05)
(0.15)
$10.01
(0.29)
(0.39)
$10.48
(0.22)
(0.25)
$10.75
Total
return+++..............................
..................
1.63%
8.68%
10.12%
Ratios/supplemental data:
Net assets, end of period (in
000's)........................
$2,871
$41,758
$14,955
Ratio of operating expenses to
average net
assets++++.............................
.................
0.90%
1.00%
1.10%
Ratio of net investment income to
average
net
assets.................................
...................
2.08%
1.25%
0.93%
Portfolio turnover
rate...................................
........
50%
187%
160%
____________________________
* The Funds commenced operations on June 1, 1993.
+ Net investment income (loss) per share before giving effect to
expense limitation arrangement by investment adviser was ($0.39) for the
PanAgora Asset Allocation Fund, $0.07 for the PanAgora Global Fund and
($0.05) for the PanAgora International Equity Fund for the year ended May,
31, 1994.
++ The amount shown at this caption for each share outstanding
throughout the period may not accord with the change in the aggregate gains
and losses in the portfolio securities for the period because of the timing
of purchases and withdrawals of shares in relation to the fluctuating
market values of the portfolio.
+++ Total return represents aggregate total return for the period
indicated.
++++ Annualized expense ratio before giving effect to expense limitation
arrangement by investment adviser was 8.96% for the PanAgora Asset
Allocation Fund, 1.53% for the PanAgora Global Fund and 2.42% for the
PanAgora International Equity Fund for the year ended May 31, 1994.
INVESTMENT OBJECTIVES AND POLICIES
The Adviser's proprietary asset allocation disciplines and the
investment objectives of each of the Funds together with the policies employed
to achieve these objectives are described below. None of the Funds alone
constitutes a complete investment program. There can, of course, be no
assurance that a Fund will achieve its investment objective.
The Adviser's Asset Allocation Disciplines
Each of the Funds relies exclusively on the Adviser's proprietary asset
allocation disciplines to actively allocate assets among various asset classes
(e.g., equity, fixed-income) and markets (e.g., U.S., global, international)
in accordance with the Fund's stated investment objectives and policies.
Underlying the Adviser's asset allocation disciplines is the belief that
investment opportunities, (i.e., return) are primarily derived from asset
class and market opportunities. Investment opportunities arising from
individual security selection, while important, are viewed as secondary to
opportunities arising from asset class and market selections. Since 1982, the
Adviser and/or its investment management professionals have developed and
continue to develop valuation techniques designed to evaluate worldwide asset
classes and markets.
In implementing the disciplines, the Adviser establishes percentage
guidelines (the "Guidelines") that indicate the optimal allocation of a Fund's
portfolio securities among the asset classes and markets in which the Fund may
invest. The Guidelines reflect the Adviser's analysis of the potential
investment returns to be derived from each asset class or market. In
evaluating potential investment returns, the Adviser considers factors such as
economic conditions, monetary policy, asset class or market valuation as
reflected by established market indices, and competitive returns available in
alternative asset classes or markets.
The Adviser periodically reformulates the Guidelines in order to achieve
each Fund's investment objective on an ongoing basis. The asset allocation
disciplines employed by the Adviser dictate that shifts among assets classes
and markets should be frequent (at least monthly), but relatively modest (a
few percentage points). Under normal market conditions, the correlation
between the Guidelines and the allocation of a Fund's investments among asset
classes and markets will be relatively close. Under certain market conditions,
however, the allocation of a Fund's investments may not approximate the
Guidelines. For instance, if the Guidelines are adjusted substantially, it
may not be feasible for the Adviser to purchase or sell sufficient amounts of
different types of securities, under terms and conditions deemed by the
Adviser to be beneficial to the Fund, to conform the Fund's portfolio
immediately to the adjusted Guidelines. This reallocation process may take
several days.
The Adviser's investment of assets within an asset class or market
utilizes more traditional analysis, focusing on such components as value and
growth potential, diversification and trading liquidity. Although individual
securities purchased by a Fund will generally be included in the underlying
indices used to formulate the Guidelines, the Funds may purchase securities
not included in such indices when deemed appropriate by the Adviser. A more
detailed discussion of each Fund's individual security selection process is
included in the section describing the investment objectives and policies of
each Fund.
PanAgora Asset Allocation Fund
The PanAgora Asset Allocation Fund's investment objective is to maximize
total return, consisting of capital appreciation and current income. The Fund
attempts to achieve its objective by actively allocating assets among U.S.
equity securities, investment grade fixed-income securities and
secfilin/1293pros.doc 7
cash and cash equivalents based on the Adviser's proprietary asset allocation
disciplines. When the
Adviser determines that domestic capital markets are fairly priced relative to
each other and relative to corresponding risks, the Fund will invest
approximately 70% of its assets in equity securities, 25% in investment grade
fixed-income securities and 5% in cash and cash equivalents. However, as
market conditions warrant, the Adviser typically allocates the Fund's assets
among asset classes without regard to the stated percentages.
Equity securities in which the PanAgora Asset Allocation Fund may invest
consist of common stocks of U.S. companies and preferred stocks, debt
instruments convertible into common stocks and securities having common stock
characteristics (such as warrants and rights to purchase common stock) of such
companies. In selecting equity securities for the Fund, the Adviser gives
important consideration to diversification and trading liquidity. The Adviser
attempts to select equity securities which, as a portfolio, have investment
characteristics, such as industry representation, dividend yield and
capitalization, and investment performance similar to the stocks in the S&P
500. The Adviser expects that the Fund will hold 50 or more larger
capitalization stocks, most of which are traded on the New York Stock Exchange
(the "NYSE"). In selecting equity securities, the Adviser also gives
consideration to the value and growth potential of such securities. The Fund
may also invest in securities of closed-end investment companies.
Fixed-income securities in which the PanAgora Asset Allocation Fund may
invest consist of all types of debt securities such as bonds, debentures,
notes and stocks, such as preferred stocks. The Fund invests in highly liquid
investment-grade securities issued by the U.S. government, its agencies and
instrumentalities and by major U.S. corporations. The Fund's investments in
fixed-income securities also include mortgage-backed and mortgage-related
securities issued by the U.S. government, its agencies and instrumentalities
and private issuers. In general, debt securities purchased by the Fund are
included in the Lehman Brothers Aggregate Bond Index, a composite index of all
U.S. government and agency and publicly-traded investment-grade corporate debt
securities with a maturity of one year or longer (the "Lehman Aggregate
Index"). Investment-grade fixed-income securities are securities rated Baa or
higher by Moody's Investors Service, Inc. ("Moody's") or BBB or higher by
Standard & Poor's Corporation ("S&P"), and unrated securities and securities
rated by other nationally recognized statistical rating services that are of
equivalent quality in the opinion of the Adviser. For a description of these
ratings, see the Appendix to the Statement of Additional Information. The
Adviser selects fixed-income securities for the Fund to match the Lehman
Aggregate Index in maturity, quality, sector and coupon characteristics.
Typically, the average maturity of fixed-income securities selected by the
Adviser is approximately 10 years, although the Fund may invest in longer- or
shorter-term securities when, in the opinion of the Adviser, investment
opportunities warrant.
The Fund invests in a wide range of cash and cash equivalents,
consisting of short-term securities issued by the U.S. government, its
agencies and instrumentalities, bank certificates of deposit and time
deposits, bankers' acceptances, commercial paper, high-grade short-term
corporate debt obligations and repurchase agreements with respect to these
securities.
In order to achieve its investment objectives, the Fund engages
significantly in options and futures for hedging and other permissible
purposes.
For a further description of the types of securities in which the
PanAgora Asset Allocation Fund may invest and the techniques and strategies
employed by the Adviser and related risks, see "Description of Securities and
Investment Techniques and Related Risks."
PanAgora Global Fund
The PanAgora Global Fund's investment objective is to maximize total
return, consisting of capital appreciation and current income. The Fund
attempts to achieve its objective by actively allocating assets among global
equity, fixed-income and currency markets based on the Adviser's proprietary
allocation disciplines. When the Adviser determines that global capital
markets are fairly priced relative to each other and relative to corresponding
risks, the Fund will invest approximately 70% of its assets in equity
securities and 30% in fixed-income securities. However, as market conditions
warrant, the Adviser typically allocates the Fund's assets among asset classes
and markets without regard to the stated percentages. As a global fund, at
least 65% of the Fund's assets will be invested in securities of issuers
having their principal place of business, having a majority of their assets or
deriving a majority of their operating income in at least three different
countries, one of which may be the United States.
Equity securities in which the PanAgora Global Fund may invest include
common stocks of U.S. and non-U.S. companies and preferred stocks, debt
instruments convertible into common stocks and securities having common stock
characteristics (such as warrants and rights to purchase common stock) of such
companies. The Fund may also invest in sponsored and unsponsored American
Depository Receipts ("ADRs") and European Depository Receipts ("EDRs"). The
Fund's U.S. equity investments include large, intermediate and small
capitalization companies, primarily included in the S&P 500 Composite Stock
Index. Although the Fund may invest anywhere in the world, the Fund's
non-U.S. equity investments are primarily in equity markets listed in the
Morgan Stanley Capital International-Europe Australia Far East Index (the
"MSCI-EAFE Index"). As of the date of this Prospectus, the MSCI-EAFE Index
currently includes the equity markets of Australia, Austria, Belgium, Denmark,
Finland, France, Germany, Hong Kong, Italy, Japan, the Netherlands, New
Zealand, Norway, Singapore, Malaysia, Spain, Sweden, Switzerland, and the
United Kingdom. Because the MSCI-EAFE Index primarily includes highly
capitalized companies, the Fund's non-U.S. equity investments will reflect
this trend. The Fund may also invest in securities of closed-end investment
companies.
Fixed-income securities in which the PanAgora Global Fund may invest
include all types of U.S. and non-U.S. debt securities such as bonds,
debentures, notes and stocks, such as preferred stocks. The Fund may invest
in all fixed-income securities of U.S. and non-U.S. issuers, including
governments, governmental entities and supranational issuers. The Fund's U.S.
fixed-income investments are rated investment-grade and are generally included
in the Lehman Aggregate Index. Investment-grade fixed-income securities are
securities rated Baa or higher by Moody's or BBB or higher by S&P, and unrated
securities and securities rated by other nationally recognized statistical
rating services that are of equivalent quality in the opinion of the Adviser.
The Fund's non-U.S. fixed-income investments are also rated investment-grade
and are typically issued by government and supranational issuers and are
generally included in the Salomon Brothers' World Government Bond Index, which
currently includes the United States, Japan, Germany, Canada and the United
Kingdom. Typically, the average maturity of fixed-income securities selected
by the Adviser is approximately 10 years, although the Fund may invest in
longer- or shorter-term securities when, in the opinion of the Adviser,
investment opportunities warrant.
For temporary defensive purposes, the Fund may invest, without
limitation, in a wide range of cash and cash equivalents, including short-term
securities issued by U.S. and non-U.S. governments, their agencies and
instrumentalities, and U.S. and non-U.S. bank certificates of deposit and time
deposits, bankers' acceptances, commercial paper, high-grade short-term
corporate debt obligations and repurchase agreements with respect to these
securities.
In order to manage the currency risks associated with global investing,
the Fund engages in certain currency management techniques. These techniques
are described in detail in "Description of Securities and Investment
Techniques and Related Risk Factors" below. In addition, in order to achieve
its investment objectives, the Fund engages significantly in options and
futures for hedging and other permissible purposes.
For a further description of the types of securities in which the
PanAgora Global Fund may invest and the techniques and strategies employed by
the Adviser and related risks, see "Description of Securities and Investment
Techniques and Related Risks."
PanAgora International Equity Fund
The PanAgora International Equity Fund's primary investment objective is
to maximize total return, consisting primarily of capital appreciation.
Current income is a secondary objective. The Fund attempts to achieve its
objectives by actively allocating assets among international equity markets
based on the Adviser's proprietary asset allocation disciplines. When the
Adviser determines that international equity markets are fairly priced
relative to each other, the Fund's investments in international equity markets
will be generally weighted in accordance with the MSCI-EAFE Index.
In establishing Guidelines for the PanAgora International Equity Fund,
the Adviser utilizes the MSCI-EAFE Index. The Adviser will deviate from the
asset allocation weightings of the MSCI-EAFE Index based on its views of the
potential investment return to be derived from such deviation.
The Fund seeks to achieve its investment objectives by investing in
equity securities allocated across a broad range of global markets. Equity
securities in which the Fund may invest include common stocks of non-U.S.
companies and preferred stocks, debt instruments convertible into common
stocks and securities having common stock characteristics (such as warrants
and rights to purchase common stock) of such companies. The Fund may also
invest in sponsored and unsponsored ADRs and EDRs. In allocating assets among
equity markets, the Fund places particular emphasis on countries that are
considered to have above average potential for long-term economic growth. In
general, the Fund's investments are expected to be broadly diversified over a
number of countries including, but not limited to, Australia, Austria,
Belgium, Denmark, Finland, France, Germany, Hong Kong, Italy, Japan, the
Netherlands, New Zealand, Norway, Singapore, Spain, Sweden, Switzerland and
the United Kingdom and, subject to the limitation that no more than 10% of the
Fund's assets taken at cost will be invested in one or more of the following
countries: Argentina, Brazil, Chile, Greece, Indonesia, Korea, Malaysia,
Mexico, Philippines, Portugal, Thailand and Turkey. Within countries, equity
investments are expected to be broadly diversified to spread risk and to
provide representation of the growth potential of the country. Selection of
securities is designed to include participation in economic and industrial
sectors which are important to the growth of the country. Within countries,
the Fund invests primarily in major established companies which are listed and
traded on principal exchanges. The Fund may also invest in securities of
closed-end investment companies.
For temporary defensive purposes, the Fund may invest, without
limitation, in a wide range of cash and cash equivalents, including short-term
securities issued by U.S. and non-U.S. governments, their agencies and
instrumentalities and U.S. and non-U.S. bank certificates of deposit and time
deposits, bankers' acceptances, commercial paper, high-grade short-term
corporate debt obligations and repurchase agreements with respect to these
securities.
In order to manage the currency risks associated with global investing,
the Fund engages in certain currency management techniques. These techniques
are described in detail in "Description of Securities and Investment
Techniques and Related Risk Factors" below. In addition, in order to
achieve its investment objectives, the Fund invests in options and futures for
hedging and other permissible purposes.
For a further description of the types of securities in which the
PanAgora International Equity Fund may invest and the techniques and
strategies employed by the Adviser and related risks, see "Description of
Securities and Investment Techniques and Related Risks."
DESCRIPTION OF SECURITIES AND INVESTMENT TECHNIQUES
AND RELATED RISKS
Fixed-Income Securities
General. In order to achieve their respective investment objectives,
the Funds (except the PanAgora International Equity Fund) may invest in a
broad range of U.S. and non-U.S. fixed-income securities. In periods of
declining interest rates, a Fund's yield (its income from portfolio
investments over a stated period of time) may tend to be higher than
prevailing market rates, and in periods of rising interest rates, the yield of
the Fund may tend to be lower. Also, when interest rates are falling, the
inflow of net new money to each Fund from the continuous sale of its shares
will likely be invested in portfolio instruments producing lower yields than
the balance of the Fund's portfolio, thereby reducing the yield of the Fund.
In periods of rising interest rates, the opposite can be true. The net asset
value of a Fund investing in fixed-income securities may also change as
general levels of interest rates fluctuate. When interest rates increase, the
value of a portfolio of fixed-income securities can be expected to decline.
Securities rated BBB by S&P or Baa by Moody's, or their equivalents, are
generally regarded as having an adequate capacity to pay principal and
interest; however, such securities may have speculative characteristics and
therefore may involve greater risks than higher rated securities.
U.S. Government Securities. The Funds may invest in obligations issued
or guaranteed as to both principal and interest by the U.S. government, its
agencies or instrumentalities ("U.S. Government Securities"). Some U.S.
Government Securities, such as U.S. Treasury bills, notes and bonds, are
supported by the full faith and credit of the United States. Others, such as
obligations issued or guaranteed by U.S. government agencies or
instrumentalities are supported either by (i) the full faith and credit of the
U.S. government (such as securities of the Small Business Administration),
(ii) the right of the issuer to borrow from the U.S. Treasury (such as
securities of the Federal Home Loan Banks), (iii) the discretionary authority
of the U.S. government to purchase the agency's obligations (such as
securities of the Federal National Mortgage Association ("FNMA")), or (iv)
only the credit of the issuer. No assurance can be given that the U.S.
government will provide financial support to U.S. government agencies or
instrumentalities in the future.
To secure advantageous prices or yields, the Fund may purchase U.S.
Government Securities on a when-issued basis or may purchase or sell
securities for delayed delivery. In such transactions, delivery of the
securities occurs beyond the normal settlement periods, but no payment or
delivery is made by the Fund prior to the actual delivery or payment by the
other party to the transaction and no income accrues prior to delivery of the
securities. The purchase of securities on a when-issued or delayed delivery
basis involves the risk that, as a result of an increase in yields available
in the marketplace, the value of the securities purchased will decline prior
to the settlement date. The sale of securities for delayed delivery involves
the risk that the prices available in the market on the delivery date may be
greater than those obtained in the sale transaction. The Fund will establish a
segregated account with its custodian consisting of cash, U.S. Government
Securities or other high-grade debt obligations in an amount equal to the
amounts of its when-issued and delayed delivery commitments.
Mortgage-Backed and Mortgage-Related Securities. The Funds may invest
in mortgage-backed securities, including collateralized mortgage obligations
("CMOs") and Government Stripped Mortgage-Backed Securities. Mortgage-backed
securities provide a monthly payment from interest and/or principal payments
made with respect to an underlying pool of mortgage loans. CMOs are types of
bonds secured by an underlying pool of mortgage pass-through certificates that
are structured to direct portions of principal and interest payments on
underlying collateral to different series or classes of the obligations.
Government Stripped Mortgage-Backed Securities are mortgage-backed
securities issued or guaranteed by FNMA, the Government National Mortgage
Association ("GNMA"), and the Federal Home Loan Mortgage Corporation
("FHLMC"). These securities represent beneficial ownership interests in
either periodic principal distributions ("principal-only") or interest
distributions ("interest-only") on mortgage-backed certificates issued by
FNMA, GNMA or FHLMC, as the case may be. The certificates underlying the
Government Stripped Mortgage-Backed Securities represent all or part of the
beneficial interest in pools of mortgage loans. Investing in Government
Stripped Mortgage-Backed Securities involves the risks normally associated
with investing in mortgage-backed securities issued by government or
government-related entities.
To the extent that a Fund purchases mortgage-related or mortgage-backed
securities at a premium, mortgage foreclosures and prepayments of principal by
mortgagors (which may be made at any time without penalty) may result in some
loss of the Fund's principal investment to the extent of the premium paid.
The yield of the Fund may be affected by reinvestment of prepayments at higher
or lower rates than the original investment. In addition, like other debt
securities, the value of mortgage-related securities will generally fluctuate
in response to market interest rates. Government Stripped Mortgage-Backed
Securities are currently traded in an over-the-counter market maintained by
several large investment banking firms. There can be no assurance than the
Fund will be able to effect a trade of a Government Stripped Mortgage-Backed
Security at a time when it wishes to do so. The Fund will acquire Government
Stripped Mortgage-Backed Securities only if a liquid secondary market for the
securities exists at the time of acquisition.
Foreign Government Securities. The foreign government securities in
which the PanAgora Global Fund may invest generally consist of obligations
supported by national, state or provincial governments or similar political
subdivisions. Foreign government securities also include debt obligations of
supranational or quasi-governmental entities. Quasi-governmental and
supranational entities include international organizations designated or
supported by governmental entities to promote economic reconstruction or
development and international banking institutions and related government
agencies. Examples include the International Bank for Reconstruction and
Development (the "World Bank"), the European Coal and Steel Community, the
Asian Development Bank and the InterAmerican Development Bank. Foreign
government securities also include mortgage-related securities issued or
guaranteed by national, state or provincial governmental instrumentalities,
including quasi-governmental agencies. For a description of the risks
associated with all foreign investments, see "Foreign Securities" below.
Foreign Securities
The PanAgora Global and PanAgora International Equity Funds may invest
in securities of non-U.S. issuers directly or in the form of sponsored and
unsponsored ADRs, EDRs or similar securities representing interests in the
common stock of foreign issuers. ADRs are receipts, typically issued by a
U.S. bank or trust company, which evidence ownership of underlying securities
issued by a foreign corporation. EDRs are receipts issued in Europe which
evidence a similar ownership arrangement. Generally, ADRs, in registered
form, are designed for use in the U.S. securities markets and EDRs are
designed for use in European securities markets. The underlying securities
are not always denominated in the same currency as the ADRs or EDRs. Although
investment in the form of ADRs or EDRs facilitates trading in foreign
securities, it does not mitigate the risks associated with investing in
foreign securities. The issuers of unsponsored ADRs and EDRs are not
obligated to disclose material information in the United States and therefore
such information may not be reflected in the market value of the unsponsored
ADRs and EDRs.
Investment in securities of foreign issuers may involve greater risks
than those associated with U.S. investments. There is generally less publicly
available information regarding foreign issuers and foreign issuers are
generally not subject to uniform accounting, auditing and financial reporting
standards comparable to those applicable to U.S. issuers. The securities
markets in many of the foreign countries in which the Funds invest will have
substantially less trading volume than the principal U.S. securities markets.
As a result, the securities of some foreign issuers may be less liquid and
more volatile than comparable U.S. securities. In addition, in some foreign
countries, there is a possibility of expropriation or confiscatory taxation as
well as political or social instability which could adversely affect U.S.
investments in those countries. Investors in foreign securities incur higher
transaction costs than investors in U.S. securities, including higher costs in
making securities transactions as well as foreign government taxes which may
reduce the investment return of the Funds. Finally, there is generally less
government regulation and supervision of foreign exchanges and brokers.
Among the foreign securities in which the Funds may invest are those
issued by companies located in developing countries, which are countries in
the initial stages of their industrialization cycles. Investing in the equity
and debt markets of developing countries involves exposure to economic
structures that are generally less diverse and less mature, and to political
systems that can be expected to have less stability, than those of developed
countries. The markets of developing countries historically have been more
volatile than the markets of the more mature economies of developed countries,
but often have provided higher rates of return to investors. To the extent a
Fund invests in securities of companies located in Eastern European countries,
there will be both country risks relating to the relative brevity of the
free-market movements in such countries and company risks relating to the
brevity of the public-company experience of such companies. In addition, the
countries of Eastern Europe have only recently emerged from a political and
economic system dominated by the communist party. While under communist party
control, these countries generally resisted private enterprise. There can be
no assurance that the communist party will not regain control of the political
and economic systems of Eastern Europe and reassert its political and economic
philosophy.
Although the Funds (except the PanAgora Asset Allocation Fund) may
invest in securities denominated in foreign currencies, each Fund values its
securities and other assets in U.S. dollars. As a result, the net asset value
of each Fund's shares may fluctuate with U.S. dollar exchange rates as well as
with price changes of the Fund's securities in the various local markets and
currencies. Thus, an increase in the value of the U.S. dollar compared to the
currencies in which the Fund makes its investments could reduce or eliminate
the effect of increases and magnify the effect of decreases in the values of
the Fund's investments. In addition to favorable and unfavorable currency
exchange-rate developments, the Funds are subject to the possible imposition
of exchange control regulations or currency blockages. See "Currency
Transactions" below.
Cash and Cash Equivalents
Each of the Funds, subject to its investment objective and policies, in
addition to the cash equivalents described elsewhere in this Prospectus,
invests in the cash equivalents described below. Cash equivalents also
include U.S. Government Securities maturing within one year (including
repurchase agreements collateralized by such securities). The Funds may also
invest in obligations of banks which at the date of investment have capital,
surplus, and undivided profits (as of the date of their most recently
published financial statements) in excess of $100 million. Each Fund may also
invest in commercial paper which at the date of investment is rated at least
A-2 by S&P or P-2 by Moody's, or their equivalent ratings, or, if not rated,
is issued or guaranteed as to payment of principal and interest by companies
which are rated, at the time of purchase, A or better by S&P or Moody's, or
their equivalents, and other debt instruments, including unrated instruments,
not specifically described if such instruments are deemed by the Adviser to be
of comparable quality.
Commercial paper represents short-term unsecured promissory notes issued
in bearer form by U.S. or foreign banks or bank holding companies,
corporations and finance companies. The commercial paper purchased by the
PanAgora Asset Allocation Fund consists of U.S. dollar-denominated obligations
of domestic or foreign issuers. Bank obligations in which the Funds may invest
include certificates of deposit, bankers' acceptances, and fixed time
deposits. Bank obligations also include U.S. dollar-denominated obligations
of foreign branches of U.S. banks or of U.S. branches of foreign banks, all of
the same type as domestic bank obligations. A Fund will invest in the
obligations of foreign branches of U.S. banks or of U.S. branches of foreign
banks only when the Adviser believes the credit risk with respect to the
instrument is minimal.
Each Fund may invest in securities of other investment companies which
invest in high-quality, short-term debt securities and which determine their
net asset value per share based on the amortized cost or penny rounding
method. Expenses imposed by investment companies in which a Fund may invest
will be borne indirectly by the shareholders of the Fund.
Currency Transactions
To effectively manage exposure to currency fluctuations, the PanAgora
Global and PanAgora International Equity Funds may alter asset class or market
exposure in accordance with its investment policies, enter into forward
foreign currency exchange contracts, buy or sell options, futures or options
on futures relating to foreign currencies, and purchase securities indexed to
the performance of several currencies. A Fund may also use currency management
techniques in the normal course of business to hedge against adverse movements
in exchange rates in connection with the purchase and sale of securities. See
"Forward Foreign Currency Transactions," "Options" and "Futures and Options on
Futures" below.
Forward Foreign Currency Transactions
As described in "Currency Transactions" above, the PanAgora Global and
PanAgora International Equity Funds may conduct foreign currency exchange
transactions on a spot (i.e., cash) basis at the spot rate prevailing in the
foreign currency exchange market or by entering into forward contracts to
purchase or sell foreign currencies. A forward contract involves an obligation
to purchase or sell a specific currency amount at a future date, which may be
any fixed number of days from the date of the contract.
When the Adviser believes that the currency of a particular country may
suffer a significant decline against the U.S. dollar or against another
currency, a Fund may enter into a forward contract to sell, for a fixed amount
of U.S. dollars or other appropriate currency, the amount of foreign currency
approximating the value of some or all of the Fund's securities denominated in
such foreign currency. At the maturity of a forward contract, the Fund may
either sell a portfolio security and make delivery of the foreign currency, or
it may retain the security and terminate its contractual obligation to deliver
the foreign currency by purchasing an "offsetting" contract with the same
currency trader obligating it to purchase, on the same maturity date, the same
amount of the foreign currency. The Funds may realize a gain or loss from
currency transactions.
Options
Each of the Funds may write (sell) covered put and call options on
equity and debt securities and enter into related closing transactions. A
Fund may realize fees (referred to as "premiums") for granting the rights
evidenced by the options. However, in return for the premium, the Fund
forfeits the right to any appreciation in the underlying security while the
option is outstanding. A put option gives to its purchaser the right to
compel the writer of the option to purchase from the option holder an
underlying security at the specified price at any time during the option
period. In contrast, a call option gives to its purchaser the right to compel
the writer of the option to sell the option holder an underlying security at a
specified price at any time during the option period. Upon the exercise of a
put option written by a Fund, the Fund may suffer a loss equal to the
difference between the price at which the Fund is required to purchase the
underlying security and its market value at the time of the option exercise,
less the premium received for writing the option. All call options written by
a Fund are covered, which means that the Fund will own the securities subject
to the option as long as the option is outstanding. All put options written by
a Fund are covered, which means that the Fund will deposit cash or cash
equivalents or a combination of both in a segregated account with the
custodian with a value at least equal to the exercise price of the put option.
The Funds may also purchase put and call options on securities. The
advantage to the purchaser of a call option is that it may hedge against an
increase in the price of portfolio securities it ultimately wishes to buy. The
advantage to the purchaser of a put option is that it may hedge against a
decrease in the price of portfolio securities it ultimately wishes to sell.
Closing transactions essentially permit the Funds to offset put options
or call options prior to exercise or expiration. If a Fund cannot effect
closing transactions, it may have to retain a security in its portfolio it
would otherwise sell or deliver a security it would otherwise retain.
The Funds may purchase and sell options traded on U.S. exchanges and, to
the extent permitted by law, options traded over-the-counter. It is the
position of the Securities and Exchange Commission (the "Commission") that
over-the-counter options are illiquid. Accordingly, each Fund will only
invest in such options to the extent consistent with its 15% limitation on
investments in illiquid securities. The PanAgora Global and PanAgora
International Equity Funds may also purchase and sell options traded on
recognized foreign exchanges.
The PanAgora Global and PanAgora International Equity Funds may purchase
and write put and call options on foreign currencies (traded on U.S. and
foreign exchanges or over-the-counter) to manage portfolio exposure to changes
in dollar exchange rates. Call options on foreign currency written by the
Fund will be covered, which means that the Fund will own an equal amount of
the underlying foreign currency. With respect to put options on foreign
currency written by the Fund, the Fund will deposit cash or cash equivalents
or a combination of both in a segregated account with the custodian in an
amount equal to the amount the Fund would be required to pay upon exercise of
the put.
Stock Index Options
The Funds may purchase and write exchange-listed put and call options on
stock indices to hedge against risks of market-wide price movements. A stock
index measures the movement of a certain group of stocks by assigning relative
values to the common stocks included in the index. Examples of well-known
stock indices are the S&P 500 Composite Stock Index, the NYSE Composite Index,
the Toronto Stock Exchange Composite 100 and the Financial Times Stock
Exchange 100. Options on stock indices are similar to options on securities.
However, because options on stock indices do not involve the delivery of an
underlying security, the option represents the holder's right to obtain from
the writer in cash a fixed multiple of the amount by which the exercise price
exceeds (in the case of a put) or is less than (in the case of a call) the
closing value of the underlying index on the exercise date.
The advisability of using stock index options to hedge against the risk
of market-wide movements will depend on the extent of diversification of a
Fund's stock investments and the sensitivity of its stock investments to
factors influencing the underlying index. The effectiveness of purchasing or
writing stock index options as a hedging technique will depend upon the extent
to which price movements in the portion of the portfolio being hedged
correlate with price movements in the stock index selected. When a Fund
writes an option on a stock index, it will deposit cash or cash equivalents or
a combination of both in an amount equal to the market value of the option, in
a segregated account with the custodian, and will maintain the account while
the option is open.
Futures and Options on Futures
When deemed advisable by the Adviser, each of the Funds may enter into
futures contracts and purchase and write options on futures contracts to hedge
against changes in interest rates, securities prices or currency exchange
rates or for certain non-hedging purposes. The Funds may purchase and sell
financial futures contracts, including stock index futures, and purchase and
write related options. A Fund will engage in futures and related options
transactions only for bona fide hedging and non-hedging purposes as defined in
regulations of the Commodity Futures Trading Commission. A Fund will not
enter into futures contracts or options thereon for non-hedging purposes, if
immediately thereafter, the aggregate initial margin and premiums required to
establish non-hedging positions in futures contracts and options on futures
will exceed 5 percent of the net asset value of the Fund's portfolio, after
taking into account unrealized profits and losses on any such positions and
excluding the amount by which such options were in-the-money at the time of
purchase.
The use of futures contracts and options on futures contracts involves
several risks. There can be no assurance that there will be a correlation
between price movements in the underlying securities, on the one hand, and
price movements in the securities which are the subject of the hedge, on the
other hand. Positions in futures contracts and options on futures contracts
may be closed out only on an exchange or board of trade that provides an
active market for them, and there can be no assurance that a liquid market
will exist for the contract or the option at any particular time. Losses
incurred by hedging transactions and the costs of these transactions will
affect a Fund's performance. The use of futures contracts and options on
futures contracts requires special skills in addition to those needed to
select portfolio securities.
Interest Rate Swaps
In order to attempt to protect fixed-income investments from interest
rate fluctuations, the PanAgora Asset Allocation and PanAgora Global Funds may
engage in interest rate swaps. Interest rate swaps involve the exchange by a
Fund with another party of their respective rights to receive interest (e.g.,
an exchange of fixed rate payments for floating rate payments). The Funds
will enter into interest rate swaps only on a net basis (i.e., the two payment
streams will be netted out, with a Fund receiving or paying, as the case may
be, only the net amount of the two payments). The net amount of the excess, if
any, of the Fund's obligations over its entitlements with respect to each
interest rate swap will be accrued on a daily basis and an amount of cash or
liquid high-grade debt securities having an aggregate net asset value at least
equal to the accrued excess, will be maintained in a segregated account by the
Fund's custodian.
The use of interest rate swaps involves investment techniques and risks
different from those associated with ordinary portfolio securities
transactions. If the Adviser is incorrect in its forecasts of market values,
interest rates and other applicable factors, the investment performance of the
Funds will be less favorable than it would have been if this investment
technique were never used. Interest rate swaps do not involve the delivery of
securities or other underlying assets or principal. Thus, if the other party
to an interest rate swap defaults, the Fund's risk of loss will consist of the
net amount of interest payments that the Fund is contractually entitled to
receive.
Miscellaneous Investment Techniques
Repurchase Agreements. In a repurchase agreement, a Fund buys a
security subject to the right and obligation to sell it back to the seller at
the same price plus accrued interest. These transactions must be fully
collateralized at all times, but they involve some credit risk to the Funds if
the other party defaults on its obligations and the Fund is delayed or
prevented from liquidating the collateral. The Funds will enter into
repurchase agreements with member banks of the Federal Reserve System having
total assets of at least $100 million or dealers on the Federal Reserve Bank
of New York's list of reporting dealers.
Restricted and Illiquid Securities. Each Fund will not invest more than
15% of its net assets in illiquid securities, which include repurchase
agreements or fixed time deposits maturing in more than seven days and
securities that are not readily marketable, unless the Board of Trustees
determines, based upon a continuing review of the trading markets for the
specific security, that such security is liquid. In addition, each Fund will
not invest more than 5% of its net assets in securities that are not
registered, but are otherwise required to be registered, under the Securities
Act of 1933, as amended (the "1933 Act").
Lending Securities. For the purpose of realizing additional income,
each Fund may lend to broker-dealers portfolio securities amounting to not
more than 30% of its total assets taken at current value. These transactions
must be fully collateralized at all times but involve some credit risk to a
Fund if the other party should default on its obligation and that Fund is
delayed or prevented from recovering the collateral. Securities loaned by a
Fund will remain subject to fluctuations of market value.
Reverse Repurchase Agreements. The Funds may enter into reverse
repurchase agreements with banks and broker-dealers. Reverse repurchase
agreements involve sales by a Fund of portfolio assets concurrently with an
agreement by the Fund to repurchase the same assets at a later date at a fixed
price. During the reverse repurchase agreement period, the Fund continues to
receive principal and interest payments on these securities. The Funds will
deposit cash or cash equivalents or a combination of both in a segregated
account with their custodian equal in value to their obligations with respect
to reverse repurchase agreements. Reverse repurchase agreements are
considered borrowings by the Fund, and as such are subject to the investment
limitations on borrowing.
_____________________
For more information concerning the Funds' investments and the
investment techniques employed by the Adviser, see "Additional Information on
Fund Investments and Strategies and Related Risks" in the Statement of
Additional Information.
ADDITIONAL INVESTMENT INFORMATION
Portfolio Turnover
Although no Fund purchases securities with a view to rapid turnover,
there are generally no limitations on the length of time that securities must
be held by any Fund and, in light of the Adviser's asset allocation
disciplines, a Fund's annual portfolio turnover rate may vary significantly
from year to year. It is estimated that, under normal circumstances, the
annual portfolio turnover rates for each Fund will not exceed 150%. The
annual portfolio turnover rate is calculated by dividing the lesser of the
dollar amount of annual sales or purchases of portfolio securities by the
average monthly value of a Fund's portfolio securities for the year, excluding
securities having a maturity at the date of purchase of one year or less. A
high rate of portfolio turnover (i.e., 100% or higher) will result in
correspondingly higher transaction costs to a Fund and, in order for the Fund
to qualify as a regulated investment company under the Internal Revenue Code
of 1986, as amended, its gross gains from the sale of stock, securities, and
certain other investments held for less than three months must constitute less
than 30% of its gross income for its taxable year.
Investment Restrictions
Each Fund has adopted certain fundamental investment restrictions which
are described in detail in the Statement of Additional Information. Each
Fund's investment objective and those investment restrictions designated as
fundamental in the Statement of Additional Information can be changed only
with shareholder approval. All other investment restrictions and policies are
non-fundamental and can be changed by the Board of Trustees of the Trust at
any time without the approval of the shareholders.
Each Fund's fundamental investment restrictions with respect to
borrowing, investment concentration and lending are as follows:
1. Each Fund may not borrow money, except from banks, or by entering
into reverse repurchase agreements, on a temporary basis for extraordinary or
emergency purposes in amounts not to exceed 33 1/3% of the Fund's total assets
(including the amount borrowed) taken at market value; provided, that no
purchases of securities will be made if such borrowings exceed 5% of the value
of the Fund's total assets. This restriction does not apply to cash
collateral received as a result of portfolio securities lending.
2. Each Fund may not purchase the securities of issuers conducting
their principal business activities in the same industry if, immediately after
such purchase, the value of a Fund's investments in such industry would exceed
25% of its total assets taken at market value at the time of each investment.
For purposes of this restriction, telephone companies are considered to be a
separate industry from water, gas or electric utilities, personal credit
finance companies and business credit finance companies are deemed to be in
separate industries and all quasi-governmental and supranational entities are
deemed to be in a single industry.
3. Each Fund may not make loans; provided, that the lending of
portfolio securities, the purchase of debt securities and the entry into
repurchase agreements pursuant to a Fund's investment objectives and policies
shall not be limited by this restriction.
Portfolio Transactions
The Adviser is responsible for making specific decisions to buy and sell
securities for the Funds. The Adviser is also responsible for selecting
brokers and dealers to effect these transactions and negotiating, if possible,
brokerage commissions and dealers' charges. The PanAgora Global and
International Equity Funds generally trade non-U.S. securities in non-U.S.
countries, since the best available market for non-U.S. securities is often on
non-U.S. markets. In transactions on non-U.S. markets, brokerage commissions
are generally fixed and are often higher than in the U.S. where commissions
are negotiated. In the over-the-counter markets, securities (i.e., debt
securities) are generally traded on a net basis with the dealers acting as
principal for their own accounts without a stated commission.
The primary consideration in selecting broker-dealers to execute
portfolio security transactions is the execution of such portfolio
transactions at the most favorable prices. Subject to this requirement and
the provisions of Section 28(e) of the Securities Exchange Act of 1934, as
amended, securities may be bought from or sold to broker-dealers who have
furnished statistical, research and other information or services to the
Adviser. Higher commissions may be paid to broker-dealers that provide
research services. See "Portfolio Transactions and Brokerage Commissions" in
the Statement of Additional Information for a more detailed discussion of
portfolio transactions. The Trustees will review periodically each Fund's
portfolio transactions.
MANAGEMENT OF THE TRUST
The Board of Trustees of the Trust is responsible for the overall
supervision and management of the Trust. The day-to-day operations of the
Trust, including investment decisions, have been delegated to the Adviser. The
Statement of Additional Information contains general background information
regarding each Trustee and executive officer of the Trust.
The Adviser
PanAgora, located at 260 Franklin Street, Boston, Massachusetts, acts as
investment adviser to the Funds. PanAgora is registered as an investment
adviser with the Commission and provides a full range of investment advisory
services to its institutional clients throughout the world. Fifty percent of
PanAgora's outstanding voting stock is owned by Nippon Life Insurance Company
and fifty percent of such stock is owned by Lehman Brothers, Inc. As of June
30, 1994, PanAgora managed approximately $11 billion in assets for various
individual and institutional accounts, including the following registered
investment companies: the S&P 100 Plus Portfolio, a portfolio of Principal
Preservation Portfolios, Inc.; the Preferred Asset Allocation Fund, a
portfolio of the Preferred Group of Mutual Funds; and The Equity Index
Portfolio of the Shearson Series Fund.
Under its Advisory Agreements with the Trust, the Adviser continually
manages each Fund. Its responsibilities include the purchase, retention and
disposition of each Fund's portfolio securities and other assets. In
addition, the Adviser administers certain of the Trust's business affairs,
performs various shareholder servicing functions to the extent these services
are not provided by other organizations and monitors and evaluates the
performance of the Trust's service providers. For these services, the Trust,
on behalf of each Fund, paid the Adviser a monthly fee at the following annual
rates of each Fund's average daily net assets for the fiscal year ended May
31, 1994:
Fund
Annual Rate
PanAgora Asset Allocation Fund 0.60%
PanAgora Global Fund 0.70%
PanAgora International Equity Fund 0.80%
The Trust, on behalf of each Fund, is responsible for all expenses other
than those expressly assumed by the Adviser under the terms of the Advisory
Agreement for each Fund. The expenses borne by each Fund include the Fund's
advisory fee, transfer agent fee and taxes and its proportionate share of
custodian fees, expenses of issuing reports to shareholders, legal fees,
auditing and tax fees, blue sky fees, fees of the commission, insurance
expenses and disinterested Trustees' fees. The Adviser has temporarily
agreed, under certain circumstances, to reduce or not impose its management
fee and limit certain expenses of the Funds as described under "Expense
Information." In the event that the expenses of a Fund (including the
advisory fee, but excluding interest, taxes, brokerage commissions, litigation
and indemnification expenses and other extraordinary expenses) for any fiscal
year exceed the limits established by certain state securities administrators,
the Adviser will reduce its fee payable on behalf of such Fund by the amount
of such excess but only to the extent of the Fund's advisory fee. The Advisor
has agreed to pay to Funds Distributor, Inc., the Trust's distributor, as
compensation for certain distribution services rendered to the Trust, a
monthly fee at the annual rate of 0.03% of the average daily net assets of
each Fund, or a minimum annual fee of $15,000, whichever is higher.
Kristine M. Lino, Portfolio Manager of the Adviser since April, 1990, is
the portfolio manager primarily responsible for the management of the PanAgora
Asset Allocation Fund since commencement of operations of the Fund on June 1,
1993. From September, 1989, to April, 1990, she was an Operations Specialist
at Boston Safe Deposit and Trust Company. Prior to September, 1989, she was a
Portfolio Controller at State Street Bank & Trust Company.
Anthony W. Ryan, Portfolio Manager of the Adviser since 1989, is the
portfolio manager primarily responsible for the management of the PanAgora
Global Fund and PanAgora International Equity Fund. Prior to managing the
global strategies for PanAgora, Mr. Ryan managed US Equity portfolios. Mr.
Ryan joined The Boston Company in 1987, and joined the Structured Investment
Products Group in 1989. He holds a BA in General Science from the University
of Rochester, and an MSc in Economics from the London School of Economics.
Mr. Ryan is a Chartered Financial Analyst and a member of the Boston Security
Analysts Society.
Administrator, Custodian and Transfer Agent
Effective August 22, 1994, the Trust has entered into Administration,
Custodian and Transfer Agency and Service Agreements with Investors Bank &
Trust Company ("Investors Bank"), 89 South Street, Boston, Massachusetts
02111.
Investors Bank generally assists in all matters relating to the
administration of the Funds, including the coordination and monitoring of any
third parties furnishing services to the Funds, the preparation and
maintenance of financial and accounting records, and the provision of the
necessary office space, equipment and personnel to perform administrative and
clerical functions. Investors Bank is not involved in the investment
decisions made with respect to the Funds.
Investors Bank also serves as the transfer agent of the Trust.
Investors Bank maintains the records of each shareholder's account, processes
purchases and redemptions of the Funds' shares, acts as dividend and
distribution disbursing agent and performs other shareholder servicing
functions. Shareholder inquiries should be addressed to The PanAgora Funds at
P.O. Box 1537, Boston, Massachusetts 02205-1537.
As compensation for its services as Administrator, Custodian and
Transfer Agent of the Trust, Investors Bank receives a monthly fee at the
annual rate of 0.10% of the average daily net assets of each Fund, plus
transaction fees and any applicable shareholder account charges. For the
fiscal year ended May 31, 1994, each Fund paid The Boston Company Advisors,
Inc., the Trust's previous administrator, a fee at the rate of 0.15% of the
Fund's average daily net assets.
Distributor
Funds Distributor, Inc., ("Funds Distributor") serves as the distributor
of shares of the Trust pursuant to a Distribution Agreement with the Trust.
Funds Distributor assists in the sale of shares of the Funds upon the terms
described herein.
_________________
Additional information regarding the services performed by the
Administrator, Custodian, Distributor and Transfer Agent is provided in the
Statement of Additional Information.
PURCHASE OF SHARES
Shares of any Fund may be purchased on any Business Day at the net asset
value next determined after receipt of the order in proper form by the
Transfer Agent. A "Business Day" means any day on which the NYSE is open.
There is no sales charge in connection with the purchase of shares. The Trust
reserves the right, in its sole discretion, to reject any purchase offer and
to suspend the offering of shares. The minimum initial investment is $100,000
and subsequent investments will be accepted only in amounts of $2,500 or
greater. The Trust reserves the right to vary the initial investment minimum
and minimums for additional investments at any time. In addition, the Trust
may waive the minimum initial investment requirement for any investor. The
Trust does not issue share certificates.
At the discretion of the Trust, investors may be permitted to purchase
Fund shares by transferring securities to a Fund that meet that Fund's
investment objectives and policies. Securities transferred to a Fund will be
valued in accordance with the same procedures used to determine the Fund's net
asset value at the time of the next determination of net asset value after
such acceptance. Shares issued by a Fund in exchange for transferred
securities will be issued at net asset value determined as of the same time.
All dividends, interest, subscription, or other rights pertaining to such
securities shall become the property of the Fund and must be delivered to the
Fund by the investor upon receipt from the issuer. Investors who are permitted
to transfer such securities should consult their tax advisor to determine any
tax consequences, including the recognition of gains or losses, associated
with such transfer. Securities will not be accepted in exchange for shares of
a Fund unless: (i) such securities are, at the time of the exchange, eligible
to be included in the Fund and current market quotations are readily available
for such securities; and (ii) the investor represents and warrants that all
securities offered to be exchanged are not subject to any restrictions on
resale imposed by the 1933 Act or under the laws of the country in which the
principal market for such securities exists, or otherwise. For additional
information and restrictions regarding this policy, see "Purchase and
Redemption Information" in the Statement of Additional Information.
Purchases by Mail
Shares may be purchased initially by completing the PanAgora Funds
Account Application accompanying this Prospectus and mailing it, together with
a check payable to the appropriate Fund for each account an investor wishes to
open, to:
The PanAgora Funds
P. O. Box 1537
Boston, Massachusetts 02205-1537
Subsequent investments in an existing account in any Fund may be made at
any time by sending to the Transfer Agent at the above address a check payable
to the appropriate Fund, along with either (i) a subsequent order form which
may be obtained from the Transfer Agent or (ii) a letter stating the amount of
the investment, the name of the Fund and the account number in which the
investment is to be made. Investors should indicate the name of the
appropriate Fund and account number on all correspondence.
Purchases by Wire
Shares of any Fund may be purchased by wiring federal funds to the
Transfer Agent. Orders for shares purchased by wire must be transmitted by
telephone by calling The PanAgora Funds at 1-800-423-6041.
Following notification to the Transfer Agent, federal funds and
registration instructions should be wired through the Federal Reserve System
to:
Investors Bank & Trust Company
Boston, Massachusetts
ABA No. 011001438
For: The PanAgora Funds DDA No. 999273824
[Name of Fund]
[Account Registration, including account number]
All investors making initial investments by wire must promptly complete
the PanAgora Funds Account Application accompanying this Prospectus and
forward it to the Transfer Agent. Investors should be aware that some banks
may charge wire fees. Redemptions will not be processed until the PanAgora
Funds Account Application has been received by the Transfer Agent.
Retirement Plans
The Funds' investment objectives may make them a suitable investment for
part or all of the assets held in various tax-deferred retirement plans,
including Individual Retirement Accounts, simplified employee pension plans,
403(b) plans and employee-sponsored retirement plans. Investors desiring
further information concerning investment in the Funds by these plans should
contact the Transfer Agent.
Reports to Shareholders
Shareholders of each Fund receive an annual report containing audited
financial statements and a semiannual report. A printed confirmation for each
transaction will be provided by the Transfer Agent. Any dividends and
distributions paid by a Fund are also reflected in the monthly statements
issued by the Transfer Agent. A year-to-date statement for any account will
be provided upon request made to the Transfer Agent. Shareholders with
inquiries regarding a Fund may call The PanAgora Funds at 1-800-423-6041 or
write to The PanAgora Funds at P.O. Box 1537, Boston, Massachusetts 02205-
1537.
REDEMPTION OF SHARES
How To Redeem
Shareholders may redeem shares of a Fund without charge upon request on
any Business Day at the net asset value next determined after receipt of the
redemption request. Redemption requests may be made by telephoning The
PanAgora Funds at 1-800-423-6041 or by a written request addressed to the
Transfer Agent. The letter of instruction must specify the number of shares
to be redeemed, the Fund from which shares are being redeemed, the account
number, payment instructions and the exact registration on the account.
Signatures must be guaranteed in accordance with the procedures set forth
below under "Payment of Redemption Proceeds." A shareholder may request
redemptions by telephone if the optional telephone redemption privilege is
elected on the PanAgora Funds Account Application. In order to verify the
authenticity of telephone redemption requests, the Trust's telephone
representatives will request that the caller provide certain information
unique to the account. If the caller is unable provide such information,
telephone redemption requests will not be processed and the redemption must be
completed by mail. As long as the Trust's telephone representatives comply
with the procedures described above, neither the Trust nor Investors Bank will
be liable for any losses due to fraudulent or unauthorized transactions.
Finally, it may be difficult to implement telephone redemptions in times of
drastic economic or market changes.
Additional documentation may be required by the Transfer Agent in order
to establish that a redemption request has been properly authorized. A
redemption request will not be considered to have been received in proper form
until such additional documentation has been submitted to the Transfer Agent.
The payment of redemption proceeds for shares of a Fund recently purchased by
check will be delayed for up to 15 days until the check has cleared.
Payment of Redemption Proceeds
Redemption proceeds will be wired to the bank account designated on the
PanAgora Funds Account Application, unless payment by check has been
requested. For redemption requests received by the Transfer Agent by 4:00
p.m., Boston time, redemption proceeds ordinarily will be wired the next
Business Day.
After a wire has been initiated by the Transfer Agent, neither the
Transfer Agent nor the Trust assumes any further responsibility for the
performance of intermediaries or the shareholder's bank in the transfer
process. If a problem with such performance arises, the shareholder should
deal directly with such intermediaries or bank.
A shareholder may change the bank designated to receive redemption
proceeds by providing written notice to the Transfer Agent which has been
signed by the shareholder or its authorized representative. This signature
must be guaranteed by a financial institution which is an acceptable guarantor
as defined under Rule 17AD-15 of the Securities Exchange Act of 1934 as
amended. If the financial institution participates in the medallion program,
it must use the "Medallion Guaranteed" stamp. Notarization is not acceptable.
NET ASSET VALUE
The net asset value per share of each Fund is normally calculated as of
the close of regular trading on the NYSE, currently 4:00 p.m. Eastern time, on
each Business Day. The net asset value of each Fund's shares is determined by
adding the value of all securities, cash and other assets of the Fund,
subtracting liabilities (including accrued expenses and dividends payable) and
dividing the result by the total number of outstanding shares of the Fund.
For purposes of calculating each Fund's net asset value per share,
equity securities traded on a recognized U.S. or foreign securities exchange
are valued at their last sale price on the principal exchange on which they
are traded on the valuation day or, if no sale occurs, at the mean between the
closing bid and asked price. Unlisted equity securities for which market
quotations are readily available are valued at the mean between the most
recent bid and asked price. Debt securities and other fixed-income
investments of the Funds will be valued at prices supplied by independent
pricing agents selected by the Board of Trustees, which prices reflect broker-
dealer supplied valuations and electronic data processing techniques. Short-
term obligations maturing in sixty days or less are valued at amortized cost,
which method does not take into account unrealized gains or losses on the
portfolio securities. Amortized cost valuation involves initially valuing a
security at its cost, and thereafter, assuming a constant amortization to
maturity of any discount or premium, regardless of the impact of fluctuating
interest rates on the market value of the security. While this method
provides certainty in valuation, it may result in periods in which the value
of the security, as determined by the amortized cost method, may be higher or
lower than the price the Fund would receive if the Fund sold the security.
Other assets and assets whose market value does not, in the Adviser's opinion,
reflect fair value are valued at fair value using methods determined in good
faith by the Board of Trustees.
A Fund's portfolio securities from time to time may be listed on foreign
exchanges which trade on days when the NYSE is closed. As a result, the net
asset value of the Fund may be significantly affected by such trading on days
when shareholders have no access to the Fund.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Each Fund intends to and pay quarterly dividends from its net investment
income and may make distributions from net short-term capital gains at the end
of each quarter. Each Fund also distributes at least annually substantially
all of the long-term capital gains in excess of available capital losses, if
any, which it realizes for each taxable year. Additional distributions may be
made if necessary for a fund to avoid federal income or excise taxes.
Dividends and distributions are made in additional shares of the same Fund or,
at the shareholder's election, in cash. The election to reinvest dividends
and distributions or receive them in cash may be changed at any time upon
written notice to the Transfer Agent. If no election is made, all dividends
and capital gain distributions will be reinvested. Dividends will be
reinvested on the ex-dividend date (the "ex-date") at the net asset value
determined at the close of business on that date. Cash dividends will
generally be paid one week after the ex-date.
Taxes
Each Fund is treated as a separate entity for federal income tax
purposes and intends to elect to be treated as a regulated investment company
under Subchapter M of the Internal Revenue Code of 1986, as amended (the
"Code"), and intends to qualify for such treatment for each taxable year. To
qualify as a regulated investment company, each Fund must satisfy certain
requirements relating to the sources of its income, diversification of its
assets and distribution of its income to shareholders. As a regulated
investment company, a Fund will not be subject to federal income or excise tax
on any net investment income and net realized capital gains that are
distributed to its shareholders in accordance with certain timing requirements
of the Code.
Dividends paid by a Fund from its net investment income, certain net
realized foreign exchange gain, the excess of net short-term capital gain over
net long-term capital loss and original issue discount or market discount
income will be taxable to shareholders as ordinary income. Dividends paid by a
Fund from any excess of net long-term capital gain over net short-term capital
loss will be taxable as long-term capital gains regardless of how long the
shareholders have held their shares. These tax consequences will apply
regardless of whether distributions are received in cash or reinvested in
shares. A portion of a Fund's dividends attributable to the dividends it
receives (if any) from U.S. domestic corporations is generally expected to
qualify, in the hands of corporate shareholders, for the corporate
dividends-received deduction, subject to the limitations on such deduction
applicable under the Code. Certain distributions declared in October,
November or December and paid in January of the following year are taxable to
shareholders as if received on December 31 of the year in which they are
declared. Shareholders will be informed annually about the amount and
character of distributions received from a Fund for federal income tax
purposes.
Individuals and certain other classes of shareholders may be subject to
31% backup withholding of federal income tax on dividends, redemptions and
exchanges if they fail to furnish their correct taxpayer identification number
and certain certifications or if they are otherwise subject to such
withholding. Individuals, corporations and other shareholders that are not
U.S. persons under the Code are subject to different tax rules and may be
subject to withholding at the rate of 30% (or a lower rate provided by an
applicable tax treaty) on amounts treated as ordinary dividends from a Fund.
A Fund that invests in foreign securities may be subject to foreign
withholding or other foreign taxes on income (possibly including, in some
cases, capital gains) earned on such securities. In any year in which
PanAgora Global Fund or PanAgora International Equity Fund qualifies, it may
make an election that would permit certain of its taxable shareholders to take
a credit or a deduction for foreign income taxes paid by such Fund. Each
shareholder would then treat as additional income his or her proportionate
share of the amount of foreign income taxes paid by such Fund. For some
years, these Funds may be unable or may not elect to pass such taxes through
to their shareholders, who consequently would not be entitled to tax credits
or deductions with respect to such taxes.
Investors should consider the tax implications of buying shares
immediately prior to a distribution. Investors who purchase shares shortly
before the record date for a distribution will pay a per share price that
includes the value of the anticipated distribution and will be taxed when any
taxable distribution is received even though the distribution represents a
return of a portion of the purchase price. Redemptions and exchanges of
shares are taxable events on which a shareholder may recognize a gain or loss.
If for any taxable year, a Fund's total distributions exceed investment
company taxable income and net capital gain, the excess distributions
generally will be treated as a tax-free return of capital up to the amount of
the shareholder's tax basis in its shares (and will reduce a shareholder's
adjusted basis in the shares) and thereafter as a gain from a deemed sale of
the shares. If in a year in which it has available a capital loss carryover,
the Fund makes distributions in excess of its net investment income, these
distributions will be taxable as ordinary income to the extent of net gains
realized during the year which are offset by the carryover.
In addition to federal taxes, a shareholder may be subject to state,
local or foreign taxes on payments received from a Fund. A state and local
tax exemption may be available in some states to the extent distributions of a
Fund are derived from interest on certain direct U.S Government Securities.
Shareholders should consult their tax advisors regarding specific questions
about Federal, state or local taxes and special rules applicable to certain
classes of investors, such as financial institutions, tax-exempt entities,
insurance companies and non-U.S. persons.
ORGANIZATION AND SHARES OF THE TRUST
The Trust was formed as a business trust under the laws of The
Commonwealth of Massachusetts on January 27, 1993, and commenced investment
operations on June 1, 1993. The Board of Trustees of the Trust is responsible
for the overall management and supervision of the affairs of the Trust. The
Declaration of Trust authorizes the Board of Trustees to create separate
investment series or portfolios of shares. On April 10, 1993, the Trustees
authorized the establishment of the PanAgora Asset Allocation Fund, PanAgora
Global Investment Fund and PanAgora International Equity Fund, each a separate
investment series of the Trust. As of the date hereof, the Trustees have
established only the three Funds described in this Prospectus. The
Declaration of Trust further authorizes the Trustees to classify or reclassify
any series or portfolio of shares into one or more classes. As of the date
hereof, the Trustees have not authorized the issuance of any classes of shares
of the Funds.
Each share of a Fund represents an equal proportionate interest in the
assets belonging to that Fund. It is contemplated that most shares of the
Funds will be held in accounts of which the record owner is a bank or other
institution acting as nominee for its customers who are the beneficial owners
of the shares.
When issued, shares of the Funds are fully paid and nonassessable. In
the event of liquidation, shareholders are entitled to share pro rata in the
net assets of the applicable Fund available for distribution to shareholders.
Shares of the Funds entitle their holders to one vote per share, are freely
transferable and have no preemptive, subscription or conversion rights.
Shares of a Fund will be voted separately with respect to matters
pertaining to that Fund except for the election of Trustees and the
ratification of independent accountants. For example, shareholders of each
Fund are required to approve the adoption of any advisory agreement relating
to such Fund and any change in the investment objective or fundamental
investment restrictions of such Fund. Approval by the shareholders of one
Fund is effective only as to that Fund. The Trust does not intend to hold
shareholder meetings, except as may be required by the 1940 Act. The Trust's
Declaration of Trust provides that special meetings of shareholders shall be
called for any purpose, including the removal of a Trustee, upon written
request of shareholders entitled to vote at least 10% of the outstanding
shares of the Trust, or Fund, as the case may be. In addition, if ten or more
shareholders of record who have held shares for at least six months and who
hold in the aggregate either shares having a net asset value of $25,000 or 1%
of the outstanding shares, whichever is less, seek to call a meeting for the
purpose of removing a Trustee, the Trust has agreed to provide certain
information to such shareholders and generally assist their efforts.
As of August 2, 1994, the following entities owned the following amounts
of the outstanding voting securities of the Funds: PanAgora Asset Allocation
Fund: IDS Trust f/b/o IDS Trust Retirement Service Plan (45.4%); Information
Alliance Pension Plan Trust (36.8%); PanAgora Global Fund: Rush-Presbyterian-
St. Luke's Medical Center Endowment Fund (56.5%); Rush-Presbyterian-St. Luke's
Medical Center Pension Fund (41%); PanAgora International Equity Fund: The
Minneapolis Foundation (84.2%).
PERFORMANCE INFORMATION
From time to time, performance information, such as total return and
yield for a Fund, may be quoted in advertisements or in communications to
shareholders. A Fund's total return may be calculated on an annualized and
aggregate basis for various periods (which periods will be stated in the
advertisement). Average annual return reflects the average percentage change
per year in value of an investment in a Fund. Aggregate total return reflects
the total percentage change over the stated period. In calculating total
return, dividends and capital gain distributions made by the Fund during the
period are assumed to be reinvested in the Fund's shares. A Fund's yield
reflects a Fund's overall rate of income on portfolio investments as a
percentage of the share price. Yield is computed by annualizing the result of
dividing the net investment income per share over a 30-day period by the net
asset value per share on the last day of that period.
To help investors better evaluate how an investment in a Fund might
satisfy their investment objective, advertisements regarding the Fund may
discuss total return as reported by various financial publications.
Advertisements may also compare total return as reported by other investments,
indices and averages. The following publications, indices and averages may be
used: Lipper Mutual Fund Performance Analysis; Lipper Fixed Income Analysis;
Lipper Mutual Fund Indices; Morgan Stanley World Index; Shearson Lehman Hutton
Treasury Index; Salomon Brothers Corporate Bond Index; Dow Jones Composite
Average or its component indices; Standard & Poor's 500 Composite Stock Index
or its component indices; The New York Stock Exchange composite or component
indices; CDA Mutual Fund Report; Weisenberger - Mutual Funds Panorama and
Investment Companies; Mutual Fund Values and Mutual Fund Services Book,
published by Morningstar, Inc.; and financial publications such as Business
Week, Kiplinger's Personal Finance, Financial World, Forbes, Fortune,
Institutional Investor, Money Magazine, The Wall Street Journal, Changing
Times, Financial Times and Barron's, which analyze and rate fund performance
over various time periods.
Performance quotations of a Fund represent the Fund's past performance
and, consequently, should not be considered representative of the future
performance of the Fund. The value of Fund shares, when redeemed, may be more
or less than the original cost. Any fees charged by banks or other
institutional investors directly to their customer accounts in connection with
investments in shares of a Fund will not be included in the Fund's
calculations of total return.
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secfilin/894pros.doc 27
THE PANAGORA FUNDS ACCOUNT APPLICATION
Send to: The PanAgora Funds
P.O. Box 1537, MFD23
Boston, MA 02205-1537
___________________________________________________________________________
I. ACCOUNT INFORMATION
_____________________________ Unless otherwise indicated,Co-Owners
Name of Account Owner will be registered as joint tenants
with right of survivorship.
______________________________
Name of Co-Owner (if applicable) ____________________________
Telephone Number
_______________________________
Street or P.O. Box
_______________________________ ___________________________
City Taxpayer Identification Number
_______________________________
State Zip Code
US Citizen, Resident or Entity [] Yes [] No
_____________________________________________________________________________
II. ADDRESS FOR CONFIRMATIONS/STATEMENTS
Confirmations and statements will be sent to the party listed in
Section I. If additional statements are needed, please list to
whom they should be sent:
Daily Confirmations (limit of one): Monthly Statements(unlimited,
additional addresses can be
listed on a separate page)
_____________________________________ ___________________________
_____________________________________ __________________________
_____________________________________ ___________________________
___________________________________________________________________________
III. INVESTMENT INFORMATION
____ PanAgora Asset Allocation Fund $__________________
____ PanAgora Global Fund $________________
____ PanAgora International Equity Fund $________________
___________________________________________________________________________
IV. DIVIDEND/DISTRIBUTIONS REMITTANCE PLANS
CHECK APPROPRIATE BOX (SEE "DIVIDENDS, DISTRIBUTIONS AND TAXES"
IN THE PROSPECTUS)
All distributions will be reinvested if no item is checked.
[ ] Cash [ ] Reinvested
___________________________________________________________________________
V. REDEMPTIONS
I/we authorize The PanAgora Funds and the Transfer Agent to
honor telephone instructions for my/our account. In an effort
to confirm that telephone requests are genuine, the Funds employ
reasonable procedures which currently include, but are not
limited to, requiring the caller to provide certain information
unique to the account. As long as the Trust's telephone
representatives comply with these procedures neither the Trust
nor the Transfer Agent will be liable for any losses due to
fraudulent or unauthorized transactions.
[ ] Permit redemption of shares via telephone
Redemptions requested via telephone will only be wired to
pre-existing bank account instructions. No bank instruction
changes will be accepted via telephone.
If you do not authorize telephone redemptions, only written
transaction instructions will be accepted; each request must
contain the signature of the owner(s) exactly as the name(s)
appear in the registration with a signature guarantee by a
member of the New York Stock Exchange's Medallion Signature
Program, or certain banks, savings and loan institutions,
credit unions, securities dealers, securities exchanges,
clearing agencies and registered securities associations in
accordance with a regulation of the Securities and Exchange
Commission and acceptable to the Funds and the Transfer Agent.
<PAGE>
VI. REDEMPTION AND DIVIDEND WIRE INSTRUCTIONS
Proceeds of any redemptions and dividend disbursements (if
applicable) should be wired to my/our bank as follows:
________________________________________________________________________
Bank Name ABA Number
________________________________________________________________________
Street Address
________________________________________________________________________
City State Zip Code
_________________________________________________________________________
Account Name Account Number
_________________________________________________________________________
VII. AUTHORIZED SIGNERS
By the execution of this PanAgora Fund Application, the
undersigned represents and warrants that it has full right,
power and authority to make the investment applied for pursuant
to this Application and is acting for itself or in some
fiduciary capacity in making such investment, and the
individual(s) signing on behalf of the registered owner(s)
represent and warrant that they are duly authorized to sign this
Application and to purchase and redeem shares of the Funds
described in the accompanying Prospectus on behalf of the
undersigned. THE UNDERSIGNED AFFIRMS THAT IT HAS RECEIVED A
CURRENT PANAGORA FUNDS PROSPECTUS AND HAS REVIEWED THE SAME,
AND AGREES TO BE BOUND BY THE TERMS DETAILED THEREIN, AND AS
AMENDED FROM TIME TO TIME.
Signature Print Name and Title, If Any
_______________________________________ _________________________
_______________________________________ _________________________
_______________________________________ _________________________
____________________________________________________________________
VIII. CERTIFICATION
TAXPAYER IDENTIFICATION NUMBER
Under penalties of perjury, the account owner named in Section I
above certifies that:
(1) The number shown on this form is the account owner's correct
Taxpayer Identification Number (or the account owner has
applied or is applying for such number), and:
(2) The account owner is not subject to backup withholding
because the account owner (a) is exempt from backup
withholding, (b) has not been notified by the Internal Revenue
Service (IRS) that the account owner is subject to backup
withholding as a result of failure to report all interest or
dividends, or (c) has received notice from the IRS that backup
withholding no longer applies.
CERTIFICATION INSTRUCTIONS: Item (2) above must be crossed out
if the account owner has received IRS notice that backup
withholding currently applies because of underreporting of
dividends on the account owner's return. (Also see "Guidelines
for Certification of Taxpayer Identification Number" at the back
of this application.)
NOTE: FAILURE TO COMPLETE THIS SECTION MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO THE ACCOUNT OWNER.
BY CHECKING ONLY THE APPROPRIATE BOX BELOW, THE ACCOUNT OWNER
CERTIFIES UNDER PENALTY OF PERJURY THAT:
[ ] The account owner does not have a taxpayer identification
number, but has applied for or intends to apply for one. Owner
understands that the required 31% withholding may apply before
the account owner provides such number and required
certifications, which should be provided within 60 days.
[ ] The account owner is an exempt recipient.
[ ] The account owner is neither a citizen nor a resident of
the United States for the purposes of the Internal Revenue
Code. Owner is a resident of______________________________________.
ALL RECIPIENTS, INCLUDING EXEMPT RECIPIENTS, MUST REPORT THEIR
TAXPAYER IDENTIFICATION NUMBERS AND PROVIDE THE CERTIFICATIONS
REQUESTED TO PREVENT WITHHOLDING.
<PAGE>
A PARTIAL LIST OF EXEMPT RECIPIENTS FOLLOWS:
Retirement Plans Colleges, Churches, Charitable Organizations
Corporations Agents, Fiduciaries, Middlemen
Common Trust Funds Registered Securities Dealers
Financial Institutions
______________________________________________________________________________
Signature: ______________________________________________
______________________________________________
Date: ______________________________________________
_______________________________________________________________________________
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER
Federal law requires that taxable distributions and proceeds of
redemptions be reported to the IRS and that 31% be withheld if
you fail to provide your correct Taxpayer Identification Number
(TIN) and the certifications in Section VIII, or you are
otherwise subject to backup withholding. Amounts withheld and
forwarded to the IRS can be credited as a payment of tax when
completing your Federal income tax return. For most individual
taxpayers, the TIN is your social security number. Special
rules apply for certain accounts. For example, for an account
established under the Uniform Gift to Minors Act, the TIN of
the minor should be furnished. If you do not have a TIN, you
may apply for one using the forms available at local offices of
the Social Security Administration of the IRS. Recipients
exempt from backup withholding, including corporations and
certain other entities, should provide their TIN and complete
the appropriate items in Section VIII of the application to
avoid possible erroneous withholding. Non-resident aliens and
foreign entities may be subject to non-resident alien
withholding of up to 30% on certain distributions received from
the Funds and must provide certain certifications on IRS Form
W-8 to avoid backup withholding with respect to other payments.
For further information, see IRC Sections 1441, 1442 and 3406,
or consult your tax advisor.
__________________________________________________________________________
WISCONSIN RESIDENTS ONLY
Annual Income: ___________________________________________
Net Worth: ___________________________________________
Investment Objective:___________________________________________
[ ] I decline to provide the above information.
_______________________
Signature as Registered Date______________
_______________________
Signature as Registered Date_______________
THE PANAGORA FUNDS
P. O. BOX 1537
BOSTON, MASSACHUSETTS 02205-1537
1-800-423-6041
STATEMENT OF ADDITIONAL INFORMATION
August 22, 1994
The PanAgora Funds (the "Trust") is an open-end, management investment
company currently consisting of three separate investment series
(individually, a "Fund" and collectively, the "Funds"), each having separate
and distinct investment objectives and policies. This Statement of Additional
Information provides supplementary information pertaining to the following
Funds:
* PanAgora Asset Allocation Fund
* PanAgora Global Fund
* PanAgora International Equity Fund
This Statement of Additional Information is not a prospectus, and should be
read only in conjunction with the Trust's Prospectus dated August 22, 1994, as
amended or supplemented from time to time. A copy of the Prospectus may be
obtained without charge from Funds Distributor, Inc., the Trust's Distributor,
by calling 1-800-423-6041 or writing to the address above.
<PAGE>
TABLE OF CONTENTS
Page
----
Introduction ................................................. 3
Additional Information on Fund Investments
and Strategies and Related Risks............................ 3
Investment Restrictions....................................... 22
Trustees and Officers......................................... 25
Investment Advisory and Other Services........................ 28
Portfolio Transactions........................................ 31
Purchase and Redemption Information........................... 33
Net Asset Value............................................... 33
Performance Information....................................... 34
Taxes......................................................... 36
General Information About the Trust........................... 41
Miscellaneous................................................. 43
Appendix...................................................... A-1
No person has been authorized to give any information or to make any
representations not contained in this Statement of Additional Information
or in the Prospectus in connection with the offering made by the Prospectus and,
if given or made, such information or representations must not be relied upon as
having been authorized by the Trust or its Distributor. The Prospectus does not
constitute an offering by the Trust or by the Distributor in any jurisdiction in
which such offering may not lawfully be made. Shares of the Funds are not
available in certain states. Please call 1-800-423-6041 to determine
availability in your state.
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INTRODUCTION
The Trust is an open-end, management investment company currently offering
shares in the following three separate investment series: PanAgora Asset
Allocation Fund, PanAgora Global Fund, and PanAgora International Equity Fund
(each a "Fund", collectively the "Funds"). Each of the Funds is classified as
"diversified" within the meaning of the Investment Company Act of 1940, as
amended (the "1940 Act"). The Trust was organized as a Massachusetts business
trust on January 27, 1993 and commenced investment operations on June 1, 1993.
PanAgora Asset Management, Inc. (the "Adviser") serves as the Funds'
investment adviser. Funds Distributor, Inc. (the "Distributor") serves as the
Funds' principal underwriter and distributor.
The information contained in this Statement of Additional Information
generally supplements the information contained in the Trust's Prospectus. No
investor should invest in a Fund without first reading the Prospectus.
Capitalized terms used herein and not otherwise defined have the same meaning
ascribed to them in the Prospectus. APPENDIX A attached hereto contains a
description of the securities ratings provided by certain nationally recognized
statistical ratings organizations.
ADDITIONAL INFORMATION ON FUND INVESTMENTS
AND STRATEGIES AND RELATED RISKS
The following supplements the information contained in the Prospectus
concerning the investment objectives and policies of each Fund.
COMMERCIAL PAPER
Commercial paper is a short-term, unsecured negotiable promissory
note of a U.S. or non-U.S. issuer. A Fund may invest in short-term debt
obligations denominated in U.S. dollars or selected foreign currencies
that at the time of investment are rated at least A-2 by Standard & Poor's
Corporation ("S&P") or P-2 by Moody's Investors Service, Inc. ("Moody's")
or, if unrated, are issued or guaranteed as to payment of principal and
interest by companies having an outstanding unsecured debt issue currently
rated A or better by S&P or A or better by Moody's, or if unrated, are, in
the opinion of the Adviser, of comparable quality. A Fund also may invest
in variable rate master demand notes which typically are issued by large
corporate borrowers providing for variable amounts of principal
indebtedness and periodic adjustments in the interest rate according to
the terms of the instrument. Demand notes are direct lending arrangements
between a Fund and an issuer, and are not normally traded in a secondary
market. A Fund, however, may demand payment of principal and accrued
interest at any time. In addition, while demand notes generally are not
rated, their issuers must satisfy the same criteria as those set forth
above for issuers of commercial paper. The Adviser will consider the
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earning power, cash flow and other liquidity ratios of issuers of demand
notes and continually will monitor their financial ability to meet payment
on demand. See also "Variable and Floating Rate Instruments."
BANK OBLIGATIONS
Certificates of Deposit ("CDs") are short-term negotiable obligations
of commercial banks. Time Deposits ("TDs") are non-negotiable deposits
maintained in banking institutions for specified periods of time at stated
interest rates. Bankers' acceptances are time drafts drawn on commercial
banks by borrowers usually in connection with international transactions.
U.S. commercial banks organized under federal law are supervised and
examined by the Comptroller of the Currency and are required to be members
of the Federal Reserve System and to be insured by the Federal Deposit
Insurance Corporation (the "FDIC"). U.S. banks organized under state law
are supervised and examined by state banking authorities but are members
of the Federal Reserve System only if they elect to join. Most state
banks are insured by the FDIC (although such insurance may not be of
material benefit to a Fund, depending upon the principal amount of CDs of
each bank held by the Fund) and are subject to federal examination and to
a substantial body of federal law and regulation. As a result of
governmental regulations, U.S. branches of U.S. banks, among other things,
generally are required to maintain specified levels of reserves, and are
subject to other supervision and regulation designed to promote financial
soundness.
U.S. savings and loan associations, the CDs of which may be purchased
by the Funds, are supervised and subject to examination by the Office of
Thrift Supervision. U.S. savings and loan associations are insured by the
Savings Association Insurance Fund which is administered by the FDIC and
backed by the full faith and credit of the U.S. Government.
Non-U.S. bank obligations include Eurodollar Certificates of Deposit
("ECDs"), which are U.S. dollar-denominated certificates of deposit issued
by offices of non-U.S. and U.S. banks located outside the United States;
Eurodollar Time Deposits ("ETDs"), which are U.S. dollar-denominated
deposits in a non-U.S. branch of a U.S. bank or a non-U.S. bank; Canadian
Time Deposits ("CTDs"), which are essentially the same as ETDs except they
are issued by Canadian offices of major Canadian banks; Yankee
Certificates of Deposit ("Yankee CDs"), which are U.S. dollar-denominated
certificates of deposit issued by a U.S. branch of a non-U.S. bank and
held in the United States; and Yankee Bankers' Acceptances ("Yankee BAs"),
which are U.S. dollar-denominated bankers' acceptances issued by a U.S.
branch of a non-U.S. bank and held in the United States.
REPURCHASE AGREEMENTS
Each of the Funds may enter into repurchase agreements as described
in the Prospectus.
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For purposes of the 1940 Act, a repurchase agreement is considered to
be a loan from the Fund to the seller of the obligation. It is not clear
whether a court would consider such an obligation as being owned by the
Fund or as being collateral for a loan by the Fund to the seller. In the
event of the commencement of bankruptcy or insolvency proceedings with
respect to the seller of the obligation before its repurchase, under the
repurchase agreement, the Fund may encounter delay and incur costs before
being able to sell the security. Such delays may result in a loss of
interest or decline in price of the obligation. If the court
characterizes the transaction as a loan and the Fund has not perfected a
security interest in the obligation, the Fund may be treated as an
unsecured creditor of the seller and required to return the obligation to
the seller's estate. As an unsecured creditor, the Fund would be at risk
of losing some or all of the principal and income involved in the
transaction. As with any unsecured debt instrument purchased for the
Funds, the Adviser seeks to minimize the risk of loss from repurchase
agreements by analyzing the creditworthiness of the obligor, in this case,
the seller of the obligation. In addition to the risk of bankruptcy or
insolvency proceedings, there is the risk that the seller may fail to
repurchase the security. However, if the market value of the obligation
falls below the repurchase price (including accrued interest), the seller
of the obligation will be required to deliver additional securities so
that the market value of all securities subject to the repurchase
agreement equals or exceeds the repurchase price.
U.S. GOVERNMENT SECURITIES
The term "U.S. Government Securities" refers to a variety of
securities which are issued or guaranteed by the U.S. government, and by
various agencies and instrumentalities which have been established or
sponsored by the U.S. government.
U.S. Treasury securities are backed by the "full faith and credit" of
the United States. Securities issued or guaranteed by Federal agencies
and U.S. Government sponsored instrumentalities may or may not be backed
by the full faith and credit of the United States.
In the case of securities not backed by the full faith and credit of
the United States, the investor must look principally to the agency or
instrumentality issuing or guaranteeing the obligation for ultimate
repayment, and may not be able to assert a claim against the United States
itself in the event the agency or instrumentality does not meet its
commitment. Agencies which are backed by the full faith and credit of the
United States include, among others, the Export-Import Bank, Farmers Home
Administration, Federal Financing Bank and others. Certain agencies and
instrumentalities, such as the Government National Mortgage Association
are, in effect, backed by the full faith and credit of the United States
through provisions in their charters that they may make "indefinite and
unlimited" drawings on the Treasury, if needed to service their debt.
Debt from certain other agencies and instrumentalities, including the
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Federal Home Loan Bank and Federal National Mortgage Association, is not
guaranteed by the United States, but those institutions are protected by
the discretionary authority of the U.S. Treasury to purchase certain
amounts of their securities to assist the institutions in meeting their
debt obligations. Finally, other agencies and instrumentalities, such as
the Farm Credit System and the Federal Home Loan Mortgage Corporation, are
federally chartered institutions under government supervision, but their
debt securities are backed only by the creditworthiness of those
institutions, not the U.S. government. No assurance can be given that the
U.S. government will provide financial support to U.S. government agencies
and instrumentalities in the future.
Each of the Funds may acquire U.S. Government Securities and their
unmatured interest coupons that have been separated ("stripped") by their
holder, typically a custodian bank or investment brokerage firm. Having
separated the interest coupons from the underlying principal of the U.S.
Government Securities, the holder will resell the stripped securities in
custodial receipt programs with a number of different names, including
"Treasury Income Growth Receipts" ("TIGRs") and "Certificate of Accrual on
Treasury Securities" ("CATS"). The stripped coupons are sold separately
from the underlying principal, which is usually sold at a deep discount
because the buyer receives only the right to receive a future fixed
payment on the security and does not receive any rights to periodic
interest (cash) payments. The underlying U.S. Treasury bonds and notes
themselves are generally held in book-entry form at a Federal Reserve
Bank. Counsel to the underwriters of these certificates or other evidences
of ownership of U.S. Treasury securities have stated that, in their
opinion, purchasers of the stripped securities most likely will be deemed
the beneficial holders of the underlying U.S. government securities for
federal tax and securities purposes. In the case of CATS and TIGRs, the
Internal Revenue Service ("IRS") has reached this conclusion for the
purpose of applying the tax diversification requirements applicable to
regulated investment companies such as the Funds, but the IRS conclusion
is contained only in a general counsel memorandum, which is an internal
document of no precedential value or binding effect, and a private letter
ruling, which also may not be relied upon by the Funds. The Trust is not
aware of any binding legislative, judicial or administrative authority on
this issue.
MORTGAGE-RELATED AND MORTGAGE-BACKED SECURITIES
The PanAgora Asset Allocation and PanAgora Global Funds may invest in
mortgage-related and mortgage-backed securities.
MORTGAGE-RELATED SECURITIES. There are a number of important
differences among the agencies and instrumentalities of the U.S.
government that issue mortgage-related securities and among the securities
that they issue. Mortgage-related securities guaranteed by the Government
National Mortgage Association ("GNMA") include GNMA Mortgage Pass-Through
Certificates (also known as "Ginnie Maes") which are guaranteed as to the
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timely payment of principal and interest by GNMA and such guarantee is
backed by the full faith and credit of the United States. GNMA is a
wholly-owned U.S. government corporation within the Department of Housing
and Urban Development. GNMA certificates also are supported by the
authority of GNMA to borrow funds from the U.S. Treasury to make payments
under its guarantee.
Mortgage-related securities issued by the Federal National Mortgage
Association ("FNMA") include FNMA guaranteed Mortgage Pass-Through
Certificates (also known as "Fannie Maes") which are solely the
obligations of the FNMA, are not backed by or entitled to the full faith
and credit of the United States and are supported by the right of the
issuer to borrow from the Treasury. FNMA is a government-sponsored
organization owned entirely by private stockholders. Fannie Maes are
guaranteed as to timely payment of the principal and interest by FNMA.
Mortgage-related securities issued by the Federal Home Loan Mortgage
Corporation ("FHLMC") include FHLMC Mortgage Participation Certificates
(also known as "Freddie Macs" or "PCs"). FHLMC is a corporate
instrumentality of the United States, created pursuant to an Act of
Congress, which is owned entirely by Federal Home Loan Banks. Freddie
Macs are not guaranteed by the United States or by any Federal Home Loan
Banks and do not constitute a debt or obligation of the United States or
of any Federal Home Loan Bank. Freddie Macs entitle the holder to timely
payment of interest, which is guaranteed by FHLMC. FHLMC guarantees
either ultimate collection or timely payment of all principal payments on
the underlying mortgage loans. When FHLMC does not guarantee timely
payment of principal, FHLMC may remit the amount due on account of its
guarantee of ultimate payment of principal at any time after default on an
underlying mortgage, but in no event later than one year after such amount
becomes payable.
COLLATERALIZED MORTGAGE OBLIGATIONS (CMOS). A CMO is a hybrid
between a mortgage-backed bond and a mortgage pass-through security.
Interest and prepaid principal are paid, in most cases, monthly. CMOs may
be collateralized by whole mortgage loans but are more typically
collateralized by portfolios of mortgage pass-through securities
guaranteed by GNMA, FHLMC or FNMA, and the income streams on such
securities.
CMOs are usually structured in multiple classes, each bearing a
different stated maturity. Actual maturity and average life will depend
upon the prepayment experience of the collateral. CMOs provide for a
modified form of call protection through a DE FACTO breakdown of the
underlying pool of mortgages according to how quickly the loans are
repaid. Under a common structure, monthly payment of principal received
from the pool of underlying mortgages, including prepayments, is first
returned to investors holding the shortest maturity class. Investors
holding the longer maturity classes receive principal only after the first
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class has been retired. Such investors are partially guarded against
earlier than desired returns of principal.
In a typical CMO transaction, a corporation ("issuer") issues
multiple series (E.G., A, B, C, Z) of CMO bonds ("Bonds"). Proceeds of the
Bond offering are used to purchase mortgages or mortgage pass-through
certificates ("Collateral"). The Collateral is pledged to a third party
trustee as security for the Bonds. Principal and interest payments from
the Collateral are used to pay principal on the Bonds in the order A, B,
C, Z. The Series A, B and C Bonds all bear current interest. Interest on
the Series Z Bond is accrued and added to principal and a like amount is
paid as principal on the Series A, B or C Bond currently being paid off.
When the Series A, B or C Bonds are paid in full, interest and principal
on the Series Z Bond begins to be paid currently. With some CMOs, the
issuer serves as a conduit to allow loan originators (primarily buildings
or savings and loan associations) to borrow against their loan portfolios.
A Fund may also invest in parallel pay CMOs and Planned Amortization
Class CMOs ("PAC Bonds"). Parallel pay CMOs are structured to provide
payments of principal on each payment date to more than one class. These
simultaneous payments are taken into account in calculating the stated
maturity date or final distribution date of each class, which, as with
other CMO structures, must be retired by its stated maturity date or final
distribution date but may be retired earlier. PAC Bonds generally require
payments of a specified amount of principal on each payment date. PAC
Bonds are always parallel pay CMOs with the required principal payment on
such securities having the highest priority after interest has been paid
to all classes.
FHLMC COLLATERALIZED MORTGAGE OBLIGATIONS. FHLMC CMOs are debt
obligations of FHLMC issued in multiple classes having different maturity
dates which are secured by the pledge of a pool of conventional mortgage
loans purchased by FHLMC. Unlike FHLMC PCs, payments of principal and
interest on the CMOs are made semiannually, as opposed to monthly. The
amount of principal payment on each semiannual payment date is determined
in accordance with FHLMC's mandatory sinking fund schedule, which, in
turn, is equal to approximately 100% of the FHA prepayment experience
applied to the mortgage collateral pool. All sinking fund payments in the
CMOs are allocated to the retirement of the individual classes of bonds in
the order of their stated maturities. Payment of principal on the
mortgage loans in the collateral pool in excess of the amount of FHLMC's
minimum sinking fund obligation for any payment date are paid to the
holders of the CMOs as additional sinking fund payments. Because of the
"pass-through" nature of all principal payments received on the collateral
pool in excess of FHLMC's minimum sinking fund requirement, the rate at
which principal of the CMOs is actually repaid is likely to be such that
each class of bonds will be repaid in advance of its scheduled maturity
date.
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If collection of principal (including pre-payments) on the mortgage
loans during any semiannual payment period is not sufficient to meet
FHLMC's minimum sinking fund obligation on the next sinking fund payment
date, FHLMC agrees to make up the deficiency from its general fund.
Criteria for the mortgage loans in the pools backing FHLMC CMOs are
identical to those for FHLMC PCs. FHLMC has the right to substitute
collateral in the event of delinquencies and/or defaults.
REVERSE REPURCHASE AGREEMENTS AND OTHER BORROWINGS
Each Fund may borrow for temporary or emergency purposes. This
borrowing may be unsecured. Among the forms of borrowing in which each
Fund may engage is entering into reverse repurchase agreements. A reverse
repurchase agreement involves the sale of a portfolio security by the
Fund, coupled with its agreement to repurchase the security at a specified
time and price. Each Fund will maintain a segregated account with the
Trust's custodian consisting of cash or cash equivalents equal (on a daily
mark-to-market basis) to its obligations under reverse repurchase
agreements with banks and broker-dealers. Reverse repurchase agreements
involve the risk that the market value of the securities subject to the
reverse repurchase agreement may decline below the repurchase price at
which the Fund is required to repurchase such securities.
The 1940 Act requires a Fund to maintain continuous asset coverage
(that is, total assets including borrowings, less liabilities exclusive of
borrowings) of 300% of the amount borrowed. If the asset coverage should
decline below 300% as a result of market fluctuations or for other
reasons, a Fund may be required to sell some of its portfolio securities
within three days to reduce its borrowings and restore the 300% asset
coverage, even though it may be disadvantageous from an investment
standpoint to sell securities at that time. To avoid the potential
leveraging effects of a Fund's borrowings, additional investments will not
be made while borrowings are in excess of 5% of a Fund's total assets.
Borrowing may exaggerate the effect on net asset value of any increase or
decrease in the market value of the portfolio. Money borrowed will be
subject to interest costs which may or may not be recovered by
appreciation of the securities purchased. A Fund also may be required to
maintain minimum average balances in connection with such borrowing or to
pay a commitment or other fee to maintain a line of credit; either of
these requirements would increase the cost of borrowing over the stated
interest rate. See "Investment Restrictions."
VARIABLE AND FLOATING RATE INSTRUMENTS
Debt instruments purchased by a Fund may be structured to have
variable or floating interest rates. These instruments may include
variable amount master demand notes that permit the indebtedness to vary
in addition to providing for periodic adjustments in the interest rates.
The Adviser will consider the earning power, cash flows and other
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liquidity ratios of the issuers and guarantors of such instruments and, if
the instrument is subject to a demand feature, will continuously monitor
their financial ability to meet payment on demand. Where necessary to
ensure that a variable or floating rate instrument is equivalent to the
quality standards applicable to a Fund's fixed-income investments, the
issuer's obligation to pay the principal of the instrument will be backed
by an unconditional bank letter or line of credit, guarantee or commitment
to lend. Any bank providing such a bank letter, line of credit, guarantee
or loan commitment will meet the Fund's investment quality standards
relating to investments in bank obligations. A Fund will invest in
variable and floating rate instruments only when the Adviser deems the
investment to involve minimal credit risk. The Adviser will also
continuously monitor the creditworthiness of issuers of such instruments
to determine whether a Fund should continue to hold the investments.
The absence of an active secondary market for certain variable and
floating rate notes could make it difficult to dispose of the instruments,
and a Fund could suffer a loss if the issuer defaults or during periods in
which a Fund is not entitled to exercise its demand rights.
Variable and floating rate instruments held by a Fund will be subject
to the Fund's 15% limitation on investments in illiquid securities when a
reliable trading market for the instruments does not exist and the Fund
may not demand payment of the principal amount of such instruments within
seven days.
"WHEN-ISSUED" PURCHASES AND FORWARD COMMITMENTS (DELAYED DELIVERY)
These transactions, which involve a commitment by a Fund to purchase
or sell particular securities with payment and delivery taking place at a
future date (perhaps one or two months later), permit the Fund to lock in
a price or yield on a security, regardless of future changes in interest
rates. A Fund will purchase securities on a "when-issued" or forward
commitment basis only with the intention of completing the transaction and
actually purchasing the securities. If deemed appropriate by the Adviser,
however, a Fund may dispose of or renegotiate a commitment after it is
entered into, and may sell securities it has committed to purchase before
those securities are delivered to the Fund on the settlement date. In
these cases the Fund may realize a taxable gain or loss.
When a Fund agrees to purchase securities on a "when-issued" or
forward commitment basis, the Fund's custodian will set aside cash or
high-grade debt securities equal to the amount of the commitment in a
separate account. Normally, the custodian will set aside portfolio
securities to satisfy a purchase commitment, and in such a case the Fund
may be required subsequently to place additional assets in the separate
account in order to ensure that the value of the account remains equal to
the amount of the Fund's commitments. The market value of a Fund's net
assets may fluctuate to a greater degree when it sets aside portfolio
securities to cover such purchase commitments then when it sets aside
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cash. Because a Fund's liquidity and ability to manage its portfolio
might be affected when it sets aside cash or portfolio securities to cover
such purchase commitments, each Fund expects that its commitments to
purchase when-issued securities and forward commitments will not exceed
25% of the value of its total assets absent unusual market conditions.
When a Fund engages in "when-issued" and forward commitment transactions,
it relies on the other party to the transaction to consummate the trade.
Failure of such party to do so may result in the Fund incurring a loss or
missing an opportunity to obtain a price considered to be advantageous.
The market value of the securities underlying a "when-issued"
purchase or a forward commitment to purchase securities, and any
subsequent fluctuations in their market value, are taken into account when
determining the market value of a Fund starting on the day the Fund agrees
to purchase the securities. The Fund does not earn interest or dividends
on the securities it has committed to purchase until the settlement date.
LENDING PORTFOLIO SECURITIES
Each Fund may lend portfolio securities to brokers, dealers and other
financial organizations. These loans, if and when made, may not exceed
30% of the value of the Fund's total assets. A Fund's loans of securities
will be collateralized by cash, cash equivalents or U.S. government
securities. The cash or instruments collateralizing the Fund's loans of
securities will be maintained at all times in a segregated account with
the Trust's custodian, in an amount at least equal to the current market
value of the loaned securities. From time to time, a Fund may pay a part
of the interest earned from the investment of collateral received for
securities loaned to the borrower and/or a third party that is
unaffiliated with the Fund and is acting as a "placing broker." No fee
will be paid to affiliated persons of the Fund. The Board of Trustees
will make a determination that the fee paid to the placing broker is
reasonable.
By lending portfolio securities, a Fund can increase its income by
continuing to receive interest or dividends on the loaned securities as
well as by either investing the cash collateral in short-term instruments
or obtaining yield in the form of interest paid by the borrower when U.S.
government securities are used as collateral. A Fund will comply with the
following conditions whenever it loans securities: (i) the Fund must
receive at least 100% cash collateral or equivalent securities from the
borrower; (ii) the borrower must increase the collateral whenever the
market value of the securities loaned rises above the level of the
collateral; (iii) the Fund must be able to terminate the loan at any time;
(iv) the Fund must receive reasonable interest on the loan, as well as any
dividends, interest or other distributions on the loaned securities, and
any increase in market value; (v) the Fund may pay only reasonable
custodian fees in connection with the loan; and (vi) voting rights on the
loaned securities may pass to the borrower except that, if a material
event adversely affecting the investment in the loaned securities occurs,
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the Fund must terminate the loan and regain the right to vote the
securities.
PREFERRED STOCK
As stated in the Prospectus, each of the Funds may purchase preferred
stock. Preferred stocks are equity securities, but possess certain
attributes of debt securities and are generally considered fixed-income
securities. Holders of preferred stocks normally have the right to
receive dividends at a fixed rate when and as declared by the issuer's
board of directors, but do not participate in other amounts available for
distribution by the issuing corporation. Dividends on the preferred stock
may be cumulative, and all cumulative dividends usually must be paid prior
to dividend payments to common stockholders. Because of this preference,
preferred stocks generally entail less risk than common stocks. Upon
liquidation, preferred stocks are entitled to a specified liquidation
preference, which is generally the same as the par or stated value, and
are senior in right of payment to common stocks. However, preferred
stocks are equity securities in that they do not represent a liability of
the issuer and therefore do not offer as great a degree of protection of
capital or assurance of continued income as investments in corporate debt
securities. In addition, preferred stocks are subordinated in right of
payment to all debt obligations and creditors of the issuer, and
convertible preferred stocks may be subordinated to other preferred stock
of the same issuer. See "Convertible Securities" below for a description
of certain characteristics of convertible preferred stock.
CONVERTIBLE SECURITIES
As stated in the Prospectus, each of the Funds may purchase
convertible securities. Convertible securities are fixed-income
securities that may be converted at either a stated price or stated rate
into underlying shares of common stock of the same issuer. Convertible
securities have general characteristics similar to both fixed-income and
equity securities. Although to a lesser extent than with fixed-income
securities, the market value of convertible securities tends to decline as
interest rates increase and, conversely, tends to increase as interest
rates decline. In addition, because of the conversion feature, the market
value of convertible securities tends to vary with fluctuations in the
market value of the underlying common stocks and therefore will also react
to variations in the general market for equity securities. A unique
feature of convertible securities is that as the market price of the
underlying common stock declines, convertible securities tend to trade
increasingly on a yield basis, and consequently may not experience market
value declines to the same extent as the underlying common stock. When the
market price of the underlying common stock increases, the prices of the
convertible securities tend to rise as a reflection of the value of the
underlying common stock. While no securities investments are without
risk, investments in convertible securities generally entail less risk
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than investments in common stock of the same issuer. However, as with all
fixed-income securities, the issuers of convertible securities may default
on their obligations.
WARRANTS
As stated in the Prospectus, each of the Funds may purchase warrants,
which are privileges issued by corporations enabling the owners to
subscribe to and purchase a specified number of shares of the corporation
at a specified price during a specified period of time. The purchase of
warrants involves a risk that a Fund could lose the purchase value of a
warrant if the right to subscribe to additional shares is not exercised
prior to the warrant's expiration. Also, the purchase of warrants
involves the risk that the effective price paid for the warrant added to
the subscription price of the related security may exceed the value of the
subscribed security's market price such as when there is no movement in
the level of the underlying security. A Fund will not invest more than 5%
of its total assets, taken at market value, in warrants, or more than 2%
of its total assets, taken at market value, in warrants not listed on a
recognized securities exchange. Warrants acquired by a Fund in units or
attached to other securities shall not be included in determining
compliance with these percentage limitations. See "Investment
Restrictions."
AMERICAN, EUROPEAN AND CONTINENTAL DEPOSITORY RECEIPTS
Each Fund (except the PanAgora Asset Allocation Fund) may invest in
the securities of foreign and domestic issuers in the form of American
Depository Receipts ("ADRs") and European Depository Receipts ("EDRs").
These securities may not necessarily be dominated in the same currency as
the securities into which they may be converted. ADRs are receipts
typically issued by a U.S. bank or trust company which evidence ownership
of underlying securities issued by a foreign corporation. EDRs, which are
sometimes referred to as Continental Depository Receipts ("CDRs"), are
receipts issued in Europe typically by non-U.S. banking and trust
companies that evidence ownership of either foreign or U.S. securities.
Generally, ADRs, in registered form, are designed for use in U.S.
securities markets and EDRs and CDRs, in bearer form, are designed for use
in European securities markets.
OPTIONS ON SECURITIES, SECURITIES INDICES AND FOREIGN CURRENCIES
Each of the Funds may write covered put and call options and purchase
put and call options. Such options may relate to particular U.S. or
non-U.S. securities or to various U.S. or non-U.S. stock indices and may
or may not be listed on a national securities exchange and issued by the
Options Clearing Corporation (the "OCC"). PanAgora Global and PanAgora
International Equity Funds may write and purchase put and call options on
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non-U.S. currencies (traded on U.S. and non-U.S. exchanges and
over-the-counter) to manage exposure to changes in U.S. dollar exchange
rates.
Options trading is a highly specialized activity which entails
greater than ordinary investment risk. Options on particular securities
may be more volatile than the underlying securities, and therefore, on a
percentage basis, subject to greater fluctuation than an investment in the
underlying securities themselves.
A put option for a particular security gives the purchaser the right
to sell the underlying security at the stated exercise price at any time
prior to the option's expiration date, regardless of the security's market
price. A call option for a particular security gives the purchaser of the
option the right to buy, and the writer the obligation to sell, the
underlying security at a stated exercise price if the option is exercised
at any time prior to the option's expiration, regardless of the underlying
security's market price. In contrast to an option on a particular
security, an option on a securities index provides the holder with the
right to receive a cash payment upon exercise of the option if the market
value of the underlying index exceeds the option's exercise price. The
amount of this payment will be equal to the difference between the closing
price of the index at the time of exercise and the exercise price of the
option expressed in U.S. dollars or a foreign currency, times a specified
multiple. A put option on a currency gives its holder the right to sell
an amount (specified in units of the underlying currency) of the
underlying currency at the stated exercise price at any time prior to the
option's expiration. Conversely, a call option on a currency gives its
holder the right to purchase an amount (specified in units of the
underlying currency) of the underlying currency at the stated exercise
price at any time prior to the option's expiration.
The Funds will engage in over-the-counter ("OTC") options only with
broker-dealers deemed creditworthy by the Adviser. Closing transactions in
certain options are usually effected directly with the same broker-dealer
that effected the original option transaction. A Fund bears the risk that
the broker-dealer may fail to meet its obligations. There is no assurance
that a Fund will be able to close an unlisted option position.
Furthermore, unlisted options are not subject to the protections afforded
purchasers of listed options by the OCC, which performs the obligations of
its members who fail to do so in connection with the purchase or sale of
options. OTC options will be deemed illiquid for purposes of a Fund's 15%
limitation on investments in illiquid securities.
A Fund will write call options only if they are "covered." In the
case of a call option on a security, the option is "covered" if a
portfolio owns the security underlying the call or has an absolute and
immediate right to acquire that security without additional cash
consideration (or, if additional cash consideration is required, cash or
high-grade debt securities in such amount as are held in a segregated
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account by the Trust's custodian) upon conversion or exchange of other
securities held by it. For a call option on an index, the option is
covered if the Fund maintains with the Fund's custodian cash or cash
equivalents equal to the contract value. A call option on a security or
an index is also covered if the Fund holds a call on the same security or
index as the call written by the Fund where the exercise price of the call
held is (i) equal to or less than the exercise price of the call written,
or (ii) greater than the exercise price of the call written provided the
difference is maintained by the Fund in cash or cash equivalents in a
segregated account with the Fund's custodian. A call option on currency
written by a Fund is covered if the Fund owns an equal amount of the
underlying currency.
When a Fund purchases a put option, the premium paid by it is
recorded as an asset of the Fund. When the Fund writes an option, an
amount equal to the net premium (the premium less the commission paid by
the Fund) received by the Fund is included in the liability section of the
Fund's statement of assets and liabilities as a deferred credit. The
amount of this asset or deferred credit will be marked-to-market on an
ongoing basis to reflect the current value of the option purchased or
written. The current value of a traded option is the last sale price or,
in the absence of a sale, the average of the closing bid and asked prices.
If an option purchased by the Fund expires unexercised, the Fund realizes
a loss equal to the premium paid. If the Fund enters into a closing sale
transaction on an option purchased by it, the Fund will realize a gain if
the premium received by the Fund on the closing transaction is more than
the premium paid to purchase the option, or a loss if it is less. If an
option written by the Fund expires on the stipulated expiration date or if
the Fund enters into a closing purchase transaction, it will realize a
gain (or loss if the cost of a closing purchase transaction exceeds the
net premium received when the option is sold) and the deferred credit
related to such option will be eliminated. If an option written by the
Fund is exercised, the proceeds to the Fund from the exercise will be
increased by the net premium originally received and the Fund will realize
a gain or loss.
There are several risks associated with transactions in options on
securities, securities indices and currencies. For example, there are
significant differences between the securities markets, currency markets
and the corresponding options markets that could result in imperfect
correlations, causing a given option transaction not to achieve its
objectives. In addition, a liquid secondary market for particular
options, whether traded OTC or on a U.S. or non-U.S. securities exchange
may be absent for reasons which include the following: there may be
insufficient trading interest in certain options; restrictions may be
imposed by an exchange on opening transactions or closing transactions or
both; trading halts, suspensions or other restrictions may be imposed with
respect to particular classes or series of options or underlying
securities; unusual or unforeseen circumstances may interrupt normal
operations on an exchange; the facilities of an exchange or the OCC may
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not at all times be adequate to handle current trading volume; or 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 that had been issued by the
OCC as a result of trades on that exchange would continue to be
exercisable in accordance with their terms.
FUTURES CONTRACTS AND RELATED OPTIONS
To hedge against changes in interest rates or securities prices and
for certain non-hedging purposes, the Funds may purchase and sell various
kinds of futures contracts, and purchase and write call and put options on
any of such futures contracts. The Funds may also enter into closing
purchase and sale transactions with respect to any of such contracts and
options. The futures contracts may be based on various securities (such as
U.S. Government Securities), securities indices and other financial
instruments and indices. The Funds will engage in futures and related
options transactions only for bona fide hedging or other non-hedging
purposes as defined in regulations promulgated by the Commodity Futures
Trading Commission (the "CFTC"). All futures contracts entered into by
the Funds are traded on U.S. exchanges or boards of trade that are
licensed and regulated by the CFTC or on foreign exchanges approved by the
CFTC.
FUTURES CONTRACTS. A futures contract may generally be described as
an agreement between two parties to buy and sell a particular financial
instrument for an agreed price during a designated month (or to deliver
the final cash settlement price, in the case of a contract relating to an
index or otherwise not calling for physical delivery at the end of trading
in the contract). Futures contracts obligate the long or short holder to
take or make delivery of a specified quantity of a commodity or financial
instrument, such as a security or the cash value of a securities index,
during a specified future period at a specified price.
When interest rates are rising or securities prices are falling, a
Fund can seek to offset a decline in the value of its current portfolio
securities through the sale of futures contracts. When interest rates are
falling or securities prices are rising, a Fund, through the purchase of
futures contracts, can attempt to secure better rates or prices than might
later be available in the market when it effects anticipated purchases.
Positions taken in the futures markets are not normally held to
maturity but are instead liquidated through offsetting transactions which
may result in a profit or a loss. While futures contracts on securities
will usually be liquidated in this manner, the Funds may instead make, or
take, delivery of the underlying securities whenever it appears
economically advantageous to do so. A clearing corporation associated
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with the exchange on which futures on securities are traded guarantees
that, if still open, the sale or purchase will be performed on the
settlement date.
HEDGING STRATEGIES. Hedging, by use of futures contracts, seeks to
establish with more certainty the effective price and rate of return on
portfolio securities and securities that a Fund owns or proposes to
acquire. The Funds may, for example, take a "short" position in the
futures market by selling futures contracts in order to hedge against an
anticipated rise in interest rates or a decline in market prices that
would adversely affect the value of a Fund's portfolio securities. Such
futures contracts may include contracts for the future delivery of
securities held by the Fund or securities with characteristics similar to
those of the Fund's portfolio securities. If, in the opinion of the
Adviser, there is a sufficient degree of correlation between price trends
for a Fund's portfolio securities and futures contracts based on other
financial instruments, securities indices or other indices, the Fund may
also enter into such futures contracts as part of its hedging strategy.
Although under some circumstances prices of securities in a Fund's
portfolio may be more or less volatile than prices of such futures
contracts, the Adviser will attempt to estimate the extent of this
volatility difference based on historical patterns and compensate for any
such differential by having the Fund enter into a greater or lesser number
of futures contracts or by attempting to achieve only a partial hedge
against price changes affecting a Fund's securities portfolio. When
hedging of this character is successful, any depreciation in the value of
portfolio securities will be substantially offset by appreciation in the
value of the futures position. On the other hand, any unanticipated
appreciation in the value of a Fund's portfolio securities would be
substantially offset by a decline in the value of the futures position.
On other occasions, the Funds may take a "long" position by
purchasing futures contracts. This would be done, for example, when a
Fund anticipates the subsequent purchase of particular securities when it
has the necessary cash, but expects the prices then available in the
applicable market to be less favorable than prices that are currently
available.
OPTIONS ON FUTURES CONTRACTS. The acquisition of put and call
options on futures contracts will give the Funds the right (but not the
obligation) for a specified price to sell or to purchase, respectively,
the underlying futures contract at any time during the option period. As
the purchaser of an option on a futures contract, a Fund obtains the
benefit of the futures position if prices move in a favorable direction
but limits its risk of loss in the event of an unfavorable price movement
to the loss of the premium and transaction costs.
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The writing of a call option on a futures contract generates a
premium which may partially offset a decline in the value of a Fund's
assets. By writing a call option, a Fund becomes obligated, in exchange
for the premium, to sell a futures contract if the option is exercised,
which may have a value higher than the exercise price. Conversely, the
writing of a put option on a futures contract generates a premium which
may partially offset an increase in the price of securities that a Fund
intends to purchase. However, a Fund becomes obligated to purchase a
futures contract if the option is exercised which may have a value lower
than the exercise price. Thus, the loss incurred by a Fund in writing
options on futures is potentially unlimited and may exceed the amount of
the premium received. The Funds will incur transaction costs in
connection with the writing of options on futures.
The holder or writer of an option on a futures contract may terminate
its position by selling or purchasing an offsetting option on the same
series. There is no guarantee that such closing transactions can be
effected. The Funds' ability to establish and close out positions on such
options will be subject to the development and maintenance of a liquid
market.
The Funds may use options on futures contracts solely for bona fide
hedging or other non-hedging purposes as described below.
OTHER CONSIDERATIONS. The Funds will engage in futures and related
options transactions only for bona fide hedging or other non-hedging
purposes as permitted by CFTC regulations. A Fund will determine that the
price fluctuations in the futures contracts and options on futures used
for hedging purposes are substantially related to price fluctuations in
securities or instruments held by the Fund or securities or instruments
which they expect to purchase. The Funds' futures transactions will be
entered into for traditional hedging purposes -- i.e., futures contracts
will be sold to protect against a decline in the price of securities that
a Fund owns or futures contracts will be purchased to protect a Fund
against an increase in the price of securities that a Fund intends to
purchase. As evidence of this hedging intent, each Fund expects that, on
75% or more of the occasions on which it takes a long futures or option
position (involving the purchase of futures contracts), the Fund will have
purchased, or will be in the process of purchasing, equivalent amounts of
related securities or assets in the cash market at the time when the
futures or option position is closed out. However, in particular cases,
when it is economically advantageous for a Fund to do so, a long futures
position may be terminated or an option may expire without the
corresponding purchase of securities or other assets.
As an alternative to compliance with the bona fide hedging
definition, a CFTC regulation permits a Fund to elect to comply with a
different test under which the aggregate initial margin and premiums
required to establish positions in futures contracts and related options
for non-hedging purposes (net of the amount the positions are "in the
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money") may not exceed 5% of the Fund's net assets. The Funds will engage
in transactions in futures contracts and related options only to the
extent such transactions are consistent with the requirements of the
Internal Revenue Code of 1986, as amended, for maintaining their
qualification as regulated investment companies for federal income tax
purposes. See "Taxes."
A Fund will be required, in connection with transactions in futures
contracts and the writing of options on futures contracts to make margin
deposits, which will be held by the Trust's custodian for the benefit of
the futures commission merchant through whom the Fund engages in such
futures contracts and option transactions. These transactions involve
brokerage costs, require margin deposits and, in the case of futures
contracts and options obligating a Fund to purchase securities, require a
Fund to segregate cash or high-grade debt securities in an account
maintained with the Trust's custodian to cover such contracts and options.
While transactions in futures contracts and options on futures may
reduce certain risks, such transactions themselves entail certain other
risks. Thus, unanticipated changes in interest rates or securities prices
may result in a poorer overall performance for a Fund than if it had not
entered into any futures contracts or options transactions. The other
risks associated with the use of futures contracts and options thereon are
(i) imperfect correlation between the change in market value of the
securities held by a Fund and the prices of the futures and options and
(ii) the possible absence of a liquid secondary market for a futures
contract or option and the resulting inability to close a futures position
prior to its maturity date.
In the event of an imperfect correlation between a futures position
and portfolio position which is intended to be protected, the desired
protection may not be obtained and the Fund may be exposed to risk of
loss. The risk of imperfect correlation may be minimized by investing in
contracts whose price behavior is expected to resemble that of a Fund's
underlying securities. The risk that the Funds will be unable to close
out a futures position will be minimized by entering into such
transactions on a national exchange with an active and liquid secondary
market.
CURRENCY TRANSACTIONS
In addition to engaging in options and future transactions to offset
the effect of fluctuating currency exchange rates as described above, the
PanAgora Global Fund and PanAgora International Equity Fund will each
exchange currencies in the normal course of managing its investments and
may incur costs in so doing because a foreign exchange dealer will charge
a fee for conversion. A Fund may exchange currencies on a "spot" basis
(I.E., for prompt delivery and settlement) at the prevailing spot rate for
purchasing or selling currency in the foreign currency exchange market. A
Fund also may enter into forward currency exchange contracts or other
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contracts to purchase and sell currencies for settlement at a future date.
A foreign exchange dealer, in that situation, will expect to realize a
profit based on the difference between the price at which a foreign
currency is sold to the Fund and the price at which the dealer will cover
the purchase in the foreign currency market. Foreign exchange transactions
are entered into at prices quoted by dealers, which may include a mark-up
over the price that the dealer must pay for the currency.
Forward currency exchange contracts are agreements to exchange one
currency for another - for example, to exchange a certain amount of U.S.
Dollars for a certain amount of German Deutsche Marks - at a future date.
The date (which may be any agreed upon fixed number of days in the
future), the amount of currency to be exchanged and the price at which the
exchange will take place will be negotiated and fixed for the term of the
contract at the time that the Fund enters into the contract. Forward
currency exchange contracts are (a) traded in an interbank market
conducted directly between currency traders (typically, commercial banks
or other financial institutions) and their customers, (b) generally have
no deposit requirements and (c) are consummated without payment of any
commissions. A Fund, however, may enter into forward currency exchange
contracts containing either or both deposit requirements and commissions.
In order to assure that a Fund's forward currency exchange contracts are
not used to achieve investment leverage, a Fund will segregate cash and
high-grade debt securities with the Trust's custodian in an amount at all
times equal to or exceeding the Fund's commitment with respect to these
contracts.
Upon maturity of a forward currency exchange contract, a Fund may (a)
pay for and receive the underlying currency, (b) negotiate with the dealer
to roll over the contract into a new forward currency exchange contract
with a new future settlement date or (c) negotiate with the dealer to
terminate the forward contract by entering into an offset with the
currency trader whereby the Fund pays or receives the difference between
the exchange rate fixed in the contract and the then current exchange
rate. A Fund also may be able to negotiate such an offset prior to
maturity of the original forward contract. There can be no assurance that
new forward contracts or offsets will always be available to a Fund.
Each Fund, in addition, may combine forward currency exchange
contracts with investments in securities denominated in other currencies
in an attempt to create a combined investment position, the overall
performance of which will be similar to that of a security denominated in
the Fund's underlying currency. A Fund could purchase a U.S.
Dollar-denominated security and at the same time enter into a forward
currency exchange contract to exchange U.S. Dollars for its underlying
currency at a future date. By matching the amount of U.S. Dollars to be
exchanged with the anticipated value of the U.S. Dollar-denominated
security, a Fund may be able to "lock in" the foreign currency value of
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the security and adopt a synthetic investment position whereby the Fund's
overall investment return from the combined position is similar to the
return from purchasing a foreign currency-denominated instrument.
Synthetic investment positions will typically involve U.S.
Dollar-denominated securities and, because of the range of highly liquid
short-term instruments available in the U.S., may provide greater
liquidity to a Fund than actual purchases of foreign currency-denominated
securities in addition to providing superior returns in some cases.
Depending on (a) each Fund's liquidity needs, (b) the relative yields of
securities denominated in different currencies and (c) spot and forward
currency exchange rates, a significant portion of a Fund's assets may be
invested in synthetic investment positions, subject to tax diversification
and other tax requirements.
There is a risk in adopting a synthetic investment position. It is
impossible to forecast with absolute precision what the market value of a
particular security will be at any given time. If the value of the U.S.
Dollar-denominated security is not exactly matched with the Portfolio's
obligation under a forward currency exchange contract on the date of
maturity, the Fund may be exposed to some risk of loss from fluctuations
in U.S. Dollars. Although the Adviser will attempt to hold such
mismatching to a minimum, there can be no assurance that the Adviser will
be able to do so.
Although the foreign currency market is not believed to be
necessarily more volatile than the market in other commodities, there is
less protection against defaults in the forward trading of currencies than
there is in trading such currencies on an exchange because such forward
contracts are not guaranteed by an exchange or clearing house. The CFTC
has indicated that it may assert jurisdiction over forward contracts in
foreign currencies and attempt to prohibit certain entities from engaging
in such transactions. In the event that such prohibition included the
Funds, the Adviser would review whether or not it would be appropriate for
the Funds to cease trading such contracts. Cessation of trading might
adversely affect the performance of the Funds.
YIELDS AND RATINGS
The yields on certain obligations, including the money market
instruments in which each Fund may invest (such as commercial paper and
bank obligations), are dependent on a variety of factors, including
general money market conditions, conditions in the particular market for
the obligation, the financial condition of the issuer, the size of the
offering, the maturity of the obligation and the ratings of the issue.
The ratings of S&P, Moody's and Duff & Phelps Credit Rating Co. and other
nationally recognized rating service organizations represent their
respective opinions as to the quality of the obligations they undertake to
rate. Ratings, however, are general and are not absolute standards of
quality or value. Consequently, obligations with the same rating, maturity
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and interest rate may have different market prices. See APPENDIX A for a
description of the ratings provided by nationally recognized statistical
ratings organizations.
Subsequent to its purchase by a Fund, a rated security may cease to
be rated or its rating may be reduced below the minimum rating required
for purchase by the Fund. The Board of Trustees or the Adviser, pursuant
to guidelines established by the Board of Trustees, will consider such an
event in determining whether the Fund should continue to hold the security
in accordance with the interests of the Fund and applicable regulations of
the Securities and Exchange Commission (the "Commission").
INVESTMENT RESTRICTIONS
The following investment restrictions may not be changed with respect
to any Fund without the approval of "a majority of the outstanding shares"
of such Fund (as such term is defined in this Statement of Additional
Information under "Miscellaneous"). INVESTMENT RESTRICTIONS THAT INVOLVE A
MAXIMUM PERCENTAGE OF SECURITIES OR ASSETS SHALL NOT BE CONSIDERED TO BE
VIOLATED UNLESS AN EXCESS OVER THE PERCENTAGE OCCURS IMMEDIATELY AFTER,
AND IS CAUSED BY, AN ACQUISITION OR ENCUMBRANCE OF SECURITIES OR ASSETS
OF, OR BORROWINGS BY OR ON BEHALF OF, A FUND, WITH THE EXCEPTION OF
BORROWINGS PERMITTED BY INVESTMENT RESTRICTION NO. 1.
Accordingly, the Trust may not, on behalf of a Fund:
1. Borrow money, except from banks, or by entering into reverse
repurchase agreements, on a temporary basis for extraordinary or emergency
purposes in amounts not to exceed 33 1/3% of the Fund's total assets
(including the amount borrowed) taken at market value; PROVIDED, that no
purchases of securities will be made if such borrowings exceed 5% of the
value of the Fund's total assets. This restriction does not apply to cash
collateral received as a result of portfolio securities lending.
2. With respect to 75% of its total assets taken at market value,
invest more than 5% of the value of the total assets of the Fund in the
securities of any one issuer, except securities issued by the U.S.
government, its agencies and instrumentalities and repurchase agreements
collateralized by such securities.
3. With respect to 75% of its total assets taken at market value,
purchase the securities of any one issuer if, as a result of such
purchase, the Fund would hold more than 10% of the outstanding voting
securities of that issuer.
4. Mortgage, pledge or hypothecate its assets except to secure
indebtedness permitted by Investment Restriction No. 1 above. For
purposes of this restriction, collateral arrangements with respect to
options on securities and indices, futures contracts and options on
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futures contracts and payments of initial and variation margin in
connection therewith are not considered a pledge of assets.
5. Act as underwriter of securities issued by others, except to the
extent that, in connection with the disposition of portfolio securities,
the Fund may be deemed to be an underwriter for the purposes of the
Securities Act of 1933, as amended (the "1933 Act").
6. Purchase the securities of issuers conducting their principal
business activities in the same industry if, immediately after such
purchase, the value of the Fund's investments in such industry would
exceed 25% of its total assets taken at market value at the time of each
investment. For purposes of this restriction, telephone companies are
considered to be a separate industry from water, gas or electric
utilities, personal credit finance companies and business credit finance
companies are deemed to be in separate industries and all
quasi-governmental and supranational entities are deemed to be in a single
industry.
7. Make loans; PROVIDED, that the lending of portfolio securities,
the purchase of debt securities and the entry into repurchase agreements
pursuant to the Fund's investment objectives and policies shall not be
limited by this restriction.
8. Invest in commodities or commodity contracts, except options on
securities, securities indices, currency and other financial instruments,
futures contracts on securities, securities indices, currency and other
financial instruments and options on such futures contracts, forward
commitments, securities index put or call warrants and repurchase
agreements entered into in accordance with the Fund's investment
objectives and policies.
9. Invest in real estate or interests therein, except that the Fund
may invest in readily marketable securities, other than limited
partnership interests, of companies that invest in real estate;
10. Issue senior securities, except as permitted by Investment
Restriction No. 1 above; PROVIDED, that for the purposes of this
restriction, the issuance of shares of beneficial interest in multiple
classes or series, the purchase or sale of options, futures contracts and
options on futures contracts, forward commitments and repurchase
agreements entered into in accordance with the Fund's investment
objectives and policies, and the pledge, mortgage or hypothecation of the
Fund's assets within the meaning of Investment Restriction No. 4 above are
not deemed to be senior securities.
In addition to the fundamental policies mentioned above, the Board of
Trustees of the Trust has adopted the following non-fundamental policies
that may be changed or amended by action of the Board of Trustees without
shareholder approval.
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Accordingly, the Trust may not, on behalf of a Fund:
(a) invest in repurchase agreements maturing in more than seven days
and securities which are illiquid, if, as a result thereof, more than 15%
of the net assets of the Fund (taken at market value) would be invested in
such investments;
(b) purchase securities on margin or make short sales of securities
or maintain a short position, except that (i) this investment limitation
shall not apply to the Fund's transactions in futures contracts and
related option transactions or the Fund's transactions in securities on a
"when-issued" or forward commitment basis and (ii) the Fund may obtain
short-term credit as may be necessary for the clearance of purchases and
sales of portfolio securities;
(c) invest in other companies for the purpose of exercising control
or management;
(d) acquire the securities of any other domestic or foreign
investment company or investment fund if after any such acquisition the
Fund would have invested more than 5% of its total assets in, or own more
than 3% of the outstanding voting securities of, such investment company
or fund or have more than 10% of its total assets invested in all such
investment companies or funds (except in connection with a plan of merger
or consolidation with or acquisition of substantially all the assets of
such other investment company);
(e) purchase or retain the securities of any company if any officer
or Trustee of the Trust or officer or director of the Adviser or the
Distributor individually owns more than one-half of 1% of the securities
of such company or, collectively, such individuals own more than 5% of the
securities of such company;
(f) invest more than 2% of its assets in warrants, valued at the
lower of cost or market, PROVIDED that the Fund may invest up to 5% of its
total assets, as so valued, in warrants listed on a recognized securities
exchange, and PROVIDED, FURTHER, that warrants acquired in units or
attached to securities shall not be included for this purpose;
(g) write (sell) uncovered calls or puts or any combination thereof
or purchase uncovered calls, puts, straddles, spreads or any combination
thereof;
(h) invest in interests in oil, gas or other mineral exploration or
development leases or programs; and
(i) purchase the securities of any enterprise which has a business
history of less than three years, including the operation of any
predecessor business to which it has succeeded, if such purchase would
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cause the Fund's investment in such enterprise taken at cost to exceed 5%
of the Fund's total assets taken at market value.
The staff of the Commission has taken the position that fixed time
deposits maturing in more than seven days that cannot be traded on a
secondary market and participation interests in loans are illiquid. Until
such time (if any) as this position changes, the Trust, on behalf of each
Fund, will include such investments in determining compliance with the 15%
limitation on investments in illiquid securities. Restricted securities
(including commercial paper issued pursuant to Section 4(2) of the 1933
Act) which the Board of Trustees has determined are readily marketable
will not be deemed to be illiquid for purposes of such restriction.
"Value" for the purposes of all investment restrictions shall mean
the market value used in determining each Fund's net asset value.
TRUSTEES AND OFFICERS
Information pertaining to the Trustees and officers of the Trust is
set forth below. An asterisk indicates those Trustees and officers deemed
to be "interested persons" of the Trust for purposes of the 1940 Act.
Positions Principal Occupation
Name and Address With Trust During Past Five Years
- ------------------------- ------------- ----------------------
Richard A. Crowell, Ph.D.* Chairman and President and Managing
260 Franklin Street President Director of the Adviser
Boston, MA 02110 since January 1990;
Senior Vice President,
Boston Safe Deposit &
Trust Company, October
1984 to February 1993;
Senior Vice President,
The Boston Company
Advisors, Inc., December
1986 to June 1991; and
Senior Vice President,
The Boston Company
Institutional Investors,
May 1985 to June 1991.
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Positions Principal Occupation
Name and Address With Trust During Past Five Years
- ------------------------- -------------- ----------------------
Susan Smick Trustee Vice President of Pricing
400 Atlantic Avenue and Estimating and Infor-
Boston, MA 02110 mation Systems; Quebecor
Printing (U.S.)
Corporation, since August
1992; Vice President of
Pricing and Estimating,
Quebecor Printing (U.S.)
Corporation, May 1991 to
July 1992; Controller of
Quebecor Sales, Inc.,
July 1990 to April 1991;
Sales Executive, Quebecor
Printing, Inc., June 1989
to June 1990; Director of
Financial Analysis,
Quebecor Printing, Inc.,
July 1988 to May 1989;
and Financial Analyst,
Quebecor Printing, Inc.,
April 1988 to June 1988.
James R. Vertin Trustee Principal, Alpine
136 Pecora Way Counselors, an investment
Menlo Park, CA 94028 consulting firm, since
1982; and previously,
1952 to 1982, employed by
Wells Fargo Bank, most
recently as Chief
Investment Officer and
Manager, Wells Fargo
Investment Advisors.
Paul J. Jasinski Treasurer Vice President, Investors
Investors Bank & Trust Bank & Trust Company,
Company since May 1990; Vice
89 South Street President, Bank of New
Boston, MA 02111 England, since July 1985.
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Positions Principal Occupation
Name and Address With Trust During Past Five Years
- ---------------------- -------------- ----------------------
Debra M. Brown Secretary Assistant Vice President
Investors Bank & Trust and Counsel, Investors
Company Bank & Trust Company,
89 South Street since June 1992; and
Boston, MA 02111 previously served as
Assistant Vice President
and Counsel to The Boston
Company Advisors, Inc.
Kevin M. Connerty Assistant Officer and Account
Investors Bank & Trust Treasurer Manager Reporting and
Company Compliance, Investors
89 South Street Bank & Trust Company,
Boston, MA 02111 since October 1992; and
previously Senior Officer
and Assistant Manager of
Financial Reporting, The
Boston Company Advisors,
Inc., December 1986 to
September 1992.
Joseph P. Barri, Esq. Assistant Partner, the law firm of
Hale and Dorr Secretary Hale and Dorr and
60 State Street secretary to the mutual
Boston, MA 02109 funds in The Pioneer
Family of Funds.
Ms. Smick and Mr. Vertin are members of the Audit Committee of the
Board of Trustees. The Audit Committee's functions include making
recommendations to the Trustees regarding the selection of independent
public accountants, and reviewing with such accountants and the
Treasurer of the Fund matters relating to accounting and auditing
practices and procedures, accounting records, internal accounting
controls and the functions performed by the Trust's custodian,
administrator and transfer agent. Mr. Crowell and Ms. Smick are members
of the Dividend Committee and Valuation Committee of the Board of
Trustees.
The Trust pays each Trustee who is not affiliated with the Adviser
a fee of $5,000 per year, plus $1,000 for each Board meeting attended by
a Trustee. The Trustees are also reimbursed for expenses incurred by
them in connection with their duties as Trustees.
As of the date of this Statement of Additional Information, the
Trustees and officers of the Trust, as a group, owned less than 1% of
the outstanding shares of any Fund. Each of the following shareholders
owned 5% or more of a Fund's shares as of July 31, 1994:
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<PAGE>
PERCENTAGE OF SHARES
NAME OF PORTFOLIO SHAREHOLDER AND ADDRESS OWNED
- ----------------- ----------------------- --------------------
Asset Allocation IDS Trust f/b/o IDS 45.4%
Fund: Trust Retirement Service
Plan, 1200 Northstar West,
P.O. Box 534, Minneapolis,
MN 55440-0534
Information Alliance 36.8%
Pension Plan Trust, Box
3079, Pittsfield, MA 01202
PanAgora Asset Management, Inc. 15.9%
260 Franklin St., Boston MA
02110
Global Fund: Rush-Presbyterian-St. Luke's 56.5%
Medical Center Endowment Fund,
1700 W. Vanburen St., Chicago,
IL 60612
Rush-Presbyterian-St. Luke's 41%
Medical Center Pension Fund,
1700 W. Vanburen St., Chicago,
IL 60612
International Equity The Minneapolis Foundation 84.2%
Fund: A200 Foshay Tower,821 Marquette
Ave., Minneapolis, MN 55402
Bost & Co., P.O. Box 9118, 6.2%
Boston, MA 02205
INVESTMENT ADVISORY AND OTHER SERVICES
The Adviser
PanAgora Asset Management, Inc. serves as the Trust's investment
adviser. The Adviser, the services provided by it pursuant to the
advisory agreement with respect to each Fund (the "Advisory Agreement"),
and the fees payable by each Fund to the Adviser for such services are
described in detail in the Prospectus. As described in the Prospectus,
the Adviser manages the investment portfolio of each Fund pursuant to
the terms of the Advisory Agreement between the Adviser and the Trust
with respect to each Fund. During the fiscal year ended May 31, 1994,
the total dollar amounts earned by the Adviser with respect to the
advisory services provided to each Fund were as follows: PanAgora Asset
Allocation Fund, $10,719; PanAgora Global Fund, $218,254; and PanAgora
International Equity Fund, $110,440. During the fiscal year ended May
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<PAGE>
31, 1994, the Advisor waived fees and/or reimbursed expenses as follows:
PanAgora Asset Allocation Fund, $114,044; PanAgora Global Fund,
$125,496; and PanAgora International Equity Fund, $156,509.
The Advisory Agreement provides that the Adviser shall not be
liable for any error of judgment or mistake of law or for any loss
suffered by the Trust or any Fund in connection with the performance of
the Adviser's obligations under its agreement with the Trust, except a
loss resulting from willful misfeasance, bad faith or gross negligence
on the part of the Adviser in the performance of its duties or from
reckless disregard of its duties and obligations thereunder.
The Advisory Agreement will remain in effect as to each Fund until
May 19, 1995 and will continue in effect thereafter only if such
continuance is specifically approved annually by the Trustees, including
a majority of the Trustees who are not parties to the Advisory Agreement
or "interested persons" (as such term is defined in the 1940 Act) of
such parties, or by a vote of a majority of the outstanding shares of
the affected Fund. The Advisory Agreement was approved on May 19, 1993
by a vote of the Trust's Board of Trustees, including a majority of
those Trustees who were not parties to the Advisory Agreement or
"interested persons" of any such party. The Advisory Agreement was also
approved by the Trust's initial shareholder, the Adviser, on May 19,
1993. The Advisory Agreement is terminable as to each Fund by vote of
the Board of Trustees, or by the holders of a majority of the
outstanding shares of the affected Fund, at any time without penalty on
60 days' written notice to the Adviser. The Adviser may terminate the
Advisory Agreement as to one or more Funds at any time without penalty
on 60 days' written notice to the Trust. The Advisory Agreement
terminates automatically in the event of its assignment (as such term is
defined in the 1940 Act).
THE ADMINISTRATOR, CUSTODIAN AND TRANSFER AGENT
As described in the Prospectus, Investors Bank & Trust Company
("Investors Bank"), 89 South Street, Boston, Massachusetts 02111, serves
as the Trust's administrator pursuant to an administration agreement
(the "Administration Agreement"). Pursuant to the Administration
Agreement, Investors Bank has agreed to maintain certain office
facilities for the Trust, furnish statistical and research data,
clerical services, and stationery and office supplies; prepare and file
various reports with the appropriate regulatory agencies including the
Commission and state securities commissions; and provide accounting and
bookkeeping services for the Funds.
The Administration Agreement provides that Investors Bank shall not
be liable under the Administration Agreement except for bad faith or
gross negligence in the performance of its duties or from the reckless
disregard by it of its duties and obligations thereunder.
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<PAGE>
As described in the Prospectus, Investors Bank also serves as the
custodian and the transfer and dividend disbursing agent for the Trust.
Pursuant to a transfer agency agreement with the Trust, Investors Bank
(i) maintains shareholder accounts, and (ii) makes periodic reports to
the Trust's Board of Trustees concerning the operations of each Fund.
Pursuant to a custodian agreement with the Trust, Investors Bank
(i) maintains custody of each Fund's assets, (ii) maintains a separate
account in the name of each Fund, (iii) holds and transfers portfolio
securities on account of each Fund, (iv) accepts receipts and makes
disbursements of money on behalf of each Fund, (v) collects and receives
all income and other payments and distributions on account of each
Fund's portfolio securities, (vi) computes each Fund's net asset value,
net investment income and realized capital gains, if any, and (vii)
makes periodic reports to the Trust's Board of Trustees concerning each
Fund's operations. Subject to approval by the Trust's Board of
Trustees, Investors Bank may contract with one or more foreign or
domestic banks or companies to serve as foreign sub-custodian on behalf
of the Trust, provided that, with respect to such sub-custodians,
Investors Bank remains responsible for the performance of all its duties
under the custodian agreement with the Trust.
For a description of the fees payable by each Fund under the
administration, transfer agency and custodian agreements, see
"Management of the Trust" in the Prospectus. During the fiscal year
ended May 31, 1994, the total dollar amounts earned by The Boston
Company Advisors, Inc., the Trust's former administrator, with respect
to the administrative services provided to each Fund were as follows:
PanAgora Asset Allocation Fund, $68,442; PanAgora Global Fund, $75,982;
and PanAgora International Equity Fund, $68,442. During the fiscal year
ended May 31, 1994, The Boston Company Advisors, Inc. waived fees and
reimbursed certain expenses of each Fund in the amount of $30,000.
THE DISTRIBUTOR
The Trust has entered into a distribution agreement (the
"Distribution Agreement") pursuant to which Funds Distributor, Inc. (the
"Distributor"), as agent, serves as principal underwriter for the
continuous offering of shares of each Fund. The Distributor has agreed
to use its best efforts to solicit orders for the purchase of shares of
each Fund, although it is not obligated to sell any particular amount of
shares. No compensation is payable by the Trust to the Distributor for
such distribution services; however, the Adviser has agreed to pay to
the Distributor a monthly fee at an annual rate of 0.03% of the average
daily net assets of each Fund or a minimum annual fee of $15,000,
whichever is higher.
The Distribution Agreement will remain in effect until May 19, 1995
and will continue in effect thereafter only if such continuance is
specifically approved annually by the Trustees, including a majority of
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<PAGE>
the Trustees who are not parties to the Distribution Agreement or
"interested persons" (as such term is defined in the 1940 Act) of any
such party. The Distribution Agreement was approved on May 19, 1993 by
a vote of the Trust's Board of Trustees, including a majority of those
Trustees who were not parties to the Distribution Agreement or
"interested persons" of any such party. The Distribution Agreement is
terminable, as to a Fund, by vote of the Board of Trustees, or by the
holders of a majority of the outstanding shares of the Fund, at any time
without penalty on 60 days' written notice to the Trust and Adviser.
The Distributor or Adviser may terminate the Distribution Agreement at
any time without penalty on 90 days' written notice to the Trust.
PORTFOLIO TRANSACTIONS
Subject to the general supervision of the Board of Trustees, the
Adviser makes decisions with respect to and places orders for all
purchases and sales of portfolio securities for the Funds. In executing
portfolio transactions, the Adviser seeks to obtain the best net results
for the Fund, taking into account such factors as price (including the
applicable brokerage commission or dealer spread), size of the order,
difficulty of execution and operational facilities of the firm involved.
OTC issues, including corporate debt securities and securities
issued by the U.S. government, its agencies and instrumentalities, are
normally traded on a "net" basis (I.E., without commission) through
dealers, or otherwise involve transactions directly with the issuer of
an instrument. The cost of foreign and domestic securities purchased
from underwriters includes an underwriting commission or concession, and
the prices at which securities are purchased from and sold to dealers
include a dealer's mark-up or mark-down. With respect to OTC
transactions, the Adviser will normally deal directly with dealers who
make a market in the instruments involved except in those circumstances
where more favorable prices and execution are available elsewhere.
In the Advisory Agreement, the Adviser agrees to select
broker-dealers in accordance with guidelines established by the Trust's
Board of Trustees from time to time and in accordance with Section 28(e)
of the Securities Exchange Act of 1934, as amended. In assessing the
terms available for any transaction, the Adviser shall consider all
factors it deems relevant, including the breadth of the market in the
security, the price of the security, the financial condition and
execution capability of the broker-dealer, and the reasonableness of the
commission, if any, both for the specific transaction and on a
continuing basis. In addition, the Advisory Agreement authorizes the
Adviser, subject to the prior approval of the Trust's Board of Trustees,
to cause a Fund to pay a broker-dealer which furnishes brokerage and
research services a higher commission than that which might be charged
by another broker-dealer for effecting the same transaction, provided
that the Adviser determines in good faith that such commission is
reasonable in relation to the value of the brokerage and research
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<PAGE>
services provided by such broker-dealer, viewed in terms of either the
particular transaction or the overall responsibilities of the Adviser to
the Fund. Such brokerage and research services might consist of reports
and statistics on specific companies or industries, general summaries of
groups of bonds and their comparative earnings and yields, or broad
overviews of the securities markets and the economy. Management of the
Trust does not believe that it is possible to estimate the proportion or
amount of the Funds' portfolio transactions directed to broker-dealers
solely because such services were provided.
Supplemental research information utilized by the Adviser is in
addition to, and not in lieu of, services required to be performed by
the Adviser and does not reduce the advisory fees payable to the Adviser
by each Fund. The Trustees will periodically review the commissions
paid by the Funds to consider whether the commissions paid over
representative periods of time appear to be reasonable in relation to
the benefits inuring to the Funds. It is possible that certain of the
supplemental research or other services received will primarily benefit
one or more other investment companies or other accounts of the Adviser
for which investment discretion is exercised. Conversely, a Fund may be
the primary beneficiary of the research or services received as a result
of portfolio transactions effected for such other account or investment
company.
Investment decisions for each Fund and for other investment
accounts managed by the Adviser are made independently of each other in
the light of differing conditions. However, the same investment
decision may be made for two or more of such accounts. In such cases,
simultaneous transactions are inevitable. Purchases or sales are then
averaged as to price and allocated as to amount in a manner deemed
equitable to each such account. While in some cases this practice could
have a detrimental effect on the price or value of the security as far
as a Fund is concerned, in other cases it is believed to be beneficial
to a Fund. To the extent permitted by law, the Adviser may aggregate
the securities to be sold or purchased for a Fund with those to be sold
or purchased for other investment companies or accounts in executing
transactions.
Portfolio securities will not be purchased from or sold to the
Adviser or any affiliated person (as such term is defined in the 1940
Act) of the Adviser except to the extent permitted by an exemptive order
issued by the Commission or by applicable law. In addition, a Fund will
not purchase securities during the existence of any underwriting or
selling group relating to such securities of which the Adviser or any
affiliated person (as such term is defined in the 1940 Act) thereof is a
member, except pursuant to procedures adopted by the Trust's Board of
Trustees in accordance with Rule 10f-3 under the 1940 Act.
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During the fiscal year ended May 31, 1994, PanAgora Asset
Allocation Fund, PanAgora Global Fund and PanAgora International Equity
Fund paid brokerage commissions in the amounts of $1,942, $150,191 and
$90,530, respectively.
PURCHASE AND REDEMPTION INFORMATION
The Trust will not generally issue shares of the Funds for
consideration other than cash. At the Trust's sole discretion, however,
it may issue shares of the Funds for consideration other than cash in
connection with a bona fide reorganization, statutory merger, or other
acquisition of portfolio securities (other than municipal debt
securities issued by state political subdivisions or their agencies or
instrumentalities), PROVIDED (i) the securities meet the investment
objectives and policies of the relevant Fund; (ii) the securities are
acquired by the relevant Fund for investment and not for resale; (iii)
the securities are not restricted as to transfer either by law or
liquidity of market; and (iv) the securities have a value which is
readily ascertainable (and not established only by evaluation
procedures) as evidenced by a listing on a recognized exchange or
through quotation on the Nasdaq Stock Market. See "Purchase of Shares"
in the Prospectus.
The Trust reserves the right, if conditions exist which make cash
payments undesirable, to honor any request for redemption or repurchase
of a Fund's shares by making payment in whole or in part in readily
marketable portfolio securities chosen by the Trust and valued in the
same way as they would be valued for purposes of computing a Fund's net
asset value. If payment is made in portfolio securities, a shareholder
may incur transaction costs in converting the securities into cash.
Under the 1940 Act, the right to redeem can be suspended and the
payment of the redemption price deferred when the New York Stock
Exchange (the "NYSE") is closed (other than for customary weekend and
holiday closings), during periods when trading on the NYSE is restricted
as determined by the Commission, during any emergency as determined by
the Commission which makes it impracticable for a Fund to dispose of its
securities or value its assets, or during any other period permitted by
order of the Commission for the protection of investors.
NET ASSET VALUE
Under the 1940 Act, the Board of Trustees of the Trust is
responsible for determining in good faith the fair value of the
securities of each Fund. In accordance with procedures adopted by the
Board of Trustees, the net asset value per share of each Fund is
calculated by determining the net worth of the Fund (assets, including
securities at value, minus liabilities) divided by the number of shares
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outstanding. All securities are valued as of the close of regular
trading on the NYSE. The Funds compute their net asset values once
daily at the close of such regular trading, which is normally 4:00 p.m.
New York time, on each Business Day (as defined in the Prospectus).
For purposes of calculating each Fund's net asset value per share,
equity securities traded on a recognized U.S. or foreign securities
exchange or the National Association of Securities Dealers Stock Market
("NSM") are valued at their last sale price on the principal exchange on
which they are traded or NSM (if NSM is the principal market for such
securities) on the valuation day or, if no sale occurs, at the mean
between the closing bid and asked price. Unlisted equity securities for
which market quotations are readily available are valued at the mean
between the most recent bid and asked price.
Debt-securities and other fixed-income investments of the Funds are
valued at prices supplied by independent pricing agents selected by the
Board of Trustees, which prices reflect broker-dealer supplied
valuations and electronic data processing techniques. Short-term
obligations maturing in sixty days or less are valued at amortized cost,
which method does not take into account unrealized gains or losses on
such portfolio securities. Amortized cost valuation involves initially
valuing a security at its cost, and thereafter, assuming a constant
amortization to maturity of any discount or premium, regardless of the
impact of fluctuating interest rates on the market value of the
security. While this method provides certainty in valuation, it may
result in periods in which the value of the security, as determined by
amortized cost, may be higher or lower than the price the Fund would
receive if the Fund sold the security.
Other assets and assets whose market value does not, in the
Adviser's opinion, reflect fair value are valued at fair value using
methods determined in good faith by the Board of Trustees.
PERFORMANCE INFORMATION
Each Fund that advertises its "average annual total return"
computes such return by determining the average annual compounded rate
of return during specified periods that equates the initial amount
invested to the ending redeemable value of such investment according to
the following formula:
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T = [(ERV) 1/n - 1]
---
P
Where: T = average annual total return,
ERV = ending redeemable value of a hypothetical
$1,000 payment made at the beginning of the 1,
5 or 10 year (or other) periods at the end of
the applicable period (or a fractional portion
thereof);
P = hypothetical initial payment of $1,000;
and
n = period covered by the computation,
expressed in years.
Each Fund that advertises its "aggregate total return" computes
such returns by determining the aggregate compounded rates of return
during specified periods that likewise equate the initial amount
invested to the ending redeemable value of such investment. The formula
for calculating aggregate total return is as follows:
Aggregate Total Return = [(ERV) - 1]
---
P
The above calculations are made assuming that (1) all dividends and
capital gain distributions are reinvested on the reinvestment dates at
the price per share existing on the reinvestment date, (2) all recurring
fees charged to all shareholder accounts are included, and (3) for any
account fees that vary with the size of the account, a mean (or median)
account size in the Fund during the periods is reflected. The ending
redeemable value (variable "ERV" in the formula) is determined by
assuming complete redemption of the hypothetical investment after
deduction of all nonrecurring charges at the end of the measuring
period.
The aggregate total return for PanAgora Asset Allocation Fund,
PanAgora Global Fund and PanAgora International Equity Fund for the
fiscal year ended May 31, 1994 was 1.63%, 8.68% and 10.12%,
respectively. In the absence of fee waivers and expense reimbursements,
the aggregate total return for each of the PanAgora Asset Allocation
Fund, PanAgora Global Fund and PanAgora International Equity Fund would
have been -3.75%, 8.27% and 8.48%, respectively.
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TAXES
Each Fund intends to elect to be treated as a regulated investment
company under Subchapter M of the Internal Revenue Code of 1986, as
amended, (the "Code") and to qualify for such treatment for each taxable
year. Such qualification does not involve supervision of management or
investment practices or policies by any governmental agency or bureau.
In order to qualify as a regulated investment company, each Fund
must, among other things, (a) derive at least 90% of its annual gross
income from dividends, interest, payments with respect to securities
loans and gains from the sale or other disposition of stock or
securities or foreign currencies or income from certain other
investments including options, futures or forward contracts with respect
to its business of investing in such stock, securities or foreign
currencies (the "90% gross income test"); (b) derive less than 30% of
its annual gross income from the sale or other disposition of stock or
securities or other investments, including options and futures contracts
on stocks, securities or indices and certain foreign currencies or
foreign currency options, futures or forward contracts, held less than
three months (the "short-short test"); and (c) diversify its holdings so
that, at the end of each quarter of its taxable year, (i) at least 50%
of the market value of the Fund's total (gross) assets is represented by
cash and cash items (including receivables), U.S. Government securities,
securities of other regulated investment companies and other securities
limited, in respect of any one issuer, to not greater in value than 5%
of the value of the Fund's total assets and to an amount not greater
than 10% of the outstanding voting securities of such issuer, and
(ii) not more than 25% of the value of the Fund's total assets is
invested in the securities (other than U.S. Government securities and
securities of other regulated investment companies) of any one issuer or
two or more issuers controlled by the Fund and engaged in the same,
similar or related trades or businesses. Gains from the sale or other
disposition of foreign currencies (or options, futures or forward
contracts on foreign currencies) that are not directly related to a
Fund's principal business of investing in stock or securities or options
and futures with respect to stock or securities will be treated as gains
from the disposition of investments held for less than three months
under the short-short test (even though characterized as ordinary income
for some purposes) if such currencies or instruments were held for less
than three months. In addition, future Treasury regulations are
expected to provide that qualifying income under the 90% gross income
test will not include gains from foreign currency transactions or
instruments that are not directly related to a Fund's principal business
of investing in stock or securities or options and futures with respect
to stock or securities. Using foreign currency positions or entering
into foreign currency options, futures and forward contracts for
purposes other than hedging currency risk with respect to existing or
future portfolio securities may not qualify as "directly-related" under
these tests. The federal income tax rules applicable to interest rate
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swaps and synthetic investments involving currency positions are unclear
in certain respects, and PanAgora Global Fund and PanAgora International
Equity Fund may be required to limit their use of these transactions in
order to comply with the requirements for qualification as a regulated
investment company.
Each Fund will not be subject to federal income tax on any of its
investment company taxable income (generally all of its taxable net
income other than the excess of net long-term capital gain over net
short-term capital loss) and net capital gain (which equals the excess,
if any, of net long-term capital gain over net short-term capital loss)
that are distributed to shareholders in accordance with certain timing
requirements with respect to any taxable year, provided that the Fund
distributes at least 90% of its investment company taxable income for
such year and qualifies as a regulated investment company. However, if
a Fund retains any investment company taxable income or net capital
gain, it will be subject to federal income tax at regular corporate
rates on the amount retained. Further, in order to avoid a
nondeductible 4% federal excise tax, each Fund must distribute (or be
deemed to have distributed) by December 31 of each calendar year at
least 98% of its ordinary income for such year, at least 98% of the
excess of its capital gains over its capital losses (generally computed
on the basis of the one-year period ending on October 31 of such year),
and all ordinary income and the excess of capital gains over capital
losses for the previous year that were not distributed in such year and
on which the Fund paid no federal income tax. In determining amounts to
be distributed, each Fund will take into account capital loss
carryforwards, if any, from prior years.
The Funds are not subject to Massachusetts corporate excise or
franchise taxes. Provided that each Fund qualifies as a regulated
investment company under the Code, such Fund will also not be liable for
Massachusetts income tax.
If PanAgora Global Fund or PanAgora International Equity Fund
acquires stock in certain non-U.S. corporations that receive at least
75% of their annual gross income from passive sources (such as sources
that produce interest, dividend, rental, royalty or capital gain income)
or hold at least 50% of their assets in such passive sources ("passive
foreign investment companies"), such Funds could be subject to federal
income tax and additional interest charges on "excess distributions"
received from such companies or gain from the sale of stock in such
companies, even if all income or gain actually received by a Fund is
timely distributed to its shareholders. The Funds would not be able to
pass through to their shareholders any credit or deduction for such a
tax. In certain cases, an election may be available that would
ameliorate these adverse tax consequences. Accordingly, a Fund may
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limit its investments in such passive foreign investment companies and
will undertake appropriate actions, including the consideration of any
available elections, to limit its tax liability, if any, with respect to
such investments.
A Fund's transactions in options or financial futures contracts
will give rise to taxable gain or loss and will be subject to special
tax rules, the effect of which may be to accelerate income to the Fund,
defer Fund losses, cause adjustments in the holding periods of Fund
securities and/or convert long-term capital gains into short-term
capital gains (or short-term capital losses into long-term capital
losses). For example, certain listed non-equity options written or
purchased by a Fund (including options and futures contracts on
securities and securities indices) are required to be "marked to market"
(I.E., treated as if closed out) on the last day of each taxable year,
and any associated gain or loss is generally required to be treated as
60% long-term and 40% short-term capital gain or loss, with adjustments
subsequently made to any gain or loss realized upon an actual
disposition of these positions. When the Fund enters into certain
hedging positions involving options or futures contracts that
substantially diminish its risk of loss with respect to other positions,
certain tax "straddle" rules may operate to alter the amount, timing or
character of gains or losses realized. The tax provisions described
above applicable to options and futures contracts may affect the amount,
timing and character of each Fund's distributions to shareholders. The
short-short test described above may limit each Fund's ability to use
options and futures transactions. Certain tax elections may be
available to a Fund to mitigate some of the unfavorable consequences
described in this paragraph.
Section 988 of the Code contains special tax rules applicable to
certain foreign currency transactions and instruments that may affect
the amount, timing and character of income, gain or loss recognized by
PanAgora Global Fund and PanAgora International Equity Fund and hence of
their distributions to shareholders. Under these rules, foreign exchange
gain or loss realized with respect to foreign currencies and certain
futures and options thereon, foreign currency-denominated debt
instruments, foreign currency forward contracts, and foreign
currency-denominated payables and receivables will generally be treated
as ordinary income or loss, although in some cases elections may be
available that would alter this treatment. If the net foreign exchange
loss treated as ordinary loss under Section 988 of the Code were to
exceed a Fund's investment company taxable income (computed without
regard to such loss) for a taxable year, the resulting loss would not be
deductible by the Fund or its shareholders in future years. Net loss,
if any, from certain foreign currency transactions or instruments could
exceed net investment income otherwise calculated for accounting
purposes with the result being either the omission of one or more
dividends or a portion of a Fund's dividends being treated as a return
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of capital for tax purposes, nontaxable to the extent of a shareholder's
tax basis in his shares and, once such basis is exhausted, generally
giving rise to capital gains.
A Fund's investment in zero coupon securities or other securities
bearing original issue discount or, if such Fund elects to include
market discount in income currently, market discount will cause it to
realize income prior to the receipt of cash payments with respect to
these securities. In order to distribute this income, maintain its
qualification as a regulated investment company, and avoid federal
income or excise taxes, the Fund may be required to liquidate portfolio
securities that it might otherwise have continued to hold.
PanAgora Global Fund and PanAgora International Equity Fund
anticipate that they will be subject to foreign withholding or other
foreign taxes on their income (possibly including, in some cases,
capital gains) from foreign securities. Tax conventions between certain
countries and the U.S. may reduce or eliminate such taxes. If more than
50% of such a Fund's total assets at the close of a taxable year of such
Fund consist of stock or securities of foreign corporations, such Fund
will qualify to file an election with the Internal Revenue Service for
such year pursuant to which shareholders of the Fund would be required
to (i) include in ordinary gross income (in addition to taxable
dividends actually received) their pro rata shares of foreign income
taxes paid by the Fund even though not actually received by such
shareholders, and (ii) treat such respective pro rata portions as
foreign income taxes paid by them, for which they may be entitled to
U.S. federal income tax credits or deductions, subject to applicable
limitations under the Code. These Funds will consider making such an
election if they are eligible to do so and, if they cannot or do not so
elect, will be entitled to deduct such taxes in computing their
distributable income.
For federal income tax purposes, distributions by a Fund, whether
reinvested in additional shares or paid in cash, generally will be
taxable to shareholders. Shareholders receiving a distribution in the
form of newly issued shares will be treated for federal income tax
purposes as receiving a distribution in an amount equal to the amount of
cash they would have received had they elected to receive cash and will
have a cost basis in each share received equal to such amount divided by
the number of shares received. Distributions designated as derived from
a Fund's dividend income, if any, that would be eligible for the
dividends received deduction if the Fund were not a regulated investment
company will be eligible, subject to certain holding period and
debt-financing restrictions, for the 70% dividends received deduction
for corporations. Eligible dividends are those received by a Fund from
U.S. domestic corporations and distributed to shareholders and properly
designated as eligible by the Fund. The entire eligible dividend,
including the deducted amount, is considered in determining the excess,
if any, of a corporate shareholder's adjusted current earnings over its
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alternative minimum taxable income, which may increase its liability for
the federal alternative minimum tax, and the dividend may, if it is
treated as an "extraordinary dividend" under the Code, reduce such
shareholder's tax basis in its shares of the Fund.
Different tax treatment, including penalties on certain excess
contributions and deferrals, certain pre-retirement and post-retirement
distributions, and certain prohibited transactions is accorded to
accounts maintained as qualified retirement plans. Shareholders should
consult their tax advisers for more information.
When a shareholder's shares are sold, redeemed or otherwise
disposed of, the shareholder will generally recognize gain or loss equal
to the difference between the shareholder's adjusted tax basis in the
shares and the cash, or fair market value of any property, received.
Assuming the shareholder holds the shares as a capital asset at the time
of such sale or other disposition, such gain or loss should be capital
in nature, and long-term if the shareholder has held the shares for more
than one year, otherwise short-term. If, however a shareholder receives
a capital gain dividend with respect to shares and such shares are sold
or redeemed when they have a tax holding period of six months or less,
then any loss the shareholder realizes on the sale or redemption will be
treated as a long-term capital loss to the extent of such capital gain
dividend. Additionally, any loss realized on a sale or redemption of
shares of a Fund 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 the shares are disposed of, such as pursuant to a
dividend reinvestment in shares of the same Fund.
Each Fund will be required to report for federal tax purposes all
taxable distributions and proceeds from the redemption or exchange of
shares, except in the case of certain shareholders exempt from such
reporting requirements. Under the backup withholding provisions of the
Code, all such distributions may be subject to withholding of federal
income tax at the rate of 31% in the case of non-exempt shareholders who
fail to furnish a Fund with their correct taxpayer identification number
or with certain required certifications or if the Internal Revenue
Service or a broker notifies a Fund that the number furnished by the
shareholder is incorrect or that the shareholder is subject to
withholding as a result of failure to report interest or dividend
income. Each Fund may refuse to accept an application that does not
contain any required taxpayer identification number or certification
that the number provided is correct or that the investor is an exempt
recipient. If the withholding provisions are applicable, any such
distributions, whether taken in cash or reinvested in shares, will be
reduced by the amounts required to be withheld.
The foregoing discussion relates solely to U.S. federal income tax
law as it applies to U.S. persons (I.E., U.S. citizens and residents and
U.S. domestic corporations, partnerships, trusts and estates) subject to
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<PAGE>
U.S. federal income tax. Each shareholder who is not a U.S. person
should consult his or her tax adviser regarding the U.S. and non-U.S.
tax consequences of ownership of shares of and receipt of distributions
from a Fund, including the possibility that such a shareholder may be
subject to a U.S. nonresident alien withholding tax at a rate of 30% (or
at a lower rate under an applicable U.S. income tax treaty) on certain
distributions.
This discussion of the tax treatment of a Fund and its shareholders
is based on the tax law in effect as of the date of this Statement of
Additional Information.
GENERAL INFORMATION ABOUT THE TRUST
The Trust is a Massachusetts business trust. Under the Trust's
Declaration of Trust, the beneficial interest in the Trust may be
divided into an unlimited number of full and fractional transferable
shares. The Declaration of Trust authorizes the Trust's Board of
Trustees to classify or reclassify any unissued shares of the Trust into
one or more series or classes by setting or changing, in any one or more
respects, their respective designations, preferences, conversion or
other rights, voting powers, restrictions, limitations, qualifications
and terms and conditions of redemption.
In the event of a liquidation or dissolution of the Trust or an
individual Fund, shareholders of a particular Fund would be entitled to
receive the assets available for distribution belonging to such Fund.
Shareholders of a Fund are entitled to participate in the net
distributable assets of the particular Fund involved on liquidation,
based on the number of shares of the Fund that are held by each
shareholder.
Shareholders of the Trust will vote together in the aggregate and
not separately by Fund except as otherwise required by law or when the
Trust's Board of Trustees determines that the matter to be voted upon
affects only the interests of the shareholders of a particular Fund.
Rule 18f-2 under the 1940 Act provides that any matter required to be
submitted to the holders of the outstanding voting securities of an
investment company such as the Trust shall not be deemed to have been
effectively acted upon unless approved by the holders of a majority of
the outstanding shares of each investment portfolio affected by the
matter. A Fund is affected by a matter unless it is clear that the
interests of each Fund in the matter are substantially identical or that
the matter does not affect any interest of the Fund. Under Rule 18f-2,
the approval of an investment advisory agreement or any change in a
fundamental investment policy would be effectively acted upon with
respect to a Fund only if approved by a majority of the outstanding
shares of such Fund. However, Rule 18f-2 also provides that the
ratification of the appointment of independent accountants, the approval
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of principal underwriting contracts and the election of Trustees may be
effectively acted upon by shareholders of the Trust voting together in
the aggregate without regard to a particular Fund.
Shares of the Trust have noncumulative voting rights and,
accordingly, the holders of more than 50% of the Trust's outstanding
shares (irrespective of series) may elect all of the Trustees. Shares
have no preemptive rights and only such conversion and exchange rights
as the Board may grant in its discretion. When issued for payment as
described in the Prospectus, shares will be fully paid and
non-assessable by the Trust.
Shareholder meetings, including meetings held to elect Trustees,
will not be held unless and until such time as required by law. At that
time, the Trustees then in office will call a shareholders' meeting to
elect Trustees. Except as set forth above, the Trustees will continue
to hold office and may appoint successor Trustees.
The Trust's Declaration of Trust authorizes the Trust's Board of
Trustees, without shareholder approval (unless otherwise required by
applicable law), to terminate the Trust or any series or class thereof
if it determines that the continuation of the Trust or a series or class
thereof is not in the best interest of the Trust or such series or
class, or their respective shareholders as a result of factors or events
adversely affecting the ability of the Trust or such series or class to
conduct its business and operations in an economically viable manner.
SHAREHOLDER AND TRUSTEE LIABILITY
Under Massachusetts law, shareholders of a Massachusetts business
trust may, under certain circumstances, be held personally liable as
partners for the obligations of the trust. However, the Trust's
Declaration of Trust provides that shareholders shall not be subject to
any personal liability in connection with the assets of the Trust, for
the acts or obligations of the Trust or any series thereof, and that
every note, bond, contract, order or other undertaking made by the Trust
shall contain a provision to the effect that the shareholders are not
personally liable thereunder. The Declaration of Trust provides for
indemnification out of a Fund's property of any shareholder of the Fund
held personally liable solely by reason of his being or having been a
shareholder of the Fund and not because of his acts or omissions or some
other reason. Thus, the risk of a shareholder's incurring financial
loss on account of shareholder liability is limited to circumstances in
which a Fund would be unable to meet its obligations.
The Declaration of Trust further provides that all persons having
any claim against the Trustees or the Trust shall look solely to the
Trust property for payment; that no Trustee, officer, employee or agent
of the Trust or any series thereof, shall be subject to any personal
liability to any person, other than to the Trust or its shareholders, in
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connection with the Trust property or the affairs of the Trust (subject
to the exception set forth below); and that no Trustee shall be
personally liable to any person for any action or failure to act except
by reason of his or her own bad faith, willful misfeasance, gross
negligence or reckless disregard of his duties as a Trustee. Subject to
such exception, the Declaration of Trust provides that a Trustee is
entitled to be indemnified against all liabilities and expenses
reasonably incurred by him in connection with the defense or disposition
of any proceeding in which he may be involved or with which the Trustee
may be threatened by reason of being or having been a Trustee, and that
the Trust will indemnify officers of the Trust to the same extent that
Trustees are entitled to indemnification.
MISCELLANEOUS
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand, One Post Office Square, Boston, Massachusetts
02109, serves as the Trust's independent accountants, providing audit
services, including review and consultation in connection with various
filings by the Trust with the Commission and tax authorities.
COUNSEL
The law firm of Hale and Dorr, 60 State Street, Boston,
Massachusetts 02109, serves as counsel to the Trust.
SHAREHOLDER APPROVALS
As used in this Statement of Additional Information and in the
Prospectus, "a majority of the outstanding shares" of a Fund means the
lesser of (a) 67% of the shares of the particular Fund represented at a
meeting at which the holders of more than 50% of the outstanding shares
of such Fund are present in person or by proxy, or (b) more than 50% of
the outstanding shares of such Fund.
REGISTRATION STATEMENT
The Trust has filed with the Commission, 450 Fifth Street, N.W.,
Washington, D.C. 20549, a Registration Statement under the Securities
Act of 1933, as amended, with respect to the shares of the Funds to
which this Statement of Additional Information relates. If further
information is desired with respect to the Trust, the Funds or such
shares, reference is made to the Registration Statement and the exhibits
filed as a part thereof.
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APPENDIX A
DESCRIPTION OF BOND RATINGS
The following summarizes the highest four ratings used by
Standard & Poor's Corporation ("S&P") for bonds:
AAA - Debt rated AAA has the highest rating assigned by S&P. Capacity to
pay interest and repay principal is extremely strong.
AA - Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from AAA issues only in a small degree. The "AA"
rating may be modified by the addition of a plus or minus sign to show
relative standing within the AA rating category.
A - 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 debt in
higher rated categories.
BBB - 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 repay principal for debt in this category than for those in
higher rated categories.
To provide more detailed indications of credit quality, the AA, A
and BBB ratings may be modified by the addition of a plus or minus sign
to show relative standing within these major rating categories.
The following summarizes the highest four ratings used by Moody's
Investors Service, Inc. ("Moody's") for bonds:
Aaa - Bonds that are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally
referred to as "gilt edge." Interest payments are protected by a large
or by an exceptionally stable margin and principal is secure. While the
various protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position
of such issues.
Aa - Bonds that are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities
or fluctuation of protective elements may be of greater amplitude or
there may be other elements present which make the long-term risks
appear somewhat larger than in Aaa securities.
<PAGE>
A - Bonds that are rated A possess many favorable investment attributes
and are to be considered upper medium grade obligations. Factors giving
security to principal and interest are considered adequate, but elements
may be present which suggest a susceptibility to impairment sometime in
the future.
Baa - Bonds that are rated Baa are considered medium grade obligations
(I.E., they are neither highly protected nor poorly secured). Interest
payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics
as well.
Moody's applies numerical modifiers (1, 2 and 3) with respect to
corporate bonds rated Aa, A and Baa. The modifier 1 indicates that the
bond being rated 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 bond ranks in the lower end of its generic rating
category.
The following summarizes the highest four ratings used by Duff &
Phelps Credit Rating Co. ("D&P") for bonds:
AAA - Debt rated AAA is of the highest credit quality. The risk factors
are considered to be negligible, being only slightly more than for
risk-free U.S. Treasury debt.
AA - Debt rated AA is of high credit quality. Protection factors are
strong. Risk is modest but may vary slightly from time to time because
of economic conditions. The AA rating may be modified by the addition
of a plus (+) or minus (-) sign to show relative standing within the
major rating category.
A - Bonds that are rated A have protection factors which are average but
adequate. However risk factors are more variable and greater in periods
of economic stress.
BBB - Bonds that are rated BBB have below average protection factors but
are still considered sufficient for prudent investment. Considerable
variability in risk during economic cycles.
To provide more detailed indications of credit quality, the AA, A
and BBB ratings may be modified by the addition of a plus or minus sign
to show relative standing within these major categories.
The following summarizes the ratings used by IBCA Limited and IBCA
Inc. ("IBCA") for bonds:
<PAGE>
Obligations rated AAA by IBCA have the lowest expectation of investment
risk. Capacity for timely repayment of principal and interest is
substantial, such that adverse changes in business, economic or
financial conditions are unlikely to increase investment risk
significantly.
IBCA also assigns a rating to certain international and U.S. banks. An
IBCA bank rating represents IBCA's current assessment of the strength of
the bank and whether such bank would receive support should it
experience difficulties. In its assessment of a bank, IBCA uses a dual
rating system comprised of Legal Ratings and Individual Ratings. In
addition, IBCA assigns banks Long- and Short-Term Ratings as used in the
corporate ratings discussed above. Legal Ratings, which range in
gradation from 1 through 5, address the question of whether the bank
would receive support provided by central banks or shareholders if it
experienced difficulties, and such ratings are considered by IBCA to be
a prime factor in its assessment of credit risk. Individual Ratings,
which range in gradations from A through E, represent IBCA's assessment
of a bank's economic merits and address the question of how the bank
would be viewed if it were entirely independent and could not rely on
support from state authorities or its owners.
DESCRIPTION OF COMMERCIAL PAPER RATINGS
Commercial paper rated A-1 by S&P indicates that the degree of
safety regarding timely payment is strong. Those issues determined to
possess extremely strong safety characteristics are denoted in A-1+.
Capacity for timely payment on commercial paper rated A-2 is
satisfactory but the relative degree of safety is not as high as for
issues designated A-1.
The rating P-1 is the highest commercial paper rating assigned by
Moody's. Issuers rated P-1 (or related supporting institutions) are
considered to have a superior capacity for repayment of short-term
promissory obligations. Issuers rated P-2 (or related supporting
institutions) are considered to have strong capacity for repayment of
short-term promissory obligations. This will normally be evidenced by
many of the characteristics of issuers rated P-1 but to a lesser degree.
Earnings trends and coverage ratios, while sound, will be more subject
to variation. Capitalization characteristics, while still appropriate,
may be more affected by external conditions. Ample alternate liquidity
is maintained.
The highest rating of D&P for commercial paper is Duff 1. D&P
employs three designations, Duff 1 plus, Duff I and Duff 1 minus, within
the highest rating category. Duff 1 plus indicates highest certainty of
timely payment. Short-term liquidity, including internal operating
factors and/or ready access to alternative sources of funds, is judged
to be "outstanding, and safety is just below risk-free U.S. Treasury
short-term obligations." Duff 1 indicates very high certainty of timely
<PAGE>
payment. Liquidity factors are excellent and supported by strong
fundamental protection factors. Risk factors are considered to be
minor. Duff 1 minus indicates high certainty of timely payment.
Liquidity factors are strong and supported by good fundamental
protection factors. Risk factors are very small.
FORM N-1A
PART C. OTHER INFORMATION
Item 24. FINANCIAL STATEMENTS AND EXHIBITS
(a) FINANCIAL STATEMENTS:
The Registrant's audited financial statements for the fiscal year
ended May 31, 1994 are incorporated by reference in the Registrant's
Statement of Additional Information from the Registrant's 1994
Annual Report to Shareholders, which is included as an exhibit to
this Registration Statement. The financial statements included are:
1. Statement of Net Assets as of May 31, 1994;
2. Statement of Operations for the fiscal year ended May 31,
1994;
3. Statement of Changes in Net Assets for the fiscal year ended
May 31, 1994;
4. Selected Per Share Data and Ratios for the fiscal year ended
May 31, 1994;
5. Notes to Financial Statements.
(b) EXHIBITS:
Except as noted, the following exhibits are being filed herewith:
1(a). Declaration of Trust of Registrant dated January 27, 1993 is
hereby incorporated by reference from the Registrant's
Registration Statement on Form N-1A (File No. 33-57740) as
filed with the Securities and Exchange Commission on
February 2, 1993.
1(b). Amendment No. 1 to Declaration of Trust dated April 10, 1993
is hereby incorporated by reference from Pre-Effective
Amendment No. 1 to the Registrant's Registration Statement
on Form N-1A (File No. 33-57740) as filed with the
Securities and Exchange Commission on April 26, 1993.
1(c). Acceptance of Trust dated May 19, 1993 of each of Susan
Smick and James R. Vertin is hereby incorporated by
reference from Pre-Effective Amendment No. 2 to the
Registrant's Registration Statement on Form N-1A
(File No. 33-57740) as filed with the Securities and
Exchange Commission on May 26, 1993.
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2. By-Laws of Registrant is hereby incorporated by reference
from Pre-Effective Amendment No. 1 to the Registrant's
Registration Statement on Form N-1A (File No. 33-57740) as
filed with the Securities and Exchange Commission on
April 26, 1993.
3. Not applicable.
4(a). Form of Specimen Share Certificate for Shares of the
PanAgora Asset Allocation Fund is hereby incorporated by
reference from Post-Effective Amendment No. 1 to the
Registrant's Registration Statement on Form N-1A
(File No. 33-57740) as filed with the Securities and
Exchange Commission on January 3, 1994.
4(b). Form of Specimen Share Certificate for Shares of the
PanAgora Global Fund is hereby incorporated by reference
from Post- Effective Amendment No. 1 to the Registrant's
Registration Statement on Form N-1A (File No. 33-57740) as
filed with the Securities and Exchange Commission on
January 3, 1994.
4(c). Form of Specimen Share Certificate for Shares of the
PanAgora International Equity Fund is hereby incorporated
by reference from Post-Effective Amendment No. 1 to the
Registrant's Registration Statement on Form N-1A
(File No. 33-57740) as filed with the Securities and
Exchange Commission on January 3, 1994.
5(a). Investment Advisory Agreement between PanAgora Asset
Management, Inc. and Registrant on behalf of PanAgora Asset
Allocation Fund is hereby incorporated by reference from
Post-Effective Amendment No. 1 to the Registrant's
Registration Statement on Form N-1A (File No. 33-57740) as
filed with the Securities and Exchange Commission on
January 3, 1994.
5(b). Investment Advisory Agreement between PanAgora Asset
Management, Inc. and Registrant on behalf of PanAgora Global
Fund is hereby incorporated by reference from Post-Effective
Amendment No. 1 to the Registrant's Registration Statement
on Form N-1A (File No. 33-57740) as filed with the
Securities and Exchange Commission on January 3, 1994.
5(c). Investment Advisory Agreement between PanAgora Asset
Management, Inc. and Registrant on behalf of PanAgora
International Equity Fund is hereby incorporated by
reference from Post-Effective Amendment No. 1 to the
Registrant's Registration Statement on Form N-1A
(File No. 33-57740) as filed with the Securities and
Exchange Commission on January 3, 1994.
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6. Distribution Agreement between Registrant, Funds
Distributor, Inc. and PanAgora Asset Management, Inc. is
hereby incorporated by reference from Post-Effective
Amendment No. 1 to the Registrant's Registration Statement
on Form N-1A (File No. 33-57740) as filed with the
Securities and Exchange Commission on January 3, 1994.
7. Not Applicable.
8. Custody Agreement between Registrant and Investors Bank &
Trust Company.
9(a). Administration Agreement between Registrant and Investors
Bank & Trust Company.
9(b). Transfer Agency and Service Agreement between Registrant and
Investors Bank & Trust Company.
10. Opinion and Consent of Counsel is hereby incorporated by
reference from Pre-Effective Amendment No. 2 to the
Registrant's Registration Statement on Form N-1A (File No.
33-57740) as filed with the Securities and Exchange
Commission on May 26, 1993.
11. Consent of Independent Public Accountants.
12. 1994 Annual Report to Shareholders.
13(a). Form of Stock Purchase Agreement between PanAgora Asset
Management, Inc. and Registrant on behalf of PanAgora Asset
Allocation Fund is hereby incorporated by reference from
Post-Effective Amendment No. 1 to the Registrant's
Registration Statement on Form N-1A (File No. 33-57740) as
filed with the Securities and Exchange Commission on January
3, 1994.
13(b). Form of Stock Purchase Agreement between PanAgora Asset
Management, Inc. and Registrant on behalf of PanAgora Global
Fund is hereby incorporated by reference from Post-Effective
Amendment No. 1 to the Registrant's Registration Statement
on Form N-1A (File No. 33-57740) as filed with the
Securities and Exchange Commission on January 3, 1994.
13(c). Form of Stock Purchase Agreement between PanAgora Asset
Management, Inc. and Registrant on behalf of PanAgora
International Equity Fund is hereby incorporated by
reference from Post-Effective Amendment No. 1 to the
Registrant's Registration Statement on Form N-1A (File No.
33-57740) as filed with the Securities and Exchange
Commission on January 3, 1994.
14. Not Applicable.
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15. Not Applicable.
16. Not Applicable.
Item 25. PERSONS CONTROLLED BY OR UNDER
COMMON CONTROL WITH REGISTRANT
The Registrant does not directly or indirectly control any person.
Shareholders who own more than 25% of a portfolio's shares as of August 2, 1994
are as follows:
PERCENTAGE OF
NAME OF FUND SHAREHOLDER SHARES OWNED
- ------------ ----------- -------------
Asset Allocation Fund IDS Trust f/b/o IDS 45.4%
Trust Retirement Service Plan
Information Alliance Pension 36.8%
Plan Trust
Global Fund Rush-Presbyterian-St. Luke's 56.5%
Medical Center Endowment Fund
Rush-Presbyterian-St. Luke's 41%
Medical Center Pension Fund
International Equity The Minneapolis Foundation 84.2%
Fund
PanAgora Asset Management, Inc., the Registrant's investment adviser (the
"Adviser") is a Delaware corporation. Fifty percent of the Adviser's outstanding
voting stock is owned by Nippon Life Insurance Company and fifty percent of such
stock is owned by Lehman Brothers, Inc.
Item 26. NUMBER OF HOLDERS OF SECURITIES
The following information is as of August 2, 1994:
FUND NUMBER OF RECORD HOLDERS
PanAgora Asset Allocation Fund 7
PanAgora Global Fund 14
PanAgora International Equity Fund 8
Item 27. INDEMNIFICATION
Section 4.3 of the Registrant's Declaration of Trust dated January 27,
1993, as amended, provides for indemnification of the Registrant's trustees and
officers under certain circumstances.
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Section 4.2 of the Distribution Agreement between the Registrant, Funds
Distributor, Inc. and the Adviser provides for indemnification of the
Registrant, the Registrant's trustees and officers and any person who controls
the Trust within the meaning of Section 15 of the Securities Act of 1933, as
amended (the "Act").
Insofar as indemnification for liability arising under the Act may be
permitted to directors, officers and controlling persons of the Registrant
pursuant to the foregoing provisions, or otherwise, the Registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a trustee, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
trustee, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
Item 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER
All of the information required by this item is set forth in the Form ADV,
as amended, of PanAgora Asset Management, Inc. (File No. 801-35497). The
following sections of such Form ADV are incorporated herein by reference:
(a) Items 1 and 2 of Part II
(b) Section 6, Business Background, of each Schedule D.
Item 29. PRINCIPAL UNDERWRITER
(a) Funds Distributor, Inc., the principal underwriter of the
Registrant, currently acts as a principal underwriter, depositor or
investment adviser for the following investment companies: The
Laurel Fund, The Laurel Tax-Free Municipal Funds, The Laurel
Investment Series, The FSB Funds, The Glenmede Fund, Inc., The
Glenmede Portfolios, The Ambassador Funds and HT Insight Funds, Inc.
(b) Directors and Officers of Funds Distributor, Inc. are as follows:
C-5
<PAGE>
Positions and Offices Positions and Offices
Name with Underwriter with Registrant
- ---- --------------------- ---------------------
William J. Nutt Director and Chief None
Executive Officer
Marie E. Connolly Director, President, Chief None
Operating Officer and
Compliance Officer
John M. Gomez Director None
John E. Pelletier Senior Vice President, None
General Counsel, Secretary
and Clerk
Richard W. Healey Senior Vice President None
Rui M. Moura Senior Vice President None
Donald R. Roberson Senior Vice President None
Joseph F. Tower, III Vice President, Treasurer None
and Chief Financial
Officer
Jean M. O'Leary Assistant Secretary and None
Assistant Clerk
Leslie M. Gaynor Assistant Treasurer None
Mary A. Nelson Assistant Treasurer None
Eric B. Fischman Vice President and None
Associate General Counsel
Mark B. Bentley Vice President None
Frederick C. Dey Vice President None
Margaret M. Hession Vice President None
Lynne H. Johnson Vice President None
Dale F. Lampe Vice President None
Thomas E. Myers Vice President None
Jerome M. Menifee Vice President None
Lynne H. Johnson Vice President None
Michael C. Roan Vice President None
Joseph A. Vignone Vice President None
Dennis J. Gallant Assistant Vice President None
Brian D. Gallary Assistant Vice President None
Cathryn A. Gibbs Assistant Vice President None
Nancy J. Morse Assistant Vice President None
Paul M. Prescott Assistant Vice President None
Linda C. Raftery Assistant Vice President None
Cynthia L. Sokel Assistant Vice President None
(c) Not Applicable.
Item 30. LOCATION OF ACCOUNTS AND RECORDS
The Declaration of Trust, By-Laws and minute books of the Registrant are
in the physical possession of PanAgora Asset Management, Inc., 260 Franklin
Street, Boston, Massachusetts 02110. All other books, records, accounts and
other documents required to be maintained under Section 31(a) of the Investment
Company Act of 1940 and the rules promulgated thereunder are in the physical
possession of Investors Bank & Trust Company, 89 South Street, Boston,
Massachusetts 02111.
C-6
<PAGE>
Item 31. MANAGEMENT SERVICES
Not Applicable.
Item 32. UNDERTAKINGS
The Registrant undertakes to comply in all respects with the
provisions of Section 16(c) of the Investment Company Act of 1940, as amended.
C-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant certifies that it meets all the
requirements for effectiveness of this Post-Effective Amendment No. 2 to its
Registration Statement pursuant to Rule 485(b) under the Securities Act of 1933
and has duly caused this Post-Effective Amendment No. 2 to such Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Boston and The Commonwealth of Massachusetts, on the
18th day of August, 1994.
THE PANAGORA FUNDS
By: /s/ Richard A. Crowell
--------------------------------------------
Pursuant to the requirements of the Securities Act of 1933, this Post-
Effective Amendment No. 2 to the Registrant's Registration Statement has been
signed below by the following person in the capacities and on the dates
indicated:
Signature Date
/s/ Richard A Crowell
- ----------------------------------- August 18, 1994
Richard A. Crowell
President and Chairman
of the Board of Trustees
(Principal Executive Officer)
/s/ Laura F. Dell
- ----------------------------------- August 18, 1994
Laura F. Dell
Assistant Treasurer
(Principal Accounting Officer)
Susan Smick*
- ----------------------------------- August 18, 1994
Susan Smick
Trustee
<PAGE>
James R. Vertin*
- ----------------------------------- August 18, 1994
James R. Vertin
Trustee
*BY: /s/ Joseph P. Barri
------------------------------
Joseph P. Barri
Attorney-in-Fact
<PAGE>
EXHIBIT INDEX
Sequential
Exhibit Page
Number Document Title Number
- ------- -------------- ----------
8. Custody Agreement between
Registrant and Investors Bank
& Trust Company
9(a). Administration Agreement between
Registrant and Investors Bank
& Trust Company
9(b). Transfer Agency and Service
Agreement between Registrant
and Investors Bank & Trust
Company
11. Consent of Independent Public
Accountants
12. 1994 Annual Report to Shareholders
17(a). Power of Attorney of Susan Smick
17(b). Power of Attorney of James R. Vertin
CUSTODIAN AGREEMENT
AGREEMENT made as of this 29th day of July, 1994, between THE PANAGORA
FUNDS, a Massachusetts business trust (the "Fund") and INVESTORS BANK &
TRUST
COMPANY (the "Bank").
The Fund, an open-end management investment company, desires to place
and
maintain all of its portfolio securities and cash in the custody of the
Bank.
The Bank has at least the minimum qualifications required by Section
17(f)(1) of
the Investment Company Act of 1940 (the "1940 Act") to act as custodian of
the
portfolio securities and cash of the Fund, and has indicated its
willingness to
so act, subject to the terms and conditions of this Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements contained herein, the parties hereto agree as follows:
1. BANK APPOINTED CUSTODIAN. The Fund hereby appoints the Bank as
custodian of its portfolio securities and cash delivered to the Bank as
hereinafter described and the Bank agrees to act as such upon the terms and
conditions hereinafter set forth.
2. DEFINITIONS. Whenever used herein, the terms listed below will
have the
following meaning:
2.1 AUTHORIZED PERSON. Authorized Person will mean any of the
persons
duly authorized to give Proper Instructions or otherwise act on behalf of
the
Fund by appropriate resolution of its Board of Trustees (the "Board"), and
set
forth in a certificate as required by Section 4 hereof.
2.2 SECURITY. The term security as used herein will have the same
meaning as when such term is used in the Securities Act of 1933, as
amended,
including, without limitation, any note, stock, treasury stock, bond,
debenture,
evidence of indebtedness, certificate of interest or participation in any
profit
sharing agreement, collateral-trust certificate, preorganization
certificate or
subscription, transferable share, investment contract, voting-trust
certificate,
certificate of deposit for a security, fractional undivided interest in
oil,
gas, or other mineral rights, any put, call, straddle, option, or privilege
on
any security, certificate of deposit, or group or index of securities
(including
any interest therein or based on the value thereof), or any put, call,
straddle,
option, or privilege entered into on a national securities exchange
relating to
a foreign currency, or, in general, any interest or instrument commonly
known as
a "security", or any certificate of interest or participation in, temporary
or
interim certificate for, receipt for, guarantee of, or warrant or right to
subscribe to, or option contract to purchase or sell any of the foregoing,
and
futures, forward contracts and options thereon.
2.3 PORTFOLIO SECURITY. Portfolio Security will mean any security
owned
by the Fund.
<PAGE>
2
2.4 OFFICERS' CERTIFICATE. Officers' Certificate will mean, unless
otherwise indicated, any request, direction, instruction, or certification
in
writing signed by any two Authorized Persons of the Fund.
2.5 BOOK-ENTRY SYSTEM. Book-Entry System shall mean the Federal
Reserve-Treasury Department Book Entry System for United States government,
instrumentality and agency securities operated by the Federal Reserve Bank,
its
successor or successors and its nominee or nominees.
2.6 DEPOSITORY. Depository shall mean The Depository Trust Company
("DTC"), a clearing agency registered with the Securities and Exchange
Commission under Section 17A of the Securities Exchange Act of 1934
("Exchange
Act"), its successor or successors and its nominee or nominees. The term
"Depository" shall further mean and include any other person authorized to
act
as a depository under the 1940 Act, its successor or successors and its
nominee
or nominees, specifically identified in a certified copy of a resolution of
the
Board.
2.7 PROPER INSTRUCTIONS. Proper Instructions shall mean (i)
instructions regarding the purchase or sale of Portfolio Securities, and
payments and deliveries in connection therewith, given by an Authorized
Person
as shall have been designated in an Officers' Certificate, such
instructions to
be given in such form and manner as the Bank and the Fund shall agree upon
from
time to time, and (ii) instructions (which may be continuing instructions)
regarding other matters signed or initialed by one or more such persons
from
time to time designated in an Officers' Certificate as having been
authorized by
the Board. Oral instructions will be considered Proper Instructions if the
Bank
reasonably believes them to have been given by a person authorized to give
such
instructions with respect to the transaction involved. The Fund shall cause
all
oral instructions to be promptly confirmed in writing. The Bank shall act
upon
and comply with any subsequent Proper Instruction which modifies a prior
instruction and the sole obligation of the Bank with respect to any follow-
up or
confirmatory instruction shall be to make reasonable efforts to detect any
discrepancy between the original instruction and such confirmation and to
report
such discrepancy to the Fund. The Fund shall be responsible, at the Fund's
expense, for taking any action, including any reprocessing, necessary to
correct
any such discrepancy or error, and to the extent such action requires the
Bank
to act the Fund shall give the Bank specific Proper Instructions as to the
action required. Upon receipt of an Officers' Certificate as to the
authorization by the Board accompanied by a detailed description of
procedures
approved by the Fund, Proper Instructions may include communication
effected
directly between electro-mechanical or electronic devices provided that the
Board and the Bank are satisfied that such procedures afford adequate
safeguards
for the Fund's assets.
3. SEPARATE ACCOUNTS. If the Fund has more than one series or
portfolio,
the Bank will segregate the assets of each series or portfolio to which
this
Agreement relates into a separate account for each such series or portfolio
containing the assets of such series or portfolio (and all investment
earnings
thereon) and, where appropriate, references herein to the "Fund" will be
deemed
to refer to each such series or portfolio separately.
<PAGE>
3
4. CERTIFICATION AS TO AUTHORIZED PERSONS. The Secretary or
Assistant
Secretary of the Fund will at all times maintain on file with the Bank his
or
her certification to the Bank, in such form as may be acceptable to the
Bank, of
(i) the names and signatures of the Authorized Persons and (ii) the names
of the
Board Members, it being understood that upon the occurrence of any change
in the
information set forth in the most recent certification on file (including
without limitation any person named in the most recent certification who is
no
longer an Authorized Person as designated therein), the Secretary or
Assistant
Secretary of the Fund, will sign a new or amended certification setting
forth
the change and the new, additional or omitted names or signatures. The Bank
will
be entitled to rely and act upon any Officers' Certificate given to it by
the
Fund which has been signed by Authorized Persons named in the most recent
certification.
5. CUSTODY OF CASH. As custodian for the Fund, the Bank will open and
maintain a separate account or accounts in the name of the Fund or in the
name
of the Bank, as Custodian of the Fund, and will deposit to the account of
the
Fund all of the cash of the Fund, except for cash held by a subcustodian
appointed pursuant to Section 13.2 hereof, including borrowed funds,
delivered
to the Bank, subject only to draft or order by the Bank acting pursuant to
the
terms of this Agreement. Upon receipt by the Bank of Proper Instructions
(which
may be continuing instructions) or in the case of payments for redemptions
and
repurchases of outstanding shares of beneficial interest of the Fund,
notification from the Fund's transfer agent as provided in Section 7,
requesting
such payment, designating the payee or the account or accounts to which the
Bank
will release funds for deposit, and stating that it is for a purpose
permitted
under the terms of this Section 5, specifying the applicable subsection,
the
Bank will make, or cause a subcustodian appointed pursuant to Section 13.2
hereof to make, payments of cash held for the accounts of the Fund, insofar
as
funds are available for that purpose, only as permitted in subsections 5.1-
5.9
below.
5.1 PURCHASE OF SECURITIES. Upon the purchase of securities for
the
Fund, against contemporaneous receipt of such securities by the Bank or,
against delivery of such securities to the Bank in accordance with
generally
accepted settlement practices and customs in the jurisdiction or market in
which
the transaction occurs, registered in the name of the Fund or in the name
of, or
properly endorsed and in form for transfer to, the Bank, or a nominee of
the
Bank, or receipt for the account of the Bank pursuant to the provisions of
Section 6 below, each such payment to be made at the purchase price shown
on a
broker's confirmation (or transaction report in the case of Book Entry
Paper) of
purchase of the securities received by the Bank before such payment is
made, as
confirmed in the Proper Instructions received by the Bank before such
payment is
made.
5.2 REDEMPTIONS. In such amount as may be necessary for the
repurchase
or redemption of shares of beneficial interest of the Fund offered for
repurchase or redemption in accordance with Section 7 of this Agreement.
5.3 DISTRIBUTIONS AND EXPENSES OF FUND. For the payment on the
account
of the Fund of dividends or other distributions to shareholders as may from
time
to time be declared by the Board, interest, taxes, management or
supervisory
fees, distribution fees, fees of the Bank for its services hereunder and
reimbursement of the expenses and
<PAGE>
4
liabilities of the Bank as provided hereunder, fees of any transfer agent,
fees
for legal, accounting, and auditing services, or other operating expenses
of the
Fund.
5.4 PAYMENT IN RESPECT OF SECURITIES. For payments in connection
with
the conversion, exchange or surrender of Portfolio Securities or securities
subscribed to by the Fund held by or to be delivered to the Bank.
5.5 REPAYMENT OF LOANS. To repay loans of money made to the Fund,
but,
in the case of final payment, only upon redelivery to the Bank of any
Portfolio
Securities pledged or hypothecated therefor and upon surrender of documents
evidencing the loan;
5.6 REPAYMENT OF CASH. To repay the cash delivered to the Fund for
the
purpose of collateralizing the obligation to return to the Fund
certificates
borrowed from the Fund representing Portfolio Securities, but only upon
redelivery to the Bank of such borrowed certificates.
5.7 FOREIGN EXCHANGE TRANSACTIONS. For payments in connection
with
foreign exchange contracts or options to purchase and sell foreign
currencies
for spot and future delivery which may be entered into by the Bank on
behalf of
the Fund upon the receipt of Proper Instructions, such Proper Instructions
to
specify the currency broker or banking institution (which may be the Bank,
or
any other subcustodian or agent hereunder, acting as principal) with which
the
contract or option is made, and the Bank shall have no duty with respect to
the
selection of such currency brokers or banking institutions with which the
Fund
deals or for their failure to comply with the terms of any contract or
option.
5.8 OTHER AUTHORIZED PAYMENTS. For other authorized transactions
of the
Fund, or other obligations of the Fund incurred for proper Fund purposes;
provided that before making any such payment the Bank will also receive a
certified copy of a resolution of the Board signed by an Authorized Person
(other than the Person certifying such resolution) and certified by its
Secretary or Assistant Secretary, naming the person or persons to whom such
payment is to be made, and either describing the transaction for which
payment
is to be made and declaring it to be an authorized transaction of the Fund,
or
specifying the amount of the obligation for which payment is to be made,
setting
forth the purpose for which such obligation was incurred and declaring such
purpose to be a proper purpose.
5.9 TERMINATION: Upon the termination of this Agreement as
hereinafter
set forth pursuant to Section 8 and Section 14 of this Agreement.
6. SECURITIES.
6.1 SEGREGATION AND REGISTRATION. Except as otherwise provided
herein,
and except for securities to be delivered to any subcustodian appointed
pursuant
to Section 13.2 hereof, the Bank as custodian, will receive and hold
pursuant
to the provisions hereof, in a separate account or accounts and physically
segregated at all times from those of other persons, any and all Portfolio
Securities which may now or hereafter be delivered to it by or for the
account
of the Fund. All such Portfolio Securities will be held or disposed of by
the
Bank for, and subject at all times to, the instructions of the Fund
pursuant to
the terms
<PAGE>
5
of this Agreement. Subject to the specific provisions herein relating to
Portfolio Securities that are not physically held by the Bank, the Bank
will
register all Portfolio Securities (unless otherwise directed by Proper
Instructions or an Officers' Certificate), in the name of a registered
nominee
of the Bank as defined in the Internal Revenue Code and any Regulations of
the
Treasury Department issued thereunder, and will execute and deliver all
such
certificates in connection therewith as may be required by such laws or
regulations or under the laws of any state. The Bank will use its best
efforts
to the end that the specific Portfolio Securities held by it hereunder will
be
at all times identifiable.
The Fund will from time to time furnish to the Bank appropriate
instruments
to enable it to hold or deliver in proper form for transfer, or to register
in
the name of its registered nominee, any Portfolio Securities which may from
time
to time be registered in the name of the Fund.
6.2 VOTING AND PROXIES. Neither the Bank nor any nominee of the Bank
will
vote any of the Portfolio Securities held hereunder, except in accordance
with
Proper Instructions or an Officers' Certificate. The Bank will execute and
deliver, or cause to be executed and delivered, to the Fund all notices,
proxies
and proxy soliciting materials with respect to such Securities, such
proxies to
be executed by the registered holder of such Securities (if registered
otherwise
than in the name of the Fund), but without indicating the manner in which
such
proxies are to be voted.
6.3 BOOK-ENTRY SYSTEM. Provided (i) the Bank has received a certified
copy
of a resolution of the Board specifically approving deposits of Fund assets
in
the Book-Entry System, and (ii) for any subsequent changes to such
arrangements
following such approval, the Board has reviewed and approved the
arrangement and
has not delivered an Officer's Certificate to the Bank indicating that the
Board
has withdrawn its approval:
(a) The Bank may keep Portfolio Securities in the Book-Entry System
provided that such Portfolio Securities are represented in an account
("Account") of the Bank (or its agent) in such System which shall not
include
any assets of the Bank (or such agent) other than assets held as a
fiduciary,
custodian, or otherwise for customers;
(b) The records of the Bank (and any such agent) with respect to
the
Fund's participation in the Book-Entry System through the Bank (or any such
agent) will identify by book entry Portfolio Securities which are included
with
other securities deposited in the Account and shall at all times during the
regular business hours of the Bank (or such agent) be open for inspection
by
duly authorized officers, employees or agents of the Fund. Where securities
are
transferred to the Fund's account, the Bank shall also, by book entry or
otherwise, identify as belonging to the Fund a quantity of securities in
fungible bulk of securities (i) registered in the name of the Bank or its
nominee, or (ii) shown on the Bank's account on the books of the Federal
Reserve
Bank;
(c) The Bank (or its agent) shall pay for securities purchased for
the
account of the Fund or shall pay cash collateral against the return of
Portfolio
Securities loaned by the Fund upon (i) receipt of advice from the Book-
Entry
System that such Securities have been transferred to the Account, and (ii)
the
making of an entry on the records of the Bank
<PAGE>
6
(or its agent) to reflect such payment and transfer for the account of the
Fund. The Bank (or its agent) shall transfer securities sold or loaned for
the
account of the Fund upon
(i) receipt of advice from the Book-Entry System that payment for
securities sold or payment of the initial cash collateral against the
delivery
of securities loaned by the Fund has been transferred to the Account; and
(ii) the making of an entry on the records of the Bank (or its
agent)
to reflect such transfer and payment for the account of the Fund. Copies of
all
advices from the Book-Entry System of transfers of securities for the
account of
the Fund shall identify the Fund, be maintained for the Fund by the Bank
and
shall be provided to the Fund at its request. The Bank shall send the Fund
a
confirmation, as defined by Rule 17f-4 of the 1940 Act, of any transfers to
or
from the account of the Fund;
(d) The Bank will promptly provide the Fund with any report
obtained by
the Bank or its agent on the Book-Entry System's accounting system,
internal
accounting control and procedures for safeguarding securities deposited in
the
Book-Entry System;
(e) The Bank shall be liable to the Fund for any loss or damage to
the
Fund resulting from use of the Book-Entry System by reason of any
negligence,
willful misfeasance or bad faith of the Bank or any of its agents (provided
that
the Book-Entry system will not be deemed an agent of the Bank for purposes
hereof) or of any of its or their employees or from any reckless disregard
by
the Bank or any such agent of its duty to use its best efforts to enforce
such
rights as it may have against the Book-Entry System; at the election of the
Fund, it shall be entitled to be subrogated for the Bank in any claim
against
the Book-Entry System or any other person which the Bank or its agent may
have
as a consequence of any such loss or damage if and to the extent that the
Fund
has not been made whole for any loss or damage;
6.4 USE OF A DEPOSITORY. Provided (i) the Bank has received a
certified
copy of a resolution of the Board specifically approving deposits in DTC or
other such Depository and (ii) for any subsequent changes to such
arrangements
following such approval, the Board has reviewed and approved the
arrangement and
has not delivered an Officer's Certificate to the Bank indicating that the
Board
has withdrawn its approval:
(a) The Bank may use a Depository to hold, receive, exchange,
release,
lend, deliver and otherwise deal with Portfolio Securities including stock
dividends, rights and other items of like nature, and to receive and remit
to
the Bank on behalf of the Fund all income and other payments thereon and to
take
all steps necessary and proper in connection with the collection thereof;
(b) Registration of Portfolio Securities may be made in the name of
any
nominee or nominees used by such Depository;
(c) Payment for securities purchased and sold may be made through
the
clearing medium employed by such Depository for transactions of
participants
acting through it. Upon any purchase of Portfolio Securities, payment will
be
made only upon delivery of the securities to or for the account of the Fund
and
the Fund shall pay cash
<PAGE>
7
collateral against the return of Portfolio Securities loaned by the Fund
only
upon delivery of the Securities to or for the account of the Fund; and upon
any
sale of Portfolio Securities, delivery of the Securities will be made only
against payment thereof or, in the event Portfolio Securities are loaned,
delivery of Securities will be made only against receipt of the initial
cash
collateral to or for the account of the Fund; and
(d) The Bank shall be liable to the Fund for any loss or damage to
the
Fund resulting from use of a Depository by reason of any negligence,
willful
misfeasance or bad faith of the Bank or any of its agents (provided that
the
Depository will not be deemed an agent of the Bank for purposes hereof) or
any
of its or their employees or from any reckless disregard by the Bank or any
such
agent of its duty to use its best efforts to enforce such rights as it may
have
against a Depository. In this connection, the Bank shall use its best
efforts to
ensure that:
(i) The Depository obtains replacement of any certificated
Portfolio
Security deposited with it in the event such Security is lost, destroyed,
wrongfully taken or otherwise not available to be returned to the Bank upon
its
request;
(ii) Any proxy materials received by a Depository with respect to
Portfolio Securities deposited with such Depository are forwarded
immediately to
the Bank for prompt transmittal to the Fund;
(iii) Such Depository immediately forwards to the Bank
confirmation of
any purchase or sale of Portfolio Securities and of the appropriate book
entry
made by such Depository to the Fund's account;
(iv) Such Depository prepares and delivers to the Bank such
records
with respect to the performance of the Bank's obligations and duties
hereunder
as may be necessary for the Fund to comply with the recordkeeping
requirements
of Section 31(a) of the 1940 Act and the rules thereunder; and
(v) Such Depository delivers to the Bank and the Fund all
internal
accounting control reports, whether or not audited by an independent public
accountant, as well as such other reports as the Fund may reasonably
request in
order to verify the Portfolio Securities held by such Depository.
6.5 USE OF BOOK-ENTRY SYSTEM FOR COMMERCIAL PAPER. Provided (i) the
Bank
has received a certified copy of a resolution of the Board specifically
approving participation in a system maintained by the Bank for the holding
of
commercial paper in book-entry form ("Book-Entry Paper") and (ii) for each
year
following such approval the Board has received and approved the
arrangements,
upon receipt of Proper Instructions and upon receipt of confirmation from
an
Issuer (as defined below) that the Fund has purchased such Issuer's Book-
entry
Paper, the Bank shall issue and hold in book-entry form, on behalf of the
Fund,
commercial paper issued by issuers with whom the Bank has entered into a
book-entry agreement (the "Issuers"). In maintaining its Book-entry Paper
System, the Bank agrees that:
<PAGE>
8
(a) the Bank will maintain all Book-Entry Paper held for the Fund
in an
account of the Bank that includes only assets held by it for customers;
(b) the records of the Bank with respect to the Fund's purchase of
Book-Entry Paper through the Bank will identify, by book-entry, Commercial
Paper
belonging to the Fund which is included in the Book-Entry Paper System and
shall
at all times during the regular business hours of the Bank be open for
inspection by duly authorized officers, employees or agents of the Fund;
(c) Subject to Section 5.1 hereof, the Bank shall pay for Book-
Entry
Paper purchased for the account of the Fund upon contemporaneous (i)
receipt of
advice from the Issuer that such sale of Book-Entry Paper has been
effected, and
(ii) the making of an entry on the records of the Bank to reflect such
payment
and transfer for the account of the Fund;
(d) The Bank shall cancel such Book-Entry Paper obligation upon the
maturity thereof upon contemporaneous (i) receipt of advice that payment
for
such Book-Entry Paper has been transferred to the Fund, and (ii) the making
of
an entry on the records of the Bank to reflect such payment for the account
of
the Fund;
(e) the Bank shall transmit to the Fund a transaction journal
confirming
each transaction in Book-Entry Paper for the account of the Fund on the
next
business day following the transaction; and
(f) the Bank will send to the Fund such reports on its system of
internal accounting control with respect to the Book-Entry Paper System as
the
Fund may reasonably request from time to time.
6.6 USE OF IMMOBILIZATION PROGRAMS. Provided (i) the Bank has
received a
certified copy of a resolution of the Board specifically approving the
maintenance of Portfolio Securities in an immobilization program operated
by a
bank which meets the requirements of Section 26(a)(1) of the 1940 Act, and
(ii)
for each year following such approval the Board has reviewed and approved
the
arrangement and has not delivered an Officer's Certificate to the Bank
indicating that the Board has withdrawn its approval, the Bank shall enter
into
such immobilization program with such bank acting as a subcustodian
hereunder.
6.7 EURODOLLAR CDS. Any Portfolio Securities which are Eurodollar
CDs may
be physically held by the European branch of the U.S. banking institution
that
is the issuer of such Eurodollar CD (a "European Branch"), provided that
such
Securities are identified on the books of the Bank as belonging to the Fund
and
that the books of the Bank identify the European Branch holding such
Securities.
Notwithstanding any other provision of this Agreement to the contrary,
except as
stated in the first sentence of this subsection 6.7 and except that the
Bank
shall take the value of Eurodollar CDs into account in determining the net
asset
value of a Fund in accordance with Section 12 hereof, the Bank shall be
under no
other duty with respect to such Eurodollar CDs belonging to the Fund, and
shall
have no liability to the Fund or its shareholders with respect to the
actions,
inactions, whether negligent or otherwise, of such European Branch in
connection
with such
<PAGE>
9
Eurodollar CDs, except for any loss or damage to the Fund resulting from
the
Bank's own negligence, willful misfeasance or bad faith in the performance
of
its duties hereunder with respect to Eurodollar CDs.
6.8 OPTIONS AND FUTURES TRANSACTIONS.
(a) Puts and Calls Traded on Securities Exchanges, NASDAQ or
Over-the-Counter.
1. Upon receipt of Proper Instructions the Bank shall take action
as
to put options ("puts") and call options ("calls") purchased or sold
(written)
by the Fund regarding escrow or other arrangements in accordance with the
provisions of any agreement entered into between the Bank, any broker-
dealer
registered under the Exchange Act and a member of the National Association
of
Securities Dealers, Inc. (the "NASD"), and, if necessary, the Fund relating
to
the compliance with the rules of the Options Clearing Corporation and of
any
registered national securities exchange, or of any similar organization or
organizations.
2. Unless another agreement requires it to do so, the Bank shall
be
under no duty or obligation to see that the Fund has deposited or is
maintaining
adequate margin, if required, with any broker in connection with any
option, nor
shall the Bank be under duty or obligation to present such option to the
broker
for exercise unless it receives Proper Instructions from the Fund. The Bank
shall have no responsibility for the legality of any put or call purchased
or
sold on behalf of the Fund, the propriety of any such purchase or sale, or
the
adequacy of any collateral delivered to a broker in connection with an
option or
deposited to or withdrawn from a Segregated Account (as defined in
subsection
6.9 below). The Bank specifically, but not by way of limitation, shall not
be
under any duty or obligation to: (i) periodically check or notify the Fund
that
the amount of such collateral held by a broker or held in a Segregated
Account
is sufficient to protect such broker of the Fund against any loss; (ii)
effect
the return of any collateral delivered to a broker; or (iii) advise the
Fund
that any option it holds, has or is about to expire. Such duties or
obligations
shall be the sole responsibility of the Fund.
(b) Puts, Calls and Futures Traded on Commodities Exchanges
1. The Bank shall take action as to puts, calls and futures
contracts
("Futures") purchased or sold by the Fund in accordance with the provisions
of
any agreement among the Fund, the Bank and a Futures Commission Merchant
registered under the Commodity Exchange Act, relating to compliance with
the
rules of the Commodity Futures Trading Commission and/or any Contract
Market, or
any similar organization or organizations, regarding account deposits in
connection with transactions by the Fund.
2. The responsibilities and liabilities of the Bank as to
futures,
puts and calls traded on commodities exchanges, any Futures Commission
Merchant
account and the Segregated Account shall be limited as set forth in
subparagraph
(a)(2) of this Section
<PAGE>
10
6.8 as if such subparagraph referred to Futures Commission Merchants rather
than
brokers, and Futures and puts and calls thereon instead of options.
6.9 SEGREGATED ACCOUNT. The Bank shall upon receipt of Proper
Instructions
establish and maintain a Segregated Account or Accounts for and on behalf
of the
Fund, into which Account or Accounts may be transferred upon receipt of
Proper
Instructions cash and/or Portfolio Securities:
(a) in accordance with the provisions of any agreement among the
Fund,
the Bank and a broker-dealer registered under the Exchange Act and a member
of
the NASD or any Futures Commission Merchant registered under the Commodity
Exchange Act, relating to compliance with the rules of the Options Clearing
Corporation and of any registered national securities exchange or the
Commodity
Futures Trading Commission or any registered Contract Market, or of any
similar
organizations regarding escrow or other arrangements in connection with
transactions by the Fund;
(b) for the purpose of segregating cash or securities in connection
with
options purchased or written by the Fund or commodity futures purchased or
written by the Fund;
(c) for the deposit of liquid assets, such as cash, U.S. Government
securities or other high grade debt obligations, having a market value
(marked
to market on a daily basis) at all times equal to not less than the
aggregate
purchase price due on the settlement dates of all the Fund's then
outstanding
forward commitment or "when-issued" agreements relating to the purchase of
Portfolio Securities and all the Fund's then outstanding commitments under
reverse repurchase agreements entered into with broker-dealer firms;
(d) for the deposit of any Portfolio Securities which the Fund has
agreed to sell on a forward commitment basis, all in accordance with
Investment
Company Act Release No. 10666;
(e) for the purposes of compliance by the Fund with the procedures
required by Investment Company Act Release No. 10666, or any subsequent
release
or releases of the Securities and Exchange Commission relating to the
maintenance of Segregated Accounts by registered investment companies;
(f) for other proper purposes, BUT ONLY, in the case of this clause
(f),
upon receipt of, in addition to Proper Instructions, a certified copy of a
resolution of the Board, or of the Executive Committee signed by an officer
of
the Fund and certified by the Secretary or an Assistant Secretary, setting
forth
the purpose or purposes of such Segregated Account and declaring such
purposes
to be proper purposes.
(g) Assets may be withdrawn from the Segregated Account pursuant to
Proper Instructions only
(i) in accordance with the provisions of any agreements
referenced in
(a) or (b) above;
<PAGE>
11
(ii) for sale or delivery to meet the Fund's obligations under
outstanding firm commitment or when-issued agreements for the purchase
of
Portfolio Securities and under reverse repurchase agreements;
(iii) for exchange for other liquid assets of equal or greater
value
deposited in the Segregated Account;
(iv) to the extent that the Fund's outstanding forward commitment
or
when-issued agreements for the purchase of portfolio securities or
reverse
repurchase agreements are sold to other parties or the Fund's
obligations
thereunder are met from assets of the Fund other than those in the
Segregated Account; or
(v) for delivery upon settlement of a forward commitment
agreement for
the sale of Portfolio Securities.
6.10 INTEREST BEARING CALL OR TIME DEPOSITS. The Bank shall, upon
receipt
of Proper Instructions relating to the purchase by the Fund of interest-
bearing
fixed-term and call deposits, transfer cash, by wire or otherwise, in such
amounts and to such bank or banks as shall be indicated in such Proper
Instructions. The Bank shall include in its records with respect to the
assets
of the Fund appropriate notation as to the amount of each such deposit, the
banking institution with which such deposit is made (the "Deposit Bank"),
and
shall retain such forms of advice or receipt evidencing the deposit, if
any, as
may be forwarded to the Bank by the Deposit Bank. Such deposits shall be
deemed
Portfolio Securities of the Fund and the responsibility of the Bank
therefor
shall be the same as and no greater than the Bank's responsibility in
respect of
other Portfolio Securities of the Fund.
6.11 TRANSFER OF SECURITIES. The Bank will transfer, exchange, deliver
or
release Portfolio Securities held by it hereunder, insofar as such
Securities
are available for such purpose, provided that before making any transfer,
exchange, delivery or release under this Section the Bank will receive
Proper
Instructions requesting such transfer, exchange or delivery stating that it
is
for a purpose permitted under the terms of this Section 6.11, specifying
the
applicable subsection, or describing the purpose of the transaction with
sufficient particularity to permit the Bank to ascertain the applicable
subsection, only
(a) upon sales of Portfolio Securities for the account of the
Fund,
against contemporaneous receipt by the Bank of payment therefor in full,
or,
against payment to the Bank in accordance with generally accepted
settlement
practices and customs in the jurisdiction or market in which the
transaction
occurs, each such payment to be in the amount of the sale price shown in a
broker's confirmation of sale of the Portfolio Securities received by the
Bank
before such payment is made, as confirmed in the Proper Instructions
received by
the Bank before such payment is made;
(b) in exchange for or upon conversion into other securities
alone or
other securities and cash pursuant to any plan of merger, consolidation,
reorganization, share split-up, change in par value, recapitalization or
readjustment or otherwise, upon exercise of subscription, purchase or sale
or
other similar rights represented by such Portfolio
<PAGE>
12
Securities, or for the purpose of tendering shares in the event of a tender
offer therefor, provided however that in the event of an offer of exchange,
tender offer, or other exercise of rights requiring the physical tender or
delivery of Portfolio Securities, the Bank shall have no liability for
failure
to so tender in a timely manner unless such Proper Instructions are
received by
the Bank at least two business days prior to the date required for tender,
and
unless the Bank (or its agent or subcustodian hereunder) has actual
possession
of such Security at least two business days prior to the date of tender;
(c) upon conversion of Portfolio Securities pursuant to their
terms
into other securities;
(d) for the purpose of redeeming in kind shares of the Fund upon
authorization from the Fund;
(e) in the case of option contracts owned by the Fund, for
presentation to the endorsing broker;
(f) when such Portfolio Securities are called, redeemed or
retired or
otherwise become payable;
(g) for the purpose of effectuating the pledge of Portfolio
Securities
held by the Bank in order to collateralize loans made to the Fund by any
bank,
including the Bank; provided, however, that such Portfolio Securities will
be
released only upon payment to the Bank for the account of the Fund of the
moneys
borrowed, except that in cases where additional collateral is required to
secure
a borrowing already made, and such fact is made to appear in the Proper
Instructions, further Portfolio Securities may be released for that purpose
without any such payment. In the event that any such pledged Portfolio
Securities are held by the Bank, they will be so held for the account of
the
lender, and after notice to the Fund from the lender in accordance with the
normal procedures of the lender, that an event of deficiency or default on
the
loan has occurred, the Bank may deliver such pledged Portfolio Securities
to or
for the account of the lender, subject to compliance with the terms of any
other
applicable agreement;
(h) for the purpose of releasing certificates representing
Portfolio
Securities, against contemporaneous receipt by the Bank of the fair market
value
of such security, as set forth in the Proper Instructions received by the
Bank
before such payment is made;
(i) for the purpose of delivering securities lent by the Fund to
a
bank or broker dealer, but only against receipt in accordance with street
delivery custom except as otherwise provided herein, of adequate collateral
as
agreed upon from time to time by the Fund and the Bank, and upon receipt of
payment in connection with any repurchase agreement relating to such
securities
entered into by the Fund;
(j) for other authorized transactions of the Fund or for other
proper
purposes; provided that before making such transfer, the Bank will also
receive
a certified copy of resolutions of the Board, signed by an authorized
officer of
the Fund (other than the officer certifying such resolution) and certified
by
its Secretary or Assistant Secretary, specifying the Portfolio Securities
to be
delivered, setting forth the transaction in or
<PAGE>
13
purpose for which such delivery is to be made, declaring such transaction
to be
an authorized transaction of the Fund or such purpose to be a proper
purpose,
and naming the person or persons to whom delivery of such securities shall
be
made; and
(k) upon termination of this Agreement as hereinafter set forth
pursuant to Section 8 and Section 14 of this Agreement.
As to any deliveries made by the Bank pursuant to subsections (a),
(b),
(c), (e), (f), (g), (h) and (i) securities or cash receivable in exchange
therefor shall be delivered to the Bank.
7. REDEMPTIONS. In the case of payment of assets of the Fund held by
the
Bank in connection with redemptions and repurchases by the Fund of its
outstanding shares of beneficial interest, the Bank will rely on
notification by
the Fund's transfer agent of receipt of a request for redemption and
certificates, if issued, in proper form for redemption before such payment
is
made. Payment shall be made in accordance with the Declaration of Trust of
the
Fund dated January 27, 1993, as amended (the "Declaration") and By-laws of
the
Fund, from assets available for said purpose.
8. MERGER, DISSOLUTION, ETC. OF FUND. In the case of the following
transactions, not in the ordinary course of business, namely, the merger of
the
Fund into or the consolidation of the Fund with another investment company,
the
sale by the Fund of all, or substantially all, of its assets to another
investment company, or the liquidation or dissolution of the Fund and
distribution of its assets, the Bank will deliver the Portfolio Securities
held
by it under this Agreement and disburse cash only upon the order of the
Fund set
forth in an Officers' Certificate, accompanied by a certified copy of a
resolution of the Board authorizing any of the foregoing transactions. Upon
completion of such delivery and disbursement and the payment of the fees,
disbursements and expenses of the Bank, this Agreement will terminate.
9. ACTIONS OF BANK WITHOUT PRIOR AUTHORIZATION. Notwithstanding
anything
herein to the contrary, unless and until the Bank receives an Officers'
Certificate to the contrary, it will without prior authorization or
instruction
of the Fund or the Fund's transfer agent:
9.1 Endorse for collection and collect on behalf of and in the name
of
the Fund all checks, drafts, or other negotiable or transferable
instruments or
other orders for the payment of money received by it for the account of the
Fund
and hold for the account of the Fund all income, dividends, interest and
other
payments or distribution of cash with respect to the Portfolio Securities
held
thereunder;
9.2 Present for payment all coupons and other income items held by
it
for the account of the Fund which call for payment upon presentation and
hold
the cash received by it upon such payment for the account of the Fund;
9.3 Receive and hold for the account of the Fund all securities
received
as a distribution on Portfolio Securities as a result of a stock dividend,
share
split-up,
<PAGE>
14
reorganization, recapitalization, merger, consolidation, readjustment,
distribution of rights and similar securities issued with respect to any
Portfolio Securities held by it hereunder.
9.4 Execute as agent on behalf of the Fund all necessary ownership
and
other certificates and affidavits required by the Internal Revenue Code or
the
regulations of the Treasury Department issued thereunder, or by the laws of
any
state, now or hereafter in effect, inserting the Fund's name on such
certificates as the owner of the securities covered thereby, to the extent
it
may lawfully do so and as may be required to obtain payment in respect
thereof.
The Bank will execute and deliver such certificates in connection with
Portfolio
Securities delivered to it or by it under this Agreement as may be required
under the provisions of the Internal Revenue Code and any Regulations of
the
Treasury Department issued thereunder, or under the laws of any State;
9.5 Present for payment all Portfolio Securities which are called,
redeemed, retired or otherwise become payable, and hold cash received by it
upon
payment for the account of the Fund; and
9.6 Exchange interim receipts or temporary securities for
definitive
securities.
10. COLLECTIONS AND DEFAULTS. The Bank will use all reasonable efforts
to
collect any funds which may to its knowledge become collectible arising
from
Portfolio Securities, including dividends, interest and other income, and
to
transmit to the Fund notice actually received by it of any call for
redemption,
offer of exchange, right of subscription, reorganization or other
proceedings
affecting such Securities. If Portfolio Securities upon which such income
is
payable are in default or payment is refused after due demand or
presentation,
the Bank will notify the Fund in writing of any default or refusal to pay
within
two business days from the day on which it receives knowledge of such
default or
refusal. In addition, the Bank will send the Fund a written report once
each
month showing any income on any Portfolio Security held by it which is more
than
ten days overdue on the date of such report and which has not previously
been
reported.
11. MAINTENANCE OF RECORDS AND ACCOUNTING SERVICES. The Bank will
maintain records with respect to transactions for which the Bank is
responsible
pursuant to the terms and conditions of this Agreement, and in compliance
with
the applicable rules and regulations of the 1940 Act and, promptly after
the
close of business on each business day, will furnish the Fund daily with
(1) a
statement of condition of the Fund which will include a description of the
day's
activity (including the change in net asset value and all subscriptions,
redemptions, fees, trades, margin, etc.), (2) a daily cash sheet showing
U.S.
dollar activity and both the beginning and ending cash balance for the day,
and
(3) reports on currency valuation and availability of portfolio securities.
The
Bank will furnish to the Fund at the end of every month, and at the close
of
each quarter of the Fund's fiscal year, a list of the Portfolio Securities
and
the aggregate amount of cash held by it for the Fund. The books and records
of
the Bank pertaining to its actions under this Agreement and reports by the
Bank
or its independent accountants concerning its accounting system, procedures
for
safeguarding securities and internal accounting controls will be open to
inspection and audit at reasonable times by officers of or auditors
employed by
the Fund and will be preserved by the Bank in the manner and in accordance
with
the applicable rules and regulations under the 1940 Act.
<PAGE>
15
The Bank shall keep the books of account and render statements or
copies
from time to time as reasonably requested by the Treasurer or any executive
officer of the Fund.
The Bank shall assist generally in the preparation of reports to
shareholders and others, audits of accounts, and other ministerial matters
of
like nature.
12. FUND VALUATION.
12.1 The Bank shall compute and, unless otherwise directed by the
Board, determine as of the close of business on the New York Stock Exchange
on
each day on which said Exchange is open for unrestricted trading and as of
such
other hours, if any, as may be authorized by the Board the net asset value
and
the public offering price of a share of capital stock of the Fund, such
determination to be made in accordance with the provisions of the
Declaration
and By-laws of the Fund and Prospectus and Statement of Additional
Information
relating to the Fund, as they may from time to time be amended, and any
applicable resolutions of the Board at the time in force and applicable;
and
promptly notify the Fund, the proper exchange and the NASD or such other
persons
as the Fund may request of the results of such computation and
determination. In
computing the net asset value hereunder, the Bank may rely in good faith
upon
information furnished to it by any Authorized Person in respect of (i) the
manner of accrual of the liabilities of the Fund and in respect of
liabilities
of the Fund not appearing on its books of account kept by the Bank, (ii)
reserves, if any, authorized by the Board or that no such reserves have
been
authorized, (iii) the source of the quotations to be used in computing the
net
asset value, (iv) the value to be assigned to any security for which no
price
quotations are available, and (v) the method of computation of the public
offering price on the basis of the net asset value of the shares, and the
Bank
shall not be responsible for any loss occasioned by such reliance or for
any
good faith reliance on any quotations received from a source pursuant to
(iii)
above.
13. CONCERNING THE BANK.
13.1 PERFORMANCE OF DUTIES AND STANDARD OF CARE. In performing
its
duties hereunder and any other duties listed on any Schedule hereto, if
any, the
Bank will be entitled to receive and act upon the advice of independent
counsel
of its own selection, which may be counsel for the Fund, and will be
without
liability for any action taken or thing done or omitted to be done in
accordance
with this Agreement in good faith in conformity with such advice. In the
performance of its duties hereunder, the Bank will be protected and not be
liable, and will be indemnified and held harmless for any action taken or
omitted to be taken by it in good faith reliance upon the terms of this
Agreement, any Officers' Certificate, Proper Instructions, resolution of
the
Board, telegram, notice, request, certificate or other instrument
reasonably
believed by the Bank to be genuine and for any other loss to the Fund
except in
the case of its negligence, willful misfeasance or bad faith in the
performance
of its duties or reckless disregard of its obligations and duties
hereunder. The
Bank will indemnify and hold harmless the Fund from any loss or expense
incurred
by reason of the negligence, willful misfeasance or bad faith by the Bank,
any
Selected Foreign Sub-Custodian (as defined in Section 13 (a) hereof), or
any of
their respective agents, in the performance or non-performance of its
<PAGE>
16
duties with respect to the Fund or the reckless disregard by the Bank, any
Selected Foreign Sub-Custodian, or any of their respective agents, of its
obligations and duties hereunder or in connection herewith; provided that
the
Bank's responsibility and liability hereunder for the actions or inactions
of
any Selected Foreign Sub-Custodian shall be limited as provided by
subsections
13.3 (h) and 13.3 (i) hereof.
The Bank will be under no duty or obligation to inquire into and will
not
be liable for:
(a) the validity of the issue of any Portfolio Securities
purchased by
or for the Fund, the legality of the purchases thereof or the propriety of
the
price incurred therefor;
(b) the legality of any sale of any Portfolio Securities by or
for the
Fund or the propriety of the amount for which the same are sold;
(c) the legality of an issue or sale of any common shares of the
Fund
or the sufficiency of the amount to be received therefor;
(d) the legality of the repurchase of any common shares of the
Fund or
the propriety of the amount to be paid therefor;
(e) the legality of the declaration of any dividend by the Fund
or the
legality of the distribution of any Portfolio Securities as payment in kind
of
such dividend; and
(f) any property or moneys of the Fund unless and until received
by
it, and any such property or moneys delivered or paid by it pursuant to the
terms hereof.
Moreover, the Bank will not be under any duty or obligation to
ascertain
whether any Portfolio Securities at any time delivered to or held by it for
the
account of the Fund are such as may properly be held by the Fund under the
provisions of its Declaration, By-laws, any federal or state statutes or
any
rule or regulation of any governmental agency.
Notwithstanding anything in this Agreement to the contrary, in no
event
shall the Bank be liable hereunder or to any third party:
(a) for any losses, damages, expenses or claims of any kind
resulting
from acts of God, earthquakes, fires, floods, storms or other disturbances
of
nature, epidemics, strikes, riots, nationalization, expropriation, currency
restrictions, acts of war, civil war or terrorism, insurrection, political
risk,
nuclear fusion, fission or radiation, the interruption, loss or malfunction
of
utilities, transportation, or computers (hardware or software) and computer
facilities, the unavailability of energy sources and other similar
happenings or
events except as results from the Bank's own negligence, and except as
provided
by subsection 13.3(i) hereof; or
(b) for special, punitive or consequential damages arising from
the
provision of services hereunder, even if the Bank has been advised of the
possibility of such damages.
<PAGE>
17
13.2 AGENTS AND SUBCUSTODIANS WITH RESPECT TO PROPERTY OF THE FUND
HELD
IN THE UNITED STATES. The Bank may employ agents in the performance of its
duties hereunder and shall be responsible for the acts and omissions of
such
agents as if performed by the Bank hereunder.
Upon receipt of Proper Instructions, the Bank may employ subcustodians
to
hold property of the Fund in the United States, provided that any such
subcustodian meets at least the minimum qualifications required by Section
17(f)(1) of the 1940 Act to act as a custodian of the Fund's assets with
respect
to property of the Fund held in the United States. The Bank shall have no
liability to the Fund or any other person by reason of any act or omission
of
any such subcustodian and the Fund shall indemnify the Bank and hold it
harmless
from and against any and all actions, suits and claims, arising directly or
indirectly out of the performance of any such subcustodian. Upon request of
the
Bank, the Fund shall assume the entire defense of any action, suit, or
claim
subject to the foregoing indemnity. The Fund shall pay all fees and
expenses of
any such subcustodian.
13.3 DUTIES OF THE BANK WITH RESPECT TO PROPERTY OF THE FUND HELD
OUTSIDE OF THE UNITED STATES.
(a) APPOINTMENT OF FOREIGN SUB-CUSTODIANS. The Fund hereby
authorizes
and instructs the Bank to employ as sub-custodians for the Fund's Portfolio
Securities and other assets maintained outside the United States the
foreign
banking institutions and foreign securities depositories designated on
Schedule
A attached hereto (each, a "Selected Foreign Sub-Custodian"). Upon receipt
of
Proper Instructions, together with a certified resolution of the Fund's
Board of
Trustees, the Bank and the Fund may agree to designate additional foreign
banking institutions and foreign securities depositories to act as Selected
Foreign Sub-Custodians hereunder. Upon receipt of Proper Instructions, the
Fund
may instruct the Bank to cease the employment of any one or more such
Selected
Foreign Sub-Custodians for maintaining custody of the Fund's assets, and
the
Bank shall so cease to employ such sub-custodian or depository as soon as
alternate custodial arrangements have been implemented.
(b) FOREIGN SECURITIES DEPOSITORIES. Except as may otherwise be
agreed
upon in writing by the Bank and the Fund, assets of the Fund shall be
maintained
in foreign securities depositories only through arrangements implemented by
the
foreign banking institutions serving as Selected Foreign Sub-Custodians
pursuant
to the terms hereof. Where possible, such arrangements shall include entry
into
agreements containing the provisions set forth in subparagraph (d) hereof.
Notwithstanding the foregoing, except as may otherwise be agreed upon in
writing
by the Bank and the Fund, the Fund authorizes the deposit in Euro-clear,
the
securities clearance and depository facilities operated by Morgan Guaranty
Trust
Company of New York in Brussels, Belgium, of Foreign Portfolio Securities
eligible for deposit therein and to utilize such securities depository in
connection with settlements of purchases and sales of securities and
deliveries
and returns of securities, until notified to the contrary pursuant to
subparagraph (a) hereunder.
(c) SEGREGATION OF SECURITIES. The Bank shall identify on its
books as
belonging to the Fund the Foreign Portfolio Securities held by each
Selected
Foreign Sub-Custodian. Each agreement pursuant to which the Bank employs a
foreign banking
<PAGE>
18
institution shall require that such institution establish a custody account
for
the Bank and hold in that account, Foreign Portfolio Securities and other
assets
of the Fund, and, in the event that such institution deposits Foreign
Portfolio
Securities in a foreign securities depository, that it shall identify on
its
books as belonging to the Bank the securities so deposited.
(d) AGREEMENTS WITH FOREIGN BANKING INSTITUTIONS. Each of the
agreements pursuant to which a foreign banking institution holds assets of
the
Fund (each, a "Foreign Sub-Custodian Agreement") shall be substantially in
the
form previously made available to the Fund and shall provide that: (a) the
Fund's assets will not be subject to any right, charge, security interest,
lien
or claim of any kind in favor of the foreign banking institution or its
creditors or agent, except a claim of payment for their safe custody or
administration (including, without limitation, any fees or taxes payable
upon
transfers or reregistration of securities); (b) beneficial ownership of the
Fund's assets will be freely transferable without the payment of money or
value
other than for custody or administration (including, without limitation,
any
fees or taxes payable upon transfers or reregistration of securities); (c)
adequate records will be maintained identifying the assets as belonging to
Bank;
(d) officers of or auditors employed by, or other representatives of the
Bank,
including to the extent permitted under applicable law, the independent
public
accountants for the Fund, will be given access to the books and records of
the
foreign banking institution relating to its actions under its agreement
with the
Bank; and (e) assets of the Fund held by the Selected Foreign Sub-Custodian
will
be subject only to the instructions of the Bank or its agents.
(e) ACCESS OF INDEPENDENT ACCOUNTANTS OF THE FUND. Upon request of
the
Fund, the Bank will use its best efforts to arrange for the independent
accountants of the Fund to be afforded access to the books and records of
any
foreign banking institution employed as a Selected Foreign Sub-Custodian
insofar
as such books and records relate to the performance of such foreign banking
institution under its Foreign Sub-Custodian Agreement.
(f) REPORTS BY BANK. The Bank will supply to the Fund from time to
time, as mutually agreed upon, statements in respect of the securities and
other
assets of the Fund held by Selected Foreign Sub-Custodians, including but
not
limited to an identification of entities having possession of the Foreign
Portfolio Securities and other assets of the Fund.
(g) TRANSACTIONS IN FOREIGN CUSTODY ACCOUNT. Transactions with
respect
to the assets of the Fund held by a Selected Foreign Sub-Custodian shall be
effected pursuant to Proper Instructions from the Fund to the Bank and
shall be
effected in accordance with the applicable Foreign Sub-Custodian Agreement.
If
at any time any Foreign Portfolio Securities shall be registered in the
name of
the nominee of the Selected Foreign Sub-Custodian, the Fund agrees to hold
any
such nominee harmless from any liability by reason of the registration of
such
securities in the name of such nominee.
Notwithstanding any provision of this Agreement to the contrary,
settlement and payment for Foreign Portfolio Securities received for the
account
of the Fund and delivery of Foreign Portfolio Securities maintained for the
account of the Fund may be effected in accordance with the customary
established
securities trading or securities
<PAGE>
19
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.
In connection with any action to be taken with respect to the
Foreign
Portfolio Securities held hereunder, including, without limitation, the
exercise
of any voting rights, subscription rights, redemption rights, exchange
rights,
conversion rights or tender rights, or any other action in connection with
any
other right, interest or privilege with respect to such Securities
(collectively, the "Rights"), the Bank shall promptly transmit to the Fund
such
information in connection therewith as is made available to the Bank by the
Foreign Sub-Custodian, and shall promptly forward to the applicable Foreign
Sub-Custodian any instructions, forms or certifications with respect to
such
Rights, and any instructions relating to the actions to be taken in
connection
therewith, as the Bank shall receive from the Fund pursuant to Proper
Instructions. Notwithstanding the foregoing, the Bank shall have no
further
duty or obligation with respect to such Rights, including, without
limitation,
the determination of whether the Fund is entitled to participate in such
Rights
under applicable U.S. and foreign laws, or the determination of whether any
action proposed to be taken with respect to such Rights by the Fund or by
the
applicable Foreign Sub-Custodian will comply with all applicable terms and
conditions of any such Rights or any applicable laws or regulations, or
market
practices within the market in which such action is to be taken or omitted.
(h) LIABILITY OF SELECTED FOREIGN SUB-CUSTODIANS. Each Foreign
Sub-Custodian Agreement with a foreign banking institution shall require
the
institution to exercise reasonable care in the performance of its duties
and to
indemnify, and hold harmless, the Bank and the Fund from and against
certain
losses, damages, costs, expenses, liabilities or claims arising out of or
in
connection with the institution's performance of such obligations, all as
set
forth in the applicable Foreign Sub-Custodian Agreement. The Fund
acknowledges
that the Bank, as a participant in Euro-clear, is subject to the Terms and
Conditions Governing the Euro-Clear System, a copy of which has been made
available to the Fund. The Fund acknowledges that pursuant to such Terms
and
Conditions, Morgan Guaranty Brussels shall have the sole right to exercise
or
assert any and all rights or claims in respect of actions or omissions of,
or
the bankruptcy or insolvency of, any other depository, clearance system or
custodian utilized by Euro-clear in connection with the Fund's securities
and
other assets.
(i) LIABILITY OF BANK. The Bank shall have no more or less
responsibility or liability on account of the acts or omissions of any
Selected
Foreign Sub-Custodian employed hereunder than any such Selected Foreign
Sub-Custodian has to the Bank and, without limiting the foregoing, the Bank
shall not be liable for any loss, damage, cost, expense, liability or claim
resulting from nationalization, expropriation, currency restrictions, or
acts of
war or terrorism, political risk (including, but not limited to, exchange
control restrictions, confiscation, insurrection, civil strife or armed
hostilities) other losses due to Acts of God, nuclear incident or any loss
where
the Selected Foreign Sub-Custodian has otherwise exercised reasonable care.
<PAGE>
20
(j) MONITORING RESPONSIBILITIES. The Bank shall furnish annually
to the
Fund, information concerning the Selected Foreign Sub-Custodians employed
hereunder for use by the Fund in evaluating such Selected Foreign Sub-
Custodians
to ensure compliance with the requirements of Rule 17f-5 of the Act. In
addition, the Bank will promptly inform the Fund in the event that the Bank
is
notified by a Selected Foreign Sub-Custodian that there appears to be a
substantial likelihood that its shareholders' equity will decline below
$200
million (U.S. dollars or the equivalent thereof) or that its shareholders'
equity has declined below $200 million (in each case computed in accordance
with
generally accepted U.S. accounting principles) or any other capital
adequacy
test applicable to it by exemptive order, or if the Bank has actual
knowledge of
any loss of the assets of the Fund held by a Foreign Sub-Custodian.
(k) TAX LAW. The Bank shall have no responsibility or liability
for any
obligations now or hereafter imposed on the Fund or the Bank as custodian
of the
Fund by the tax laws of any jurisdiction, and it shall be the
responsibility of
the Fund to notify the Bank of the obligations imposed on the Fund or the
Bank
as the custodian of the Fund by the tax law of any non-U.S. jurisdiction,
including responsibility for withholding and other taxes, assessments or
other
governmental charges, certifications and governmental reporting. The sole
responsibility of the Custodian with regard to such tax law shall be to use
reasonable efforts to assist the Fund with respect to any claim for
exemption or
refund under the tax law of jurisdictions for which the Fund has provided
such
information.
13.4 INSURANCE. The Bank shall use the same care with respect to the
safekeeping of Portfolio Securities and cash of the Fund held by it as it
uses
in respect of its own similar property but it need not maintain any special
insurance for the benefit of the Fund. However, the Bank hereby warrants
that as
of the date of this Agreement it is maintaining a Bankers Blanket Bond and
hereby agrees to notify the Fund in the event that such bond is canceled or
otherwise lapses.
13.5. FEES AND EXPENSES OF BANK. The Fund will pay or reimburse the
Bank
from time to time for any transfer taxes payable upon transfer of Portfolio
Securities made hereunder, and for all necessary proper disbursements,
expenses
and charges made or incurred by the Bank in the performance of this
Agreement
and any indemnities for any loss, liabilities or expense to the Bank as
provided
above. Disbursements, expenses and charges for which the Bank may obtain
reimbursement or payment from the Fund in accordance with the preceding
sentence
may include only the items specified on SCHEDULE B attached hereto. For the
services rendered by the Bank hereunder, the Fund will pay to the Bank such
compensation or fees at such rate and at such times as shall be agreed upon
in
writing by the parties from time to time and shown on SCHEDULE B. Should
the
Trust exercise its right to terminate this Agreement, the Bank will also be
entitled to reimbursement by the Fund for all out of pocket or reasonable
expenses incurred in conjunction with the movement of records and
Portfolio
Securities of the Trust.
13.6 ADVANCES BY BANK. The Bank may, in its sole discretion, advance
funds
on behalf of the Fund to make any payment permitted by this Agreement upon
receipt of any proper authorization required by this Agreement for such
payments
by the Fund. Should such a payment or payments, with advanced funds, result
in
an overdraft (due to insufficiencies of the Fund's account with the Bank,
or for
any other reason) this
<PAGE>
21
Agreement deems any such overdraft or related indebtedness, a loan made by
the
Bank to the Fund payable on demand and bearing interest at the current rate
charged by the Bank for such loans unless the Fund shall provide the Bank
with
agreed upon compensating balances. The Fund agrees that the Bank shall have
a
continuing lien and security interest to the extent of any overdraft or
indebtedness, in and to any property at any time held by it for the Fund's
benefit or in which the Fund has an interest and which is then in the
Bank's
possession or control (or in the possession or control of any third party
acting
on the Bank's behalf). The Fund authorizes the Bank, in its sole
discretion, at
any time to charge any overdraft or indebtedness, together with interest
due
thereon against any balance of account standing to the credit of the Fund
on the
Bank's books.
13.7 PERSONS HAVING ACCESS TO FUND ASSETS.
(a) No trustee or agent of the Fund, and no officer, director,
employee
or agent of the Fund's investment manager, of any sub-investment adviser of
the
Fund, or of the Fund's administrator or transfer agent, shall have physical
access to the assets of the Fund held by the Custodian or any Selected
Foreign
Sub-Custodian or be authorized or permitted to withdraw any investments of
the
Fund, nor shall the Bank or any Selected Foreign Sub-Custodian deliver any
assets of the Fund to any such person. No officer, director, employee or
agent
of the Bank who holds any similar position with the Fund's investment
manager,
with any sub-investment adviser of the Fund or with the Fund's
administrator or
transfer agent shall have access to the assets of the Fund.
(b) Nothing in this subsection 13.7 shall prohibit any officer,
employee
or agent of the Fund, or any officer, director, employee or agent of the
Fund's
investment manager, of any sub-investment adviser of the Fund or of the
Fund's
administrator or transfer agent, from instructing the Bank in accordance
with
the terms of this Agreement, so long as it does not result in delivery of
or
access to Fund assets prohibited to paragraph (a) of this subsection 13.7.
(c) The Bank represents that it maintains a system that is
reasonably
designed to prevent unauthorized persons from having access to the assets
that
it holds (by any means) for its customers.
14. TERMINATION.
14.1 This Agreement may be terminated at any time without penalty
upon
sixty days written notice delivered by either party to the other by means
of
registered mail, and upon the expiration of such sixty days this Agreement
will
terminate; provided, however, that the effective date of such termination
may be
postponed to a date not more than ninety days from the date of delivery of
such
notice (i) by the Bank in order to prepare for the transfer by the Bank of
all
of the assets of the Fund held hereunder, and (ii) by the Fund in order to
give
the Fund an opportunity to make suitable arrangements for a successor
custodian.
At any time after the termination of this Agreement, the Fund will, at its
request, have access to the records of the Bank relating to the performance
of
its duties as custodian.
<PAGE>
22
14.2 In the event of the termination of this Agreement,
the
Bank will immediately upon receipt or transmittal, as the case may
be,
of notice of termination, commence and prosecute diligently to completion
the
transfer of all cash and the delivery of all Portfolio Securities
duly
endorsed and all records maintained under Section 11 to the successor
custodian when appointed by the Fund. The obligation of the Bank
to
deliver and transfer over the assets of the Fund held by it directly
to
such successor custodian will commence as soon as such successor is
appointed
and will continue until completed as aforesaid. If the Fund does not select
a
successor custodian within ninety (90) days from the date of delivery of
notice
of termination the Bank may, subject to the provisions of subsection
(14.3),
deliver the Portfolio Securities and cash of the Fund held by the Bank to a
bank
or trust company of its own selection which meets the requirements of
Section
17(f)(1) of the 1940 Act and has a reported capital, surplus and undivided
profits aggregating not less than $2,000,000, to be held as the property of
the
Fund under terms similar to those on which they were held by the Bank,
whereupon
such bank or trust company so selected by the Bank will become the
successor
custodian of such assets of the Fund with the same effect as though
selected by
the Board.
14.3 Prior to the expiration of ninety (90) days after notice of
termination has been given, the Fund may furnish the Bank with an order of
the
Fund advising that a successor custodian cannot be found willing and able
to act
upon reasonable and customary terms and that there has been submitted to
the
shareholders of the Fund the question of whether the Fund will be
liquidated or
will function without a custodian for the assets of the Fund held by the
Bank.
In that event the Bank will deliver the Portfolio Securities and cash of
the
Fund held by it, subject as aforesaid, in accordance with one of such
alternatives which may be approved by the requisite vote of shareholders,
upon
receipt by the Bank of a copy of the minutes of the meeting of shareholders
at
which action was taken, certified by the Fund's Secretary and an opinion of
counsel to the Fund in form and content satisfactory to the Bank.
15. CONFIDENTIALITY. Both parties hereto agree than any non-public
information obtained hereunder concerning the other party is confidential
and
may not be disclosed to any other person without the consent of the other
party,
except as may be required by applicable law or at the request of a
governmental
agency. The parties further agree that a breach of this provision would
irreparably damage the other party and accordingly agree that each of them
is
entitled, without bond or other security, to an injunction or injunctions
to
prevent breaches of this provision.
16. NOTICES. Any notice or other instrument in writing authorized or
required by this Agreement to be given to either party hereto will be
sufficiently given if addressed to such party and mailed or delivered to it
at
its office at the address set forth below; namely:
(a) In the case of notices sent to the Fund to:
The PanAgora Funds
260 Franklin Street
Boston, Massachusetts 02110
Attention: Kathleen I. DeVivo
<PAGE>
23
In the case of notices sent to the Trust under Section 14
hereof, with a copy to:
Hale and Dorr
60 State Street
Boston, Massachusetts 02109
Attention: Joseph P. Barri, Esq.
(b) In the case of notices sent to the Bank to:
Investors Bank & Trust Company
89 South Street
Boston, Massachusetts 02111
Attention: Henry N. Joyce
or at such other place as such party may from time to time designate
in
writing.
17. AMENDMENTS. This Agreement may not be altered or amended, except
by an
instrument in writing, executed by both parties, and in the case of the
Fund,
such alteration or amendment will be authorized and approved by its Board.
18. PARTIES. This Agreement will be binding upon and shall inure to
the
benefit of the parties hereto and their respective successors and assigns;
provided, however, that this Agreement will not be assignable by the Fund
without the written consent of the Bank or by the Bank without the written
consent of the Fund, authorized and approved by its Board; and provided
further
that termination proceedings pursuant to Section 14 hereof will not be
deemed to
be an assignment within the meaning of this provision.
19. GOVERNING LAW. This Agreement and all performance hereunder will
be
governed by the laws of the Commonwealth of Massachusetts.
20. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but such
counterparts shall, together, constitute only one instrument.
21. LIMITATION OF LIABILITY. The Fund and the Bank agree that the
obligations of the Fund under this agreement shall not be binding upon any
of
the Trustees, shareholders, nominees, officers, employees or agents,
whether
past, present or future, of the Fund individually, but are binding only
upon the
assets and the property of the Fund or of the appropriate series or
portfolio(s) thereof, as provided in the Declaration. The execution and
delivery of this Agreement have been authorized by the Trustees of the
Fund, and
signed by an authorized officer of the Fund, acting as such, and neither
such
authorization by such Trustees nor such execution and delivery by such
officer
shall be deemed to have been made by any of them or any shareholder of the
Fund
individually or to impose any liability on any of them or any shareholder
of the
Fund personally, but shall bind only the assets and property of the Fund or
of
the appropriate series or portfolio(s) thereof as provided in the
Declaration.
<PAGE>
24
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be
executed by their respective officers thereunto duly authorized as of the
day
and year first written above.
The PanAgora Funds
By:/s/ Edgar E. Peters
---------------------
Name: Edgar E. Peters
Title: Investment Officer
ATTEST:
/s/Kathleen DeVivo
- -------------------
Investors Bank & Trust Company
By:/s/ Henry M. Joyce
---------------------
Name:
Title:Vice President
ATTEST:
- ---------------------
DATE:
----------------
Exhibit 9(a)
ADMINISTRATION AGREEMENT
THIS ADMINISTRATION AGREEMENT is made as of July 29, 1994 by and
between
THE PANAGORA FUNDS, a Massachusetts business trust (the "Fund"), and
INVESTORS
BANK & TRUST COMPANY, a Massachusetts trust company ("Investors Bank").
WHEREAS, the Fund is registered as an open-end management investment
company under the Investment Company Act of 1940, as amended (the "1940
Act")
consisting of three separate portfolios; and
WHEREAS, the Fund desires to retain Investors Bank to render certain
administrative services to the Fund and Investors Bank is willing to render
such
services;
WITNESSETH:
NOW, THEREFORE, in consideration of the mutual covenants herein set
forth,
it is agreed between the parties hereto as follows:
1. APPOINTMENT. The Fund hereby appoints Investors Bank to act as
Administrator of the Fund on the terms set forth in this Agreement.
Investors
Bank accepts such appointment and agrees to render the services herein set
forth for the compensation herein provided.
2. DELIVERY OF DOCUMENTS. The Fund has furnished Investors Bank
with
copies properly certified or authenticated of each of the following:
(a) Resolutions of the Fund's Board of Trustees authorizing the
appointment of Investors Bank to provide certain administrative services to
the
Fund and approving this Agreement;
(b) The Fund's Declaration of Trust filed with the Commonwealth of
Massachusetts on June 27, 1993 and all amendments thereto (the
"Declaration");
(c) The Fund's by-laws and all amendments thereto (the "By-Laws");
(d) The Fund's agreements with all service providers which include
any
investment advisory agreements, sub-investment advisory agreements, custody
agreements, distribution agreements and transfer agency agreements
(collectively, the "Agreements");
(e) The Fund's most recent Registration Statement on Form N-1A (the
"Registration Statement") under the Securities Act of 1933 and under the
1940
Act and all amendments thereto; and
(f) The Fund's most recent prospectus and statement of additional
information (the "Prospectus"); and
(g) Such other certificates, documents or opinions as may mutually be
deemed necessary or appropriate for Investors Bank in the proper
performance of
its duties hereunder.
<PAGE>
The Fund will immediately furnish Investors Bank with copies, properly
certified or authenticated, of all amendments of or supplements to the
foregoing. Furthermore, the Fund will notify Investors Bank as soon as
possible of any matter materially affecting the performance of Investors
Bank
of its services under this Agreement.
3. DUTIES OF ADMINISTRATOR. Subject to the supervision and direction
of
the Board of Trustees of the Fund, Investors Bank, as Administrator, will
assist
in supervising various aspects of the Fund's administrative operations and
undertakes to perform the following specific services for the Fund:
(a) Maintaining office facilities (which may be in the offices of
Investors Bank or a corporate affiliate);
(b) Furnishing internal legal, executive and administrative services
and
clerical services and office supplies in connection with the foregoing;
(c) Furnishing corporate secretarial services including preparation
and
distribution of materials for Board of Trustees meetings;
(d) Accumulating information for and, subject to approval by the
Fund's
treasurer and legal counsel, coordination of the preparation, filing,
printing
and dissemination of reports to the Fund's shareholders of record and the
Securities and Exchange Commission ("SEC") including, but not necessarily
limited to, post-effective amendments to the Fund's registration statement,
annual reports, semiannual reports, Form N-SAR, 24f-2 notices and proxy
material;
(e) Coordinating the preparation and filing of various reports or
other
documents required by federal, state and other applicable laws and
regulations,
including filings required by state securities laws, other than those filed
or
required to be filed by the Fund's investment adviser or transfer agent;
(f) Coordinating the preparation and filing of the Fund's tax
returns;
(g) Assisting the Fund's investment adviser(s), upon request, in
monitoring and further developing compliance procedures for each series of
the
Fund which will include, among other matters, procedures to assist such
adviser
in monitoring compliance with each series' investment objective, policies,
restrictions, tax matters and applicable laws and regulations;
(h) Preparing and furnishing each series of the Fund, upon reasonable
request by the Fund, with SEC yield and total return performance
information for
each such series and for each such series' benchmark index or indices, as
noted
in the Fund's Registration Statement and as further described in writing
from
an officer of the Fund to Investors Bank, for such periods as are
prescribed by
the SEC for performance information and the following additional periods:
one
month, three months, year-to-date and since inception.;
(i) Coordinating working relationships, procedures and communications
among the Fund and its contractual service providers;
2
<PAGE>
(j) Performing internal auditing services;
(k) Upon receipt of appropriate information and on the basis of such
information received, provide determinations of whether proposed sales of
fund
shares to particular investors require registration in accordance with the
applicable state securities laws; and
(l) Other services as may be detailed as a schedule to this
Agreement.
In performing all services under this Agreement, Investors Bank shall
act
in conformity with Fund's Declaration and By-Laws and the 1940 Act, as the
same
may be amended from time to time; and the investment objectives, investment
policies and other practices and policies set forth in the Fund's
Registration
Statement, as the same may be amended from time to time. Notwithstanding
any
item discussed herein, Investors Bank has no discretion over the Fund's
assets
or choice of investments and cannot be held liable for any problem relating
to
such investments.
4. FEES AND EXPENSES.
(a) For the services to be rendered and the facilities to be
furnished by
Investors Bank, as provided for in this Agreement, the Fund will compensate
Investors Bank in accordance with the fee schedule attached hereto as
Schedule
A. Such fees do not include out-of-pocket disbursements of the
Administrator for
which the Administrator shall be entitled to bill separately. Out-of-pocket
disbursements may include only the items specified in Schedule A to this
Agreement, which schedule may be modified by Investors Bank if the Fund
consents
in writing to the modification.
(b) Investors Bank shall not be required to pay any expenses incurred
by
the Fund.
5. LIMITATION OF LIABILITY.
(a) Investors Bank, its trustees, officers, employees and agents shall
not
be liable for any error of judgment or mistake of law or for any loss
suffered
by the Fund in connection with the performance of its obligations and
duties
under this Agreement, except a loss resulting from willful misfeasance, bad
faith or gross negligence in the performance of such obligations and
duties, or
by reason of its reckless disregard thereof (collectively, "Disqualifying
Conduct"). The Fund will indemnify Investors Bank, its trustees, officers,
employees and agents against and hold it and them harmless from any and all
losses, claims, damages, liabilities or expenses (including reasonable
counsel
fees and expenses) resulting from any claim, demand, action or suit in
connection with performance of its obligations hereunder and not resulting
from
Disqualifying Conduct of Investors Bank. Investors Bank will indemnify the
Fund
against and hold it harmless from any and all losses, claims, damages,
liabilities or expenses (including reasonable counsel fees and expenses)
resulting from any claim, demand, action or suit resulting from the
Disqualifying Conduct of Investors Bank in connection with performance or
nonperformance of its obligations hereunder.
3
<PAGE>
(b) Investors Bank may apply to the Fund at any time for instructions
and
may consult counsel for the Fund, or its own counsel, and accountants and
other
experts with respect to any matter arising in connection with its duties
hereunder, and Investors Bank shall not be liable or accountable for any
action
taken or omitted by it in good faith in accordance with such instruction,
or
with the opinion of such counsel, accountants, or other experts. Investors
Bank
shall be protected in acting upon any document, certificate or instrument
which
it reasonably believes to be genuine and to be signed or presented by the
proper
person or persons. Investors Bank shall not be held to have notice of any
change
of authority of any officers, employees, or agents of the Fund until
receipt of
written notice thereof has been received from the Fund.
6. TERMINATION OF AGREEMENT.
(a) This Agreement shall become effective on the date hereof and
shall
remain in force unless terminated pursuant to the provisions of subsection
(b)
of this Section 6, provided however that Section 5 shall survive the
termination
of the Agreement.
(b) This Agreement may be terminated at any time without payment of
any
penalty, upon 60 days written notice, by vote of the holders of a majority
of
the outstanding voting securities of the Fund or any series thereof, or by
vote
of a majority of the Board of Trustees of the Fund, or by Investors Bank.
7. AMENDMENT OF AGREEMENT. No provision of this Agreement may be
changed,
discharged or terminated orally, but only by an instrument in writing
signed by
the party against which enforcement of the change, discharge or termination
is
sought.
8. MISCELLANEOUS.
(a) Any notice or other instrument authorized or required by this
Agreement to be given in writing to the Fund or Investors Bank shall be
sufficiently given if addressed to that party and received by it at its
office
set forth below or at such other place as it may from time to time
designate in
writing.
To the Fund: The PanAgora Funds
260 Franklin Street
Boston, Massachusetts 02110
Attention: Kathleen I. DeVivo
In the case of a notice sent to the Fund under Section 6 hereof,
a
copy to:
Hale and Dorr
60 State Street
Boston, Massachusetts 02109
Attention: Joseph P. Barri, Esq.
4
<PAGE>
To Investors Bank: Investors Bank & Trust Company
89 South Street
Boston, MA 02111
Attention: Debra M. Brown, Esq.
(b) This Agreement shall extend to and shall be binding upon the
parties
hereto and their respective successors and assigns; provided, however, that
this
Agreement shall not be assignable without the written consent of the other
party.
(c) This Agreement shall be construed in accordance with the laws of
the
Commonwealth of Massachusetts.
(d) This Agreement may be executed in any number of counterparts each
of
which shall be deemed to be an original and which collectively shall be
deemed
to constitute only one instrument.
(e) The captions of 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.
9. CONFIDENTIALITY. All books, records, information and data
pertaining to
the business of the other party which are exchanged or received pursuant to
the
negotiation or the carrying out of this Agreement shall remain
confidential, and
shall not be voluntarily disclosed to any other person, except as may be
required in the performance of duties hereunder or as otherwise required by
law.
10. LIMITATION OF LIABILITY. The Fund and Investors Bank agree that
the
obligations of the Fund under this agreement shall not be binding upon any
of
the Trustees, shareholders, nominees, officers, employees or agents,
whether
past, present or future, of the Fund individually, but are binding only
upon the
assets and the property of the Fund or of the appropriate series or
portfolio(s)
thereof, as provided in the Declaration. The execution and delivery of this
Agreement have been authorized by the Trustees of the Fund, and signed by
an
authorized officer of the Fund, acting as such, and neither such
authorization
by such Trustees nor such execution and delivery by such officer shall be
deemed
to have been made by any of them or any shareholder of the Fund
individually or
to impose any liability on any of them or any shareholder of the Fund
personally, but shall bind only the assets and property of the Fund or of
the
appropriate series or portfolio(s) thereof as provided in the Declaration.
11. USE OF NAME. The Fund shall not use the name of Investors Bank or
any
of its affiliates in any prospectus, sales literature or other material
relating
to the Fund in a manner not approved by the Bank prior thereto in writing;
provided however, that the approval of the Bank shall not be required for
any
use of its name which merely refers in accurate and factual terms to its
appointment hereunder or which is required by the SEC or any state
securities
authority or any other appropriate regulatory, governmental or judicial
authority; PROVIDED FURTHER, that in no event shall such approval be
unreasonably withheld or delayed.
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument
to be
duly executed and delivered by their duly authorized officers as of the
date
first written above.
The PanAgora Funds
By: /s/ Edgar E. Peters
---------------------------
Name: Edgar E. Peters
Title: Investment Officer
ATTEST:
- ------------------------------
Investors Bank & Trust Company
By: /s/ Henry N. Joyce
---------------------------
Name: Henry N. Joyce
Title: Vice President
ATTEST:
- ------------------------------
Date:
-------------------------
6
TRANSFER AGENCY AND SERVICE AGREEMENT
BETWEEN
THE PANAGORA FUNDS
AND
INVESTORS BANK & TRUST COMPANY
<PAGE>
TRANSFER AGENCY AND SERVICE AGREEMENT
AGREEMENT effective as of the 29th day of July, 1994 by and between
THE
PANAGORA FUNDS, a Massachusetts business trust (the "Trust"), and INVESTORS
BANK
& TRUST COMPANY, a Massachusetts trust company (the "Bank").
WITNESSETH:
WHEREAS, the Trust desires to appoint the Bank as its transfer agent,
dividend disbursing agent and agent in connection with certain other
activities,
and the Bank desires to accept such appointment;
WHEREAS, the Trust is authorized to issue shares in separate series,
with
each such series representing interests in a separate portfolio of
securities
and other assets;
WHEREAS, the Trust currently offers shares in three series, PanAgora
Asset
Allocation Fund, PanAgora Global Fund and PanAgora International Equity
Fund
(such series, together with all other series subsequently established by
the
Trust and made subject to this Agreement in accordance with Article 17,
being
herein referred to as the "Fund(s)");
NOW, THEREFORE, in consideration of the mutual covenants herein set
forth,
the Trust and the Bank agree as follows:
ARTICLE 1. TERMS OF APPOINTMENT; DUTIES OF THE BANK
1.01 Subject to the terms and conditions set forth in this Agreement,
the
Trust on behalf of the Funds, hereby employs and appoints the Bank to act
as,
and the Bank agrees to act as, transfer agent for each of the Fund(s)'
authorized and issued shares of beneficial interest ("Shares"), dividend
disbursing agent and agent in connection with any accumulation, open-
account or
similar plans provided to the shareholders of the Trust ("Shareholders")
and set
out in the currently effective prospectus and statement of additional
information, as each may be amended from time to time, (the "Prospectus")
of the
Trust, including without limitation any periodic investment plan or
periodic
withdrawal program.
1.02 The Bank agrees that it will perform the following services:
(a) In accordance with applicable disclosure contained in the
Trust's
Prospectus and such procedures as are consistent therewith and established
from
time to time by agreement between the Trust and the Bank, the Bank shall:
(i) Receive for acceptance, orders for the purchase of Shares,
and
promptly deliver payment and appropriate documentation therefor
to
the custodian of the Trust appointed by the Board of Trustees
of the
Trust (the "Custodian");
<PAGE>
(ii) Pursuant to purchase orders, issue the appropriate number
of
Shares and hold such Shares in the appropriate Shareholder
account;
(iii) Receive for acceptance, redemption requests and
redemption
directions and deliver the appropriate documentation therefor
to
the Custodian;
(iv) At the appropriate time as and when it receives monies
paid to
it by the Custodian with respect to any redemption, pay over or
cause to be paid over in the appropriate manner such monies as
instructed by the redeeming Shareholders;
(v) Effect transfers of Shares by the registered owners
thereof
upon receipt of appropriate instructions;
(vi) Prepare and transmit payments for dividends and
distributions
declared by the Trust on behalf of a Fund;
(vii) Create and maintain all necessary records including
those
specified in Article 10 hereof, in accordance with all
applicable
laws, rules and regulations, including but not limited to
records
required by Section 31(a) of the Investment Company Act of
1940, as
amended (the "1940 Act"), and those records pertaining to the
various functions performed by the Bank hereunder. Where
applicable, such records shall be maintained by the Bank for
the
periods and in the places required by Rule 31a-2 under the 1940
Act.
All records shall be available for inspection and use by the
Trust,
or any person retained by the Trust, during regular business
hours
and at other reasonable times;
(viii) Make available during regular business hours all
records and
other data created and maintained pursuant to this Agreement
for
reasonable audit and inspection by the Trust, or any person
retained
by the Trust. Upon reasonable notice by the Trust, the Bank
shall
make available during regular business hours its facilities and
premises employed in connection with its performance of this
Agreement for reasonable visitation by the Trust, or any person
retained by the Trust; and
(ix) Record the issuance of Shares of the Trust and each Fund
and
maintain, pursuant to Rule 17Ad-10(e) under the 1934 Act, a
record
of the total number of Shares of the Trust and each Fund which
are
authorized, based upon data provided to the Bank by the Trust,
and
issued and outstanding. The Bank shall also provide the Trust
on a
regular basis with the total number of Shares which are
authorized
and issued and outstanding and shall have no obligation, when
recording the issuance of Shares, to monitor the issuance of
such
Shares or to take cognizance of any laws relating to the issue
or
sale of such Shares.
(b) In addition to and not in lieu of the services set forth in
the
above paragraph (a) or in any Schedule hereto, the Bank shall: (i)
perform all
of the customary services of a transfer agent, dividend disbursing agent
and, as
relevant, agent in connection with accumulation, open-account or similar
plans
(including without limitation any periodic investment plan or periodic
withdrawal program); including but not limited to: maintaining all
Shareholder
accounts, preparing Shareholder meeting lists, mailing proxies, receiving
and
tabulating proxies, mailing Shareholder reports, prospectuses to current
Shareholders and statements of additional information on request,
withholding
taxes on all accounts, including nonresident alien accounts, preparing and
filing U.S.
2
<PAGE>
Treasury Department Forms 1099 and other appropriate forms required with
respect
to dividends and distributions by federal authorities for all Shareholders,
preparing and mailing confirmation forms and statements of account to
Shareholders for all purchases and redemptions of Shares and other
confirmable
transactions in Shareholder accounts, responding to Shareholder telephone
calls
and Shareholder correspondence, preparing and mailing activity statements
for
Shareholders, and providing Shareholder account information; and (ii)
provide a
system which will enable the Trust to monitor the total number of shares
sold in
each State.
(c) Additionally, the Bank shall utilize a system to identify all
share
transactions which involve purchase and redemption orders that are
processed at
a time other than the time of the computation of net asset value per share
next
computed after receipt of such orders, and shall compute the net effect
upon the
Fund(s) of such transactions so identified on a daily and cumulative basis.
(d) On each day on which the New York Stock Exchange is open for
business (each such day, a "Business Day"), the Bank shall supply the Trust
with
a written statement specifying, with respect to the immediately preceding
Business Day, the total number of Shares of each Fund (including fractional
Shares) issued and outstanding at the close of business on such day.
ARTICLE 2. SALE OF TRUST SHARES
2.01 Whenever the Trust shall sell or cause to be sold any Shares of
a
Fund, the Trust shall deliver or cause to be delivered to the Bank a
document
duly specifying: (i) the name of the Fund whose Shares were sold; (ii)
the
number of Shares sold, trade date, and price; (iii) the amount of money to
be
received by the Bank for the sale of such Shares and specifically allocated
to
such Fund; and (iv) in the case of a new account, a new account
application or
sufficient information to establish an account.
2.02 The Bank will, upon receipt by it of a check or other payment
identified by it as an investment in Shares of one of the Funds and drawn
or
endorsed to the Bank as agent for, or identified as being for the account
of,
one of the Funds, promptly deposit such check or other payment to the
appropriate account postings necessary to reflect the investment. The Bank
will
notify the Trust, or its designee, and the Custodian of all purchases and
related account adjustments.
2.03 In accordance with the terms of this Agreement, applicable
disclosure
contained in the Prospectus of the Trust and such applicable procedures as
are
established by mutual agreement between the Trust and the Bank, the Bank
shall
issue to the purchaser or his authorized agent such Shares, computed to the
nearest three decimal points, as he is entitled to receive, based on the
appropriate net asset value of the Fund's Shares, determined in accordance
with
the prospectus and applicable Federal law and regulations. The Bank shall
be
responsible for verifying that the amount provided to it by each purchaser
of
Shares is consistent with the number of Shares issued by the purchaser,
based on
the appropriate net asset value of the applicable Fund's Shares. In issuing
Shares to a purchaser or his authorized agent, the Bank shall be entitled
to
rely upon the latest directions, if any, previously received by the Bank
from
the purchaser or his authorized agent concerning the delivery of such
Shares.
2.04 The Bank shall not be required to issue any Shares of the Trust
where
it has received a written instruction from the Trust or written
notification
from any appropriate Federal or State
3
<PAGE>
authority that the sale of the Shares of the Fund(s) in question has been
suspended or discontinued, and the Bank shall be entitled to rely upon such
written instructions or written notification.
2.05 Upon the issuance of any Shares of any Fund(s) in accordance
with
foregoing provisions of this Article 2, the Bank shall not be responsible
for
the payment of any original issue or other taxes, if any, required to be
paid by
the Trust in connection with such issuance.
2.06 Subject to the terms of the Trust's Prospectus, the Bank may
establish such additional rules and regulations governing the transfer or
registration of Shares as it may deem advisable and consistent with such
rules
and regulations generally adopted by transfer agents, or with the written
consent of the Trust, any other rules and regulations.
ARTICLE 3. RETURNED CHECKS
3.01 In the event that any check or other order for the transfer of
money
is returned unpaid for any reason, the Bank will take such steps as the
Bank
may, in its discretion, deem appropriate to protect the Trust from
financial
loss or as the Trust or its designee may instruct. Provided that the Bank
adheres to the terms of this Agreement, applicable disclosure contained in
the
Trust's Prospectus and such standard procedures as are agreed upon from
time to
time between the Trust and the Bank regarding purchases and redemptions of
Shares (i) the Bank shall not be liable for any loss suffered by a Fund as
a
result of returned or unpaid purchase or redemption transactions and (ii)
any
legal or other expenses incurred to collect amounts owed to a Fund as a
consequence of returned or unpaid purchase or redemption transactions,
shall be
an expense solely of that Fund.
ARTICLE 4. REDEMPTIONS
4.01 In accordance with the terms of this Agreement, applicable
disclosure
contained in the Prospectus of the Trust and such procedures as are
established
by mutual agreement between the Trust and the Bank, the Bank, upon receipt
of
proper a redemption request, shall cancel the redeemed Shares and, after
making
deduction for any withholding of taxes required by applicable law, make
payment
of the appropriate redemption proceeds, which the Trust's custodian shall
provide to it. The Bank shall be responsible for verifying that the amount
provided to it by the Trust's custodian for the payment of redemption
proceeds
is consistent with the number of Shares being redeemed, based on the
appropriate
net asset value of the Fund's Shares.
ARTICLE 5. TRANSFERS AND EXCHANGES
5.01 The Bank is authorized to review and process transfers of Shares
of
each Fund. The Bank will, upon an order therefor by or on behalf of the
registered holder thereof in proper form, credit the same to the transferee
on
its books.
ARTICLE 6. RIGHT TO SEEK ASSURANCES
6.01 The Bank reserves the right to refuse to transfer or redeem
Shares
until it is satisfied that the requested transfer or redemption is legally
authorized, and it shall incur no liability for the refusal, in good faith,
to
make transfers or redemptions which the Bank, in its judgment, deems
improper or
unauthorized, or until it is satisfied that there is no basis for any
claims
adverse to
4
<PAGE>
such transfer or redemption. The Bank may, in effecting transfers, rely
upon
the provisions of the Uniform Act for the Simplification of Fiduciary
Security
Transfers or the Uniform Commercial Code, as the same may be amended from
time
to time, which in the opinion of legal counsel for the Trust or of the
Bank's
own legal counsel, protects the Bank and the Fund from any adverse
consequences
that may result from it in not requiring certain documents in connection
with
the transfer or redemption of Shares of any Fund, and the Trust shall
indemnify
the Bank for any act done or omitted by it in good faith reliance upon
such
laws or opinions.
ARTICLE 7. DISTRIBUTIONS
7.01 The Trust will promptly notify the Bank of the declaration of
any
dividend or distribution. The Trust shall furnish to the Bank a resolution
of
the Board of Trustees of the Trust certified by the Secretary (a
"Certificate"):
(i) authorizing the declaration of dividends on a specified periodic basis
and
authorizing the Bank to rely on oral instructions or a Certificate
specifying
the date of the declaration of such dividend or distribution, the date of
payment thereof, the record date as of which Shareholders entitled to
payment
shall be determined and the amount payable per share to Shareholders of
record
as of the date and the total amount payable to the Bank on the payment
date; or
(ii) setting forth the date of the declaration of any dividend or
distribution
by a Fund, the date of payment thereof, the record date as of which
Shareholders
entitled to payment shall be determined, and the amount payable per share
to
the Shareholders of record as of that date and the total amount payable to
the
Bank on the payment date.
7.02 The Bank, on behalf of the Trust, shall instruct the Custodian
to
place in a dividend disbursing account funds equal to the cash amount of
any
dividend or distribution to be paid out. The Bank will calculate (based
upon
the dividend rate and the number of shares held by the shareholder of
record on
the applicable record date), prepare and mail checks to (at the address as
it
appears on the records of the Bank), or (where appropriate) credit such
dividend
or distribution to the account of, Fund Shareholders, and maintain and
safeguard
all underlying records.
7.03 The Bank will replace lost checks at its discretion and in
conformity
with regular business practices.
7.04 The Bank will maintain all records necessary to reflect the
crediting
of dividends which are reinvested in Shares of the Trust, including without
limitation daily dividends.
7.05 The Bank shall not be liable for any improper payments made in
accordance with a resolution of the Board of Trustees of the Trust and the
terms
hereof.
7.06 If the Bank shall not receive from the Custodian sufficient cash
to
make payment to all Shareholders of the Trust as of the record date, the
Bank
shall, upon notifying the Trust, withhold payment to all Shareholders of
record
as of the record date until such sufficient cash is provided to the Bank.
ARTICLE 8. OTHER DUTIES
8.01 In addition to the duties expressly provided for herein, the
Bank
shall perform such other duties and functions and shall be paid such
amounts
therefor as may from time to time be agreed to in writing.
5
<PAGE>
ARTICLE 9. TAXES
9.01 It is understood that the Bank shall file such appropriate
information returns concerning the payment of dividends and capital gain
distributions and tax withholding with the proper Federal, State and local
authorities as are required by law to be filed by the Trust and shall
withhold
such sums as are required to be withheld by applicable law.
ARTICLE 10. BOOKS AND RECORDS
10.01 The Bank shall maintain confidential records showing for each
Shareholder's account the following: (i) names, addresses and tax
identification
numbers; (ii) numbers of Shares held; (iii) historical information (as
available from prior transfer agents) regarding the account of each
Shareholder,
including dividends paid and date and price of all transactions on a
Shareholder's account; (iv) any stop or restraining order placed against
a
Shareholder's account; (v) information with respect to withholdings;
(vi)
any capital gain or dividend reinvestment order, plan application, dividend
address and correspondence relating to the current maintenance of a
Shareholder's account; (vii) certificate numbers and denominations for any
Shareholders holding certificates; (viii) any information required in
order
for the Bank to perform the calculations contemplated or required by this
Agreement; and (ix) such other information and data as may be required by
applicable law.
10.02 Any records required to be maintained by Rule 31a-1 under the
1940
Act will be preserved for the periods prescribed in Rule 31a-2 under the
1940
Act. The Bank may, at its option at any time upon no less than thirty days'
notice to the Trust, and shall forthwith upon the Trust's demand, turn over
to
the Trust and cease to retain in the Bank's files, records and documents
created
and maintained by the Bank in performance of its service or for its
protection.
At the end of the six-year retention period, such records and documents
will
either be turned over to the Trust, or destroyed in accordance with the
Trust's
authorization.
10.03 Procedures applicable to the services to be performed hereunder
may
be established from time to time by agreement between the Trust and the
Bank.
Subject to the terms of Article 18 hereof, the Bank shall have the right to
utilize any shareholder accounting and recordkeeping systems which, in its
opinion, qualifies to perform any services to be performed hereunder.
Subject
to compliance with the requirements of applicable law, the Bank shall keep
records relating to the services performed hereunder in the form and manner
as
it may deem advisable.
ARTICLE 11. FEES AND EXPENSES.
11.01 For performance by the Bank pursuant to this Agreement, the
Fund(s)
agree to pay the Bank an annual maintenance fee for each Shareholder
account as
set out in the initial fee schedule attached hereto. Such fees and
out-of-pocket expenses and advances identified under Section 11.02 below
may be
changed from time to time subject to mutual written agreement between the
Fund(s) and the Bank.
11.02 In addition to the fee paid under Section 11.01 above, the
Fund(s)
agree to reimburse the Bank for out-of-pocket expenses or advances incurred
by
the Bank for the items set out in the fee schedule attached hereto. In
addition, any other expenses incurred by the Bank at the request or with
the
prior written consent of the Fund(s) including, without limitation, any
6
<PAGE>
equipment or supplies specifically ordered by the Trust or required to be
purchased by the Trust, will be reimbursed by the Fund(s).
11.03 The Fund(s) agree to pay all fees and reimbursable expenses
within
thirty days following the mailing of the respective billing notice.
Postage for
mailing of dividends, proxies, Fund reports and other mailings to all
shareholder accounts shall be advanced to the Bank by the Fund(s) at least
seven
(7) days prior to the mailing date of such material.
ARTICLE 12. REPRESENTATIONS AND WARRANTIES OF THE BANK
The Bank represents and warrants to the Trust that:
12.01 It is a trust company duly organized and existing and in good
standing under the laws of the Commonwealth of Massachusetts.
12.02 It is empowered under applicable laws and by its charter and
by-laws
to enter into and perform this Agreement.
12.03 All requisite corporate proceedings have been taken to
authorize it
to enter into and perform this Agreement.
12.04 It has and will continue to have access to the necessary
facilities,
equipment and personnel to perform its duties and obligations under this
Agreement.
12.05 It is duly registered as a transfer agent under Section 17A of
the
Securities Exchange Act of 1934, as amended, and will continue to be so
registered for as long as this Agreement remains in effect.
ARTICLE 13. REPRESENTATIONS AND WARRANTIES OF THE TRUST
The Trust represents and warrants to the Bank that:
13.01 It is a Massachusetts business trust duly organized and
existing and
in good standing under the laws of the Commonwealth of Massachusetts as set
forth in the preamble hereto.
13.02 It is empowered under applicable laws and by its charter
documents
and by-laws to enter into and perform this Agreement.
13.03 All proceedings required by said charter documents and by-laws
have
been taken to authorize it to enter into and perform this Agreement.
13.04 It is an open-end investment company registered under the 1940
Act.
13.05 A registration statement on Form N-1A (including a prospectus
and
statement of additional information) under the Securities Act of 1933, as
amended ( the "1933 Act"), and the 1940 Act is currently effective and will
remain effective, and appropriate state securities law filings have been
made
and will continue to be made, with respect to all Shares of the Trust being
offered for sale.
7
<PAGE>
13.06 When Shares are hereafter issued in accordance with the terms
of the
Prospectus, such Shares shall be validly issued, fully paid and
nonassessable by
the Fund(s).
ARTICLE 14. INDEMNIFICATION
14.01 Except as set forth in Section 14.02 hereof and elsewhere
herein,
the Bank shall not be responsible for, and the Trust shall indemnify and
hold
the Bank harmless from and against, any and all losses, damages, costs,
charges,
counsel fees, payments, expenses and liability arising out of or
attributable
to:
(a) All actions taken or omitted to be taken by the Bank or its
agent
or subcontractors in good faith reliance on, or use by the Bank or its
agents or
subcontractors of, information, records and documents which (i) are
received by
the Bank or its agents or subcontractors and furnished to it by or on
behalf of
the Fund(s), (ii) have been prepared and/or maintained by the Fund(s) or
any
other person or firm on behalf of the Fund(s), and (iii) were received by
the
Bank or its agents or subcontractors from a prior transfer agent.
(b) Any action taken or omitted to be taken by the Bank in
connection
with its appointment in good faith reliance upon any law, act, regulation
in
effect at the time of such action or inaction or interpretation of the
same.
(c) The Fund(s)' refusal or failure to comply with the terms of
this
Agreement, or which arise out of the Funds' lack of good faith, negligence
or
willful misconduct or which arise out of the breach of any representation
or
warranty of the Fund(s) hereunder.
(d) The good faith reliance on, or the carrying out by the Bank or
its
agents or subcontractors of, any instructions or requests, whether written
or
oral, of the Fund(s).
(e) The offer or sale of Shares by the Trust in violation of any
requirement under the federal securities laws or regulations or the
securities
laws or regulations of any State that such Shares be registered in such
State or
in violation of any stop order or other determination or ruling by any
federal
agency or any State with respect to the offer or sale of such Shares in
such
state.
14.02 In addition to any other limitation provided herein, or by law,
and
notwithstanding anything herein to the contrary, the Trust's
indemnification
obligations hereunder shall not apply to any liability arising out of or
attributable to any willful misfeasance, bad faith or negligence by the
Bank or
any of its directors, officers, employees, agents or subcontractors or
reckless
disregard by the Bank or any of its directors, officers, employees, agents
or
subcontractors of their respective duties hereunder.
14.03 The Bank shall indemnify and hold the Fund(s) harmless from and
against any and all losses, damages, costs, charges, counsel fees,
payments,
expenses and liability arising out of or attributable to any willful
misfeasance, bad faith or negligence by the Bank or any of its directors,
officers, employees, agents or subcontractors or reckless disregard by the
Bank
or any of its directors, officers, employees, agents or subcontractors of
their
respective duties hereunder.
14.04 At any time the Bank may apply to any officer of the Trust for
instructions, and may consult with legal counsel with respect to any
matter
arising in connection with the services to be
8
<PAGE>
performed by the Bank under this Agreement, and the Bank and its agents or
subcontractors shall not be liable and shall be indemnified by the Trust
for any
action taken or omitted by it in good faith reliance upon such instructions
or
upon the opinion of such counsel. The Bank, its agents and subcontractors
shall
be protected and indemnified in acting upon any paper or document furnished
by
or on behalf of the Fund(s), reasonably believed to be genuine and to have
been
signed by the proper person or persons, or upon any instruction,
information,
data, records or documents provided to the Bank or its agents or
subcontractors
by machine readable input, telex, CRT data entry or other similar means
authorized by the Fund(s), and shall not be held to have notice of any
change of
authority of any person, until receipt of written notice thereof from the
Fund(s).
14.05 In the event either party is unable to perform its obligations
under
the terms of this Agreement because of acts of God, strikes, interruption
of
electrical power or other utilities, equipment or transmission failure or
damage
reasonably beyond its control, or other causes reasonably beyond its
control,
such party shall not be liable to the other for any damages resulting from
such
failure to perform or otherwise from such causes.
14.06 Neither party to this Agreement shall be liable to the other
party
under any provision of this Agreement for consequential damages.
14.07 In order that the indemnification provisions contained in this
Article 14 shall apply, upon the assertion of a claim for which either
party may
be required to indemnify the other, the party seeking the indemnification
shall
promptly notify the other party of such assertion, and shall keep the other
party advised with respect to all developments concerning such claim. The
party
who may be required to indemnify shall have the option to participate with
the
party seeking indemnification in the defense of such claim. The party
seeking
indemnification shall in no case confess any claim or make any compromise
in any
case in which the other party may be required to indemnify it except with
the
other party's prior written consent, which consent shall not be
unreasonably
withheld.
ARTICLE 15. COVENANTS OF THE TRUST AND THE BANK
15.01 The Trust shall promptly furnish to the Bank the following:
(a) A certified copy of the resolution of the Trustees of the
Trust
authorizing the appointment of the Bank and the execution and delivery of
this
Agreement.
(b) A copy of the charter documents and by-laws of the Trust and
all
amendments thereto.
(c) Copies of each vote of the Trustees designating authorized
persons
to give instructions to the Bank, and a Certificate providing specimen
signatures for such authorized persons.
(d) Certificates as to any change in any officer or Trustee of the
Trust.
(e) If applicable a specimen of the certificate of Shares in each
Fund
of the Trust in the form approved by the Trustees, with a Certificate as
to
such approval.
9
<PAGE>
(f) If applicable specimens of all new certificates for Shares,
accompanied by the Trustees' resolutions approving such forms.
(g) All account application forms and other documents relating to
shareholder accounts or relating to any plan, program or service offered by
the
Trust.
(h) A list of all Shareholders of the Fund(s) with the name,
address
and tax identification number of each Shareholder, and the number of Shares
of
the Fund(s) held by each, certificate numbers and denominations ( if any
certificates have been issued), lists of any account against which stops
have
been placed, together with the reasons for said stops, and the number of
Shares
redeemed by the Fund(s).
(i) An opinion of counsel for the Trust with respect to the
validity of
the Shares and the status of such Shares under the 1933 Act.
(j) Copies of the Fund(s) registration statement on Form N-1A as
amended and declared effective by the Securities and Exchange Commission
and all
post-effective amendments thereto.
(k) Such other certificates, documents or opinions as may mutually
be
deemed necessary or appropriate for the Bank in the proper performance of
its
duties.
15.02 The Bank hereby agrees to establish and maintain facilities and
procedures reasonably acceptable to the Trust for safekeeping of stock
certificates, check forms and facsimile signature imprinting devices, if
any;
and for the preparation or use, and for keeping account of, such
certificates,
forms and devices.
15.03 The Bank shall keep records relating to the services to be
performed
hereunder, in the form and manner as it may deem advisable. To the extent
required by Section 31 of the 1940 Act and the Rules thereunder, the Bank
agrees
that all such records prepared or maintained by the Bank relating to the
services to be performed by the Bank hereunder are the confidential
property of
the Trust and will be preserved, maintained and made available in
accordance
with such Section and Rules, and will be surrendered promptly to the Trust
on
and in accordance with its request.
15.04 The Bank and the Trust agree that all books, records,
information
and data pertaining to the business of the other party which are exchanged
or
received pursuant to the negotiation or the carrying out of this Agreement
shall
remain confidential, and shall not be voluntarily disclosed to any other
person,
except as may be required by law.
15.05 In case of any requests or demands for the inspection of the
Shareholder records of the Trust, the Bank will endeavor to notify the
Trust and
to secure instructions from an authorized officer of the Trust as to such
instruction. The Bank reserves the right, however, to exhibit the
Shareholder
records to any person whenever it is advised by its counsel that it may be
held
liable for the failure to exhibit the Shareholder records to such person.
ARTICLE 16. AGREEMENT
16.01 This Agreement shall become effective on the date hereof (the
"Effective Date") and shall continue in effect for twelve months from the
Effective Date ( the "Initial Term") and from year to year thereafter with
respect to each Fund, provided that subsequent to the Initial Term,
10
<PAGE>
this Agreement may be terminated by either party at any time without
payment of
any penalty upon ninety (90) days written notice to the other. This
agreement
may be terminated at any time by either party and without payment of any
penalty
upon material breach of the terms of the Agreement by the other party. A
party
may effect such a termination upon forty-five (45) days' written notice,
specifying the nature of the breach, to the other party. In the event a
termination notice is given by the Trust, it shall be accompanied by a
resolution of the Board of Trustees, certified by the Secretary, electing
to
terminate this Agreement and designating a successor transfer agent.
16.02 Should the Trust exercise its right to terminate, all out-of-
pocket
or reasonable expenses associated with the movement of records and material
relating to the Trust will be borne by the Trust.
ARTICLE 17. ADDITIONAL FUNDS
17.01 In the event that the Trust establishes one or more series of
Shares
in addition to the initial series with respect to which it desires to have
the
Bank render services as transfer agent under the terms hereof, it shall so
notify the Bank in writing, and if the Bank agrees in writing to provide
such
services, such series of Shares shall become a Fund hereunder.
ARTICLE 18. ASSIGNMENT
18.01 Except as provided in Section 18.03 below, neither this
Agreement
nor any rights or obligations hereunder may be assigned by either party
without
the written consent of the other party.
18.02 This Agreement shall inure to the benefit of and be binding
upon the
parties and their respective permitted successors and assigns.
18.03 The Bank, may without further consent on the part of the Trust,
subcontract for the performance of any of the services to be provided
hereunder
to third parties, including any affiliate of the Bank, provided that the
Bank
(i) shall remain the primary provider of services hereunder and (ii) shall
remain liable hereunder for any acts or omissions of any subcontractor as
if
performed by the Bank.
ARTICLE 19. AMENDMENT
19.01 This Agreement may be amended or modified by a written
agreement
executed by both parties.
ARTICLE 20. MASSACHUSETTS LAW TO APPLY
20.01 This Agreement shall be construed and the provisions thereof
interpreted under and in accordance with the laws of the Commonwealth of
Massachusetts.
ARTICLE 21. MERGER OF AGREEMENT AND SEVERABILITY
21.01 This Agreement constitutes the entire agreement between the
parties
hereto and supersedes any prior agreement with respect to the subject
hereof
whether oral or written.
11
<PAGE>
21.02 In the event any provision of this Agreement shall be held
unenforceable or invalid for any reason, the remainder of the Agreement
shall
remain in full force and effect.
21.03 This Agreement may be executed in any number of counterparts,
each
of which shall be deemed to be an original; but such counterparts shall
together, constitute only one instrument.
ARTICLE 22. NOTICES
22. 01 Any notice or other instrument in writing authorized or
required by
this Agreement to be given to either party hereto will be sufficiently
given if
addressed to such party and mailed or delivered to it at its office at the
address set forth below:
For the Fund(s): The PanAgora Funds
260 Franklin Street
Boston, Massachusetts 02110
Attention: Kathleen I. DeVivo
In the case of a notice sent to the Fund(s) under Article 16 hereof
with a
copy to:
Hale and Dorr
60 State Street
Boston, Massachusetts 02109
Attention: Joseph P. Barri, Esq.
For the Bank: Investors Bank & Trust Company
P.O. Box 1537
Boston, Massachusetts 02205-1537
Attention:
ARTICLE 23. LIMITATION OF LIABILITY
23.01 The Trust and the Bank agree that the obligations of the Trust
under
this agreement shall not be binding upon any of the Trustees, Shareholders,
nominees, officers, employees or agents, whether past, present or future,
of the
Trust, individually, but are binding only upon the assets and the property
of
the Trust or of the appropriate Fund(s) thereof, as provided in the
Declaration.
The execution and delivery of this Agreement have been authorized by the
Trustees of the Trust, and signed by an authorized officer of the Trust,
acting
as such, and neither such authorization by such Trustees nor such execution
and
delivery by such officer shall be deemed to have been made by any of them
or any
Shareholder of the Trust individually or to impose any liability on any of
them
or any shareholder of the Trust personally, but shall bind only the assets
and
property of the Trust or of the appropriate Fund(s) thereof as provided in
the
Declaration.
12
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed in their names and on their behalf
under their seals by and through their duly authorized officers,
as of the day and the year first above written.
The PanAgora Funds
/s/ Edgar E. Peters
-----------------------------------
Name: Edgar E. Peters
Title: Investment Officer
ATTEST:
- ------------------------------
Investors Bank & Trust Company
/s/ Henry N. Joyce
-----------------------------------
Name: Henry N. Joyce
Title: Vice President
ATTEST:
- ------------------------------
CONSENT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees
of the PanAgora Funds:
We hereby consent to the following with respect to
Post-Effective Amendment No. 2 to the Registration Statement on
Form N-1A (File No. 33-57740) under the Securities Act of 1933,
as amended, of the PanAgora Funds:
1. The incorporation by reference of our report dated
August 10, 1994 accompanying the Annual Report dated
May 31, 1994 of the PanAgora Funds, in the Statement
of Additional Information.
2. The reference to our firm under the heading "Financial
Highlights" in the Prospectus.
3. The reference to our firm under the heading "Counsel and
Auditors" in the Statement of Additional Information.
/s/ COOPERS & LYBRAND L.L.P.
Coopers & Lybrand L.L.P.
Boston, Massachusetts
August 10, 1994
The PanAgora Funds
EDGAR DESCRIPTIONS
DESCRIPTION OF MOUNTAIN CHART 1
A line graph depicting the total growth (including reinvestment of
dividends and
capital gains) of a hypothetical investment of $10,000 in The PanAgora
Asset
Allocation Fund's shares on June 1, 1993 through May 31, 1994 as compared
with
the growth of a $10,000 investment in S&P 500 Composite Stock Price Index
and
the Lehman Brothers Aggregate Bond Index. The plot points used to draw the
line
graph were as follows:
<TABLE>
<CAPTION>
GROWTH OF $10,000
GROWTH OF $10,000 INVESTMENT IN THE
GROWTH OF $10,000 INVESTMENT IN THE LEHMAN BROTHERS
INVESTED IN ASSET S&P 500 COMPOSITE AGGREGATE BOND
MONTH ENDED ALLOCATION FUND STOCK PRICE INDEX INDEX
<S> <C> <C> <C>
05/31/93 -- $10,000 $10,000
06/01/93 $10,000 -- --
06/93 $9,930 $10,029 $10,181
09/93 $10,130 $10,288 $10,446
12/93 $10,327 $10,526 $10,453
03/94 $9,973 $10,127 $10,153
05/94 $10,163 $10,425 $10,071
</TABLE>
DESCRIPTION OF MOUNTAIN CHART 2
A line graph depicting the total growth (including reinvestment of
dividends and
capital gains) of a hypothetical investment of $10,000 in The PanAgora
Global
Fund's shares on June 1, 1993 through May 31, 1994 as compared with the
growth
of a $10,000 investment in Salomon Brothers World Government Bond Index and
the
Morgan Stanley World Index. The plot points used to draw the line graph
were as
follows:
<TABLE>
<CAPTION>
GROWTH OF $10,000
INVESTMENT IN THE GROWTH OF $10,000
SALOMON BROTHERS INVESTMENT IN THE
GROWTH OF $10,000 WORLD GOVERNMENT MORGAN STANLEY
MONTH ENDED INVESTED IN GLOBAL FUND BOND INDEX WORLD INDEX
<S> <C> <C> <C>
05/31/93 -- $10,000 $10,000
06/01/93 $10,000 -- --
06/93 $9,910 $9,978 $9,917
09/93 $10,460 $10,530 $10,395
12/93 $10,790 $10,425 $10,575
03/94 $10,630 $10,426 $10,653
05/94 $10,868 $10,346 $11,014
</TABLE>
<PAGE>
DESCRIPTION OF MOUNTAIN CHART 3
A line graph depicting the total growth (including reinvestment of
dividends and
capital gains) of a hypothetical investment of $10,000 in the PanAgora
International Equity Fund's shares on June 4, 1993 through MaY 31, 1994 as
compared with the growth of a $10,000 investment in MSCI EAFE Index and the
MSCI
EAFE-GDP Index. The plot points used to draw the line graph were as
follows:
<TABLE>
<CAPTION>
GROWTH OF
$10,000
GROWTH OF $10,000 GROWTH OF $10,000 INVESTMENT
IN THE
INVESTED IN INTERNATIONAL INVESTMENT IN THE MSCI
EAFE-GDP
MONTH ENDED EQUITY FUND MSCI EAFE INDEX INDEX
<S> <C> <C> <C>
05/31/93 -- $10,000
$10,000
06/04/93 $10,000 -- -
- -
06/93 $9,800 $9,846
$9,830
09/93 $10,710 $10,506
$10,650
12/93 $10,602 $10,604
$10,790
03/94 $10,889 $10,982
$11,396
05/94 $11,012 $11,387
$11,704
</TABLE>
<PAGE>
THE PANAGORA FUNDS
ANNUAL REPORT
MAY 31, 1994
<PAGE>
The PanAgora Funds
President's Letter
June 30, 1994
We are pleased to present the first annual report of The PanAgora
Funds. The PanAgora Funds were started in 1993 to provide
investors with investment vehicles in the form of mutual funds
implementing specific investment strategies. PanAgora Asset
Management, Inc., the Fund's advisor, manages pension funds using
very similar strategies. The PanAgora Funds make these
strategies available to smaller pension funds, foundations and
endowment funds, 401k plans and individual investors.
The PanAgora Funds are a series of three funds. The PanAgora
Asset Allocation Fund invests in a mix of U.S. stocks, bonds and
cash equivalents. The PanAgora International Equity Fund invests
in stocks outside the U.S. The PanAgora Global Fund invests in
stocks, bonds and cash equivalents in the U.S. and around the
world.
The PanAgora Asset Allocation Fund's investment objective is to
maximize total return, consisting of capital appreciation and
current income. The Fund attempts to achieve its objective by
actively allocating assets among U.S. equity securities,
investment grade fixed income securities and cash and cash
equivalents based on the Advisor's proprietary asset allocation
disciplines. The Fund was heavily invested in stocks throughout
most of the last year. More recently, the percentage in stocks
has been reduced to less than 70% with the balance invested
primarily in bonds. This shift is based on the high level of the
U.S. stock market, the maturing of the U.S. business cycle and
rising interest rates.
The PanAgora International Equity Fund's primary investment
objective is to maximize total return, consisting primarily of
capital appreciation. Current income is a secondary objective.
The Fund attempts to achieve its objective by actively allocating
assets among international equity markets based on the Advisor's
proprietary asset allocation disciplines. Over the past year,
the Fund has focused on European stocks. European economies are
coming out of their recessions and beginning to grow again.
Combined with declining interest rates, this makes European
stocks attractive. We have more modest investments in the Far
East because these markets appear overpriced. In early 1994, we
began to invest a portion of the Fund (up to 10%) in emerging
markets. Emerging markets offer rapid growth and long term
return potential. They are appropriate for a portion of the
Fund. Unfortunately, emerging markets underperformed during the
first few months of 1994 despite their excellent long term growth
prospects.
The PanAgora Global Fund's investment objective is to maximize
total return, consisting of capital appreciation and current
income. The Fund attempts to achieve its objective by actively
allocating assets among global equity, fixed income and currency
markets based on the Advisor's proprietary asset allocation
disciplines. Global investment strategies are new to most
American investors but familiar to many European investors. Over
the past 12 months, PanAgora Global Fund has
<PAGE>
invested more than 70% of its assets in global equity markets based
on the Advisor's view of their superior return opportunities.
We thank you for your interest in The PanAgora Funds and we look
forward to serving you.
Sincerely,
Richard A. Crowell
President
The PanAgora Funds
<PAGE>
<TABLE>
<CAPTION>
THE PANAGORA FUNDS
ASSET ALLOCATION FUND
- ---------------------------------------------------------------------------
- -
PORTFOLIO OF INVESTMENTS MAY 31,
1994
- ---------------------------------------------------------------------------
- -
MARKET
VALUE
SHARES (NOTE 1)
- ---------------------------------------------------------------------------
- -
<S> <C>
COMMON STOCKS - 62.8%
FINANCIAL SERVICES - 10.1%
200 American International Group, Inc.
$18,675
300 American Premier Underwriters, Inc.
8,250
300 AmSouth Bancorporation
9,488
600 Bank of New York, Inc.
17,700
200 Bankers Trust NY Corporation
14,075
840 Bear Stearns Companies, Inc.
17,115
400 Beneficial Corporation
14,750
300 Cigna Corporation
20,662
200 Citicorp
7,900
200 Federal Home Loan Mortgage Corporation
11,600
300 Federal National Mortgage Association
25,050
400 First Union Corporation
18,700
400 MBNA Corporation
10,550
400 Merrill Lynch & Company, Inc.
15,600
400 Morgan (J.P.) & Company, Inc.
26,400
300 Morgan Stanley Group, Inc.
17,925
500 Norwest Corporation
13,375
500 SouthTrust Corporation
10,562
200 Travelers, Inc.
6,550
100 UNUM Corporation
4,688
- ---------------------------------------------------------------------------
- -
289,615
- ---------------------------------------------------------------------------
- -
ENERGY - 8.7%
400 Ashland Oil, Inc.
14,850
500 Chevron Corporation
43,500
700 Dresser Industries, Inc.
15,837
200 Exxon Corporation
12,200
100 Mobil Corporation
8,100
300 Panhandle Eastern Corporation
5,963
400 Royal Dutch Petroleum Company
42,750
500 Schlumberger Limited
28,625
300 Tenneco, Inc.
14,362
400 Texaco, Inc.
25,400
300 Unocal Corporation
8,288
600 USX-Marathon Group
10,275
100 Western Atlas, Inc. +
4,275
500 Williams Companies, Inc.
14,063
- ---------------------------------------------------------------------------
- -
248,488
- ---------------------------------------------------------------------------
- -
UTILITIES - 8.5%
400 American Telephone & Telegraph Company
21,800
800 Ameritech Corporation
31,300
300 DQE, Inc.
9,525
500 Entergy Corporation
14,438
400 Illinois Power Company
8,250
800 MCI Communications Corporation
19,200
1,300 Niagara Mohawk Power Corporation
21,450
700 NYNEX Corporation
26,425
1,000 Philadelphia Electric Company (PECO Energy)
27,250
300 Potomac Electric Power Company
5,887
400 Rochester Telephone Corporation
8,950
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE>
<TABLE>
<CAPTION>
THE PANAGORA FUNDS
ASSET ALLOCATION FUND
- ---------------------------------------------------------------------------
- -
PORTFOLIO OF INVESTMENTS (CONTINUED) MAY 31,
1994
- ---------------------------------------------------------------------------
- -
MARKET
VALUE
SHARES (NOTE 1)
- ---------------------------------------------------------------------------
- -
<S> <C>
COMMON STOCKS (CONTINUED)
UTILITIES - (CONTINUED)
800 Southern Company
$14,800
300 Southwestern Bell Corporation
12,337
400 Sprint Corporation
15,200
200 U.S. West, Inc.
8,025
- ---------------------------------------------------------------------------
- -
244,837
- ---------------------------------------------------------------------------
- -
CONSUMER NON-DURABLES - 7.2%
600 Coca-Cola
24,225
200 Crown Cork & Seal, Inc. +
7,225
300 Dole Food, Inc.
8,250
300 Gillette
20,925
200 Liz Claiborne
4,375
200 McDonald's Corporation
12,400
200 Nike, Inc.
11,800
200 PepsiCo, Inc.
7,200
500 Philip Morris Companies, Inc.
24,625
500 Procter & Gamble
28,188
300 Reebok International Ltd
9,450
600 Seagram Ltd
17,775
100 Unilever N.V.
10,500
400 V.F. Corporation
19,650
- ---------------------------------------------------------------------------
- -
206,588
- ---------------------------------------------------------------------------
- -
CONSUMER SERVICES - 5.5%
300 Blockbuster Entertainment Corporation
8,475
400 Circuit City Stores, Inc.
7,750
400 Fleming Companies, Inc.
9,950
600 K mart Corporation
9,000
500 King World Productions, Inc.+
20,000
400 Kroger Company+
9,550
300 Melville Corporation
12,187
400 Penney (J.C.), Inc.
20,450
500 Rite Aid Corporation
10,063
200 Sears Roebuck & Company
10,125
400 Toys "R" Us, Inc.+
14,200
800 Wal-Mart Stores, Inc.
18,800
400 Woolworth Corporation
6,300
- ---------------------------------------------------------------------------
- -
156,850
- ---------------------------------------------------------------------------
- -
HEALTH CARE - 5.4%
500 Abbott Laboratories
14,937
400 Baxter International Corporation
10,300
200 Becton, Dickinson
7,625
300 Johnson & Johnson
13,275
400 Merck & Company
12,200
200 Pfizer, Inc.
12,750
600 Schering Plough Corporation
39,150
300 SciMed Life Systems, Inc. +
8,981
900 Upjohn Company
28,912
100 Warner-Lambert Company
7,038
- ---------------------------------------------------------------------------
- -
155,168
- ---------------------------------------------------------------------------
- -
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE>
<TABLE>
<CAPTION>
THE PANAGORA FUNDS
ASSET ALLOCATION FUND
--------------------------------------------------------------------------
- --
PORTFOLIO OF INVESTMENTS (CONTINUED) MAY 31,
1994
--------------------------------------------------------------------------
- --
MARKET
VALUE
SHARES (NOTE 1)
--------------------------------------------------------------------------
- --
<S> <C>
COMMON STOCKS (CONTINUED)
CAPITAL GOODS - 5.3%
500 Boeing Company
$23,187
200 Centex Corporation
4,875
300 Deere & Company
20,925
200 Fluor Corporation
10,200
1,000 General Electric Company
49,625
300 Lockheed Corporation
19,162
400 Raytheon Company
24,900
--------------------------------------------------------------------------
- -
152,874
--------------------------------------------------------------------------
- -
TECHNOLOGY - 4.6%
200 Apple Computer, Inc.
5,850
100 Autodesk, Inc.
5,150
100 COMPAQ Computer Corporation+
11,825
500 Digital Equipment Corporation+
11,063
200 E-Systems, Inc.
7,925
200 Intel Corporation
12,500
400 International Business Machines Corporation
25,300
200 ITT Corporation
16,700
400 Loral Corporation
14,300
200 Pitney Bowes, Inc.
7,825
300 Sun Microsystem, Inc.+
6,263
100 Texas Instruments, Inc.
8,025
--------------------------------------------------------------------------
- -
132,726
--------------------------------------------------------------------------
- -
BASIC INDUSTRIES - 4.0%
400 Boise Cascade Corporation
8,350
400 Champion International Corporation
13,050
300 Dow Chemical Company
20,475
400 FMC Corporation+
19,300
400 Lubrizol Corporation
13,700
500 Phelps Dodge Corporation
27,750
500 Union Carbide Corporation
13,500
--------------------------------------------------------------------------
- -
116,125
--------------------------------------------------------------------------
- -
CONSUMER DURABLES - 1.9%
200 Chrysler Corporation
9,925
400 Fleetwood Enterprises, Inc.
8,400
500 Ford Motor Company
28,875
200 Goodyear Tire & Rubber Company
7,750
--------------------------------------------------------------------------
- -
--------------------------------------------------------------------------
- -
54,950
TRANSPORTATION - 1.6%
400 American President Companies Limited
9,050
300 Conrail, Inc.
16,462
300 Delta Airlines, Inc.
13,688
100 Union Pacific Corporation
5,900
--------------------------------------------------------------------------
- -
45,100
--------------------------------------------------------------------------
- -
TOTAL COMMON STOCKS (COST $1,886,089)
1,803,321
--------------------------------------------------------------------------
- -
--------------------------------------------------------------------------
- -
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE>
THE PANAGORA FUNDS
ASSET ALLOCATION FUND
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (CONTINUED) MAY 31, 1994
- ---------------------------------------------------------------------------
FACE MARKET VALUE
VALUE (NOTE 1)
- ---------------------------------------------------------------------------
<S> <C>
U.S. TREASURY BILLS - 1.4% (COST $39,917)
$40,000 U.S. Treasury Bills, 3.640% # due 6/23/94 ++ $39,917
- ---------------------------------------------------------------------------
COMMERCIAL PAPER - 32.7%
204,000 Ford Motor Credit Corporation, 4.250% due 6/1/94 204,000
735,000 General Electric Capital Corporation, 4.220%
due 6/1/94 735,000
- ---------------------------------------------------------------------------
TOTAL COMMERCIAL PAPER (COST $939,000) 939,000
- ---------------------------------------------------------------------------
TOTAL INVESTMENTS (COST $2,865,006*) 96.9% 2,782,238
OTHER ASSETS AND LIABILITIES (NET) 3.1 88,595
- ---------------------------------------------------------------------------
NET ASSETS 100.0% 2,870,833
- ---------------------------------------------------------------------------
<FN>
*Aggregate cost for Federal tax purposes.
+Non-income producing security.
++ Security pledged as collateral for futures contracts.
# Annualized yield to maturity (unaudited).
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF UNREALIZED
CONTRACTS DEPRECIATION
- ---------------------------------------------------------------------------
<S> <C>
OPEN FUTURES CONTRACTS TO BUY AT MAY 31, 1994:
9 U.S. Treasury 10 Year Note Index Future, September
1994
(6,063)
- ---------------------------------------------------------------------------
OPEN FUTURES CONTRACTS TO SELL AT MAY 31, 1994:
1 Standard & Poor's 500 Index Future, September 1994
(425)
- ---------------------------------------------------------------------------
NET UNREALIZED DEPRECIATION OF OPEN FUTURES CONTRACTS
($6,488)
- ---------------------------------------------------------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE>
<TABLE>
<CAPTION>
THE PANAGORA FUNDS
Global Fund
- ---------------------------------------------------------------------------
- -----------------
Portfolio of Investments
May 31, 1994
- ---------------------------------------------------------------------------
- -----------------
MARKET VALUE
SHARES
(Note 1)
- ---------------------------------------------------------------------------
- -----------------
<S>
<C>
COMMON STOCKS - 74.1%
AUSTRIA - 0.7%
100 Austrian Airlines
$16,086
100 Constantia Industry Holdings
8,303
700 Creditanstalt Bank
41,712
100 EA Generali AG
30,184
100 Lenzing AG
10,984
200 Oesterreichische
11,399
900 Oesterreichische El Wirtsch
45,846
700 Omev AG
57,150
300 Steyer-Daimler Puch Ag
6,461
300 Veitscher
9,340
100 Wienerberger Baust
30,184
200 Z-Landerbank
10,465
100 Z-Landerbank Austria, Ptg
3,537
- ---------------------------------------------------------------------------
- -----------------
281,651
- ---------------------------------------------------------------------------
- -----------------
BELGIUM - 3.6%
935 ACEC Union Miniere
74,557
227 A.G. Finance
18,000
84 Bekaert SA
63,198
156 CBR (Cimenteries)
58,166
1,769 Delhaize
70,844
1,714 Electrabel Com
289,548
360 Electrabel (AFUL)
61,134
575 Generale de Banque Ord
138,401
161 Gevaert Photo Productions
46,408
128 Group Brussels Lambert SA
16,747
522 Kredietbank
104,832
894 Petrofina SA
285,151
69 Royale Belge
10,719
303 Solvay ET Cie, Class A
140,493
435 Tractabel Cap
132,645
- ---------------------------------------------------------------------------
- -----------------
1,510,843
- ---------------------------------------------------------------------------
- -----------------
FINLAND - 2.4%
1,400 Amer Group, Class A
34,218
900 Cultor, Series 1
23,485
500 Cultor, Series 2, Free
12,956
30,500 Kansallis-Osake-Pankki
67,259
5,300 Kesko Group
48,698
400 Kone Corporation, Class B, Free
45,207
4,800 Kymmene Oy
100,558
800 Metra AB, Class A
25,874
800 Metra AB, Class B
26,021
2,400 Nokia Oy AB I
177,299
6,500 Outokumpu Oy, Class A
109,893
1,200 Pohjola Insurance Company, Class A
18,965
1,200 Pohjola Insurance Company, Class B Free
16,539
8,800 Repola
145,544
800 Sampo, Class A
41,899
28,500 Unitas, Class A
76,990
500 Stockman Oy AB, Class A
20,904
400 Stockman Oy AB, Class B, Free
15,804
- ---------------------------------------------------------------------------
- -----------------
1,008,113
- ---------------------------------------------------------------------------
- -----------------
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE>
<CAPTION>
THE PANAGORA FUNDS
Global Fund
- ---------------------------------------------------------------------------
- -----------------
Portfolio of Investments (continued)
May 31, 1994
- ---------------------------------------------------------------------------
- -----------------
MARKET VALUE
SHARES
(Note 1)
- ---------------------------------------------------------------------------
- -----------------
<C> <S>
<C>
COMMON STOCKS (continued)
GERMANY - 0.1%
100 Viag AG
$28,098
- ---------------------------------------------------------------------------
- -----------------
HONG KONG - 3.6%
7,500 Bank of East Asia
36,645
27,000 Cathay Pacific Airways
38,790
34,000 Cheung Kong Holdings
171,624
28,800 China Light & Power
160,286
20,000 Dairy Farm International Holdings
29,251
23,000 Hang Seng Bank Ltd.
165,217
95,000 Hong Kong Telecommunications
188,126
24,000 Hong Kong & China Gas
50,633
35,000 Hutchison-Whampoa Limited
154,021
7,000 Jardine Matheson Holdings
57,078
22,000 New World Development Company
70,902
28,600 Sun Hung Kai Properties
192,488
15,000 Swire Pacific Ltd., Series A
116,487
18,000 Wharf Holdings
76,881
- ---------------------------------------------------------------------------
- -----------------
1,508,429
- ---------------------------------------------------------------------------
- -----------------
ITALY - 0.1%
1,160 Mediobanca S.p.A.
11,615
12,500 SME (Meridionale Finanziaria)
30,133
- ---------------------------------------------------------------------------
- -----------------
41,748
- ---------------------------------------------------------------------------
- -----------------
JAPAN - 15.5%
13,000 Asahi Bank Limited
143,989
7,000 Asahi Glass Company
82,211
12,000 Bank of Tokyo
191,349
19,000 Dai Ichi Kangyo Bank
362,838
8,000 Daiwa Securities
137,497
19,000 Fuji Bank
439,034
4,000 Fuji Photo Film Limited
86,699
10,000 Fujitsu Limited
105,032
19,000 Hitachi Limited
195,932
5,000 Honda Motor Company
89,755
16,000 Industrial Bank of Japan
498,043
1,000 Ito-Yokado Company
51,370
5,000 Kansai Electric Power
126,516
7,000 Kirin Brewery
82,880
1,000 Kyocera Corporation
64,547
12,000 Matsushita Electric Industrial
209,682
8,000 Mitsubishi Corporation
94,720
8,000 Mitsubishi Estate Company
94,720
21,000 Mitsubishi Heavy Industries
153,795
8,000 Mitsubishi Trust & Banking
129,094
7,000 Mitsui Trust & Banking
88,227
10,000 NEC Corporation
113,625
5,000 Nippon Denso Company Limited
95,484
47,000 Nippon Steel
168,739
16,000 Nissan Motor Company
133,983
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE>
<CAPTION>
THE PANAGORA FUNDS
Global Fund
- ---------------------------------------------------------------------------
- -----------------
Portfolio of Investments (continued)
May 31, 1994
- ---------------------------------------------------------------------------
- -----------------
MARKET VALUE
SHARES
(Note 1)
- ---------------------------------------------------------------------------
- ---------
<C> <S>
<C>
COMMON STOCKS (continued)
JAPAN - (CONTINUED)
12,000 Nomura Securities Company
$277,284
16,000 Osaka Gas Company
74,554
21,000 Sakura Bank
294,758
1,100 Seven-Eleven Japan
81,190
7,000 Sharp Corporation
120,309
1,000 Sony Corporation
59,391
21,000 Sumitomo Bank
451,160
4,000 Tohoku Electric Power
101,976
13,000 Tokai Bank
168,815
10,000 Tokio Marine & Fire Insurance Company
130,812
8,000 Tokyo Electric Power Company
246,730
17,000 Tokyo Gas Company Limited
86,680
22,000 Toyota Motor Company
443,235
- ---------------------------------------------------------------------------
- -----------------
6,476,655
- ---------------------------------------------------------------------------
- -----------------
NETHERLANDS - 5.2%
8,200 ABN Amro Holdings
268,539
3,500 Ahold Koninklijke NV
90,140
800 Akzo Nobel NV
90,221
2,100 Elsevier NV CVA
190,945
500 Heineken NV
61,133
8,000 International Nederlanden Groep CVA
329,222
2,200 KLM Royal Dutch Airlines
61,192
1,100 Koninklijke KNP BT NV
28,568
3,700 Philips Electronics NV
102,914
6,000 Royal Dutch Petroleum
633,719
1,700 Unilever NV CVA
177,895
2,200 Wolters Kluwer CVA
135,386
- ---------------------------------------------------------------------------
- -----------------
2,169,874
- ---------------------------------------------------------------------------
- -----------------
NEW ZEALAND - 0.1%
25,000 Fletcher Challange
36,131
- ---------------------------------------------------------------------------
- -----------------
SINGAPORE - 1.6%
1,200 City Developments
6,141
2,500 Development Bank of Singapore
26,402
4,000 Fraser & Neave
47,979
17,000 Genting Berhad Myro
203,911
1,000 Keppel Corporation
7,040
30,000 Malayan Banking
173,077
4,666 Overseas-Chinese Banking Corporation
40,759
40,000 Sime Darby BHD
100,652
3,000 Singapore International Airlines
26,010
700 Singapore Press Holdings
6,982
3,375 United Overseas Bank
27,502
- ---------------------------------------------------------------------------
- -----------------
666,455
- ---------------------------------------------------------------------------
- -----------------
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE>
<CAPTION>
THE PANAGORA FUNDS
Global Fund
- ---------------------------------------------------------------------------
- -----------------
Portfolio of Investments (continued)
May 31, 1994
- ---------------------------------------------------------------------------
- -----------------
MARKET VALUE
SHARES
(Note 1)
- ---------------------------------------------------------------------------
- -----------------
<C> <S>
<C>
COMMON STOCKS (continued)
SPAIN - 6.0%
12,300 Banco Bilbao Vizcaya
$289,705
8,700 Banco Central Hispano Americano
189,200
5,100 Banco de Santander
223,325
3,100 Banco Espanol de Credito
24,795
3,300 Dragados & Constructoras SA
55,710
9,400 Empresa Nacional De Electrica (Endesa)
453,889
1,200 Gas Natural S.D.G. SA L.C.
100,671
42,300 Iberdrola SA
310,896
11,200 Repsol SA
353,380
37,700 Telefonica Nacional de Espana
511,375
- ---------------------------------------------------------------------------
- -----------------
2,512,946
- ---------------------------------------------------------------------------
- -----------------
SWEDEN - 0.4%
100 AGA AB, Class A
4,894
100 AGA AB, Class B, Free
4,792
200 Atlas Copco AB, Class A, Free
12,376
400 Esselte AB, Class B, Free
6,098
500 Esselte AF
7,623
200 Euroc Industriab, Class A, Free
3,254
300 Hennes & Mauritz, Series 5
15,604
100 Securitas AB, Class B, Free
3,113
1,700 Skandia Forsakrings AB Free
25,482
3,600 Skandinaviska Enskil Banken
23,291
400 SKF AB, Class B, Free
6,713
300 SKF, Class A, Free
5,035
500 Svenska Handelsbanken, Class A, Free
6,726
700 Trelleborg AB, Class B, Free
9,954
100 Volvo AB, Class A, Free
9,288
- ---------------------------------------------------------------------------
- -----------------
144,243
- ---------------------------------------------------------------------------
- -----------------
SWITZERLAND - 3.7%
49 Adia I
9,426
15 Alisuisse-Lonza Holdings AG, BR
7,032
30 Alisuisse-Lonza Holdings AG, Reg
14,108
57 Brown Boveri & Cie AG, Class A
51,172
40 Brown Boveri & Cie AG, Class B
6,698
28 Ciba Geigy AG, BR
17,556
193 Ciba Geigy AG, Reg
116,886
161 Credit Suisse Holdings
71,122
319 C.S. Holdings
27,957
3 Fischer (George)
3,164
1 Forbo Holdings AG
1,974
76 Holderbank Financier Glaris
10,289
28 Holderbank Financier Glaris AG
19,252
27 Merkur Holdings
6,945
291 Nestle SA
237,818
12 Roche Holdings AG, BR
109,697
51 Roche Holdings AG, Genuscheine
243,826
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE>
<CAPTION>
THE PANAGORA FUNDS
Global Fund
- ---------------------------------------------------------------------------
- -----------------
Portfolio of Investments (continued)
May 31, 1994
- ---------------------------------------------------------------------------
- -----------------
MARKET VALUE
SHARES
(Note 1)
- ---------------------------------------------------------------------------
- -----------------
<C> <S>
<C>
COMMON STOCKS (continued)
SWITZERLAND - (continued)
16 Sandoz AG, BR
$8,003
255 Sandoz AG, Reg
125,184
3 Schindler Holdings AG, Ptg
3,815
5 Schindler Holdings AG, Reg
6,234
7 Schweiz Ruckversic
3,167
180 Schweiz Ruckversicherungs (Renaissance)
74,898
173 Schweizercher Bankverein, BR
49,798
198 Schweizercher Bankverein, Reg
28,497
154 Schweizerische Bankgelsellschaft
131,122
12 Sika Finanz AG
3,403
26 SMH AG Neuenburg, BR
15,042
116 SMH AG Neuenburg, Reg
14,547
8 Societe Generale de Surveillance
12,084
16 Sulzer AG
10,488
7 Sulzer AG, Ptg
4,514
15 Swissair AG
8,443
164 Union Bank of Switzerland
35,055
28 Zurich Versicherungs, BR
26,893
40 Zurich Versicherungs, Reg
38,475
- ---------------------------------------------------------------------------
- -----------------
1,554,584
- ---------------------------------------------------------------------------
- -----------------
UNITED STATES - 31.1%
7,400 Abbott Laboratories
221,075
3,700 Airtouch Communications +
90,188
2,700 American Home Products Corporation
156,600
2,800 American International Group, Inc.
261,450
11,900 American Telephone & Telegraph Company
648,550
4,800 Ameritech Corporation
187,800
4,400 Amoco Corporation
259,050
1,400 Atlantic Richfield
141,225
3,100 BankAmerica Corporation
150,350
3,800 Bell Atlantic Corporation
202,825
4,400 BellSouth Corporation
261,800
4,600 Bristol-Myers Squibb
251,275
2,900 Cheveron Corporation
252,300
3,100 Chrysler Corporation
153,837
11,500 Coca Cola Company
464,313
4,700 Disney (Walt) Company
203,275
2,400 Dow Chemical Company
163,800
6,000 duPont (EI) deNemours & Company
372,000
725 Eastman Chemical
34,891
2,900 Eastman Kodak Company
135,937
11,000 Exxon Corporation
671,000
2,400 Federal National Mortgage Association
200,400
4,400 Ford Motor Company
254,100
8,400 GTE Corporation
259,350
15,200 General Electric Company
754,300
- ---------------------------------------------------------------------------
- -----------------
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE>
<CAPTION>
THE PANAGORA FUNDS
Global Fund
- ---------------------------------------------------------------------------
- -----------------
Portfolio of Investments (continued)
May 31, 1994
- ---------------------------------------------------------------------------
- -----------------
MARKET VALUE
SHARES
(Note 1)
- ---------------------------------------------------------------------------
- -----------------
<C> <S>
<C>
COMMON STOCKS (continued)
UNITED STATES - (continued)
6,300 General Motors Corporation
$338,625
2,200 Hewlett Packard Company
172,700
4,000 Home Depot, Inc.
180,500
3,700 Intel Corporation
231,250
5,100 International Business Machines Corporation
322,575
5,800 Johnson & Johnson
256,650
3,100 McDonald's Corporation
192,200
10,000 Merck & Company, Inc.
305,000
3,800 Minnesota Mining & Manufacturing Company
193,800
3,500 Mobil Corporation
283,500
4,800 Motorola, Inc.
224,400
3,700 NYNEX Corporation
139,675
3,800 Pacific Gas & Electric Company
97,375
3,700 Pacific Telesis Group
112,388
7,000 PepsiCo Inc.
252,000
2,800 Pfizer, Inc.
178,500
7,800 Philip Morris Companies, Inc.
384,150
6,000 Procter & Gamble Company
338,250
4,700 Royal Dutch Petroleum Company ADR
502,313
2,100 Schlumberger, Ltd.
120,225
3,100 Sears Roebuck & Company
156,937
5,300 Southwestern Bell Corporation
217,963
2,300 Texaco, Inc.
146,050
3,300 Time Warner Inc.
127,875
1,400 Unilever N.V. ADR
147,000
3,700 US West, Inc.
148,462
20,300 Wal-Mart Stores, Inc.
477,050
- ---------------------------------------------------------------------------
- -----------------
12,999,104
- ---------------------------------------------------------------------------
- -----------------
TOTAL COMMON STOCKS (Cost $30,029,609)
30,938,874
- ---------------------------------------------------------------------------
- -----------------
PREFERRED STOCK - 0.3%
400 Creditanstalt Bank
23,248
1,300 Nokia Oy AB I
96,276
- ---------------------------------------------------------------------------
- -----------------
TOTAL PREFERRED STOCK (Cost $135,547)
119,524
- ---------------------------------------------------------------------------
- -----------------
RIGHTS AND WARRANTS - 0.0%
146 CBR (Cimenteries) Warrants, expire 12/20/96 +
780
338 United Overseas Bank, Rights, expire 6/17/94 +
1,844
- ---------------------------------------------------------------------------
- -----------------
TOTAL RIGHTS AND WARRANTS (Cost $2,448)
2,624
- ---------------------------------------------------------------------------
- -----------------
<CAPTION>
FACE
VALUE
- ---------------------------------------------------------------------------
- -----------------
<C> <S>
<C>
COMMERCIAL PAPER - 9.8%
$3,556,000 Ford Motor Credit Corporation, 4.250% due 6/1/94
3,556,000
537,000 General Electric Capital Corporation, 4.220% due 6/1/94
537,000
- ---------------------------------------------------------------------------
- -----------------
TOTAL COMMERCIAL PAPER (Cost $4,093,000)
4,093,000
- ---------------------------------------------------------------------------
- -----------------
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE>
THE PANAGORA FUNDS
Global Fund
- ---------------------------------------------------------------------------
- -----------------
Portfolio of Investments (continued)
May 31, 1994
- ---------------------------------------------------------------------------
- -----------------
<CAPTION>
FACE
MARKET VALUE
VALUE
(Note 1)
- ---------------------------------------------------------------------------
- -----------------
<C> <S>
<C>
U.S. TREASURY BILL - 2.6% (Cost $1,097,357)
1,100,000 U.S. Treasury Bill, 3.940% # due 6/23/94
$1,097,357
- ---------------------------------------------------------------------------
- -----------------
REPURCHASE AGREEMENT - 8.5% (Cost $3,556,000)
3,556,000 Agreement with Union Bank of Switzerland
dated 5/31/94 bearing 4.000% to be
repurchased at $3,556,395 on 6/1/94,
collateralized by $3,810,000 U.S. Treasury
Bills due 5/4/95
3,556,000
- ---------------------------------------------------------------------------
- -----------------
TOTAL INVESTMENTS (Cost $38,913,961*) 95.3%
39,807,379
OTHER ASSETS AND LIABILITIES (Net) 4.7
1,950,193
- ---------------------------------------------------------------------------
- -----------------
NET ASSETS 100.0%
$41,757,572
- ---------------------------------------------------------------------------
- -----------------
<FN>
* Aggregate cost for federal tax purposes.
+ Non-income producing security.
# Annualized yield to maturity (unaudited).
ADR - American Depository Receipt
BR - Bearer
Ptg - Participating
Reg - Registered
</TABLE>
<TABLE>
<CAPTION>
UNREALIZED
NUMBER OF
APPRECIATION/
CONTRACTS
(DEPRECIATION)
- ---------------------------------------------------------------------------
- -----------------
<S>
<C>
OPEN FUTURES CONTRACTS TO BUY AT MAY 31, 1994:
21 All Ordinary Index Future, June 1994
(57,314)
46 CAC 40 Index Future, June 1994
(105,140)
44 Canadian 10 Year Bond Index Future, September 1994
(62,588)
29 Financial Times Stock Exchange Index Future, June 1994
(144,210)
1 Japan 10 Year Bond Index Future, June 1994
630
10 Toronto 35 Index Future, June 1994
(9,235)
8 U.S. Treasury Note 10 Year Index Future, September 1994
(2,500)
- ---------------------------------------------------------------------------
- -----------------
(380,357)
- ---------------------------------------------------------------------------
- -----------------
OPEN FUTURES CONTRACTS TO SELL AT MAY 31, 1994:
(5) Standard & Poor's 500 Index Future, June 1994
(16,750)
(7) Topix Index Future, June 1994
(68,663)
- ---------------------------------------------------------------------------
- -----------------
(85,413)
- ---------------------------------------------------------------------------
- -----------------
Net Unrealized Depreciation of Open Futures Contracts
($465,770)
- ---------------------------------------------------------------------------
- -----------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE>
<TABLE>
<CAPTION>
THE PANAGORA FUNDS
Global Fund
- ---------------------------------------------------------------------------
- -----------------
Portfolio of Investments
May 31, 1994
- ---------------------------------------------------------------------------
- -----------------
PERCENTAGE OF
MARKET VALUE
Sector Diversification (unaudited) NET ASSETS
(NOTE 1)
- ---------------------------------------------------------------------------
- -----------------
<S> <C>
<C>
COMMON STOCKS:
Financial Services 15.6 %
$6,521,590
Utility 13.9
5,810,185
Oil & Gas 7.5
3,153,158
Basic Industries 5.5
2,310,952
Consumer Services 4.6
1,938,693
Technology 4.6
1,914,855
Transportation 3.6
1,485,296
Food & Kindred Products 3.2
1,346,899
Health Care Services 3.2
1,338,237
Non-Durable Goods 2.7
1,134,920
Durable Goods 2.4
982,781
Holding Companies 1.6
663,670
Construction & Building 1.5
616,623
Forestry Products & Paper 1.2
504,601
Real Estate 0.7
287,208
Manufacturing 0.6
235,447
Minerals & Mining 0.5
204,715
Other 1.2
489,044
-----------
- -----------
TOTAL COMMON STOCKS 74.1
30,938,874
PREFERRED STOCKS 0.3
119,524
RIGHTS AND WARRANTS 0.0
2,624
COMMERCIAL PAPER 9.8
4,093,000
U.S. TREASURY BILL 2.6
1,097,357
REPURCHASE AGREEMENT 8.5
3,556,000
-----------
- -----------
TOTAL INVESTMENTS 95.3
39,807,379
OTHER ASSETS AND LIABILITIES (NET) 4.7
1,950,193
-----------
- -----------
NET ASSETS 100.0 %
$41,757,572
-----------
- -----------
-----------
- -----------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE>
THE PANAGORA FUNDS
Global Fund
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
- -----------------
Schedule of Forward Foreign Exchange Contracts
MAY 31, 1994
- ---------------------------------------------------------------------------
- -----------------
<S> <C>
<C>
CONTRACT
MARKET VALUE
VALUE DATE
(Note 1)
- ---------------------------------------------------------------------------
- -----------------
FORWARD FOREIGN EXCHANGE CONTRACTS TO BUY
19,848,850 French Francs 6/6/94
$3,530,290
2,481,900 German Deutsche Marks 6/6/94
1,507,753
2,072,643 Great Britain Pound Sterling 6/6/94
3,133,310
354,494,200 Japanese Yen 6/6/94
3,385,295
- ---------------------------------------------------------------------------
- -----------------
TOTAL FORWARD FOREIGN EXCHANGE CONTRACTS TO BUY
(Contract Amount $11,500,000)
$11,556,648
- ---------------------------------------------------------------------------
- -----------------
FORWARD FOREIGN EXCHANGE CONTRACTS TO SELL (Contract Amount $4,200,000)
7,027,440 German Deutsche Marks 6/6/94
($4,269,166)
- ---------------------------------------------------------------------------
- -----------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE>
THE PANAGORA FUNDS
International Equity Fund
Portfolio of Investments
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
- ----------------------------
May 31, 1994
- ---------------------------------------------------------------------------
- ----------------------------
MARKET VALUE
SHARES
(Note 1)
- ---------------------------------------------------------------------------
- ----------------------------
<C> <S>
<S>
COMMON STOCKS - 89.8%
ARGENTINA - 1.5%
2,000 Banco Frances del Rio de la Plata
$20,899
600 Cladea S.A.
8,896
1,300 Galicia y Buenos Aires
12,282
1,000 Molinos Rio de la Plata
13,225
5,300 Perez Companc
28,779
9,000 Telefonica de Argentina S.A.
64,920
3,000 YPF Sociedad Anonima
78,896
- ---------------------------------------------------------------------------
- ----------------------------
227,897
- ---------------------------------------------------------------------------
- ----------------------------
AUSTRIA - 4.4%
100 Austrian Airlines
16,086
100 BWT Benchiser Wassertechnik
13,968
100 Constantina Industry Holdings
8,303
1,021 Creditanstalt Bank
60,840
200 EA Generali AG
60,368
100 Lenzing AG
10,984
300 Oesterreichische
17,098
1,700 Oesterreichische El Wirtsch
86,599
1,400 Omev AG
114,300
200 Radex Heraklith
7,957
400 Steyer-Daimler Puch AG
8,614
400 Veitscher
12,454
100 Wienerberger Baust
30,184
2,260 Z-Landerbank Austria AG
192,527
300 Z-Landerbank Austria, Ptg
10,612
- ---------------------------------------------------------------------------
- ----------------------------
650,894
- ---------------------------------------------------------------------------
- ----------------------------
BELGIUM - 3.3%
261 ACEC Union Miniere
20,812
358 A.G. Finance
28,388
23 Bekaert SA
17,304
40 CBR Cimenteries, NVP
14,914
9 CBR Cimenteries, AFVI
3,216
540 Delhaize
21,626
100 Electrabel, AFVI
16,982
334 Electrabel Common, NVP
56,423
150 Generale de Banque
36,105
46 Gevaert Photo Prod
13,259
55 Glaverbal de Banque
7,846
245 Group Brussels Lambert SA
32,054
135 Kredietbank, NVP
27,112
19 Kredietbank, AFVI
3,849
240 Pertofina SA
76,550
140 Royal Belge
21,748
31 Royal Belge, AFVI
4,752
86 Solvay Et Cie, Class A
39,876
23 Tractabel Cap, AFVI
6,895
120 Tractabel Cap, NVP
36,592
- ---------------------------------------------------------------------------
- ----------------------------
486,303
- ---------------------------------------------------------------------------
- ----------------------------
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE>
<CAPTION>
THE PANAGORA FUNDS
International Equity Fund
- ---------------------------------------------------------------------------
- ----------------------------
Portfolio of Investments (continued)
May 31, 1994
- ---------------------------------------------------------------------------
- ----------------------------
MARKET VALUE
SHARES
(Note 1)
- ---------------------------------------------------------------------------
- ----------------------------
<C> <S>
<C>
COMMON STOCKS (continued)
FRANCE - 5.2%
222 Alcatel Alsthom Cie Generale D'Electic
$24,127
300 Axa Company
68,943
89 BSN
13,329
430 Carrefour
142,798
200 Compagnie Bancaire SA
19,246
495 Compagnie de Saint Gobain
58,111
500 Compagnie Financiere de Suez
27,054
256 Cie Generale des Eaux
113,793
200 Elf Sanofi
31,661
600 Euro Disney SCA
3,319
303 Gulibert SA
28,565
200 Lafarge Coppee SA
14,621
100 L'Oreal
20,455
655 LVMH Moet Hennessey
101,011
100 Lyonnaise des Eaux DuMez
10,157
400 Michelin Group
15,639
551 Pechiney International
16,162
80 Pernod - Ricard
5,350
400 Rhone - Poulenc SA, Class A
10,018
73 Societe Generale
7,934
220 Societe National Elf Aquitaine
16,052
400 Thompson - CSF
12,060
435 Union des Assurances de Paris
11,776
- ---------------------------------------------------------------------------
- ----------------------------
772,181
- ---------------------------------------------------------------------------
- ----------------------------
GERMANY - 6.2%
189 Allianz AG
277,070
280 BASF AG
53,074
330 Bayer AG
72,797
115 Beiersdorf AG
66,513
150 Daimler Benz AG
73,588
100 Deutsche Bank AG
44,775
25 Douglas Holdings AG
8,673
200 Dresdner Bank AG
45,504
100 Karstadt AG
36,695
23 Linde AG
12,548
300 Mannesmann AG
79,465
120 M.A.N. Group AG
30,292
23 Pittler Maschinenfabrik AG
2,033
120 Siemens AG
50,814
100 Thyssen AG
16,798
190 VEBA Group AG
58,408
- ---------------------------------------------------------------------------
- ----------------------------
929,047
- ---------------------------------------------------------------------------
- ----------------------------
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE>
<CAPTION>
THE PANAGORA FUNDS
International Equity Fund
- ---------------------------------------------------------------------------
- ----------------------------
Portfolio of Investments (continued)
May 31, 1994
- ---------------------------------------------------------------------------
- ----------------------------
MARKET VALUE
SHARES
(Note 1)
- ---------------------------------------------------------------------------
- ----------------------------
<C> <S>
<C>
COMMON STOCKS (continued)
GREAT BRITAIN - 6.1%
4,433 Arjo Wiggins Appleton
$18,329
23,960 Chubb Security
133,934
6,566 General Electric
29,928
18,408 Glaxo Holdings
149,165
51,250 Hanson Trust PLC
196,799
3,600 Imperial Chemical Industries
43,921
60 Racal Electronics
208
5,250 RTZ Corporation
66,789
9,278 SmithKline Beecham, Class A
53,862
19,449 Vodafone
155,836
6,900 Zeneca Group
70,881
- ---------------------------------------------------------------------------
- ----------------------------
919,652
- ---------------------------------------------------------------------------
- ----------------------------
GREECE - 1.5%
1,667 Credit Bank
68,652
500 Delta Dairy
14,630
900 Ergo Bank
33,270
300 Hellas Can
4,698
1,600 Hellenic Bottling Company SA
45,761
700 Intracom SA
32,166
200 Michaniki
7,954
500 Titan Cement Company
14,630
- ---------------------------------------------------------------------------
- ----------------------------
221,761
- ---------------------------------------------------------------------------
- ----------------------------
HONG KONG - 2.5%
4,800 Cheung Kong Holdings
24,229
4,560 China Light & Power
25,379
3,300 Hang Seng Bank Limited
23,705
13,500 Hong Kong Telecommunications
26,734
16,700 Hong Kong & Shanghia Banking Corporation Holdings
192,371
10,800 Hutchison-Whampoa Limited
47,527
5,280 Sun Hung Kia Properties
35,536
- ---------------------------------------------------------------------------
- ----------------------------
375,481
- ---------------------------------------------------------------------------
- ----------------------------
INDONESIA - 0.8%
1,000 Astra International
8,825
10,000 Bank International Indonesia
24,489
10,000 Barito Pacific Timber
46,205
5,000 Indocement Tunggal Prakar
41,585
- ---------------------------------------------------------------------------
- ----------------------------
121,104
- ---------------------------------------------------------------------------
- ----------------------------
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE>
<CAPTION>
THE PANAGORA FUNDS
International Equity Fund
- ---------------------------------------------------------------------------
- ----------------------------
Portfolio of Investments (continued)
May 31, 1994
- ---------------------------------------------------------------------------
- ----------------------------
MARKET VALUE
SHARES
(Note 1)
- ---------------------------------------------------------------------------
- ----------------------------
<C> <S>
<C>
COMMON STOCKS (continued)
- ---------------------------------------------------------------------------
- ----------------------------
ITALY - 7.6%
253 Allanza Assicurazioni Di Risp
$2,494
1,500 Assicurazioni Generali
42,657
49,800 Banca Comerciale Italiana
159,909
20,900 Banco Ambrosianno Veneto
61,075
88,000 Credito Italiano S.p.A.
124,298
3,000 Falck Acc Ferr Lamb
10,735
49,600 Fiat S.p.A., Ord
211,733
29,300 Fiat S.p.A., Priv
76,333
2,700 Instituto Banca San Paolo Torino
17,119
16,750 Mediobanca S.p.A.
165,913
1,000 Montedison S.p.A.
868
100 Olivetti Group S.p.A.
170
12,600 Rinascente
84,635
17,900 SIP
48,319
1,000 SNIA BPD, Ord
1,507
100 SNIA BPD Risp
148
53,700 SME (Meridionale Finanziaria)
129,450
- ---------------------------------------------------------------------------
- ----------------------------
1,137,363
- ---------------------------------------------------------------------------
- ----------------------------
JAPAN - 24.9%
3,200 Ajinomoto Company, Inc.
39,110
7,100 Asahi Chemical Industry
54,167
3,200 Asahi Glass Company
37,582
4,000 Bank of Tokyo
63,783
1,600 Bridgestone Company
24,291
1,900 Canon, Inc.
31,566
1,600 Chugai Pharmaceutical
17,875
6,790 Dai Ichi Kangyo Bank
129,667
3,200 Dai Nippon Printing Company
58,054
800 Daido Steel Company
3,919
8,000 Daikyo Kanko
86,317
1,600 Daishowa Paper Manufacturing
16,194
1,600 Daiwa House Industry Company
24,138
2,400 Denki Kagaku Kogyo
9,464
5,100 Fuji Bank
117,846
800 Fuji Photo Film Limited
17,340
3,200 Fujitsu Limited
33,610
7,100 Hitachi Limited
73,217
1,600 Honda Motor Company
28,721
880 House Food Industrial Company
17,645
4,800 Industrial Bank of Japan
149,413
6,500 Itochu Corporation
45,059
1,000 Ito-Yokado Company
51,370
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE>
<CAPTION>
THE PANAGORA FUNDS
International Equity Fund
- ---------------------------------------------------------------------------
- ----------------------------
Portfolio of Investments (continued)
May 31, 1994
- ---------------------------------------------------------------------------
- ----------------------------
MARKET VALUE
SHARES
(Note 1)
- ---------------------------------------------------------------------------
- ----------------------------
<C> <S>
<C>
COMMON STOCKS (continued)
JAPAN - (continued)
2,400 Japan Airlines
$17,050
1,680 Joyo Bank
14,437
5,200 Kajima Corporation
47,318
1,600 Kamigumi Company
19,250
1,122 Kandenko Company
22,605
2,560 Kansai Electric Power
64,776
8,400 Kawasaki Steel Corporation
34,168
7,274 Kinki Nippon Railway Company
56,397
4,000 Kirin Brewery Company
47,360
2,400 Konatsu
22,137
800 Kyocera Corporation
51,638
800 Kyushu Electric Power Company, Inc.
20,090
800 Maeda Road Construction
15,277
800 Marudai Food Company Limited
6,302
5,600 Matsushita Electric Industrial
97,852
8,790 Mitsubishi Bank
235,004
4,000 Mitsubishi Estate Company
47,360
14,300 Mitsubishi Heavy Industry
104,727
7,100 Mitsubishi Kasei Company
35,998
4,800 Mitsubishi Trust & Banking
77,456
1,600 Mitsui & Company
12,604
2,400 Mitsui Marine & Fire
20,052
4,000 Mitsui Toatsu Chemicals Inc.
16,843
6,400 Mitsui Trust & Banking
80,665
3,200 NEC Corporation
36,360
2,400 Nikko Kyodo Company Limited
10,289
2,400 Nikon
24,062
300 Nintendo Company
18,419
1,600 Nippon Light Metal Company
10,480
3,200 Nippon Oil Company
23,222
19,900 Nippon Steel
71,445
3,200 Nippon Yusen Kaisha
19,677
2,400 Oji Paper
23,833
6,400 Sakura Bank
89,831
800 Sanwa Shutter Corporation
7,173
1,111 Seven-Eleven, Japan
82,002
1,600 Shizuoka Bank
21,236
1,800 Snow Brand Milk Products Company Limited
13,612
1,060 Sony Corporation
62,954
5,693 Sumitomo Bank
122,307
3,200 Sumitomo Electric Industry
48,582
8,150 Sumitomo Trust & Banking
129,180
1,600 Taiyo Fishery Company
6,310
4,000 Takeda Chemical Industries
46,214
3,200 Tokai Bank
41,554
3,200 Tokio Marine & Fire Insurance
41,860
3,040 Tokyo Electric Power Company
93,757
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE>
<CAPTION>
THE PANAGORA FUNDS
International Equity Fund
- ---------------------------------------------------------------------------
- ----------------------------
Portfolio of Investments (continued)
May 31, 1994
- ---------------------------------------------------------------------------
- ----------------------------
MARKET VALUE
SHARES
(Note 1)
- ---------------------------------------------------------------------------
- ----------------------------
<C> <S>
<C>
COMMON STOCKS (continued)
JAPAN - (continued)
5,180 Tokyu Corporation
$39,074
4,800 Toyobo Company
21,908
5,986 Toyota Motor Company
120,600
2,400 Ube Industries Limited
8,914
800 Yakult Honsha
12,757
2,000 Yamanouchi Pharmaceutical Company
37,620
4,000 Yasuda Trust & Banking
35,902
11,100 Yokogawa Electric Corporation
105,987
- ---------------------------------------------------------------------------
- ----------------------------
3,724,835
- ---------------------------------------------------------------------------
- ----------------------------
MEXICO - 1.3%
3,375 Cementos Mexicanos SA, Class B
24,904
10,000 Cifra SA de CV, Class B
27,533
2,500 Fomento Economico Mexicana, Class B
12,248
1,000 Grupo Financiero Banamex Accivl, Class C
7,484
6,000 Grupo Financiero Bancomer, Class C
9,017
1,000 Grupo Televisa Cpo
29,005
28,000 Telefonos de Mexico, Class L
86,853
- ---------------------------------------------------------------------------
- ----------------------------
197,044
- ---------------------------------------------------------------------------
- ----------------------------
NETHERLANDS - 6.3%
3,200 ABN Amro Holding
104,796
1,200 Ahold Koninklijke
30,905
363 Akzo Nobel NV
40,938
1,030 Elsevier NV CVA
93,654
175 Heineken NV
21,396
2,187 International Nederlanden Groep CVA
90,001
1,500 Philips Electronics NV
41,722
2,500 Royal Dutch Petroleum
264,050
1,975 Unilever NV CVA
206,672
700 Wolters Kluwer CVA
43,077
- ---------------------------------------------------------------------------
- ----------------------------
937,211
- ---------------------------------------------------------------------------
- ----------------------------
NEW ZEALAND - 0.1%
11,600 Fletcher Challenge
16,765
- ---------------------------------------------------------------------------
- ----------------------------
NORWAY - 0.1%
300 Norsk Hydro AS
9,949
1,700 Vard A
10,012
- ---------------------------------------------------------------------------
- ----------------------------
19,961
- ---------------------------------------------------------------------------
- ----------------------------
PHILLIPINES - 0.6%
4,000 Ayala Land, Inc., Class B
4,238
900 Manila Electric Company, Class B
12,797
400 Philippine Long Distance Telephone
28,848
1,200 Philippine National Bank
23,197
3,200 San Miguel Corporation, Class B
16,773
- ---------------------------------------------------------------------------
- ----------------------------
85,853
- ---------------------------------------------------------------------------
- ----------------------------
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE>
<CAPTION>
THE PANAGORA FUNDS
International Equity Fund
- ---------------------------------------------------------------------------
- ----------------------------
Portfolio of Investments (continued)
May 31, 1994
- ---------------------------------------------------------------------------
- ----------------------------
MARKET VALUE
SHARES
(Note 1)
- ---------------------------------------------------------------------------
- ----------------------------
<C> <S>
<C>
COMMON STOCKS (continued)
PORTUGAL - 1.5%
3,600 Banco Commercial Portugese
$49,862
1,000 Banco Portugese de Investimento SA
17,043
2,000 BTA
35,608
600 Corticeira Amorim-Sociedad
8,433
200 Inapa-Investments
4,802
300 Jeronimo Martins
22,192
200 Lusotur
4,041
300 Mague-Gestao e Participacoes
10,849
500 Radio Marconi
15,227
600 Soares Da Costa
11,385
1,300 Sonae Investmentos
22,384
600 Tranquilidade
6,325
400 Unicer
12,065
- ---------------------------------------------------------------------------
- ----------------------------
220,216
- ---------------------------------------------------------------------------
- ----------------------------
SINGAPORE - 1.3%
5,600 Singapore Press Holdings
98,566
12,487 United Overseas Bank
101,752
- ---------------------------------------------------------------------------
- ----------------------------
200,318
- ---------------------------------------------------------------------------
- ----------------------------
SPAIN - 8.0%
7,200 Autopista Cesa
66,878
6,000 Banco Bilbao Vizcaya
141,320
4,400 Banco Central Hispano Americano
95,687
5,940 Banco de Santander
105,094
3,700 Banco Espanol de Credito
29,595
4,100 Empresa Nacional de Electricite (Endesa)
197,973
11,380 Gas Natural S.D.G.
75,503
15,600 Iberdrola
114,657
5,100 Repsol
160,914
15,600 Telefonica Nacional de Espana
211,603
- ---------------------------------------------------------------------------
- ----------------------------
1,199,224
- ---------------------------------------------------------------------------
- ----------------------------
SWEDEN - 1.1%
200 Aga AB, Class B Free
9,583
300 Astra AB, Class A Free
6,380
100 Astra AB, Class B Free
2,076
100 Atlas Copco AB, Class B Free
6,098
100 Electrolux AB, Class B Free
5,163
200 Ericsson (L.M.) Telephone, Class B Free
9,788
200 Esselte AB, Class B Free
3,049
200 Esselte AF
3,049
500 Euroc Industries AB, Class A Free
8,135
300 Securitas AB, Class B Free
9,340
900 Skandia Forsakrings AB, Free
13,490
6,000 Skandinaviska
38,818
100 Skanska AB, Class B Free
2,396
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE>
<CAPTION>
THE PANAGORA FUNDS
International Equity Fund
- ---------------------------------------------------------------------------
- ----------------------------
Portfolio of Investments (continued)
May 31, 1994
- ---------------------------------------------------------------------------
- ----------------------------
MARKET VALUE
SHARES
(Note 1)
- ---------------------------------------------------------------------------
- ----------------------------
<C> <S>
<C>
COMMON STOCKS (continued)
SWEDEN - (continued)
100 SKF AB, Class B Free
$1,678
100 Stora Kopparbergs, Class A Free
5,483
100 Stora Kopparbergs, Class B Free
5,381
200 Svenska Cellulosa, Class B Free
2,998
2,300 Svenska Handelsbanken, Class A Free
32,707
200 Svenska Handelsbanken, Class B Free
2,690
100 Trelleborg AB, Class B Free
1,422
- ---------------------------------------------------------------------------
- ----------------------------
169,724
- ---------------------------------------------------------------------------
- ----------------------------
SWITZERLAND - 3.2%
18 Brown Boveri & Cie AG, Class A
16,160
105 Ciba Geigy AG
63,591
87 Credit Suisse Holdings
38,432
158 Nestle SA
129,124
3 Roche Holdings AG
27,424
28 Roche Holdings AG Genuscheine
133,865
110 Sandoz AG
54,001
3 Schweizerishe Bankgesellschaft
2,554
3 Schweizerisher Bankverein
864
4 SMH AG Neuenburg
502
15 Zurich Versicherung
14,428
- ---------------------------------------------------------------------------
- ----------------------------
480,945
- ---------------------------------------------------------------------------
- ----------------------------
THAILAND - 1.2%
9,000 Bangkok Bank
75,714
600 Charoen Pokphand Feedmill
4,190
2,000 Land & House
46,191
700 Shinawatra Computer
16,556
800 Siam Cement
38,222
- ---------------------------------------------------------------------------
- ----------------------------
180,873
- ---------------------------------------------------------------------------
- ----------------------------
TURKEY - 1.1%
16,000 Akso
14,035
40,000 Arcelik
15,630
5,000 Cimsa
9,569
14,000 Cukurova Elektrik
2,590
8,000 Ege Biracilik Ve
12,759
73,000 Eregli Demir Ve Celik
9,198
3,000 Migros
8,708
3,000 Otosan
4,785
138,000 T. Garanti Bankas
17,608
30,000 Tofas Otomobil Fab
44,976
28,000 Trakya Cam
6,877
25,000 Turkiye Guaranti
3,190
85,000 Turkiye Is Bankasi
8,676
- ---------------------------------------------------------------------------
- ----------------------------
158,601
- ---------------------------------------------------------------------------
- ----------------------------
TOTAL COMMON STOCK (Cost $12,823,808)
13,433,253
- ---------------------------------------------------------------------------
- ----------------------------
- ---------------------------------------------------------------------------
- ----------------------------
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE>
<CAPTION>
THE PANAGORA FUNDS
International Equity Fund
- ---------------------------------------------------------------------------
- ----------------------------
Portfolio of Investments (continued)
May 31, 1994
- ---------------------------------------------------------------------------
- ----------------------------
MARKET VALUE
SHARES
(Note 1)
- ---------------------------------------------------------------------------
- ----------------------------
<C> <S>
<C>
PREFERRED STOCK - 0.3%
400 Credit Anstalt Bank
$23,248
300 Z-Landerbank Austria Preferred
15,697
- ---------------------------------------------------------------------------
- ----------------------------
TOTAL PREFERRED STOCK (Cost $41,063)
38,945
- ---------------------------------------------------------------------------
- ----------------------------
- ---------------------------------------------------------------------------
- ----------------------------
RIGHTS - 0.1%
32,000 Arcelik Rights, expire 6/3/94 +
11,483
1,000 Migros Rights, expire 6/8/94 +
2,871
300 Nork Hydro As Rights, expire 6/16/94 +
171
1,249 United Overseas Bank Rights, expire 6/18/94 +
6,821
- ---------------------------------------------------------------------------
- ----------------------------
TOTAL RIGHTS (Cost $16,885)
21,346
- ---------------------------------------------------------------------------
- ----------------------------
<CAPTION>
FACE
VALUE
- ---------------------------------------------------------------------------
- ----------------------------
<S> <C>
<C>
U.S. TREASURY BILL - 0.6% (Cost $89,842)
$90,000 U.S. Treasury Bill, 3.812% # due 6/23/94
89,784
- ---------------------------------------------------------------------------
- ----------------------------
COMMERCIAL PAPER - 4.2% (Cost $622,000)
622,000 Ford Motor Corporation, 4.250% due 6/1/94
622,000
- ---------------------------------------------------------------------------
- ----------------------------
TOTAL INVESTMENTS (Cost $13,593,598*) 95.0%
14,205,328
OTHER ASSETS AND LIABILITIES (Net) 5.0
749,239
- ---------------------------------------------------------------------------
- ----------------------------
- ---------------------------------------------------------------------------
- ----------------------------
NET ASSETS 100.0%
$14,954,567
- ---------------------------------------------------------------------------
- ----------------------------
- ---------------------------------------------------------------------------
- ----------------------------
<FN>
* Aggregate cost for Federal tax purposes.
+ Non-income producing security.
# Annualized yield to maturity (unaudited).
Ptg - Participating
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF
UNREALIZED
CONTRACTS
DEPRECIATION
- ---------------------------------------------------------------------------
- ----------------------------
<C> <S>
<C>
OPEN FUTURES CONTRACTS TO BUY AT MAY 31, 1994:
14 CAC 40 Index Future, June 1994
($24,612)
5 Financial Times Stock Exchange Index Future, June 1994
(32,522)
1 Toronto 35 Index Future, June 1994
(1,526)
- ---------------------------------------------------------------------------
- ----------------------------
(58,660)
- ---------------------------------------------------------------------------
- ----------------------------
OPEN FUTURES CONTRACTS TO SELL AT MAY 31, 1994:
(3) Topix Index Future, June 1994
(25,342)
- ---------------------------------------------------------------------------
- ----------------------------
NET UNREALIZED DEPRECIATION OF OPEN FUTURES CONTRACTS
($84,002)
- ---------------------------------------------------------------------------
- ----------------------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE>
THE PANAGORA FUNDS
International Equity Fund
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------
- ----------------------------
Portfolio of Investments (unaudited)
May 31, 1994
- ---------------------------------------------------------------------------
- ----------------------------
Percentage of
Market Value
Sector Diversification Net Assets
(Note 1)
- ---------------------------------------------------------------------------
- ----------------------------
<S> <C>
<C>
COMMON STOCKS:
Energy & Utility 16.5 %
$2,466,649
Banking & Finance 14.8
2,218,436
Financial Services 12.8
1,917,427
Non-Durable Goods 8.1
1,217,070
Durable Goods 7.5
1,116,979
Consumer Services 5.1
765,790
Basic Industries 4.7
696,210
Construction & Building 3.9
588,580
Health Care & Personal Services 3.8
572,849
Manufacturing 2.5
379,900
Transportation 1.5
229,266
Holding Companies 1.1
161,628
Minerals & Mining 1.1
157,902
Technology 1.0
143,229
Forestry Products & Paper 0.6
93,174
Real Estate 0.6
89,530
Other 4.1
618,633
----------
- -------------
TOTAL COMMON STOCKS 89.8
13,433,253
COMMERCIAL PAPER 4.2
622,000
U.S. TREASURY BILL 0.6
89,784
PREFERRED STOCK 0.3
38,945
RIGHTS 0.1
21,346
----------
- -------------
TOTAL INVESTMENTS 95.0
14,205,328
OTHER ASSETS AND LIABILITIES (NET) 5.0
749,239
----------
- -------------
NET ASSETS 100.0 %
$14,954,567
----------
- -------------
----------
- -------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE>
<TABLE>
<CAPTION>
THE PANAGORA FUNDS
International Equity Fund
- ---------------------------------------------------------------------------
- ----------------------------
Schedule of Forward Foreign Exchange Contracts
May 31, 1994
- ---------------------------------------------------------------------------
- ----------------------------
CONTRACT
VALUE
Market Value
DATE
(Note 1)
- ---------------------------------------------------------------------------
- ----------------------------
<S> <C>
<C>
FORWARD FOREIGN EXCHANGE CONTRACTS TO BUY
5,671,100 French Francs
6/6/94 $1,008,654
400,053 Great Britain Pound Sterling
6/6/94 604,779
40,702,800 Japanese Yen
6/6/94 388,698
- ---------------------------------------------------------------------------
- ----------------------------
TOTAL FORWARD FOREIGN EXCHANGE CONTRACTS TO BUY
(Contract Amount $2,000,000)
$2,002,131
- ---------------------------------------------------------------------------
- ----------------------------
- ---------------------------------------------------------------------------
- ----------------------------
</TABLE>
<PAGE>
THE PANAGORA FUNDS
Statements of Assets and Liabilities
May 31, 1994
<TABLE>
<CAPTION>
PanAgora PanAgora
Asset PanAgora International
Allocation Global Equity
Fund Fund Fund
ASSETS
-----
- --------- ------------ -------------
<S> <C>
<C> <C>
Investments, at value (Cost $2,865,006, $38,913,961
and $13,593,598, respectively) (Note 1)
See accompanying schedules...................... $
2,782,238 $ 39,807,379 $ 14,205,328
Cash and foreign currency.........................
3,018 402,642 151,628
Segregated cash and foreign currency as collateral
for futures.....................................
- - 1,997,870 576,352
Receivable for forward foreign exchange contracts
to sell.........................................
- - 4,200,000 -
Forward foreign exchange contracts to buy, at value
(Contract Cost $0, $11,500,000 and $2,000,000,
respectively) See accompanying schedules........
- - 11,556,648 2,002,131
Receivable from investment adviser (Note 2).......
103,500 - 49,675
Receivable from administrator (Note 2)............
- - 25,153 7,323
Unamortized organization costs (Note 5)...........
16,737 16,760 16,760
Dividends and interest receivable.................
7,629 151,490 86,701
Receivable for investment securities sold.........
- - - 8,646
-----
- --------- ------------ ------------
Total Assets....................................
2,913,122 58,157,942 17,104,544
-----
- --------- ------------ ------------
-----
- --------- ------------ ------------
LIABILITIES
Forward foreign exchange contracts to sell, at value
(Contract cost $0, $4,200,000 and $0, respectively)
(Note 1) See accompanying schedule..............
- - 4,269,166 -
Payable for forward foreign exchange contracts to buy
- - 11,500,000 2,000,000
Investment advisory fees payable (Note 2).........
- - 86,395 -
Transfer agent fees payable (Note 2)..............
6,040 6,882 6,324
Custodian fees payable (Note 2)...................
3,065 22,500 20,400
Administration fees payable (Note 2)..............
5,000 10,000 10,000
Accrued legal and audit fees......................
19,000 22,000 22,000
Payable for Fund shares redeemed..................
- - 622 -
Net unrealized depreciation of futures contracts
(Note 1)........................................
6,488 465,770 84,002
Accrued expenses and other payables...............
2,696 17,035 7,251
---
- --------- ------------ -------------
Total Liabilities ..............................
42,289 16,400,370 2,149,977
---
- --------- ------------ -------------
NET ASSETS........................................ $
2,870,833 $ 41,757,572 $ 14,954,567
---
- --------- ------------ -------------
---
- --------- ------------ -------------
NET ASSETS CONSIST OF:
Undistributed net investment income/(Distributions
in excess of net investment income)............. $
11,000 $ (1,118,599) $ (2,131)
Accumulated net realized gain on
securities sold, forward foreign exchange
contracts, foreign currency, futures contracts
and net other assets............................
13,837 74,161 391,111
Net unrealized appreciation/(depreciation) on
securities, forward foreign exchange contracts,
foreign currency, futures contracts and net
other assets....................................
(89,256) 421,283 577,506
Paid-in capital ..................................
2,935,252 42,380,727 13,988,081
-----
- --------- ------------ -------------
$
2,870,833 $ 41,757,572 $ 14,954,567
-----
- --------- ------------ -------------
-----
- --------- ------------ -------------
Net Asset Value and redemption price per share of
beneficial interest outstanding................ $
10.01 $ 10.48 $ 10.75
-----
- --------- ------------ -------------
-----
- --------- ------------ -------------
Number of Fund shares outstanding.................
286,748 3,985,823 1,390,597
-----
- --------- ------------ -------------
-----
- --------- ------------ -------------
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE>
THE PANAGORA FUNDS
Statements of Operations
For the Year Ended May 31, 1994*
<TABLE>
<CAPTION>
PanAgora PanAgora
Asset PanAgora International
Allocation Global Equity
Fund Fund Fund
----------
- ----- -------------- --------------
<S> <C>
<C> <C>
INVESTMENT INCOME:
Dividends (Net of foreign withholding taxes of $256,
$41,094 and $45,573, respectively).............. $
30,460 $ 524,751 $ 252,436
Interest..........................................
22,642 162,977 33,187
----------
- ----- -------------- --------------
Total investment income.........................
53,102 687,728 285,623
----------
- ----- -------------- --------------
EXPENSES:
Transfer agent fees (Note 2)......................
32,703 39,117 33,781
Trustees' fees and expenses (Note 2)..............
7,912 7,245 7,912
Investment advisory fees (Note 2).................
10,719 218,254 110,440
Custodian fees (Note 2)...........................
10,112 68,539 71,183
Administration fees (Note 2)......................
60,684 75,992 68,442
Amortization of organization costs (Note 5) ......
4,170 4,147 4,147
Legal and audit fees..............................
25,028 28,028 28,028
Other.............................................
8,714 26,205 17,153
Fees waived and expenses reimbursed by investment
adviser and administrator (Note 2)..............
(144,044) (160,977) (186,509)
----------
- ----- -------------- --------------
Total expenses.................................
15,998 306,550 154,577
----------
- ----- -------------- --------------
NET INVESTMENT INCOME.............................
37,104 381,178 131,046
----------
- ----- -------------- --------------
NET REALIZED AND UNREALIZED GAIN\(LOSS)
ON INVESTMENTS (Notes 1 and 3):
Realized gain/(loss) from:
Security transactions...........................
49,644 1,217,507 593,446
Futures contracts...............................
(24,060) (770,693) 90,557
Forward foreign exchange contracts..............
- - (334,040) (46,583)
Foreign currency transactions...................
- - (38,613) (51,075)
----------
- ----- -------------- --------------
Net realized gain during the year.................
25,584 74,161 586,345
----------
- ----- -------------- --------------
Net change in unrealized appreciation/(depreciation)
of:
Securities.....................................
(82,768) 893,418 611,730
Futures contracts..............................
(6,488) (465,770) (84,002)
Forward foreign exchange contracts.............
- - (12,518) 2,131
Foreign currency and net other assets..........
- - 6,153 47,647
----------
- ----- -------------- --------------
Net unrealized appreciation/(depreciation) during
the year........................................
(89,256) 421,283 577,506
----------
- ----- -------------- --------------
Net realized and unrealized gain/(loss) on
investments.....................................
(63,672) 495,444 1,163,851
----------
- ----- -------------- --------------
NET INCREASE/(DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS ...................... $
(26,568) $ 876,622 $ 1,294,897
----------
- ----- -------------- --------------
----------
- ----- -------------- --------------
<FN>
- ----------------------------------
* The Funds commenced operations on June 1, 1993.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE>
THE PANAGORA FUNDS
Statements of Changes in Net Assets
Year Ended May 31, 1994*
<TABLE>
<CAPTION>
PanAgora PanAgora
Asset PanAgora International
Allocation Global Equity
Fund
Fund Fund
--------
- ------- ------------ -------------
<S> <C>
<C> <C>
Net investment income............................. $
37,104 $ 381,178 $ 131,046
Net realized gain on securities sold, forward foreign
exchange contracts, foreign currency transactions
and futures contracts during the year..........
25,584 74,161 586,345
Net unrealized appreciation/(depreciation) of
securities, forward foreign exchange contracts,
foreign currency, futures contracts and net other
assets during the year..........................
(89,256) 421,283 577,506
--------
- ----- ------------ -------------
Net increase/(decrease) in net assets resulting from
operations.....................................
(26,568) 876,622 1,294,897
Distributions to shareholders:
Net investment income...........................
(26,104) (381,178) (35,519)
In excess of net investment income..............
- - (1,118,599) (292,892)
Net realized capital gains......................
(11,747) - -
Net increase in net assets from Fund
share transactions (Note 4)....................
2,901,252 42,347,727 13,955,081
--------
- ----- ------------ -------------
Net increase in net assets........................
2,836,833 41,724,572 14,921,567
NET ASSETS:
Beginning of year.................................
34,000 33,000 33,000
--------
- ----- ------------ -------------
End of year (including undistributed net investment
income of $11,000, and distributions in excess
of net investment income of $1,118,599 and
$197,365, respectively)......................... $
2,870,833 $41,757,572 $ 14,954,567
--------
- ----- ------------ -------------
--------
- ----- ------------ -------------
<FN>
- ----------------------------------
* The Funds commenced operations on June 1, 1993.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE>
THE PANAGORA FUNDS
Asset Allocation Fund
Financial Highlights
For a Fund share outstanding throughout the year.
<TABLE>
<CAPTION>
Year
Ended
5/31/94*
---------
- ----
<S> <C>
Operating performance:
Net asset value, beginning of year..........................
$10.00
---------
- ----
Income from investment operations:
Net investment income+......................................
0.14
Net realized and unrealized gain on investments ++..........
0.02
---------
- ----
Total from investment operations.........................
0.16
---------
- ----
Distributions:
Distributions from net investment income....................
(0.10)
Distributions from net realized capital gains...............
(0.05)
---------
- ----
Total from investment operations.........................
(0.15)
---------
- ----
Net asset value, end of year................................
$10.01
---------
- ----
---------
- ----
Total return+++.............................................
1.63%
---------
- ----
---------
- ----
Ratios to average net assets/supplemental data:
Net assets, end of year (in 000's)..........................
$2,871
Ratio of operating expenses to average net assets++++.......
0.90%
Ratio of net investment income to average net assets........
2.08%
Portfolio turnover rate.....................................
50%
<FN>
- --------------------------------------
* The Fund commenced operations on June 1, 1993.
+ Net investment loss per share before waiver of fees and
reimbursement of
expenses by investment adviser and administrator was $0.39 for the
year
ended May 31, 1994.
++ The amount shown at this caption for each share outstanding
throughout
the period may not accord with the change in the aggregate gains and
losses in the portfolio securities for the period because of the
timing
of purchases and withdrawals of shares in relation to the
fluctuating
market values of the portfolio.
+++ Total return represents aggregate total return for the period
indicated.
++++ Annualized expense ratio before waiver of fees and reimbursement of
expenses by investment adviser and administrator was 8.96% for the
year
ended May 31, 1994.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE>
THE PANAGORA FUNDS
Global Fund
Financial Highlights
For a Fund share outstanding throughout the year.
<TABLE>
<CAPTION>
Year
Ended
5/31/94*
----------
<S> <C>
Operating performance:
Net asset value, beginning of year................ $10.00
----------
Income from investment operations:
Net investment income+............................ 0.11
Net realized and unrealized gain on investments... 0.76
----------
Total from investment operations............... 0.87
----------
Distributions:
Distributions from net investment income.......... (0.10)
Distributions in excess of net investment income.. (0.29)
Distributions from net realized capital gains..... ---
----------
Total from investment operations............... (0.39)
----------
Net asset value, end of year...................... $10.48
----------
----------
Total return+++................................... 8.68%
----------
----------
Ratios to average net assets/supplemental data:
Net assets, end of year (in 000's)................ $41,758
Ratio of operating expenses to average net
assets++++...................................... 1.00%
Ratio of net investment income to average net
assets.......................................... 1.23%
Portfolio turnover rate........................... 187%
<FN>
- --------------------
* The Fund commenced operations on June 1, 1993.
+ Net investment income per share before waiver of fees by investment
adviser and administrator was $0.07 for the year ended May 31, 1994.
+++ Total return represents aggregate total return for the period
indicated.
++++ Annualized expense ratio before waiver of fees by investment adviser
and
administrator was 1.53% for the year ended May 31, 1994.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE>
THE PANAGORA FUNDS
International Equity Fund
Financial Highlights
For a Fund share outstanding throughout the year.
<TABLE>
<CAPTION>
Year
Ended
5/31/94*
---
- -------
<S>
<C>
Operating performance:
Net asset value, beginning of year............................
$10.00
---
- -------
Income from investment operations:
Net investment income+........................................
0.11
Net realized and unrealized gain on investments...............
0.89
---
- -------
Total from investment operations...........................
1.00
---
- -------
Distributions:
Distributions from net investment income......................
(0.03)
Distributions in excess of net investment income..............
(0.22)
Distributions from net realized capital gains.................
- ---
---
- -------
Total from investment operations...........................
(0.25)
---
- -------
Net asset value, end of year..................................
$10.75
---
- -------
---
- -------
Total return+++...............................................
10.12%
---
- -------
---
- -------
Ratios to average net assets/supplemental data:
Net assets, end of year (in 000's)............................
$14,955
Ratio of operating expenses to average net assets++++.........
1.10%
Ratio of net investment income to average net assets..........
0.93%
Portfolio turnover rate.......................................
160%
<FN>
- ---------------------
* The Fund commenced operations on June 1, 1993.
+ Net investment loss per share before waiver of fees and
reimbursement of expenses by
investment adviser and administrator was $0.05 for the year ended
May 31, 1994.
+++ Total return represents aggregate total return for the period
indicated.
++++ Annualized expense ratio before waiver of fees and reimbursement of
expenses by
investment adviser and administrator was 2.42% for the year ended
May 31, 1994.
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
<PAGE>
The PanAgora Funds
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES
The PanAgora Funds (the "Trust") was organized under the laws of the
Commonwealth of Massachusetts on January 27, 1993 as a Massachusetts
business trust and began operations on June 1, 1993. The Trust is
registered under the Investment Company Act of 1940, as amended (the
"1940 Act"), as an open-end management investment company, consisting of
three investment series: PanAgora Asset Allocation Fund, PanAgora
Global Fund and PanAgora International Equity Fund (the "Funds"). The
following is a summary of significant accounting policies consistently
followed by the Funds in the preparation of their financial statements.
PORTFOLIO VALUATION:
Securities traded on a recognized U.S. or foreign securities exchange
or the National Association of Securities Dealers Automated Quotation
System (NASDAQ) are valued at their last sale price on the principal
exchange on which they are traded or NASDAQ (if NASDAQ is the principal
market for such securities). If no sale occurs, securities are valued
at the mean between the closing bid and asked price. Unlisted equity
securities for which market quotations are readily available are valued
at the mean between the most recent bid and asked price. Debt
securities and other fixed-income investments of the Funds will be
valued at prices supplied by independent pricing agents selected by the
Board of Trustees. Short-term obligations maturing in sixty days or
less are valued at amortized cost. Amortized cost valuation involves
initially valuing a security at its cost, and thereafter, assuming a
constant amortization to maturity of any discount or premium, regardless
of the impact of fluctuating interest rates on the market value of the
security. Securities whose market value does not, in the Adviser's
opinion, reflect fair value are valued at fair value using methods
determined in good faith by the Board of Trustees.
Repurchase Agreements: Each Fund may engage in repurchase agreement
transactions. Under the terms of a typical repurchase agreement, the Fund
takes possession of an underlying debt obligation subject to an obligation
of the seller to repurchase, and the Fund to resell, the obligation at an
agreed-upon price and time, thereby determining the yield during the Fund's
holding period. This arrangement results in a fixed rate of return that is
not subject to market fluctuations during the Fund's holding period. The
value of the collateral is at least equal at all times to the total amount
of the repurchase obligations, including interest. In the event of
counterparty default, the Fund has the right to use the collateral to
offset losses incurred. There is potential loss to the Fund in the event
the Fund is delayed or prevented from exercising its rights to dispose of
the collateral securities, including the risk of a possible decline in the
value of the underlying securities during the period while the Fund seeks
to assert its rights. The Fund's investment adviser, acting under the
supervision of the Board of Trustees, reviews the value of the collateral
and the creditworthiness of those banks and dealers with which the Fund
enters into repurchase agreements to evaluate potential risks.
Futures Contracts: Upon entering into a futures contract, each Fund
is required to deposit with the broker an amount of cash or cash
equivalents equal to a certain percentage of the contract amount. This
is known as the "initial margin." Subsequent payments ("variation
margin") are made or received by the Asset Allocation Fund each day,
depending on the daily fluctuation of the value of the contract; and by
the Global Fund and International Equity Fund when the futures contract
is closed.
-1-
<PAGE>
The PanAgora Funds
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Futures contracts are marked-to-market daily and the daily changes in
the value of the contract are recorded as unrealized gains or losses.
The Fund recognizes a realized gain or loss when the contract is closed.
There are several risks in connection with the use of futures
contracts as a hedging device. The change in value of futures contracts
primarily corresponds with the value of their underlying instruments or
index, which may not correlate with the change in value of the hedged
investments. In addition, there is the risk that the Fund may not be
able to enter into a closing transaction because of an illiquid
secondary market.
Foreign Currency: The books and records of the PanAgora Global Fund
and the PanAgora International Equity Fund are maintained in United
States (U.S.) dollars. Foreign currencies, investments and other assets
and liabilities are translated into U.S. dollars at the exchange rates
prevailing at the end of the period, and purchases and sales of
investment securities, income and expenses are translated on the
respective dates of such transactions.
Unrealized gains and losses which result from changes in foreign
currency exchange rates have been included in the unrealized
appreciation/(depreciation) of foreign currency and net other assets.
Net realized foreign currency gains and losses resulting from changes in
exchange rates include foreign currency gains and losses between trade
date and settlement date on investment securities transactions, foreign
currency transactions and the difference between the amounts of interest
and dividends recorded on the books of the Funds and the amount actually
received. The portion of foreign currency gains and losses related to
fluctuation in exchange rates between the initial trade date and
subsequent sale trade date is included in realized gains and losses on
investment securities sold.
Forward Foreign Currency Contracts: The PanAgora Global Fund and the
PanAgora International Equity Fund may enter into forward foreign
currency contracts. Forward foreign currency contracts are valued at
the forward rate and are marked-to-market daily. The change in market
value is recorded by the Fund as an unrealized gain or loss. When the
contract is closed or delivery is taken, the Fund records a realized
gain or loss equal to the difference between the value of the contract
at the time it was opened and the value at the time it was closed.
The use of forward foreign currency contracts does not eliminate
fluctuations in the underlying prices of the Fund's securities, but it
does establish a rate of exchange that can be achieved in the future.
Although forward foreign currency contracts limit the risk of loss due
to a decline in the value of the hedged currency, they also limit any
potential gain that might result should the value of the currency
increase. In addition, the Fund could be exposed to risks if the
counterparties to the contracts are unable to meet the terms of their
contracts.
Securities Transactions and Investment Income: Securities
transactions are recorded as of the trade date. Realized gains and
losses from securities sold are recorded on the identified cost basis.
Interest income is recorded on the accrual basis and consists of
interest accrued and, if applicable, discount earned less premiums
amortized. Dividend income is recorded on the ex-dividend date, except
that certain dividends from foreign securities are recorded as soon as
the Fund is informed of the ex-dividend date.
-2-
<PAGE>
The PanAgora Funds
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
Dividends and Distributions to Shareholders: Each Fund declares and
pays dividends from net investment income, if any, and distributes net
short-term capital gains, if any, on a quarterly basis. Each Fund also
distributes at least annually substantially all of the long-term capital
gains in excess of available capital losses, if any, which it realizes for
each taxable year. Income distributions and capital gain distributions are
determined in accordance with income tax regulations which may differ from
generally accepted accounting principles. These differences are primarily
due to differing treatments of income and gains on various investment
securities held by each Fund, timing differences and differing
characterization of distributions made by each Fund. Permanent differences
incurred during the year ended May 31, 1994 on the PanAgora International
Equity
Fund, resulting from a tax basis
currency transaction, have been reclassified to accumulated net realized
gains at year end.
Federal Income Taxes: It is the policy of the Funds to qualify as a
regulated investment company, which distributes exempt-interest
dividends, by complying with the requirements of the Internal Revenue
Code of 1986, as amended, applicable to regulated investment companies
and by distributing substantially all of its earnings to its
shareholders. Therefore, no Federal income tax provision is required.
2. INVESTMENT ADVISORY FEE, ADMINISTRATION FEE AND OTHER RELATED PARTY
TRANSACTIONS
The Trust has entered into an investment advisory agreement (the
"Advisory Agreement") with PanAgora Asset Management, Inc. ("PanAgora").
Fifty percent of PanAgora's outstanding voting stock is owned by Lehman
Brothers Inc. ("Lehman Brothers"), a national investment banking firm
and fifty percent of such stock is owned by Nippon Life Insurance
Company ("Nippon Life"). Lehman Brothers is a wholly owned subsidiary
of Lehman Brothers Holdings Inc. ("Holdings"). Prior to May 31, 1994,
American Express Company ("American Express") owned 100% of Holdings'
issued and outstanding common stock, which represented approximately 92%
of Holdings' issued and outstanding voting stock. On May 31, 1994,
American Express distributed to holders of common stock of American
Express all outstanding shares of common stock of Holdings. As of May
31, 1994, Nippon Life Insurance Company owned 11.2% of the outstanding
voting securities of Holdings. Under the Advisory Agreement, the Trust,
on behalf of each Fund, pays a monthly fee at an annual rate of the
value of each Fund's average daily net assets as follows:
<TABLE>
<S> <C>
PanAgora Asset Allocation Fund 0.60%
PanAgora Global Fund 0.70%
PanAgora International Equity Fund 0.80%
</TABLE>
PanAgora has agreed to pay to Funds Distributor, Inc., the Trust'
distributor, as compensation for certain distribution services rendered
to the Trust, a monthly fee at the annual rate of 0.03% of the value of
the average daily net assets of each Fund. The minimum fee, with
respect to all three funds, is $15,000 per year.
The Trust has also entered into an administration agreement (the
"Administration Agreement") with The Boston Company Advisors, Inc.
("Boston Advisors"), an indirect wholly owned subsidiary of Mellon Bank
Corporation ("Mellon"). Under the Administration Agreement, each Fund
pays a monthly fee at the annual rate of 0.15% of the value of the
average daily net assets of each Fund. The minimum fee, with respect to
each Fund, is $60,000 per year.
-3-
<PAGE>
The PanAgora Funds
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
No officer, director or employee of PanAgora, Boston Advisors or any
parent or subsidiary of those corporations receives any compensation
from the Trust for serving as a Trustee or officer of the Trust. The
Trust pays each Trustee who is not an officer, director, or employee of
PanAgora, Boston Advisors or any of their affiliates $5,000 per annum
plus $1,000 per meeting attended and reimburses each such Trustee for
travel and out-of-pocket expenses.
From time to time PanAgora and Boston Advisors may voluntarily waive
and
reimburse a portion or all of their respective fees and expenses
otherwise payable to them. For the year ended May 31, 1994, PanAgora
and Boston Advisors voluntarily waived fees and reimbursed expenses as
follows:
<TABLE>
<CAPTION>
PanAgora Boston
Advisors
--------------------- ------------
- ---
FEES EXPENSES FEES
WAIVED REIMBURSED WAIVED
------- ---------- ------
<S> <C> <C> <C>
PanAgora Asset Allocation Fund $ 10,719 $ 103,325 $ 30,000
PanAgora Global Fund 130,977 - 30,000
PanAgora International Equity Fund 110,440 46,069 30,000
</TABLE>
Boston Safe Deposit and Trust Company, an indirect wholly owned
subsidiary of Mellon, serves as the Trust's custodian. The Shareholder
Services Group, Inc., a subsidiary of First Data Corporation, which is
in turn a partially owned subsidiary of American Express, serves as the
Trust's transfer agent.
3. PURCHASES AND SALES OF SECURITIES
Cost of purchases and proceeds from sales of investment securities,
excluding short-term investments, during the year ended May 31, 1994
were as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
------------- ------------
<S> <C> <C>
PanAgora Asset Allocation Fund $ 2,326,373 $ 490,375
PanAgora Global Fund 69,930,216 40,873,135
PanAgora International Equity Fund 30,460,220 18,108,707
</TABLE>
-4-
<PAGE>
The PanAgora Funds
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
At May 31, 1994, aggregate gross unrealized appreciation for all
securities in which there is an excess of value over tax cost and
aggregate gross unrealized depreciation for all securities in which
there is an excess of tax cost over value were as follows:
<TABLE>
<CAPTION>
TAX BASIS TAX BASIS
UNREALIZED UNREALIZED
APPRECIATION DEPRECIATION
------------- ------------
<S> <C> <C>
PanAgora Asset Allocation Fund $ 45,384 $ 128,152
PanAgora Global Fund 2,077,195 1,183,777
PanAgora International Equity Fund 1,244,070 632,340
</TABLE>
4. SHARES OF BENEFICIAL INTEREST
At May 31, 1994, an unlimited number of shares of beneficial interest
without par value were authorized. Changes in shares of beneficial
interest were as follows:
<TABLE>
<CAPTION>
YEAR ENDED
MAY 31, 1994*
PanAgora Asset Allocation Fund: SHARES AMOUNT
<S> <C> <C>
Sold . . . . . . . . . . . . . . . 281,095 $ 2,878,610
Issued as reinvestment of
dividends. . . . . . . . . . . . 3,736 37,851
Redeemed . . . . . . . . . . (1,483) (15,209)
--------- -------------
Net increase . . . . . . . . . 283,348 $ 2,901,252
--------- -------------
--------- -------------
</TABLE>
<TABLE>
<CAPTION>
YEAR ENDED
MAY 31, 1994*
PANAGORA GLOBAL FUND: SHARES AMOUNT
<S> <C> <C>
Sold . . . . . . . . . . . . . . . 4,031,219 $42,897,445
Issued as reinvestment of dividends 141,622 1,499,777
Redeemed . . . . . . . . . . . (190,318) (2,049,495)
Net increase . . . . . . . . . . 3,982,523 $42,347,727
</TABLE>
-5-
<PAGE>
The PanAgora Funds
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED
MAY 31, 1994*
PANAGORA INTERNATIONAL EQUITY FUND: SHARES AMOUNT
<S> <C> <C>
Sold . . . . . . . . . . . . . . . 1,362,693 $ 13,701,754
Issued as reinvestment of
dividends. . . . . . . . . . . . 31,417 326,091
Redeemed . . . . . . . . . (6,813) (72,764)
Net increase . . . . . . . . . . 1,387,297 $ 13,955,081
<FN>
_________________
*The Funds commenced operations on June 1, 1993.
</TABLE>
5. ORGANIZATION COSTS
Each Fund bears all costs in connection with its organization including
the fees and expenses of registering and qualifying its shares for
distribution under Federal and state securities regulations. All such
costs are being amortized on the straight-line method over a period of five
years from the commencement of operations for each Fund. In the event that
any of the initial shares of the Funds are redeemed during such
amortization period, the Funds will be reimbursed for any unamortized
organization costs in the same proportion as the number of shares redeemed
bears to the number of initial shares held at the time of redemption.
6. FOREIGN SECURITIES
The PanAgora Global and International Equity Funds may purchase
securities of foreign issuers. Investing in securities of foreign
companies and foreign governments involves special risks and considerations
not typically associated with investing in U.S. companies and the U.S.
government. These risks include revaluation of currencies and future
adverse political and economic developments. Moreover, securities of many
foreign companies and foreign governments and their markets may be less
liquid and their prices more volatile than those of securities of
comparable U.S. companies and the U.S. government.
7. SUBSEQUENT EVENT
On or about August 22, 1994, Investors Bank & Trust Company will be the
Trust's Administrator, Custodian, and Transfer Agent.
-6-
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Directors of The PanAgora Funds:
We have audited the accompanying statement of assets and liabilities of
PanAgora Asset Allocation Fund, PanAgora Global Fund and PanAgora
International Equity Fund including the schedule of portfolio investments,
the related statement of operations, the statement of changes in net assets
and the financial highlights for the year ended May 31, 1994. These
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of May 31, 1994 by correspondence with the custodian
and brokers. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position
of PanAgora Asset Allocation Fund, PanAgora Global Fund, and PanAgora
International Equity Fund as of May 31, 1994, the results of its operations
for the year then ended, the changes in its net assets and the financial
highlights for the year then ended, in conformity with generally accepted
accounting principles.
COOPERS & LYBRAND
Boston, Massachusetts
August 10, 1994
-7-
<PAGE>
The PanAgora Funds
TAX INFORMATION (UNAUDITED)
Year Ended May 31, 1994
For the Asset Allocation Fund, the capital gains dividend distribution
paid to shareholders for fiscal 1994, whether taken in shares or in cash is
as follows:
Long-term capital gains. . . . . . . . . . . . . . $11,509
-8-
<PAGE>
Exhibit 17a
POWER OF ATTORNEY
The undersigned Trustee of The PanAgora Funds, a
Massachusetts business trust, does hereby severally constitute
and
appoint Richard A. Crowell and Joseph P. Barri, and each of
them
acting singly, to be my true, sufficient and lawful attorneys,
with full power to each of them, and each of them acting
singly,
to sign for me, in my name and in the capacity indicated below,
any and all amendments to the Registration Statement on Form N-
1A
to be filed by The PanAgora Funds under the Investment Company
Act
of 1940, as amended (the "1940 Act"), and under the Securities
Act
of 1933, as amended (the "1933 Act"), with respect to the
offering
of its shares of beneficial interest and any and all other
documents and papers relating thereto, and generally to do all
such things in my name and on my behalf in the capacity
indicated
to enable The PanAgora Funds to comply with the 1940 Act and
the
1933 Act, and all requirements of the Securities and Exchange
Commission thereunder, hereby ratifying and confirming my
signature as it may be signed by said attorneys or each of them
to
any and all amendments to said Registration Statement.
IN WITNESS WHEREOF, I have hereunder set my hand on this
Instrument the 10th day of August, 1994.
/s/ Susan Smick
-------------------------------
Susan Smick
Trustee
Exhibit 17b
POWER OF ATTORNEY
The undersigned Trustee of The PanAgora Funds, a
Massachusetts business trust, does hereby severally constitute and
appoint Richard A. Crowell and Joseph P. Barri, and each of
them
acting singly, to be my true, sufficient and lawful attorneys,
with full power to each of them, and each of them acting
singly,
to sign for me, in my name and in the capacity indicated below,
any and all amendments to the Registration Statement on Form N-
1A
to be filed by The PanAgora Funds under the Investment Company
Act
of 1940, as amended (the "1940 Act"), and under the Securities
Act
of 1933, as amended (the "1933 Act"), with respect to the
offering
of its shares of beneficial interest and any and all other
documents and papers relating thereto, and generally to do all
such things in my name and on my behalf in the capacity
indicated
to enable The PanAgora Funds to comply with the 1940 Act and
the
1933 Act, and all requirements of the Securities and Exchange
Commission thereunder, hereby ratifying and confirming my
signature as it may be signed by said attorneys or each of them
to
any and all amendments to said Registration Statement.
IN WITNESS WHEREOF, I have hereunder set my hand on this
Instrument the 8th day of August, 1994.
/s/ James R. Vertin
--------------------------------
James R. Vertin
Trustee
