As filed with the Securities and Exchange Commission on January 3, 1994
1993 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 /
Pre-Effective Amendment No. / /
Post-Effective Amendment No. 1 / X /
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 / X /
Amendment No. 3 / X /
(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)
The Index to Exhibits is located at page ______.
Page 1 of ______ total pages.
It is proposed that this filing will become effective (check appropriate box):
X immediately upon filing pursuant to paragraph (b), or
on ___________ pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a), or
on ___________ pursuant to paragraph (a) of Rule 485
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. Registrant's Rule 24f-2
Notice for the fiscal year ending May 31, 1994 will be filed on or before July
30, 1994.
CROSS REFERENCE SHEET
(as required by Rule 495)
The PanAgora Funds
N-1A Item No.
Location
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
Registrant
Cover Page; Investor
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
Securities
Dividends, Distributions
and Taxes; Organization
and Shares of the Trust
Item 7.
Purchase of Securities Being
Offered
Purchase of Shares; Net
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
N-1A Item No.
Location
Item 13.
Investment Objectives and
Policies
Additional Information on
Fund Investments and
Strategies and Related
Risks; Investment
Restrictions
Item 14.
Management of the Fund
Trustees and Officers
Item 15.
Control Persons and Principal
Holders of Securities
Trustees and Officers
Item 16.
Investment Advisory and Other
Services
Investment Advisory and
Other Services;
Miscellaneous
Item 17.
Brokerage Allocation and Other
Practices
Portfolio Transactions
Item 18.
Capital Stock and Other
Securities
General Information About
the Trust
Item 19.
Purchase, Redemption and
Pricing of Securities Being
Offered
Purchase and Redemption
Information; Net Asset
Value
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.
THE PANAGORA FUNDS
P. O. Box 9698
Providence, Rhode Island 02940-9698
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 JANUARY 3, 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...................................................................
............................ 17
Management of the
Trust.........................................................................
.................................... 19
Purchase of
Shares........................................................................
.............................................. 21
Redemption of
Shares........................................................................
.......................................... 23
Net Asset
Value.........................................................................
.................................................. 23
Dividends, Distribution and
Taxes.........................................................................
...................... 24
Organization and Shares of the
Trust.........................................................................
.................. 25
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 January 3, 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. The Boston Company Advisors, Inc. serves as
the Administrator to the Funds. The Shareholder Services Group, Inc. serves as
the Funds' transfer agent and Boston Safe Deposit and Trust Company serves as
the Funds' 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 pay short-term capital gains at the end of each quarter, if
earned and as declared. Distributions of net capital gains, if any, will be
paid annually. 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
PanAgora
Asset
Allocation
Fund*
PanAgora
Global
Fund*
PanAgora
Inter-
national
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
Estimated Annual Fund Operating Expenses
(as a percentage of average net assets)
Advisory
Fees**......................................
...............
0.60%
0.70%
0.80%
Administration
Fees........................................
.........
0.15%
0.15%
0.15%
Other
Expenses**..................................
..................
0.15%
0.15%
0.15%
Estimated Total Fund Operating
Expenses**.....................
0.90%
1.00%
1.10%
_________________________
[ * The Trust will provide to shareholders thirty days notice prior to
effecting changes to the expense table.]
** The Adviser has agreed not to impose its advisory fee and to limit the
expenses of each Fund to the extent necessary to limit Estimated 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.
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 current fiscal year ending May 31, 1994 and actual expenses may be
more or less than such estimates. 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
unaudited financial statements included in the Trust's 1993 Semi-Annual Report
to Shareholders. The 1993 Semi-Annual Report to Shareholders is incorporated
by reference into the Statement of Additional Information. 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.
PanAgora
Asset
Allocation
Fund
Six months
ended
November 30,
1993*
(Unaudited)
PanAgora
Global Fund
Six months
ended
November 30,
1993*
(Unaudited)
PanAgora
International
Equity Fund
Six months
ended
November 30,
1993*
(Unaudited)
Operating Performance:
Net asset value, beginning of
period...........................
$10.00
$10.00
$10.00
Income from Investment Operations:
Net investment
income+................................
....
0.04
0.02
0.04
Net realized and unrealized
gain/(loss)
on
investments............................
..................
0.13++
0.32++
(0.03)
Total from investment
operations......................
0.17
0.34
0.01
Distributions:
Dividends from net investment
income...................
(0.01)
----
(0.02)
Net asset value, end of
period.................................
.
$10.16
$10.34
$ 9.99
Total
return+++..............................
..................
1.70%
3.40%
0.08%
Ratios/supplemental data:
Net assets, end of period (in
000's)........................
$2,475
$39,804
$12,946
Ratio of operating expenses to
average net
assets++++.............................
.................
0.90%**
1.00%**
1.10%**
Ratio of net investment income to
average
net
assets.................................
...................
2.02%**
0.75%**
0.76%**
Portfolio turnover
rate...................................
........
0%
63%
73%
____________________________
* The Funds commenced operations on June 1, 1993.
** Annualized.
+ Net investment loss per share before waiver of fees and reimbursement of
expenses by investment adviser was ($0.18) for the PanAgora Asset Allocation
Fund, $0.00 for the PanAgora Global Fund and ($0.02) for the PanAgora
International Equity Fund for the six months from June 1, 1993, commencement
of operations, through November 30, 1993.
++ 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 was 11.94% for the PanAgora Asset Allocation
Fund, 1.76% for the PanAgora Global Fund and 2.25% for the PanAgora
International Equity Fund for the six months from June 1, 1993, commencement
of operations, through November 30, 1993.
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 valuations 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 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,
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
therefor 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 issuer 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 its 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. ("Lehman").
As of November 30, 1993, PanAgora managed approximately $12 billion in assets
for various individual and institutional accounts, including the following
registered investment companies: the Asset Allocation Fund and the
International Fund, portfolios of The Boston Company Investment Series; the
Asset Manager's Equity Fund, a portfolio of The Boston Company Fund; 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; the Shearson Series Fund; and the Shearson Sector Analysis 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, pays the Adviser a monthly fee at an annual rate of
each Fund's average daily net assets as follows:
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.
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.
James A. Rullo, Portfolio Manager of the Adviser since April, 1990, is
the portfolio manager primarily responsible for the management of the PanAgora
Global Fund and PanAgora International Equity Fund since commencement of
operations of these Funds on June 1, 1993. Prior to April, 1990, Mr. Rullo
was a Portfolio Manager at Boston Safe Deposit and Trust Company.
Administrator and Custodian
The Trust has entered into an Administration Agreement with The Boston
Company Advisors, Inc. ("Boston Advisors" or the "Administrator"), One Boston
Place, Boston, Massachusetts 02108, pursuant to which Boston Advisors receives
a monthly fee at the annual rate of 0.15% of the average daily net assets of
each Fund. The minimum fee (with respect to each Fund) is $60,000 per year.
Boston Advisors is a wholly-owned subsidiary of The Boston Company, Inc.
("TBC"). All of the outstanding stock of Boston Group Holdings, Inc., TBC's
parent, is owned by Mellon Bank Corporation, a publicly-traded multibank
holding company incorporated under the laws of the Commonwealth of
Pennsylvania in 1971 and registered under the Federal Bank Holding Company Act
of 1956.
The Administrator 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.
The Trust has entered into a Custodian Agreement with Boston Safe
Deposit & Trust Company, an affiliate of Boston Advisors ("Boston Safe" or the
"Custodian"), pursuant to which Boston Safe serves as custodian of the Trust's
assets. Boston Safe is located at One Boston Place, Boston, Massachusetts
02109.
Distributor
Funds Distributor, Inc., a wholly-owned subsidiary of Lehman ("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.
Transfer Agent
The Shareholder Services Group, Inc. ("TSSG" or the "Transfer Agent"),
P.O. Box 9698, Providence, Rhode Island 02940-9698, serves as the transfer
agent of the Trust. TSSG is a business unit of First Data Corporation, a
publicly-traded company that provides information processing services to a
wide variety of enterprises. TSSG 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 9698, Providence, Rhode Island 02940-9698.
_________________
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 Funds
Distributor. 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 only be accepted 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 9698
Providence, Rhode Island 02940-9698
Subsequent investments in an existing account in any Fund may be made at
any time by sending to Funds Distributor at the above address a check payable
to the appropriate Fund, along with either (i) a subsequent order form which
may be obtained from Funds Distributor 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 Funds
Distributor. Orders for shares purchased by wire must be transmitted by
telephone by calling The PanAgora Funds at 1-800-423-6041.
Following notification to Funds Distributor, federal funds and
registration instructions should be wired through the Federal Reserve System
to:
Boston Safe Deposit & Trust Company
Boston, Massachusetts
ABA No. 011001234
For: The PanAgora Funds Account No. 161527
[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 Funds Distributor. 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 Funds Distributor.
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 Funds Distributor.
Reports to Shareholders
Shareholders of each Fund receive an annual report containing audited
financial statements and a semiannual report. Upon request, 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 quarterly
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 9698, Providence, Rhode Island
02940-9698.
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, TSSG'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 TSSG's telephone representatives comply with
the procedures described above, neither the Trust nor TSSG will 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. Shares subject to such requests will earn dividends on the day
the request is received.
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 bank, a securities broker or dealer, a credit union
having authority to issue signature guarantees, a savings and loan
association, a building and loan association, a cooperative bank, a federal
savings bank or association, a national securities exchange, a registered
securities association or a clearing agency, provided that such institution
satisfies the standards established by The Transfer Agent. The Transfer Agent
may also require additional documentation in connection with a request to
change a designated bank.
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 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. 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 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 certain 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 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 taxes on income 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 shareholders to take a
credit or a deduction for foreign income taxes paid by such Fund. Each
shareholder would then treat as an additional dividend his or her
proportionate share of the amount of foreign taxes paid by such Fund. For
some years, these Funds may be unable or may not elect to pass such taxes and
foreign tax credits and deductions with respect to such taxes through to their
shareholders.
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.
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 Board 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.
The PanAgora Funds
A C C O U N T
A P P L I C A T I O N
SEND TO: The PanAgora Funds
P.O. Box 9698
Providence, RI 02940-9698
DATE ____________________
I. ACCOUNT INFORMATION
____________________________________ _________________________________________
NAME OF ACCOUNT OWNER TELEPHONE NUMBER
____________________________________ _________________________________________
STREET OR P.O. BOX TAXPAYER IDENTIFICATION NUMBER
____________________________________
CITY
____________________________________
STATE ZIP CODE US CITIZEN, RESIDENT OR ENTITY *YES *NO
II. INVESTMENT INFORMATION
_____PanAgora Global Fund $__________________
_____PanAgora International Equity Fund $__________________
_____PanAgora Asset Allocation Fund $__________________
III. DIVIDEND/DISTRIBUTIONS REMITTANCE PLANS
CHECK APPROPRIATE BOX (SEE "DIVIDENDS, DISTRIBUTIONS AND TAXES"
IN THE PROSPECTUS)
*Cash *Reinvested
IV. REDEMPTIONS
The Transfer Agent is hereby authorized to honor telephone, telegraphic
or other
instructions, without signature guarantee, from the Authorized Signers
listed below for the
redemption of shares, provided that the proceeds are transmitted to the
following bank account
only and the amount of the redemption is $25,000 or less. Redemptions in
excess of $25,000 will
require a signature guarantee. Absent its own gross negligence, neither
The PanAgora Funds nor
the Transfer Agent shall be liable for payments made to any unauthorized
account.
BANK NAME ABA NUMBER
STREET ADDRESS
CITY STATE ZIP CODE
ACCOUNT NAME ACCOUNT NUMBER
V. 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 undersigned
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.
SIGNATURE PRINT NAME AND TITLE, IF ANY
______________________________________ _______________________________________
______________________________________ _______________________________________
______________________________________ _______________________________________
______________________________________ _______________________________________
The PanAgora Funds
VI. 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 tax 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.
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
VII. Signature: _____________________________________________
_____________________________________________
Date _____________________________________________
The PanAgora Funds
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 VI,
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 you 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 VI 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 1441, 1442 and 3406, or
consult your
tax advisor.
The PanAgora Funds
P. O. Box 9698
Providence, Rhode Island 02940-9698
1-800-423-6041
STATEMENT OF ADDITIONAL INFORMATION
January 3, 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 January 3, 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.
TABLE OF CONTENTS
Page
Introduction 2
Additional Information on Fund Investments
and Strategies and Related Risks 3
Investment Restrictions 17
Trustees and Officers 19
Investment Advisory and Other Services 22
Portfolio Transactions 24
Purchase and Redemption Information 26
Net Asset Value 26
Performance Information 27
Taxes 28
General Information About the Trust 32
Miscellaneous 33
Financial Statements 34
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.
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 Advisor,
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 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.
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 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 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 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.
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 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 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 unaffiliated 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, 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 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 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 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
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 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.
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, 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 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 sum of the amounts of initial margin deposits on the Fund's existing
futures contracts and premiums paid for options on non-hedging futures (net of
the amount the positions are "in the money") would exceed 5% of the market
value of the Fund's total 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 its qualification as a regulated investment company
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. The Funds may not purchase or sell futures
contracts or purchase or sell related options except for closing purchase or
sale transactions if, immediately thereafter, the sum of the amount of initial
margin deposits on a Fund's outstanding futures and related options positions
and the amount of premiums paid for outstanding options on futures would
exceed 5% of the market value of a Fund's total assets. 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 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 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 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 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.
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 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.
Susan Smick Trustee Vice President of Pricing
400 Atlantic Avenue and Estimating and Infor-
Boston, MA 02110 mation Systems of Quebecor
Printing (U.S.) Corporation,
since August 1992; Vice
Positions Principal
Occupation
Name and Address With Trust During Past Five
Years
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.
Vincent Nave* Treasurer Senior Vice President, The
The Boston Company Boston Company Advisors,
Advisors, Inc. Inc. and Boston Safe Deposit
One Exchange Place & Trust Company, since
Boston, MA 02109 September 1983; Treasurer of
certain mutual funds affiliated
with Smith Barney Shearson
and The Boston Company
Advisors, Inc.; and
previously, Audit Manager and
National Office Liaison for The
Mutual Funds Industry
Chairman, Coopers & Lybrand
Francis J. McNamara, III* Secretary Senior Vice President and
The Boston Company General Counsel, The Boston
Advisors, Inc. Company Advisors, Inc.,
One Exchange Place since June 1989; Secretary
Boston, MA 02109 of certain mutual funds
affiliated with Smith Barney
Shearson and The Boston
Company Advisors, Inc.; Vice
President and Associate
Counsel, The Boston Company
Positions Principal
Occupation
Name and Address With Trust During Past Five
Years
Advisors, Inc., June 1987 to
June 1989; and previously,
Associate, the law firm of
Ropes & Gray.
Michael C. Kardok Assistant Vice President, The Boston
The Boston Company Treasurer Company Advisors, Inc.,
Advisors, Inc. since November 1990;
One Exchange Place Assistant Treasurer of
Boston, MA 02109 certain mutual funds
affiliated with Smith Barney
Shearson and The Boston Company
Advisors, Inc.; and previously, Senior
Manager, Deloitte & Touche.
Richard W. Ingram Assistant Vice President and Tax
The Boston Company Treasurer Director, Investor Services
Advisors, Inc. Group, The Boston Company
One Exchange Place Advisors, Inc.; Assistant
Boston, MA 02109 Treasurer of certain mutual funds affiliated
with Smith Barney Shearson and The
Boston Company Advisors, Inc.; and
previously, employed by Arthur Andersen
& Co., most recently as Tax Manager
in their Boston office.
Joseph P. Barri, Esq. Assistant Partner, the law firm of Hale and Dorr;
Hale and Dorr Secretary and Secretary to the mutual
60 State Street funds in The Pioneer Family
Boston, MA 02109 of Funds.
David M. Elwood, Esq. Assistant Vice President and Associate
The Boston Company Secretary General Counsel, The Boston
Advisors, Inc. Company Advisors, Inc.,
One Exchange Place since 1992; and previously,
Boston, MA 02109 Partner, the law firm of Gaston & Snow.
Elizabeth Nystedt Assistant Vice President, The Boston
The Boston Company Secretary Company Advisors, Inc.,
Advisors, Inc. since 1984.
One Exchange Place
Boston, MA 02109
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. Shareholders who own more than 5% of a portfolio's shares
as of November 30, 1993 is as follows:
Name of Portfolio
Shareholder and Address
% of Shares
Owned
Asset Allocation Fund
Information Alliance Pension
Plan Trust
Box 3079
Pittsfield, MA
61%
PanAgora Asset Management, Inc.
260 Franklin Street, 22nd Floor
Boston, MA
37.81%
Global Fund
Rush-Presbyterian-St. Luke's
Medical Center Pension Fund
1700 W Vanburen St., Suite 265
Chicago, IL
43.11%
Rush-Presbyterian-St. Luke's
Medical Center Endowment Fund
1700 W Vanburen St., Suite 265
Chicago, IL
56.15%
International Equity
Fund
Bost & Co.
P.O. Box 9118
Boston, MA
71.47%
The Minneapolis Foundation
821 Marquette Avenue
Minneapolis, MN
25.38%
INVESTMENT ADVISORY AND OTHER SERVICES
The Adviser
PanAgora Asset Management, Inc. serves as the Trust's investment
adviser. A description of the Adviser, the services provided by it pursuant
to the advisory agreement with respect to each Fund (the "Advisory
Agreement"), as well as 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.
Each 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.
Each Advisory 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 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 a Fund. Each 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 such parties. Each Advisory Agreement was also
approved by the Trust's initial shareholder, the Adviser, on May 19, 1993.
Each Advisory Agreement is terminable 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 each Advisory Agreement at any time without penalty on
60 days' written notice to the Trust. Each Advisory Agreement terminates
automatically in the event of its assignment (as such term is defined in the
1940 Act).
The Administrator and Transfer Agent
As described in the Prospectus, The Boston Company Advisors, Inc.
("Boston Advisors") serves as the Trust's administrator pursuant to an
administration and accounting services agreement (the "Administration
Agreement"). Pursuant to the Administration Agreement, Boston Advisors 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, including the
computation of each Fund's net asset value, net investment income and realized
capital gains, if any.
The Administration Agreement provides that Boston Advisors 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.
For a description of the fees payable by each Fund under the
Administration Agreement, see "Management of the Trust" in the Prospectus.
The Shareholder Services Group, Inc. ("TSSG") serves as the transfer and
dividend disbursing agent for the Trust pursuant to a transfer agency
agreement (the "Transfer Agency Agreement"), under which TSSG (i) maintains
shareholder accounts, and (ii) makes periodic reports to the Trust's Board of
Trustees concerning the operations of each Fund.
In accordance with the Transfer Agency Agreement, the Trust pays a
monthly fee to TSSG on an annualized basis as follows: 0.07% of the aggregate
net assets of the Trust up to $150 million of such assets; 0.05% of the
aggregate net assets of the Trust exceeding $150 million up to $350 million of
such assets; 0.04% of the aggregate assets of the Trust exceeding $350 million
up to $800 million of such assets; and 0.03% of such assets exceeding $800
million. The Trust must also pay a minimum fee of $2,500 per Fund up to
December 31, 1993 and a minimum fee of $3,000 per Fund thereafter.
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 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 Advisor has
agreed to pay to the Distributor a monthly fee at an annual rate of 0.03% of
the average net asset value of each Fund.
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 the Trustees who
are not parties to the Distribution Agreement or "interested persons" (as such
term is defined in the 1940 Act) of such parties. 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 such parties. 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.
Custodian
As described in the Prospectus, Boston Safe Deposit & Trust Company (the
"Custodian"), whose principal business address is One Boston Place, Boston,
Massachusetts 02108, maintains custody of each Fund's assets pursuant to a
custodian agreement (the "Custodian Agreement"). Under the Custodian
Agreement, the Custodian (i) maintains a separate account in the name of each
Fund, (ii) holds and transfers portfolio securities on account of each Fund,
(iii) accepts receipts and makes disbursements of money on behalf of each
Fund, (iv) collects and receives all income and other payments and
distributions on account of each Fund's portfolio securities and (v) makes
periodic reports to the Trust's Board of Trustees concerning each Fund's
operations. The Custodian is authorized to select one or more foreign or
domestic banks or companies to serve as sub-custodian on behalf of the Trust,
provided that, with respect to sub-custodians, the Custodian remains
responsible for the performance of all its duties under the Custodian
Agreement and holds the Trust harmless from the acts and omissions of any
sub-custodian. The custodian is an affiliate of Boston Advisors.
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 each 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, each 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 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.
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.
PURCHASE AND REDEMPTION INFORMATION
The Trust will not generally issue Trust shares for consideration other
than cash. At the Trust's sole discretion, however, it may issue Trust shares
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 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
Yield
Each Fund's 30-day (or one month) standard yield is calculated in
accordance with the method prescribed by the Commission for investment
companies:
YIELD = 2 [(a - b +1)6 - 1]
cd
Where: a = dividends and interest earned by the Fund during the
period;
b = net expenses accrued for the period;
c = average daily number of shares out-standing during the
period, entitled
to receive dividends; and
d = maximum offering price per share on
the last day of the period.
For the purpose of determining interest earned on debt obligations
purchased by a Fund at a discount or premium (variable "a" in the formula),
each Fund computes the yield to maturity of such instrument based on the
market value of the obligation (including actual accrued interest) at the
close of business on the last business day of each month, or, with respect to
obligations purchased during the month, the purchase price (plus actual
accrued interest). Such yield is then divided by 360 and the quotient is
multiplied by the market value of the obligation (including actual accrued
interest) in order to determine the interest income on the obligation for each
day of the subsequent month that the obligation is in the portfolio. It is
assumed in the above calculation that each month contains 30 days. The
maturity of a debt obligation with a call provision is deemed to be the next
call date on which the obligation reasonably may be expected to be called or,
if none, the maturity date.
For the purpose of computing yield on equity securities held by a Fund,
dividend income is recognized by accruing 1/360 of the stated dividend rate of
the security for each day that the security is held by the Fund. With respect
to mortgage or other receivables-backed debt obligations purchased at a
discount or premium, the formula generally calls for amortization of the
discount or premium. The amortization schedule will be adjusted monthly to
reflect changes in the market value of such debt obligations. Expenses
accrued for the period (variable "b" in the formula) include all recurring
fees charged by a Fund to all shareholder accounts in proportion to the length
of the base period and the Fund's mean (or median) account size. Undeclared
earned income may be subtracted from the offering price per share (variable
"d" in the formula).
Total Return
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:
T = [(ERV) 1/n - 1]
P
Where: T = average annual total return,
ERV = ending redeemable value of a hypo- thetical $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 the PanAgora Asset Allocation Fund,
PanAgora Global Fund and PanAgora International Equity Fund from inception
(June 1, 1993) to November 30, 1993, was 1.70%, 3.40%, and 0.08%,
respectively.
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 future contracts and
certain foreign currencies or currency 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 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 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 currency swaps and synthetic investment positions
involving currency forward contracts 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, as a regulated investment company, 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. 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 no federal income tax was paid. 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") and do not distribute their income on a regular basis, 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.
Regulations published by the Treasury Department in proposed form on April 1,
1992 would, if they become effective, substantially ameliorate these adverse
tax consequences by allowing regulated investment companies to mark to market
their stock in certain passive foreign investment companies. The IRS
announced in November, 1992, in Notice 92-53, that final regulations will
provide that eligible regulated investment companies may apply the mark to
market election for their taxable years ending after March 31, 1992 and before
April 1, 1993. If, as anticipated, final regulations containing similar
provisions become effective for taxable years ending after April 1, 1993,
these Funds may not be required to take defensive actions with respect to
investments in passive foreign investment companies, including limiting
investments in such companies.
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 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 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 taxes on their income 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. 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 investment company taxable 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 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 have a tax holding period of six months or less at the
time of the sale or redemption, 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 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 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 of 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 company. 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, other than to the Trust or its shareholders, in
connection with the Trust or its shareholders, in 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 securities 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 securities, reference is
made to the Registration Statement and the exhibits filed as a part thereof.
FINANCIAL STATEMENTS
The Trust's unaudited financial statements for the period from June 1,
1993 through November 30, 1993, and the financial highlights, appearing in the
1993 Semi-Annual Report to Shareholders are incorporated by reference in this
Statement of Additional Information.
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.
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:
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
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 unaudited Financial Statements for the period
ended November 30, 1993 are incorporated by reference in the Statement
of Additional Information from the Registrant's 1993 Semi-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 November 30, 1993;
2. Statement of Operations for the period ended November 30,
1993;
3. Statement of Changes in Net Assets for the period ended
November 30, 1993;
4. Selected Per Share Data and Ratios for the period appearing
in the 1993 Semi-Annual Report to Shareholders;
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.
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.
4(b). Form of Specimen Share Certificate for Shares of the
PanAgora Global Fund.
4(c). Form of Specimen Share Certificate for Shares of the
PanAgora International Equity Fund.
5(a). Investment Advisory Agreement between PanAgora Asset
Management, Inc. and Registrant on behalf of PanAgora Asset Allocation
Fund.
5(b). Investment Advisory Agreement between PanAgora Asset
Management, Inc. and Registrant on behalf of PanAgora Global Fund.
5(c). Investment Advisory Agreement between PanAgora Asset
Management, Inc. and Registrant on behalf of PanAgora International
Equity Fund.
6. Distribution Agreement between Registrant, Funds
Distributor, Inc. and PanAgora Asset Management, Inc.
7. Not Applicable.
8. Custody Agreement between Registrant and Boston Safe
Deposit & Trust Company.
9(a). Administration Agreement between Registrant and The
Boston Company Advisors, Inc.
9(b). Form of Transfer Agent and Registrar Agreement between
Registrant and The Shareholder Services Group, Inc. 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 April 26, 1993.
10. Opinion and Consent of Counsel 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 May 26, 1993.
11. Consent of Independent Public Accountants 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 April 26, 1993.
12. 1993 Semi-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.
13(b). Form of Stock Purchase Agreement between
PanAgora Asset Management, Inc. and Registrant on behalf of PanAgora
Global Fund.
13(c). Form of Stock Purchase Agreement between
PanAgora Asset Management, Inc. and Registrant on behalf of PanAgora
International Equity Fund.
14. Not Applicable.
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 5% of a portfolio's shares as of November
30, 1993 is as follows:
Name of Portfolio
Shareholder and Address
% of Shares
Owned
Asset Allocation Fund
Information Alliance Pension
Plan Trust
Box 3079
Pittsfield, MA
61%
PanAgora Asset Management, Inc.
260 Franklin Street, 22nd Floor
Boston, MA
37.81%
Global Fund
Rush-Presbyterian-St. Luke's
Medical Center Pension Fund
1700 W Vanburen St., Suite 265
Chicago, IL
43.11%
Rush-Presbyterian-St. Luke's
Medical Center Endowment Fund
1700 W Vanburen St., Suite 265
Chicago, IL
56.15%
International Equity
Fund
Bost & Co.
P.O. Box 9118
Boston, MA
71.47%
The Minneapolis Foundation
821 Marquette Avenue
Minneapolis, MN
25.38%
PanAgora Asset Management, Inc., the Registrant's investment adviser, is
a Delaware corporation (the "Adviser"). 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.,
("Lehman"). Funds Distributor, Inc., the Registrant's principal
underwriter and distributor, is a wholly-owned subsidiary of Lehman.
See Item 29 below.
Item 26. Number of Holders of Securities
The following information is as of November 30, 1993:
Fund # of Record Holders
PanAgora Asset Allocation Fund 5
PanAgora Global Fund 7
PanAgora International Equity Fund 9
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.
Section 4.2 of the Distribution Agreement between the Trust,
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 Boston
Company Fund, The Boston Company Tax-Free Municipal Funds, The Boston
Company 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:
Name
Positions and Offices
with Underwriter
Positions and Offices
with Registrant
Marie E. Connolly
Director, President and
Treasurer
None
Peter Meenan
Director
None
Richard W. Healey
Senior Vice President
None
Rui M. Moura
Senior Vice President
None
Jean M. O'Leary
Clerk and Secretary
None
Robert M. Steele
Vice President
None
Mark B. Bentley
Vice President
None
Margaret M. Hession
Vice President
None
Jerome M. Menifee
Vice President
None
Joseph A. Vignone
Vice President
None
Dennis J. Gallant
Assistant Vice President
None
Cathryn A. Gibbs
Assistant Vice President
None
Dale F. Lampe
Assistant Vice President
None
Linda C. Raftery
Assisant Vice President
None
Nancy J. Morse
Senior Operations Officer
None
Brian D. Gallary
Operations Officer
None
Cynthia L. Sokel
Operations Officer
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 Boston Safe
Deposit & Trust Company, One Boston Place, Boston, Massachusetts 02109,
except for (i) certain transfer agency records which are in the physical
possession of The Shareholder Services Group, Inc., 53 State Street,
Boston, Massachusetts 02109 and (ii) certain fund accounting records
which are in the physical possession of The Boston Company Advisors,
Inc., 53 State Street, Boston, Massachusetts 02109.
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.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this
Post-Effective Amendment No. 1 to the 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 3rd day
of January, 1994.
THE PANAGORA FUNDS
By: /s/Richard A. Crowell
Richard A. Crowell
President
Pursuant to the requirements of the Securities Act of 1933, this
Post-Effective Amendment No. 1 to the Registration Statement has been
signed below by the following person in the capacities and on the date
indicated:
Signature Date
/s/Richard A. Crowell
January 3, 1994
Richard A. Crowell
President and Chairman
of the Board of Trustees
(Principal Executive Officer)
/s/Vincent Nave
January 3, 1994
Vincent Nave
Treasurer
(Principal Accounting Officer)
/s/Susan Smick
January 3, 1994
Susan Smick
Trustee
/s/James R. Vertin
January 3, 1994
James R. Vertin
Trustee
EXHIBIT LIST
Item No. Description
Page
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.
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.
4(b). Form of Specimen Share Certificate for Shares of the
PanAgora Global Fund.
4(c). Form of Specimen Share Certificate for Shares of the
PanAgora International Equity Fund.
5(a). Investment Advisory Agreement between PanAgora Asset
Management, Inc. and Registrant on behalf of PanAgora Asset Allocation
Fund.
5(b). Investment Advisory Agreement between PanAgora Asset
Management, Inc. and Registrant on behalf of PanAgora Global Fund.
5(c). Investment Advisory Agreement between PanAgora Asset
Management, Inc. and Registrant on behalf of PanAgora International
Equity Fund.
6. Distribution Agreement between Registrant, Funds
Distributor, Inc. and PanAgora Asset Management, Inc.
7. Not Applicable.
8. Custody Agreement between Registrant and Boston Safe
Deposit & Trust Company.
9(a). Administration Agreement between Registrant and The
Boston Company Advisors, Inc.
9(b). Form of Transfer Agent and Registrar Agreement between
Registrant and The Shareholder Services Group, Inc. 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 April 26, 1993.
10. Opinion and Consent of Counsel 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 May 26, 1993.
11. Consent of Independent Public Accountants 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 April 26, 1993.
12. 1993 Semi-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.
13(b). Form of Stock Purchase Agreement between
PanAgora Asset Management, Inc. and Registrant on behalf of PanAgora
Global Fund.
13(c). Form of Stock Purchase Agreement between
PanAgora Asset Management, Inc. and Registrant on behalf of PanAgora
International Equity Fund.
14. Not Applicable.
15. Not Applicable.
16. Not Applicable.
secfilin/1293sai.doc 22
The Commonwealth of Massachusetts
(Massachusetts Capitol Building in Background)
NUMBER (Picture of Eagle with Wings Spread)
SHARES
(Pillar) SPECIMEN
(Pillar)
This Certifies that XXXXXXXXXXXXXXXXXX of XXXXXXXXXXXXXXXXX is the owner of
XXXXXXXXXXXXXXXXXXXXXXXXX Shares in the PanAgora Asset Allocation Fund, a
series of The PanAgora Funds created by a Declaration of Trust dated January
27, 1993 and recorded with The Secretary of State of the Commonwealth of
Massachusetts which shares are fully paid and non-assessable, and subject to
the provisions of this Trust, are transferable by assignment endorsed thereon,
and, the surrender of this certificate.
IN WITNESS WHEREOF, the Trustees hereunto set their hands and have caused
their seal to be affixed hereto this
______________________ day of ____________________ A.D. 19xx
______________________________ (Picture of Seal)
___________________________
President Treasurer
(Reverse Side of Certificate)
(In opposite direction of paragraph below: Picture of torch with the
words The PanAgora Asset Allocation Fund, a series of The PanAgora
Funds, Certificate for _____________, Issued to ________________, Dated
________________.)
For Value Received, __________________________ hereby sell, assign
and transfer unto _____________________________________________________
Shares of the Capital represented by the within Certificate, and do
hereby irrevocably constitute and appoint
_____________________________________ Attorney to transfer the said
Shares on the books of the within named Organization with full power of
substitution in the premises.
Dated _____________________, 19___
In presence of
____________________________________
___________________________
(Text in opposite direction of paragraph above that runs along the right
side of paragraph: NOTICE: THE SIGNATURE OF THIS ASSIGNMENT MUST
CORRESPOND WITH THE NAME AS WRITTEN UPON THE FACE OF THE CERTIFICATE, IN
EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT, OR ANY CHANGE
WHATEVER.)
The Commonwealth of Massachusetts
(Massachusetts Capitol Building in Background)
NUMBER (Picture of Eagle with Wings Spread)
SHARES
(Pillar) SPECIMEN
(Pillar)
This Certifies that XXXXXXXXXXXXXXXXXX of XXXXXXXXXXXXXXXXX is the owner of
XXXXXXXXXXXXXXXXXXXXXXXXX Shares in the PanAgora Global Fund, a series of The
PanAgora Funds created by a Declaration of Trust dated January 27, 1993 and
recorded with The Secretary of State of the Commonwealth of Massachusetts
which shares are fully paid and non-assessable, and subject to the provisions
of this Trust, are transferable by assignment endorsed thereon, and, the
surrender of this certificate.
IN WITNESS WHEREOF, the Trustees hereunto set their hands and have caused
their seal to be affixed hereto this
______________________ day of ____________________ A.D. 19xx
______________________________ (Picture of Seal)
___________________________
President Treasurer
(Reverse Side of Certificate)
(In opposite direction of paragraph below: Picture of torch with the
words The PanAgora Global Fund, a series of The PanAgora Funds,
Certificate for _____________, Issued to ________________, Dated
________________.)
For Value Received, __________________________ hereby sell, assign
and transfer unto _____________________________________________________
Shares of the Capital represented by the within Certificate, and do
hereby irrevocably constitute and appoint
_____________________________________ Attorney to transfer the said
Shares on the books of the within named Organization with full power of
substitution in the premises.
Dated _____________________, 19___
In presence of
____________________________________
___________________________
(Text in opposite direction of paragraph above that runs along the right
side of paragraph: NOTICE: THE SIGNATURE OF THIS ASSIGNMENT MUST
CORRESPOND WITH THE NAME AS WRITTEN UPON THE FACE OF THE CERTIFICATE, IN
EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT, OR ANY CHANGE
WHATEVER.)
The Commonwealth of Massachusetts
(Massachusetts Capitol Building in Background)
NUMBER (Picture of Eagle with Wings Spread)
SHARES
(Pillar) SPECIMEN
(Pillar)
This Certifies that XXXXXXXXXXXXXXXXXX of XXXXXXXXXXXXXXXXX is the owner of
XXXXXXXXXXXXXXXXXXXXXXXXX Shares in the PanAgora International Equity Fund, a
series of The PanAgora Funds created by a Declaration of Trust dated January
27, 1993 and recorded with The Secretary of State of the Commonwealth of
Massachusetts which shares are fully paid and non-assessable, and subject to
the provisions of this Trust, are transferable by assignment endorsed thereon,
and, the surrender of this certificate.
IN WITNESS WHEREOF, the Trustees hereunto set their hands and have caused
their seal to be affixed hereto this
______________________ day of ____________________ A.D. 19xx
______________________________ (Picture of Seal)
___________________________
President Treasurer
(Reverse Side of Certificate)
(In opposite direction of paragraph below: Picture of torch with the
words The PanAgora International Equity Fund, a series of The PanAgora
Funds, Certificate for _____________, Issued to ________________, Dated
________________.)
For Value Received, __________________________ hereby sell, assign
and transfer unto _____________________________________________________
Shares of the Capital represented by the within Certificate, and do
hereby irrevocably constitute and appoint
_____________________________________ Attorney to transfer the said
Shares on the books of the within named Organization with full power of
substitution in the premises.
Dated _____________________, 19___
In presence of
____________________________________
___________________________
(Text in opposite direction of paragraph above that runs along the right
side of paragraph: NOTICE: THE SIGNATURE OF THIS ASSIGNMENT MUST
CORRESPOND WITH THE NAME AS WRITTEN UPON THE FACE OF THE CERTIFICATE, IN
EVERY PARTICULAR, WITHOUT ALTERATION OR ENLARGEMENT, OR ANY CHANGE
WHATEVER.)
THE PANAGORA FUNDS
260 Franklin Street
Boston, Massachusetts 02110
May 19, 1993
PanAgora Asset Management, Inc.
260 Franklin Street
Boston, Massachusetts 02110
Investment Advisory Agreement
(PanAgora Asset Allocation Fund)
_____________________________________
Dear Sirs:
The PanAgora Funds (the "Trust") has been organized under the laws of
The Commonwealth of Massachusetts to engage in the business of an investment
company. The shares of beneficial interest of the Trust ("Shares") are
divided into multiple series, including the PanAgora Asset Allocation Fund
(the "Fund") as established pursuant to a written instrument executed by the
Trustees of the Trust. Series may be terminated, and additional series
established, from time to time by action of the Trustees. The Trust on behalf
of the Fund has selected you to act as the investment adviser of the Fund and
to provide certain other services, as more fully set forth below, and you are
willing to act as such investment adviser and to perform such services under
the terms and conditions hereinafter set forth. Accordingly, the Trust agrees
with you as follows:
1. Delivery of Fund Documents. The Trust has furnished you with
copies, properly certified or authenticated, of each of the following:
(a) Declaration of Trust of the Trust, filed with the Secretary of
State of The Commonwealth of Massachusetts, dated January 27 1993, as amended
from time to time (the "Declaration of Trust").
(b) Establishment and Designation of Series of Shares of Beneficial
Interest, No Par Value Per Share, establishing the Fund.
(c) By-Laws of the Trust as in effect on the date hereof.
(d) Resolutions of the Trustees selecting you as investment adviser
and approving the form of this Agreement.
The Trust shall furnish you from time to time with copies, properly
certified or authenticated, of all amendments of or supplements to the
foregoing, including future resolutions of the Trustees approving the
continuance of the items listed in (d) above.
2. Name of Fund. The Trust may use the name "PanAgora Funds" or any
name derived from the name "PanAgora" in connection with the Fund only for so
long as this Agreement or any extension, renewal or amendment hereof remains
in effect, including any similar agreement with any organization which shall
have succeeded to your business as investment adviser. At such time as such
an agreement shall no longer be in effect, the Trust (to the extent that it
lawfully can) will cause the Fund to cease to use such a name or any other
name indicating that it is advised by or otherwise connected with you or any
organization which shall have so succeeded to your business.
3. Subadvisers. You may engage one or more investment advisers which
are either registered as such or specifically exempt from registration under
the Investment Company Act of 1940, as amended, to act as subadvisers to
provide with respect to the Fund certain services set forth in paragraphs 4
and 7 hereof, all as shall be set forth in a written contract to which the
Trust, on behalf of the Fund, and you shall be parties, which contract shall
be subject to approval by the vote of a majority of the Trustees who are not
interested persons of you, the subadviser, or of the Trust, cast in person at
a meeting called for the purpose of voting on such approval and by the vote of
a majority of the outstanding voting securities of the Fund and otherwise
consistent with the terms of the Investment Company Act of 1940, as amended.
4. Advisory Services. Subject to the authority of the Board of
Trustees, you shall (i) regularly provide to, or cause to be provided to, the
Fund office facilities, investment research, advice and supervision; (ii)
furnish continuously, or cause to be so furnished, an investment program for
the Fund consistent with the investment objectives and policies of the Fund;
(iii) formulate, or cause to be formulated, the Fund's investment objectives
and policies; (iv) analyze, or cause to be analyzed, economic trends affecting
the Fund; (v) review and monitor the performance of service providers to the
Fund, including the administrator, principal underwriter, transfer agent and
custodian; and (vi) provide certain shareholder services to the Fund's
shareholders not otherwise provided by other service providers. You may from
time to time recommend to the Board of Trustees the engagement of new service
providers with respect to the Fund. You shall advise and assist the officers
of the Trust to take such steps as are necessary or appropriate to carry out
the decisions of the Board of Trustees and the appropriate committees of the
Board of Trustees regarding the conduct of the business of the Trust insofar
as it relates to the Fund.
5. Allocation of Charges and Expenses. You shall pay the
compensation and expenses of all officers and executive employees of the Trust
and shall make available, without expense to the Trust, the services of such
of your partners and employees as may duly be elected officers or Trustees of
the Trust, subject to their individual consent to serve and to any limitations
imposed by law. You shall pay the Trust's office rent and shall provide
investment advisory, research and statistical services (except as described in
paragraph 7 relating to supplemental investment and market research) and all
clerical services relating to research, statistical and investment work. You
shall not be required to pay any expenses of the Trust other than those
specifically allocated to you in this paragraph 5. In particular, but without
limiting the generality of the foregoing, you shall not be required to pay:
organization expenses of the Trust; clerical salaries; fees and expenses
incurred by the Trust in connection with membership in investment company
organizations; brokers' commissions; payment for portfolio pricing services to
a pricing agent, if any; legal, auditing or accounting expenses; taxes or
governmental fees; the fees and expenses of the transfer agent of the Trust;
the cost of preparing share certificates or any other expenses, including
clerical expenses, of issue, redemption or repurchase of shares of beneficial
interest of the Trust; the expenses of and fees for registering or qualifying
securities for sale and of maintaining the registration of the Trust and
registering the Trust as a broker or a dealer; the fees and expenses of
Trustees of the Trust who are not affiliated with you; the cost of preparing
and distributing reports and notices to shareholders; the fees or
disbursements of custodians of the Trust's assets, including expenses incurred
in the performance of any obligations enumerated by the Declaration of Trust
or By-Laws of the Trust insofar as they govern agreements with any such
custodian; or litigation and indemnification expenses and other extraordinary
expenses not incurred in the ordinary course of the Trust's business. You
shall not be required to pay expenses of activities which are primarily
intended to result in sales of Shares of the Trust if and to the extent that
(i) such expenses are required to be borne by a principal underwriter which
acts as the distributor of the Trust's Shares pursuant to an underwriting
agreement which provides that the underwriter shall assume some or all of such
expenses, or (ii) the Trust on behalf of the Fund shall have adopted a plan in
conformity with Rule 12b-1 under the Investment Company Act of 1940, as
amended, providing that the Trust (or some other party) shall assume some or
all of such expenses. You shall be required to pay such of the foregoing
expenses as are not required to be paid by the principal underwriter pursuant
to the underwriting agreement or are not permitted to be paid by the Trust (or
some other party) pursuant to such a plan.
6. Compensation of the Adviser. (a) For all services to be rendered
and payments made as provided in paragraphs 4 and 5 hereof, the Trust on
behalf of the Fund will pay you on the last day of each month a fee equal to
such percentage of the Fund's average daily net assets, as defined below, as
set forth on Schedule A hereto. The "average daily net assets" of the Fund
are defined as the average of the values placed on the net assets as of 4:00
p.m. (Boston time) on each day on which the net asset value of the Fund's
portfolio is determined consistent with the provisions of Rule 22c-1 under the
Investment Company Act of 1940, as amended, or, if the Fund lawfully
determines the value of the net assets of its portfolio as of some other time
on each business day, as of such time. The value of net assets of the Fund
shall be determined pursuant to the applicable provisions of the Declaration
of Trust of the Trust. If, pursuant to such provisions, the determination of
net asset value is suspended for any particular business day, then for the
purposes of this paragraph 6, the value of the net assets of the Fund as last
determined shall be deemed to be the value of the net assets as of the close
of the regular trading on the New York Stock Exchange, or as of such other
time as the value of the net assets of the Fund's portfolio may lawfully be
determined, on that day. If the determination of the net asset value of the
Shares of the Fund has been suspended pursuant to the Declaration of Trust of
the Trust for a period including such month, your compensation payable at the
end of such month shall be computed on the basis of the value of the net
assets of the Fund as last determined (whether during or prior to such month).
If the Fund determines the value of the net assets of its portfolio more than
once on any day, the last such determination thereof on that day shall be
deemed to be the sole determination thereof on that day for the purposes of
this paragraph 6.
(b) You agree that your compensation for any month shall include, and
thus be reduced by, the amount, if any, which you pay to any subadviser
engaged pursuant to paragraph 3 hereof. You agree that the Trust on behalf of
the Fund shall not be required to pay any fee to any such subadviser.
7. Avoidance of Inconsistent Position. In connection with purchases
and sales of portfolio securities for the account of the Fund, neither you nor
any of your partners, directors, officers or employees nor any subadviser
engaged by you pursuant to paragraph 3 hereof will act as a principal or agent
or receive any commission. You or your agent shall arrange for the placing of
all orders for the purchase and sale of portfolio securities for the Fund's
account with brokers or dealers selected by you. In the selection of such
brokers or dealers and the placing of such orders, you are directed at all
times to seek for the Fund the most favorable execution and net price
available. It is also understood that it is desirable for the Fund that you
have access to supplemental investment and market research and security and
economic analyses provided by certain brokers who may execute brokerage
transactions at a higher cost to the Fund than may result when allocating
brokerage to other brokers on the basis of seeking the most favorable price
and efficient execution. Therefore, you are authorized to place orders for
the purchase and sale of securities for the Fund with such certain brokers,
subject to review by the Trust's Trustees from time to time with respect to
the extent and continuation of this practice. It is understood that the
services provided by such brokers may be useful to you in connection with your
services to other clients. If any occasion should arise in which you give any
advice to clients of yours concerning the Shares of the Fund, you will act
solely as investment counsel for such clients and not in any way on behalf of
the Fund. Your services to the Fund pursuant to this Agreement are not to be
deemed to be exclusive and it is understood that you may render investment
advice, management and other services to others.
8. Limitation of Liability of Adviser. You 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 matters to which this Agreement relates, except a loss
resulting from willful misfeasance, bad faith or gross negligence on your part
in the performance of your duties or from reckless disregard by you of your
obligations and duties under this Agreement. Any person, even though also
employed by you, who may be or become an employee of and paid by the Trust or
the Fund shall be deemed, when acting within the scope of his employment by
the Trust, to be acting in such employment solely for the Trust and not as
your employee or agent.
9. Duration and Termination of this Agreement. This Agreement shall
remain in force until May 19, 1995 and from year to year thereafter, but only
so long as such continuance is specifically approved at least annually by the
vote of a majority of the Trustees who are not interested persons of you or of
the Trust, cast in person at a meeting called for the purpose of voting on
such approval and by a vote of the Board of Trustees or of a majority of the
outstanding voting securities of the Fund. The aforesaid requirement that
continuance of this Agreement be "specifically approved at least annually"
shall be construed in a manner consistent with the Investment Company Act of
1940, as amended, and the rules and regulations thereunder. This Agreement
may, on 60 days' written notice, be terminated at any time without the payment
of any penalty, by the Board of Trustees, by vote of a majority of the
outstanding voting securities of the Fund, or by you. This Agreement shall
automatically terminate in the event of its assignment. In interpreting the
provisions of this Agreement, the definitions contained in Section 2(a) of the
Investment Company Act of 1940 (particularly the definitions of "interested
person," "assignment" and "majority of the outstanding voting securities"), as
from time to time amended, shall be applied, subject, however, to such
exemptions as may be granted by the Securities and Exchange Commission by any
rule, regulation or order.
10. Amendment of this Agreement. No provision of this Agreement may
be changed, waived, discharged or terminated orally, but only by an instrument
in writing signed by the party against which enforcement of the change,
waiver, discharge or termination is sought, and no amendment of this Agreement
shall be effective until approved by vote of the holders of a majority of the
outstanding voting securities of the Fund and by the Board of Trustees,
including a majority of the Trustees who are not interested persons of you or
of the Trust, cast in person at a meeting called for the purpose of voting on
such approval.
11. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of The Commonwealth of Massachusetts.
12. Miscellaneous. It is understood and expressly stipulated that
neither the holders of shares of the Trust or the Fund nor the Trustees shall
be personally liable hereunder. The captions in this Agreement are included
for convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. This
Agreement may be executed simultaneously in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
The names "PanAgora Funds" and "PanAgora Asset Allocation Fund" are the
designations of the Trustees for the time being under the Declaration of the
Trust dated January 27, 1993, as amended from time to time, and all persons
dealing with the Trust or the Fund must look solely to the property of the
Trust or the Fund for the enforcement of any claims against the Trust as
neither the Trustees, officers, agents nor shareholders assume any personal
liability for obligations of the Trust. No series of the Trust shall be
liable for any claim against any other series of the Trust.
If you are in agreement with the foregoing, please sign the form of
acceptance on the accompanying counterpart of this letter and return one such
counterpart to the Trust, whereupon this letter shall become a binding
contract.
Very truly yours,
THE PANAGORA FUNDS
By:_____________________________
Title:
The foregoing Agreement is hereby accepted as of the date hereof.
PANAGORA ASSET MANAGEMENT, INC.
By:_____________________________
Title:
Schedule A
INVESTMENT ADVISORY FEES
0.60% of average daily net assets
--
--
THE PANAGORA FUNDS
260 Franklin Street
Boston, Massachusetts 02110
May 19, 1993
PanAgora Asset Management, Inc.
260 Franklin Street
Boston, Massachusetts 02110
Investment Advisory Agreement
(PanAgora Global Fund)
_____________________________________
Dear Sirs:
The PanAgora Funds (the "Trust") has been organized under the laws of
The Commonwealth of Massachusetts to engage in the business of an investment
company. The shares of beneficial interest of the Trust ("Shares") are
divided into multiple series, including the PanAgora Global Fund (the "Fund")
as established pursuant to a written instrument executed by the Trustees of
the Trust. Series may be terminated, and additional series established, from
time to time by action of the Trustees. The Trust on behalf of the Fund has
selected you to act as the investment adviser of the Fund and to provide
certain other services, as more fully set forth below, and you are willing to
act as such investment adviser and to perform such services under the terms
and conditions hereinafter set forth. Accordingly, the Trust agrees with you
as follows:
1. Delivery of Fund Documents. The Trust has furnished you with
copies, properly certified or authenticated, of each of the following:
(a) Declaration of Trust of the Trust, filed with the Secretary of
State of The Commonwealth of Massachusetts, dated January 27, 1993, as amended
from time to time (the "Declaration of Trust").
(b) Establishment and Designation of Series of Shares of Beneficial
Interest, No Par Value Per Share, establishing the Fund.
(c) By-Laws of the Trust as in effect on the date hereof.
(d) Resolutions of the Trustees selecting you as investment adviser
and approving the form of this Agreement.
The Trust shall furnish you from time to time with copies, properly
certified or authenticated, of all amendments of or supplements to the
foregoing, including future resolutions of the Trustees approving the
continuance of the items listed in (d) above.
2. Name of Fund. The Trust may use the name "PanAgora Funds" or any
name derived from the name "PanAgora" in connection with the Fund only for so
long as this Agreement or any extension, renewal or amendment hereof remains
in effect, including any similar agreement with any organization which shall
have succeeded to your business as investment adviser. At such time as such
an agreement shall no longer be in effect, the Trust (to the extent that it
lawfully can) will cause the Fund to cease to use such a name or any other
name indicating that it is advised by or otherwise connected with you or any
organization which shall have so succeeded to your business.
3. Subadvisers. You may engage one or more investment advisers which
are either registered as such or specifically exempt from registration under
the Investment Company Act of 1940, as amended, to act as subadvisers to
provide with respect to the Fund certain services set forth in paragraphs 4
and 7 hereof, all as shall be set forth in a written contract to which the
Trust, on behalf of the Fund, and you shall be parties, which contract shall
be subject to approval by the vote of a majority of the Trustees who are not
interested persons of you, the subadviser, or of the Trust, cast in person at
a meeting called for the purpose of voting on such approval and by the vote of
a majority of the outstanding voting securities of the Fund and otherwise
consistent with the terms of the Investment Company Act of 1940, as amended.
4. Advisory Services. Subject to the authority of the Board of
Trustees, you shall (i) regularly provide to, or cause to be provided to, the
Fund office facilities, investment research, advice and supervision; (ii)
furnish continuously, or cause to be so furnished, an investment program for
the Fund consistent with the investment objectives and policies of the Fund;
(iii) formulate, or cause to be formulated, the Fund's investment objectives
and policies; (iv) analyze, or cause to be analyzed, economic trends affecting
the Fund; (v) review and monitor the performance of service providers to the
Fund, including the administrator, principal underwriter, transfer agent and
custodian; and (vi) provide certain shareholder services to the Fund's
shareholders not otherwise provided by other service providers. You may from
time to time recommend to the Board of Trustees the engagement of new service
providers with respect to the Fund. You shall advise and assist the officers
of the Trust to take such steps as are necessary or appropriate to carry out
the decisions of the Board of Trustees and the appropriate committees of the
Board of Trustees regarding the conduct of the business of the Trust insofar
as it relates to the Fund.
5. Allocation of Charges and Expenses. You shall pay the
compensation and expenses of all officers and executive employees of the Trust
and shall make available, without expense to the Trust, the services of such
of your partners and employees as may duly be elected officers or Trustees of
the Trust, subject to their individual consent to serve and to any limitations
imposed by law. You shall pay the Trust's office rent and shall provide
investment advisory, research and statistical services (except as described in
paragraph 7 relating to supplemental investment and market research) and all
clerical services relating to research, statistical and investment work. You
shall not be required to pay any expenses of the Trust other than those
specifically allocated to you in this paragraph 5. In particular, but without
limiting the generality of the foregoing, you shall not be required to pay:
organization expenses of the Trust; clerical salaries; fees and expenses
incurred by the Trust in connection with membership in investment company
organizations; brokers' commissions; payment for portfolio pricing services to
a pricing agent, if any; legal, auditing or accounting expenses; taxes or
governmental fees; the fees and expenses of the transfer agent of the Trust;
the cost of preparing share certificates or any other expenses, including
clerical expenses, of issue, redemption or repurchase of shares of beneficial
interest of the Trust; the expenses of and fees for registering or qualifying
securities for sale and of maintaining the registration of the Trust and
registering the Trust as a broker or a dealer; the fees and expenses of
Trustees of the Trust who are not affiliated with you; the cost of preparing
and distributing reports and notices to shareholders; the fees or
disbursements of custodians of the Trust's assets, including expenses incurred
in the performance of any obligations enumerated by the Declaration of Trust
or By-Laws of the Trust insofar as they govern agreements with any such
custodian; or litigation and indemnification expenses and other extraordinary
expenses not incurred in the ordinary course of the Trust's business. You
shall not be required to pay expenses of activities which are primarily
intended to result in sales of Shares of the Trust if and to the extent that
(i) such expenses are required to be borne by a principal underwriter which
acts as the distributor of the Trust's Shares pursuant to an underwriting
agreement which provides that the underwriter shall assume some or all of such
expenses, or (ii) the Trust on behalf of the Fund shall have adopted a plan in
conformity with Rule 12b-1 under the Investment Company Act of 1940, as
amended, providing that the Trust (or some other party) shall assume some or
all of such expenses. You shall be required to pay such of the foregoing
expenses as are not required to be paid by the principal underwriter pursuant
to the underwriting agreement or are not permitted to be paid by the Trust (or
some other party) pursuant to such a plan.
6. Compensation of the Adviser. (a) For all services to be rendered
and payments made as provided in paragraphs 4 and 5 hereof, the Trust on
behalf of the Fund will pay you on the last day of each month a fee equal to
such percentage of the Fund's average daily net assets, as defined below, as
set forth on Schedule A hereto. The "average daily net assets" of the Fund
are defined as the average of the values placed on the net assets as of 4:00
p.m. (Boston time) on each day on which the net asset value of the Fund's
portfolio is determined consistent with the provisions of Rule 22c-1 under the
Investment Company Act of 1940, as amended, or, if the Fund lawfully
determines the value of the net assets of its portfolio as of some other time
on each business day, as of such time. The value of net assets of the Fund
shall be determined pursuant to the applicable provisions of the Declaration
of Trust of the Trust. If, pursuant to such provisions, the determination of
net asset value is suspended for any particular business day, then for the
purposes of this paragraph 6, the value of the net assets of the Fund as last
determined shall be deemed to be the value of the net assets as of the close
of the regular trading on the New York Stock Exchange, or as of such other
time as the value of the net assets of the Fund's portfolio may lawfully be
determined, on that day. If the determination of the net asset value of the
Shares of the Fund has been suspended pursuant to the Declaration of Trust of
the Trust for a period including such month, your compensation payable at the
end of such month shall be computed on the basis of the value of the net
assets of the Fund as last determined (whether during or prior to such month).
If the Fund determines the value of the net assets of its portfolio more than
once on any day, the last such determination thereof on that day shall be
deemed to be the sole determination thereof on that day for the purposes of
this paragraph 6.
(b) You agree that your compensation for any month shall include, and
thus be reduced by, the amount, if any, which you pay to any subadviser
engaged pursuant to paragraph 3 hereof. You agree that the Trust on behalf of
the Fund shall not be required to pay any fee to any such subadviser.
7. Avoidance of Inconsistent Position. In connection with purchases
and sales of portfolio securities for the account of the Fund, neither you nor
any of your partners, directors, officers or employees nor any subadviser
engaged by you pursuant to paragraph 3 hereof will act as a principal or agent
or receive any commission. You or your agent shall arrange for the placing of
all orders for the purchase and sale of portfolio securities for the Fund's
account with brokers or dealers selected by you. In the selection of such
brokers or dealers and the placing of such orders, you are directed at all
times to seek for the Fund the most favorable execution and net price
available. It is also understood that it is desirable for the Fund that you
have access to supplemental investment and market research and security and
economic analyses provided by certain brokers who may execute brokerage
transactions at a higher cost to the Fund than may result when allocating
brokerage to other brokers on the basis of seeking the most favorable price
and efficient execution. Therefore, you are authorized to place orders for
the purchase and sale of securities for the Fund with such certain brokers,
subject to review by the Trust's Trustees from time to time with respect to
the extent and continuation of this practice. It is understood that the
services provided by such brokers may be useful to you in connection with your
services to other clients. If any occasion should arise in which you give any
advice to clients of yours concerning the Shares of the Fund, you will act
solely as investment counsel for such clients and not in any way on behalf of
the Fund. Your services to the Fund pursuant to this Agreement are not to be
deemed to be exclusive and it is understood that you may render investment
advice, management and other services to others.
8. Limitation of Liability of Adviser. You 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 matters to which this Agreement relates, except a loss
resulting from willful misfeasance, bad faith or gross negligence on your part
in the performance of your duties or from reckless disregard by you of your
obligations and duties under this Agreement. Any person, even though also
employed by you, who may be or become an employee of and paid by the Trust or
the Fund shall be deemed, when acting within the scope of his employment by
the Trust, to be acting in such employment solely for the Trust and not as
your employee or agent.
9. Duration and Termination of this Agreement. This Agreement shall
remain in force until May 19, 1995 and from year to year thereafter, but only
so long as such continuance is specifically approved at least annually by the
vote of a majority of the Trustees who are not interested persons of you or of
the Trust, cast in person at a meeting called for the purpose of voting on
such approval and by a vote of the Board of Trustees or of a majority of the
outstanding voting securities of the Fund. The aforesaid requirement that
continuance of this Agreement be "specifically approved at least annually"
shall be construed in a manner consistent with the Investment Company Act of
1940, as amended, and the rules and regulations thereunder. This Agreement
may, on 60 days' written notice, be terminated at any time without the payment
of any penalty, by the Board of Trustees, by vote of a majority of the
outstanding voting securities of the Fund, or by you. This Agreement shall
automatically terminate in the event of its assignment. In interpreting the
provisions of this Agreement, the definitions contained in Section 2(a) of the
Investment Company Act of 1940 (particularly the definitions of "interested
person," "assignment" and "majority of the outstanding voting securities"), as
from time to time amended, shall be applied, subject, however, to such
exemptions as may be granted by the Securities and Exchange Commission by any
rule, regulation or order.
10. Amendment of this Agreement. No provision of this Agreement may
be changed, waived, discharged or terminated orally, but only by an instrument
in writing signed by the party against which enforcement of the change,
waiver, discharge or termination is sought, and no amendment of this Agreement
shall be effective until approved by vote of the holders of a majority of the
outstanding voting securities of the Fund and by the Board of Trustees,
including a majority of the Trustees who are not interested persons of you or
of the Trust, cast in person at a meeting called for the purpose of voting on
such approval.
11. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of The Commonwealth of Massachusetts.
12. Miscellaneous. It is understood and expressly stipulated that
neither the holders of shares of the Trust or the Fund nor the Trustees shall
be personally liable hereunder. The captions in this Agreement are included
for convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. This
Agreement may be executed simultaneously in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
The names "PanAgora Funds" and "PanAgora Global Fund" are the
designations of the Trustees for the time being under the Declaration of the
Trust dated January 26, 1993, as amended from time to time, and all persons
dealing with the Trust or the Fund must look solely to the property of the
Trust or the Fund for the enforcement of any claims against the Trust as
neither the Trustees, officers, agents nor shareholders assume any personal
liability for obligations of the Trust. No series of the Trust shall be
liable for any claim against any other series of the Trust.
If you are in agreement with the foregoing, please sign the form of
acceptance on the accompanying counterpart of this letter and return one such
counterpart to the Trust, whereupon this letter shall become a binding
contract.
Very truly yours,
THE PANAGORA FUNDS
By:_____________________________
Title:
The foregoing Agreement is hereby accepted as of the date hereof.
PANAGORA ASSET MANAGEMENT, INC.
By:_____________________________
Title:
Schedule A
INVESTMENT ADVISORY FEES
0.70% of average daily net assets
--
--
THE PANAGORA FUNDS
260 Franklin Street
Boston, Massachusetts 02110
May 19, 1993
PanAgora Asset Management, Inc.
260 Franklin Street
Boston, Massachusetts 02110
Investment Advisory Agreement
(PanAgora International Equity Fund)
_____________________________________
Dear Sirs:
The PanAgora Funds (the "Trust") has been organized under the laws of
The Commonwealth of Massachusetts to engage in the business of an investment
company. The shares of beneficial interest of the Trust ("Shares") are
divided into multiple series, including the PanAgora International Equity Fund
(the "Fund") as established pursuant to a written instrument executed by the
Trustees of the Trust. Series may be terminated, and additional series
established, from time to time by action of the Trustees. The Trust on behalf
of the Fund has selected you to act as the investment adviser of the Fund and
to provide certain other services, as more fully set forth below, and you are
willing to act as such investment adviser and to perform such services under
the terms and conditions hereinafter set forth. Accordingly, the Trust agrees
with you as follows:
1. Delivery of Fund Documents. The Trust has furnished you with
copies, properly certified or authenticated, of each of the following:
(a) Declaration of Trust of the Trust, filed with the Secretary of
State of The Commonwealth of Massachusetts, dated January 27, 1993, as amended
from time to time (the "Declaration of Trust").
(b) Establishment and Designation of Series of Shares of Beneficial
Interest, No Par Value Per Share, establishing the Fund.
(c) By-Laws of the Trust as in effect on the date hereof.
(d) Resolutions of the Trustees selecting you as investment adviser
and approving the form of this Agreement.
The Trust shall furnish you from time to time with copies, properly
certified or authenticated, of all amendments of or supplements to the
foregoing, including future resolutions of the Trustees approving the
continuance of the items listed in (d) above.
2. Name of Fund. The Trust may use the name "PanAgora Funds" or any
name derived from the name "PanAgora" in connection with the Fund only for so
long as this Agreement or any extension, renewal or amendment hereof remains
in effect, including any similar agreement with any organization which shall
have succeeded to your business as investment adviser. At such time as such
an agreement shall no longer be in effect, the Trust (to the extent that it
lawfully can) will cause the Fund to cease to use such a name or any other
name indicating that it is advised by or otherwise connected with you or any
organization which shall have so succeeded to your business.
3. Subadvisers. You may engage one or more investment advisers which
are either registered as such or specifically exempt from registration under
the Investment Company Act of 1940, as amended, to act as subadvisers to
provide with respect to the Fund certain services set forth in paragraphs 4
and 7 hereof, all as shall be set forth in a written contract to which the
Trust, on behalf of the Fund, and you shall be parties, which contract shall
be subject to approval by the vote of a majority of the Trustees who are not
interested persons of you, the subadviser, or of the Trust, cast in person at
a meeting called for the purpose of voting on such approval and by the vote of
a majority of the outstanding voting securities of the Fund and otherwise
consistent with the terms of the Investment Company Act of 1940, as amended.
4. Advisory Services. Subject to the authority of the Board of
Trustees, you shall (i) regularly provide to, or cause to be provided to, the
Fund office facilities, investment research, advice and supervision; (ii)
furnish continuously, or cause to be so furnished, an investment program for
the Fund consistent with the investment objectives and policies of the Fund;
(iii) formulate, or cause to be formulated, the Fund's investment objectives
and policies; (iv) analyze, or cause to be analyzed, economic trends affecting
the Fund; (v) review and monitor the performance of service providers to the
Fund, including the administrator, principal underwriter, transfer agent and
custodian; and (vi) provide certain shareholder services to the Fund's
shareholders not otherwise provided by other service providers. You may from
time to time recommend to the Board of Trustees the engagement of new service
providers with respect to the Fund. You shall advise and assist the officers
of the Trust to take such steps as are necessary or appropriate to carry out
the decisions of the Board of Trustees and the appropriate committees of the
Board of Trustees regarding the conduct of the business of the Trust insofar
as it relates to the Fund.
5. Allocation of Charges and Expenses. You shall pay the
compensation and expenses of all officers and executive employees of the Trust
and shall make available, without expense to the Trust, the services of such
of your partners and employees as may duly be elected officers or Trustees of
the Trust, subject to their individual consent to serve and to any limitations
imposed by law. You shall pay the Trust's office rent and shall provide
investment advisory, research and statistical services (except as described in
paragraph 7 relating to supplemental investment and market research) and all
clerical services relating to research, statistical and investment work. You
shall not be required to pay any expenses of the Trust other than those
specifically allocated to you in this paragraph 5. In particular, but without
limiting the generality of the foregoing, you shall not be required to pay:
organization expenses of the Trust; clerical salaries; fees and expenses
incurred by the Trust in connection with membership in investment company
organizations; brokers' commissions; payment for portfolio pricing services to
a pricing agent, if any; legal, auditing or accounting expenses; taxes or
governmental fees; the fees and expenses of the transfer agent of the Trust;
the cost of preparing share certificates or any other expenses, including
clerical expenses, of issue, redemption or repurchase of shares of beneficial
interest of the Trust; the expenses of and fees for registering or qualifying
securities for sale and of maintaining the registration of the Trust and
registering the Trust as a broker or a dealer; the fees and expenses of
Trustees of the Trust who are not affiliated with you; the cost of preparing
and distributing reports and notices to shareholders; the fees or
disbursements of custodians of the Trust's assets, including expenses incurred
in the performance of any obligations enumerated by the Declaration of Trust
or By-Laws of the Trust insofar as they govern agreements with any such
custodian; or litigation and indemnification expenses and other extraordinary
expenses not incurred in the ordinary course of the Trust's business. You
shall not be required to pay expenses of activities which are primarily
intended to result in sales of Shares of the Trust if and to the extent that
(i) such expenses are required to be borne by a principal underwriter which
acts as the distributor of the Trust's Shares pursuant to an underwriting
agreement which provides that the underwriter shall assume some or all of such
expenses, or (ii) the Trust on behalf of the Fund shall have adopted a plan in
conformity with Rule 12b-1 under the Investment Company Act of 1940, as
amended, providing that the Trust (or some other party) shall assume some or
all of such expenses. You shall be required to pay such of the foregoing
expenses as are not required to be paid by the principal underwriter pursuant
to the underwriting agreement or are not permitted to be paid by the Trust (or
some other party) pursuant to such a plan.
6. Compensation of the Adviser. (a) For all services to be rendered
and payments made as provided in paragraphs 4 and 5 hereof, the Trust on
behalf of the Fund will pay you on the last day of each month a fee equal to
such percentage of the Fund's average daily net assets, as defined below, as
set forth on Schedule A hereto. The "average daily net assets" of the Fund
are defined as the average of the values placed on the net assets as of 4:00
p.m. (Boston time) on each day on which the net asset value of the Fund's
portfolio is determined consistent with the provisions of Rule 22c-1 under the
Investment Company Act of 1940, as amended, or, if the Fund lawfully
determines the value of the net assets of its portfolio as of some other time
on each business day, as of such time. The value of net assets of the Fund
shall be determined pursuant to the applicable provisions of the Declaration
of Trust of the Trust. If, pursuant to such provisions, the determination of
net asset value is suspended for any particular business day, then for the
purposes of this paragraph 6, the value of the net assets of the Fund as last
determined shall be deemed to be the value of the net assets as of the close
of the regular trading on the New York Stock Exchange, or as of such other
time as the value of the net assets of the Fund's portfolio may lawfully be
determined, on that day. If the determination of the net asset value of the
Shares of the Fund has been suspended pursuant to the Declaration of Trust of
the Trust for a period including such month, your compensation payable at the
end of such month shall be computed on the basis of the value of the net
assets of the Fund as last determined (whether during or prior to such month).
If the Fund determines the value of the net assets of its portfolio more than
once on any day, the last such determination thereof on that day shall be
deemed to be the sole determination thereof on that day for the purposes of
this paragraph 6.
(b) You agree that your compensation for any month shall include, and
thus be reduced by, the amount, if any, which you pay to any subadviser
engaged pursuant to paragraph 3 hereof. You agree that the Trust on behalf of
the Fund shall not be required to pay any fee to any such subadviser.
7. Avoidance of Inconsistent Position. In connection with purchases
and sales of portfolio securities for the account of the Fund, neither you nor
any of your partners, directors, officers or employees nor any subadviser
engaged by you pursuant to paragraph 3 hereof will act as a principal or agent
or receive any commission. You or your agent shall arrange for the placing of
all orders for the purchase and sale of portfolio securities for the Fund's
account with brokers or dealers selected by you. In the selection of such
brokers or dealers and the placing of such orders, you are directed at all
times to seek for the Fund the most favorable execution and net price
available. It is also understood that it is desirable for the Fund that you
have access to supplemental investment and market research and security and
economic analyses provided by certain brokers who may execute brokerage
transactions at a higher cost to the Fund than may result when allocating
brokerage to other brokers on the basis of seeking the most favorable price
and efficient execution. Therefore, you are authorized to place orders for
the purchase and sale of securities for the Fund with such certain brokers,
subject to review by the Trust's Trustees from time to time with respect to
the extent and continuation of this practice. It is understood that the
services provided by such brokers may be useful to you in connection with your
services to other clients. If any occasion should arise in which you give any
advice to clients of yours concerning the Shares of the Fund, you will act
solely as investment counsel for such clients and not in any way on behalf of
the Fund. Your services to the Fund pursuant to this Agreement are not to be
deemed to be exclusive and it is understood that you may render investment
advice, management and other services to others.
8. Limitation of Liability of Adviser. You 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 matters to which this Agreement relates, except a loss
resulting from willful misfeasance, bad faith or gross negligence on your part
in the performance of your duties or from reckless disregard by you of your
obligations and duties under this Agreement. Any person, even though also
employed by you, who may be or become an employee of and paid by the Trust or
the Fund shall be deemed, when acting within the scope of his employment by
the Trust, to be acting in such employment solely for the Trust and not as
your employee or agent.
9. Duration and Termination of this Agreement. This Agreement shall
remain in force until May 19, 1995 and from year to year thereafter, but only
so long as such continuance is specifically approved at least annually by the
vote of a majority of the Trustees who are not interested persons of you or of
the Trust, cast in person at a meeting called for the purpose of voting on
such approval and by a vote of the Board of Trustees or of a majority of the
outstanding voting securities of the Fund. The aforesaid requirement that
continuance of this Agreement be "specifically approved at least annually"
shall be construed in a manner consistent with the Investment Company Act of
1940, as amended, and the rules and regulations thereunder. This Agreement
may, on 60 days' written notice, be terminated at any time without the payment
of any penalty, by the Board of Trustees, by vote of a majority of the
outstanding voting securities of the Fund, or by you. This Agreement shall
automatically terminate in the event of its assignment. In interpreting the
provisions of this Agreement, the definitions contained in Section 2(a) of the
Investment Company Act of 1940 (particularly the definitions of "interested
person," "assignment" and "majority of the outstanding voting securities"), as
from time to time amended, shall be applied, subject, however, to such
exemptions as may be granted by the Securities and Exchange Commission by any
rule, regulation or order.
10. Amendment of this Agreement. No provision of this Agreement may
be changed, waived, discharged or terminated orally, but only by an instrument
in writing signed by the party against which enforcement of the change,
waiver, discharge or termination is sought, and no amendment of this Agreement
shall be effective until approved by vote of the holders of a majority of the
outstanding voting securities of the Fund and by the Board of Trustees,
including a majority of the Trustees who are not interested persons of you or
of the Trust, cast in person at a meeting called for the purpose of voting on
such approval.
11. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of The Commonwealth of Massachusetts.
12. Miscellaneous. It is understood and expressly stipulated that
neither the holders of shares of the Trust or the Fund nor the Trustees shall
be personally liable hereunder. The captions in this Agreement are included
for convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. This
Agreement may be executed simultaneously in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
The names "PanAgora Funds" and "PanAgora International Equity Fund" are
the designations of the Trustees for the time being under the Declaration of
the Trust dated January 27, 1993, as amended from time to time, and all
persons dealing with the Trust or the Fund must look solely to the property of
the Trust or the Fund for the enforcement of any claims against the Trust as
neither the Trustees, officers, agents nor shareholders assume any personal
liability for obligations of the Trust. No series of the Trust shall be
liable for any claim against any other series of the Trust.
If you are in agreement with the foregoing, please sign the form of
acceptance on the accompanying counterpart of this letter and return one such
counterpart to the Trust, whereupon this letter shall become a binding
contract.
Very truly yours,
THE PANAGORA FUNDS
By:_____________________________
Title:
The foregoing Agreement is hereby accepted as of the date hereof.
PANAGORA ASSET MANAGEMENT, INC.
By:_____________________________
Title:
Schedule A
INVESTMENT ADVISORY FEES
0.80% of average daily net assets
--
--
THE PANAGORA FUNDS
DISTRIBUTION AGREEMENT
, 1993
Funds Distributor, Inc.
Exchange Place
Boston, Massachusetts 02109
Ladies and Gentlemen:
This is to confirm that, in consideration of the agreements hereinafter
contained, the undersigned, The PanAgora Funds (the "Trust"), a business trust
organized under the laws of The Commonwealth of Massachusetts, has agreed that
Funds Distributor, Inc. ("Funds Distributor") will be, for the period of this
Agreement, a distributor of shares of beneficial interest (the "Shares") of
each portfolio currently offered by the Trust or to be offered in the future
(individually, a "Fund" and collectively, the "Funds").
1. Services as Distributor.
1.1 Funds Distributor will assist in the development of sales
literature and advertising and promotional material for the Trust and will
monitor compliance with all applicable laws, rules and regulations relating
thereto, including, without limitation, all rules and regulations made or
adopted by the Securities and Exchange Commission (the "SEC") or by any
securities association registered under the Securities Exchange Act of 1934
(the "1934 Act").
1.2 Funds Distributor will act as non-exclusive agent for the
distribution to dealers of Shares covered by the Trust's registration
statement, prospectuses and statements of additional information then in
effect (the "Registration Statement") under the Securities Act of 1933, as
amended (the "1933 Act"), and the Investment Company Act of 1940, as amended
(the "1940 Act"). Funds Distributor shall not be obligated to sell any
certain number of Shares, but shall be obligated to use its best efforts (but
only in jurisdictions in which it may lawfully do so) in soliciting from
investors unconditional orders for Shares.
1.3 All activities by Funds Distributor as distributor of the Shares
will comply with all applicable laws, rules and regulations, including,
without limitation, all rules and regulations made or adopted by the SEC or by
any securities association registered under the 1934 Act.
1.4 Funds Distributor will transmit any orders received by it for
purchase of Shares to The Shareholder Services Group, Inc. ("TSSG"), the
Trust's transfer agent, or any successor to TSSG of which the Trust has
notified Funds Distributor in writing.
1.5 Whenever in their judgment such action is warranted for any
reason, including, without limitation, market, economic or political
conditions, the Trust's officers may decline to accept any orders for, or make
any sales of, the Shares until such time as those officers deem it advisable
to accept such orders and to make such sales.
1.6 Funds Distributor will act only on its own behalf as principal in
entering into selling agreements with selected dealers or others.
2. Duties of the Trust.
2.1 The Trust agrees at its own expense to execute any and all
documents, to furnish any and all information and to take any other actions
that may be reasonably necessary in connection with the qualification of the
Shares for sale in those states that are mutually agreeable to the Trust and
Funds Distributor.
2.2 The Trust shall furnish from time to time, for use in connection
with the sale of the Shares, such information reports with respect to the
Funds and the Shares as Funds Distributor may reasonably request, all of which
shall be signed by one or more of the Trust's duly authorized officers; and
the Trust warrants that the statements contained in any such reports, when so
signed by the Trust's officers, will be true and correct. The Trust will also
furnish Funds Distributor upon request with (a) annual audits of the books and
accounts of the Funds made by independent certified public accountants
regularly retained by the Trust; (b) semi-annual unaudited financial
statements pertaining to each Fund; (c) quarterly earnings statements prepared
by the Trust with respect to each Fund; (d) a monthly itemized list of the
securities in the portfolio of each Fund; (e) monthly balance sheets with
respect to each Fund as soon as practicable after the end of each month; and
(f) from time to time such additional information regarding the financial
condition of each Fund as Funds Distributor may reasonably request.
3. Representations and Warranties.
The Trust represents to Funds Distributor that all registration
statements, prospectuses and statements of additional information filed by the
Trust with the SEC under the 1933 Act and the 1940 Act with respect to the
Shares have been carefully prepared in conformity with the requirements of the
1933 Act, the 1940 Act and the rules and regulations of the SEC thereunder.
As used in this Agreement, the terms "registration statement," "prospectus"
and "statement of additional information" mean any registration statement,
prospectus and statement of additional information filed by the Trust with the
SEC and any amendments and supplements to the registration statement,
prospectus and statement of additional information that at any time has been
filed with the SEC. The Trust represents and warrants to Funds Distributor
that any registration statement, prospectus and statement of additional
information, when the registration statement becomes effective, will include
all statements required to be contained in it in conformity with the 1933 Act,
the 1940 Act and the rules and regulations of the SEC; that all statements of
fact contained in any registration statement, prospectus or statement of
additional information will be true and correct when the registration
statement becomes effective; and that the registration statement, the
prospectus and the statement of additional information, when the registration
statement becomes effective, will include no untrue statement of a material
fact and will not omit to state a material fact required to be stated therein
or necessary to make the statements therein not misleading to a purchaser of
the Shares; except that the foregoing representation and warranty will not be
deemed to cover any such statement or omission made in any registration
statement, any prospectus or any statement of additional information in
reliance upon information furnished by Funds Distributor, any of its officers
or directors, or any person who controls Funds Distributor within the meaning
of Section 15 of the 1933 Act to the Trust or its representatives for use in
the preparation thereof. Funds Distributor may, but is not be obligated to,
propose from time to time such amendment or amendments to any registration
statement and such supplement or supplements to any prospectus or statement of
additional information as, in the light of future developments, may, in the
opinion of Funds Distributor's counsel, be necessary or advisable. If the
Trust does not propose such amendment or amendments and/or supplement or
supplements within fifteen days after receipt by the Trust of a written
request from Funds Distributor to do so, Funds Distributor may, at its option,
terminate this Agreement forthwith. The Trust will not file any amendment to
any registration statement or supplement to any prospectus or statement of
additional information without giving Funds Distributor reasonable advance
notice except that nothing contained in this Agreement will in any way limit
the Trust's right to file at any time such amendments to any registration
statement and/or supplements to any prospectus or statement of additional
information, of whatever character, as the Trust may deem advisable, such
right being in all respects absolute and unconditional.
4. Indemnification.
4.1 The Trust authorizes Funds Distributor and any dealers with whom
Funds Distributor has entered into dealer agreements to use the most recent
prospectus or statement of additional information furnished by the Trust in
connection with the sale of the Shares. The Trust agrees to indemnify, defend
and hold Funds Distributor, its several officers and directors, and any person
who controls Funds Distributor within the meaning of Section 15 of the 1933
Act, free and harmless from and against any and all claims, demands,
liabilities and expenses (including the cost of investigating or defending
those claims, demands or liabilities and any related counsel fees) that Funds
Distributor, its officers and directors, or any such controlling person, may
incur under the 1933 Act, the 1940 Act or common law or otherwise, arising out
of or on the basis of any untrue statement, or alleged untrue statement, of a
material fact contained in any registration statement, any prospectus or any
statement of additional information or arising out of or based upon any
omission, or alleged omission, to state a material fact required to be stated
in any registration statement, any prospectus or any statement of additional
information or necessary to make the statements in any of them not misleading,
except that the Trust's agreement to indemnify Funds Distributor, its officers
or directors, and any such controlling person will not be deemed to cover any
such claim, demand, liability or expense to the extent that it arises out of
or is based upon any such untrue statement, alleged untrue statement, omission
or alleged omission made in any registration statement, any prospectus or any
statement of additional information in reliance upon information furnished by
Funds Distributor, its officers, directors or any such controlling person to
the Trust or its representatives for use in the preparation thereof; and
except that the Trust's agreement to indemnify Funds Distributor and the
Trust's representations and warranties set out in paragraph 3 of this
Agreement will not be deemed to cover any liability to the Funds or their
shareholders to which Funds Distributor would otherwise be subject by reason
of willful misfeasance, bad faith or gross negligence in the performance of
its duties, or by reason of Funds Distributor's reckless disregard of its
obligations and duties under this Agreement ("Disqualifying Conduct"). The
Trust's agreement to indemnify Funds Distributor, its officers and directors,
and any such controlling person, as described above, is expressly conditioned
upon the Trust's being notified of any action brought against Funds
Distributor, its officers or directors, or any such controlling person, the
notification to be given by letter, via facsimile or by telegram addressed to
the Trust at its principal office in Boston, Massachusetts and sent to the
Trust by the person against whom the action is brought, within ten days after
the summons or other first legal process has been served. The failure so to
notify the Trust of any such action will not relieve the Trust from any
liability that the Trust may have to the person against whom the action is
brought by reason of any such untrue, or alleged untrue, statement or
omission, or alleged omission, otherwise than on account of the Trust's
indemnity agreement contained in this paragraph 4.1. The Trust will be
entitled to assume the defense of any suit brought to enforce any such claim,
demand or liability, but, in such case, the defense will be conducted by
counsel of good standing chosen by the Trust and approved by Funds
Distributor. In the event the Trust elects to assume the defense of any such
suit and retains counsel of good standing approved by Funds Distributor, the
defendant or defendants in the suit will bear the fees and expenses of any
additional counsel retained by any of them; but if the Trust does not elect to
assume the defense of any such suit, or if Funds Distributor does not approve
of counsel chosen by the Trust, the Trust will reimburse Funds Distributor,
its officers and directors, or the controlling person or persons named as
defendant or defendants in the suit, for the fees and expenses of any counsel
retained by Funds Distributor or them. The Trust's indemnification agreement
contained in this paragraph 4.1 and the Trust's representations and warranties
in this Agreement will remain operative and in full force and effect
regardless of any investigation made by or on behalf of Funds Distributor, its
officers and directors, or any controlling person, and will survive the
delivery of any of the Shares. This agreement of indemnity will inure
exclusively to Funds Distributor's benefit, to the benefit of its several
officers and directors, and their respective estates, and to the benefit of
the controlling persons and their successors. The Trust agrees to notify
Funds Distributor promptly of the commencement of any litigation or
proceedings against the Trust or any of its officers or trustees in connection
with the issuance and sale of any of the Shares.
4.2 Funds Distributor agrees to indemnify, defend and hold the Trust,
its several officers and Trustees, and any person who controls the Trust
within the meaning of Section 15 of the 1933 Act, free and harmless from and
against any and all claims, demands, liabilities and expenses (including the
costs of investigating or defending those claims, demands or liabilities and
any related counsel) that the Trust, its officers or Trustees or any such
controlling person may incur under the 1933 Act, the 1940 Act or common law or
otherwise, but only to the extent that the liability or expense incurred by
the Trust, its officers or Trustees or such controlling person as a result of
any such claim or demand (a) arises out of or is based upon any unauthorized
sales literature, advertisements, information, statements or representations
or any Disqualifying Conduct of Funds Distributor or any of its employees or
representatives in connection with the offering and sale of any Shares, (b)
arises out of or is based upon any untrue, or alleged untrue, statement of a
material fact contained in information furnished in writing by Funds
Distributor to the Trust and used in the answers to any of the items of the
registration statement or in the corresponding statements made in the
prospectus or statement of additional information, or arises out of or is
based upon any omission, or alleged omission, to state a material fact in
connection with the information furnished in writing by Funds Distributor to
the Trust and required to be stated in such answers or necessary to make such
information not misleading, or (c) arises by reason of Funds Distributor's
acting as the Trust's agent instead of purchasing and reselling Shares as
principal in distributing the Shares. Funds Distributor's agreement to
indemnify the Trust, its officers and Trustees, and any such controlling
person, as described above, is expressly conditioned upon Funds Distributor's
being notified of any action brought against the Trust, its officers or
Trustees, or any such controlling person, the notification to be given by
letter, via facsimile or by telegram addressed to Funds Distributor at its
office in Boston, Massachusetts, and sent to Funds Distributor by the person
against whom such action is brought, within ten days after the summons or
other first legal process has been served. The failure so to notify Funds
Distributor of any such action will not relieve Funds Distributor from any
liability that Funds Distributor may have to the Trust, its officers or
Trustees, or to such controlling person otherwise than on account of Funds
Distributor's indemnity agreement contained in this paragraph 4.2. Funds
Distributor will be entitled to assume the defense of any such action that is
based solely upon an alleged misstatement or omission on Funds Distributor's
part but, in such case, the defense will be conducted by counsel of good
standing chosen by Funds Distributor and approved by the Trust. If Funds
Distributor does not elect to assume the defense of any such action, or if the
Trust does not approve of counsel chosen by Funds Distributor, or with respect
to any other action for which the Trust, its officers or Trustees or a
controlling person of the Trust is entitled to indemnification hereunder,
Funds Distributor will reimburse the Trust, its officers and Trustees, or the
controlling person or persons named as defendant or defendants in the action,
for the fees and expenses of any counsel retained by the Trust or them. Funds
Distributor agrees to notify the Trust promptly of the commencement of any
litigation or proceedings against Funds Distributor or any of its officers or
directors in connection with the issuance and sale of any of the Trust's
shares.
5. Effectiveness of Registration.
None of the Shares may be offered by either Funds Distributor or the
Trust under any of the provisions of this Agreement and no orders for the
purchase or sale of the Shares under this Agreement may be accepted by the
Trust if and so long as the effectiveness of the registration statement then
in effect or any necessary amendments the registration statement is suspended
under any of the provisions of the 1933 Act or if and so long as a current
prospectus as required by Section 5(b)(2) of the 1933 Act is not on file with
the SEC; provided that nothing contained in this paragraph 5 will in any way
restrict or have an application to or bearing upon the Trust's obligation to
repurchase Shares from any shareholder in accordance with the provisions of
the prospectuses or statement of additional information relating to the Funds
or the Trust's Declaration of Trust dated January 27, 1993, as amended from
time to time (the "Declaration").
6. Suspension of Sales.
The Trust reserves the right to suspend the authority of Funds
Distributor to offer the Shares on behalf of the Trust if, in the judgment of
a majority of the Trust's Board of Trustees or a majority of the Executive
Committee of such Board, if such committee exists, it is in the best interests
of the Trust to do so, such suspension to continue in effect for such period
as may be determined by such majority.
7. Confidentiality.
Funds Distributor agrees on behalf of itself and its employees to treat
confidentially and as proprietary information of the Trust all records and
other information relating to the Trust and its prior, present or potential
shareholders, and not to use such records or other information for any purpose
other than performance of its duties and responsibilities hereunder, except
after prior notification to, and written approval by, the Trust, which
approval may not be withheld when Funds Distributor is requested to divulge
such information by duly constituted governmental authorities and failure to
divulge such information could expose Funds Distributor to civil or criminal
contempt proceedings.
8. Independent Contractor.
Funds Distributor shall be an independent contractor under this
Agreement and neither Funds Distributor nor any of its officers or employees
is or shall be an employee of the Trust in the performance of its duties
hereunder. Funds Distributor shall be responsible for its own conduct and the
employment, control and conduct of its agents and employees and for injury to
such agents or employees or to others through such agents or employees. Funds
Distributor assumes full responsibility for its agents and employees under
applicable statutes and agrees to pay all employee taxes thereunder.
9. Notice to Funds Distributor.
The Trust agrees to advise Funds Distributor immediately in writing:
(a) of any request by the SEC for amendments to the registration
statement, prospectus or statement of additional information then in effect or
for additional information;
(b) in the event of the issuance by the SEC of any stop order
suspending the effectiveness of the registration statement, prospectus or
statement of additional information then in effect or the initiation of any
proceeding for that purpose;
(c) of the happening of any event that makes untrue any statement of a
material fact made in the registration statement, prospectus or statement of
additional information then in effect or that requires the making of a change
in the registration statement, prospectus or statement of additional
information in order to make the statements in those documents not misleading;
and
(d) of all actions of the SEC with respect to any amendment to any
registration statement, prospectus or statement of additional information that
may from time to time be filed with the SEC.
10. Amendments.
This Agreement may be amended only by an instrument in writing signed by
the party against which enforcement of the amendment is sought. If the Trust
should at any time deem it necessary or advisable in the best interests of the
Trust that any amendment of this Agreement be made in order to comply with the
recommendations or requirements of the SEC (including its staff) or other
governmental authority or to obtain any advantage under state or federal tax
laws and should notify Funds Distributor of the form of such amendment, and
the reason(s) therefor, and if Funds Distributor should decline to assent to
such amendment, the Trust may terminate this Agreement forthwith. If Funds
Distributor should at any time request that a change be made in the Trust's
Declaration or by-laws or in its methods of doing business, in order to comply
with any requirements of federal law or regulations of the SEC or of a
national securities association of which Funds Distributor is a member
relating to the sale of Shares, and the Trust should not make such necessary
change within a reasonable time, Funds Distributor may terminate this
Agreement forthwith.
11. Term of the Agreement.
11.1 This Agreement will become effective with respect to a Fund as of
the date hereof and will continue for an initial two-year term and will
continue thereafter so long as such continuance is specifically approved at
least annually by (i) the Trust's Board of Trustees or (ii) by a vote of a
"majority" (as defined in the 1940 Act) of the Fund's outstanding voting
securities, provided that in either event the continuance is also approved by
a majority of the Trustees of the Trust who are not "interested persons" (as
defined in the 1940 Act) of any party to this Agreement by vote cast in person
at a meeting called for the purpose of voting on the approval.
11.2 This Agreement is terminable with respect to a Fund, without
penalty, on 60 days' written notice, by the Trustees of the Trust or by vote
of holders of a majority of the Fund's outstanding voting securities, or upon
90 days' written notice, by Funds Distributor.
11.3 This Agreement will terminate automatically in the event of its
"assignment" (as defined in the 1940 Act).
12. Miscellaneous.
The Trust recognizes that directors, officers and employees of Funds
Distributor may from time to time serve as directors, trustees, officers and
employees of corporations and business trusts (including other investment
companies), and that Funds Distributor or its affiliates may enter into
distribution or other agreements with such other corporations and trusts.
13. Representation by the Trust.
The Trust represents that a copy of its Declaration is on file with the
Secretary of The Commonwealth of Massachusetts and with the Boston City Clerk.
14. Limitation of Liability.
The Trust, Funds Distributor and the Advisor agree that the obligations
of the Trust under this Agreement will not be binding upon any of the Trustees
of the Trust, shareholders of the Funds, nominees, officers, employees or
agents, whether past, present or future, of the Trust, individually, but are
binding only upon the assets and property of the Funds, 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 the authorization by the Trustees
nor the execution and delivery by the officer will be deemed to have been made
by any of them individually or to impose any liability on any of them or any
shareholder of the Trust personally, but will bind only the trust property of
the Trust as provided in the Declaration. No Fund will be liable for any
claims against any other Fund.
If the foregoing is in accordance with your understanding, kindly
indicate your acceptance of this Agreement by signing and returning to us the
enclosed copy of this Agreement.
Very truly yours,
THE PANAGORA FUNDS
By:
Name:
Title: President
Accepted:
FUNDS DISTRIBUTOR, INC.
By:
Name:
Title: President
- - 9 -
laurlbank\panagora\pandist2.doc
CUSTODY AGREEMENT
AGREEMENT dated as of June 1, 1993 between BOSTON SAFE DEPOSIT AND TRUST
COMPANY ("Bank") and the PanAgora Funds ("Company").
WITNESSETH:
WHEREAS, Company is a registered open-end investment company having
three investment portfolios, PanAgora Asset Allocation Fund, PanAgora Global
Fund and PanAgora International Equity Fund, which together with any such
other separate and distinct investment portfolios as may from time to time be
created by the Company, and which the Company and the Bank shall have agreed
in writing shall be subject to this Agreement, shall be referred to herein as
the "Funds"; and
WHEREAS, the Company wishes to retain the Bank to provide certain
custodian services to the Company on behalf of the Funds for the benefit of
the Funds, and the Bank is willing to furnish such services;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. Appointment of Custodian; Custody Account. The Company hereby
constitutes and appoints the Bank as custodian of all the securities and
monies at the time owned by or in the possession of the Company during the
period of this Agreement. The Bank hereby accepts appointment as such
custodian and agrees to perform the duties thereof as hereinafter set
forth. The Bank agrees to establish and maintain (a) a separate custody
account in the name of the Company on behalf of the Funds ("Custody Account")
for any and all stocks, shares, bonds, debentures, notes, mortgages or other
obligations for the payment of money and any certificates, receipts, warrants
or other instruments representing rights to receive, purchase or subscribe for
the same or evidencing or representing any other rights or interests therein
and other similar property (hereinafter called "Securities") from time to time
received by the Bank or any sub-custodian (as defined in the second paragraph
of Section 3 hereof) from or at the direction of the Company for the account
of the particular Funds; and (b) a separate deposit account or accounts in the
name of each Fund ("Deposit Account") for any and all cash and cash
equivalents in any currency received by the Bank or any sub-custodian from or
at the direction of the Company for the account of the Funds, which cash shall
not be subject to withdrawal by draft or check. The term "Property" as used
herein shall mean all Securities, cash, cash equivalents and other assets of
Funds.
2. Maintenance of Property. Securities in a Custody Account shall be
held in such country or other jurisdiction as shall be specified from time to
time in Instructions (as defined in Section 9 hereof), provided that such
country or other jurisdiction shall be one in which the principal trading
market for such Securities is located or the country or other jurisdiction in
which such Securities are to be presented for payment or are acquired for the
Custody Account, and cash in a Deposit Account shall be credited to an account
in such amounts and in the country or other jurisdiction as shall be specified
from time to time in Instructions, provided that such country or other
jurisdiction shall be one in which such cash in the legal currency for the
payment of public or private debts.
3. Eligible Foreign Custodians and Securities Depositories. The
Company authorizes the Bank to hold the Securities in the Custody Account(s)
and the cash in the Deposit Account(s) in custody and deposit accounts,
respectively, which have been established by the Bank with one of its
branches, a branch of a qualified U.S. bank, an eligible foreign custodian or
an eligible foreign securities depository. If a Bank's branch, a branch of a
qualified U.S. bank or an eligible foreign custodian is selected to act as the
Bank's sub-custodian to hold any property, such entity is authorized to hold
such in its account with any eligible foreign securities depository in which
it participates so long as such foreign securities depository has been
approved by the Company on behalf of the Funds. For purposes of this
Agreement (a) "qualified U.S. bank" shall mean a qualified U.S. bank as
defined in Rule 17f-5 under the Investment Company Act of 1940, as amended
("Rule 17f-5"); (b) "eligible foreign custodian" shall mean (i) a banking
institution or trust company incorporated or organized under the laws of a
country other than the United States that is regulated as such by that
country's government or an agency thereof and that has shareholders' equity in
excess of $200 million in U.S. currency (or a foreign currency equivalent
thereto) or (ii) a majority-owned direct or indirect subsidiary of a qualified
U.S. bank or bank holding company that is incorporated or organized under the
laws of a country other than the United States and that has shareholders'
equity in excess of $100 million in U.S. currency (or a foreign currency
equivalent thereto); (c) "eligible foreign securities depository" shall mean a
securities depository or clearing agency, incorporated or organized under the
laws of a country other than the United States, which operates (i) the central
system for handling of securities or equivalent book-entries in that country
or (ii) a transnational system for the central handling of securities or
equivalent book-entries.
Hereinafter the term "sub-custodian" will refer to any Bank branch, any
branch of a qualified U.S. bank, any eligible foreign custodian or any
eligible foreign securities depository with which the Bank, as sub-custodian
for the Company, has entered into an agreement of the type contemplated
hereunder regarding Securities and/or cash held in or to be acquired for a
Custody Account or a Deposit Account.
If, after the initial approval of the sub-custodians by the Company on
behalf of the Funds in connection with this Agreement, the Bank wishes to
appoint other sub-custodians to hold Funds' Property, it will so notify the
Company will provide the Company with information reasonably necessary to
determine any such new sub-custodian's eligibility under Rule 17f-5, including
a copy of the proposed agreement with sub-custodian. The Company shall within
30 days after receipt of such notice give a written approval or disapproval of
the proposed action.
If the bank intends to remove any sub-custodian previously approved, it
shall so notify the Company and shall move the Property deposited with such
sub-custodian to another sub-custodian previously approved or to a new sub-
custodian, provided that the appointment of any new sub-custodian will be
subject to the requirements set forth in the preceding paragraph. The Bank
shall take steps as may be required to remove any sub-custodian which has
ceased to meet the requirements of Rule 17f-5.
4. Use of Sub-Custodians. With respect to Property which is
maintained by the Bank in the physical custody of a sub-custodian pursuant to
Section 3:
(a) The Bank will identify on its books as belonging to the particular
Fund any Property held by such sub-custodian.
(b) In the event that a sub-custodian permits any of the Securities
placed in its care to be held in an eligible foreign securities depository,
such sub-custodian will be required by its agreement with the Bank to identify
on its books such Securities as being held for the account of the Bank as a
custodian for its customers.
(c) Any Securities in a Custody Account held by a sub-custodian of the
Bank will be subject only to the instructions of the Bank or its agents; and
any Securities held in an eligible foreign securities depository for the
account of a sub-custodian will be subject only to the instructions of such
sub-custodian.
(d) The Bank will only deposit Property in an account with a sub-
custodian which includes exclusively the assets held by the Bank for its
customers, and the Bank will cause such account to be designated by such sub-
custodian as a special custody account for the exclusive benefit of customers
of the Bank.
(e) Any agreement the Bank shall enter into with a sub-custodian with
respect to the holding of Property shall require that (i) the Property is not
subject to any right, charge, security interest, lien or claim of any kind in
factor of such sub-custodian or its creditors except for a claim of payment
for its safe custody or administration and (ii) beneficial ownership of such
Property is freely transferable without the payment of money or value other
than for safe custody or administration.
(f) The Bank shall allow independent public accountants of the Company
and/or the Funds such reasonable access to the records of the Bank relating to
Property held in a Custody Account and a Deposit Account as required by such
accountants in connection with their examination of the books and records
pertaining to the affairs of the Company and/or the Funds. The Bank shall,
subject to restrictions under applicable law, also obtain from any sub-
custodian with which the Bank maintains the physical possession of any
Property an undertaking to permit independent public accountants of the
Company and/or Funds such reasonable access to the records of such sub-
custodian as may be required in connection with their examination of the books
and records pertaining to the affairs of the Company and/or Funds or to supply
a verifiable confirmation of the contents of such records. The Bank shall
furnish the Company such reports (or portions thereof) of the Bank's external
auditors as relate directly to the Bank's system of internal accounting
controls applicable to the Bank's duties under this Agreement.
(g) The Bank will supply to the Company at least monthly a statement
in respect to any Property in a Custody and a Deposit Account held by each
sub-custodian, including an identification of the entity having possession of
such Property, and the Bank will send to the Company an advice or notification
of any transfers of Property to or from the Custodian Account and Deposit
Account, indicating, as to Property acquired on behalf of any of the Funds,
the identity of the entity having physical possession of such Property. In
the absence of the filing in writing with the Bank by the Company on behalf of
the Funds of exceptions or objections to any such statement within ninety (90)
days of the Company's receipt of such statement, or within ninety (90) days
after the date that a material defect in reasonably discoverable, the Company
shall be deemed to have approved such statement; and in such case or upon
written approval of the Company of any such statement the Bank shall, to the
extent permitted by law and provided the Bank has met the standard of case in
Section 12 hereof, be released, relieved and discharged with respect to all
matters and things set forth in such statement as though such statement has
been settled by the decree of a court of competent jurisdiction in an action
in which the Company and all persons having any equity interest in Funds were
parties.
(h) The Bank warrants to the Company that in its opinion, after due
inquiry, the established procedures to be followed by each of its branches,
each branch of a qualified U.S. bank, each eligible foreign custodian and each
eligible foreign securities depository holding Property for the account of the
Company on behalf of the Funds pursuant to this Agreement afford protection
for such Property at least equal to that afforded by the Bank's established
procedures with respect to similar Property held by the Bank (and its
securities depositories) in Boston, MA.
(i) The Bank hereby warrants the Company that as of the date of this
Agreement it is maintaining a Bankers Blanket Bond and hereby agrees to notify
the Company in the event its Bankers Blanket Bond is cancelled or otherwise
lapses.
5. Deposit Account Payments. Subject to the provisions of Section 7,
the Bank shall make, or cause its sub-custodian to make, payments of cash
credited to a Deposit Account only:
(a) in connection with the purchase of Securities for a
particular Fund involved and the delivery of such Securities to, or the
crediting of such Securities to the particular Custody Account of, the Bank or
its sub-custodian, each such payment to be made at prices as confirmed by
Instructions from Authorized Persons (as defined in Section 10 hereof);
(b) for the purchase or redemption of shares of the capital
stock of a particular Fund involved and the delivery to, or crediting to the
account of, the Bank or its sub-custodian of such shares to be so purchased or
redeemed;
(c) for the payment for the account of a particular Fund
involved of dividends, interest, taxes, management or supervisory fees,
capital distributions or operating expenses;
(d) for the payments to be made in connection with the
conversion, exchange or surrender of Securities held in a Custody Account;
(e) for other proper corporate purposes of a particular Fund
involved; or
(f) upon the termination of this Custody Agreement as
hereinafter set forth. All payments of cash for a purpose permitted by
subsection (a), (b), (c) or (d) of this Section 5 will be made only upon
receipt by the Bank of Instructions from Authorized Persons which shall
specify the purpose for which the payment is to be made and the applicable
subsection of this Section 5. In the case of any payment to be made for the
purpose permitted by subsection (e) of this Section 5, the Bank must first
receive a certified copy of a resolution of the Board of Trustees of the Funds
adequately describing such payment, declaring such purpose to be a proper
corporate purpose, and naming the person or persons to whom such payment shall
be made. Any payment pursuant to subsection (f) of this Section 5 will be
made in accordance with Section 17 hereof.
In the event that any payment for a Fund made under this Section 5
exceeds the funds available in that Fund Deposit Account, the Bank's foreign
subcustodian may, in its discretion, advance funds on behalf of that Fund an
amount equal to such excess and such advance shall be deemed an overdraft from
the Bank's foreign subcustodian to that investment portfolio payable on
demand, bearing interest at the rate of interest customarily charges by the
Bank's foreign subcustodian on similar overdrafts. If the Bank causes a
Deposit Account to be credited on the payable date for interest, dividends or
redemptions, the particular Fund involved will promptly return to the Bank any
such amount or property so credited upon oral or written notification that
neither the Bank nor its sub-custodian can collect such amount or property in
the ordinary course of business. The Bank or its sub-custodian, as the case
may be, shall have no duty or obligation to institute legal proceeding or take
any other action with respect to the collection of such amount or property
beyond its ordinary collection procedures.
6. Custody Account Transactions. Subject to the provisions of
Section 7, Securities in a Custody Account will be transferred, exchanged or
delivered by the Bank or its sub-custodian only:
(a) upon sale of such Securities for the particular Funds
involved and receipt by the Bank or its sub-custodian or payment therefor,
each such payment to be in the amount confirmed by Instruction from Authorized
Persons;
(b) when such Securities are called, redeemed or retired, or
otherwise become payable;
(c) in exchange for or upon conversion into other Securities
alone or other Securities and cash pursuant to any plan of merger,
consolidation, reorganization, recapitalization or readjustment;
(d) upon conversion of such Securities pursuant to their terms
into other Securities;
(e) upon exercise of subscription, purchase or other similar
rights represented by such Securities;
(f) for the purpose of exchanging interim receipts or temporary
Securities for definitive Securities;
(g) for the purpose of redeeming in kind shares of the capital
stock of the particular Funds involved against delivery to the Bank or its
sub-custodian of such shares to be redeemed;
(h) for other proper corporate purposes of the particular Funds
involved; or
(i) upon the termination of this Sub-Custodian Agreement as
hereinafter set forth. All transfers, exchanges or deliveries of Securities
in a Custody Account for a purpose permitted by either subsection (a), (b),
(c), (d), (e) or (f) of this Section 6 will be made, except as provided in
Section 8 hereof, only upon receipt by the Bank of Instructions from
Authorized Persons which shall specify the purpose of the transfer, exchange
or delivery to be made and the applicable subsection of this Section 6. In
the case of any transfer or delivery to be made for the purpose permitted by
subsection (g) of this Section 6, the Bank must first receive Instructions
from Authorized Persons specifying the shares held by the Bank or its sub-
custodian to be so transferred or delivery of such shares shall be made. In
the case of any transfer, exchange or delivery to be made for the purpose
permitted by subsection (h) of this Section 6, the Bank must first receive a
certified copy of a resolution of the Board of Trustees of the Funds
adequately describing such transfer, exchange or delivery, declaring such
purpose to be proper corporate purpose, and naming the person or persons to
whom delivery of such Securities shall be made. Any transfer or delivery
pursuant to subsection (i) of this Section 6 will be made in accordance with
Section 17 hereof.
7. Custody Account Procedures. With respect to any transaction
involving Securities held in or to be acquired for a Custody Account, the Bank
in its discretion may cause the Deposit Account on behalf of a particular Fund
involved to be credited on the actual settlement date with the proceeds of any
sale or exchange of Securities from the particular Custody Account and to be
debited on the actual settlement date for the cost of Securities purchased or
acquired for the particular Custody Agreement.
Settlement and payment for Securities received for, and delivery of
Securities out of, a Custody Account may be effected in accordance with the
customary or established securities trading or securities processing practices
and procedures in the jurisdiction or market in which the transaction occurs,
including, without limitation, delivering Securities to the purchaser thereof
or to a dealer therefor (or an agent for such purchaser or dealer) against a
receipt with the expectation of receiving later payment for such Securities
from such purchaser or dealer.
8. Actions of the Bank. Until the Bank receives Instructions from
Authorized Persons to the contrary, the Bank will, or will instruct its sub-
custodian, to:
(a) present for payment any Securities in a Custody Account
which are called, redeemed or retired or otherwise become payable and all
coupons and other income items which call for payment upon presentation to the
extent that the Bank or sub-custodian is aware of such opportunities for
payment, and hold cash received upon presentation of such Securities in
accordance with the provisions of Section 2, 3 and 4 hereof;
(b) in respect of Securities in a Custody Account, execute in
the name of the Company on behalf of the Funds involved such ownership and
other certificates as may be required to obtain payments in respect thereof;
(c) exchange interim receipts or temporary Securities in a
Custody Account for definitive Securities;
(d) (if applicable) convert monies received with respect to
Securities or foreign issue into United States dollars or any other currency
necessary to effect any transaction involving the Securities whenever it is
practicable to do so through customary banking channels, using any method or
agency available, including, but not limited to, the facilities of the Bank,
its subsidiaries, affiliates or sub-custodians;
(e) (if applicable) appoint brokers and agents for any
transaction involving the Securities in a Custody Account; and
(f) reclaim taxes withheld by foreign issuers where reclaim is
possible provided that Bank has been provided with all documentation it may
require.
9. Instructions. As used in this Agreement, the term "Instructions"
means instructions of the Company received by the Bank, via telephone, telex,
TWX, facsimile transmission, bank wire or other telephonic or electronic
instruction system acceptable to the Bank which the Bank believes in good
faith to have been given by Authorized Persons or which are transmitted with
proper testing or authentication pursuant to terms and conditions which the
Bank may specify.
Any Instructions delivered to the Bank by telephone shall promptly
thereafter be confirmed in writing by an Authorized Person (which confirmation
may bear the facsimile signature of such Person), but the Company will hold
the Bank harmless for the Company's (i) failure to send such confirmation in
writing, or (ii) the failure of such confirmation to conform to the telephone
Instructions received. Unless otherwise expressly provided, all Instructions
shall continue in full force and effect until cancelled or superseded. If the
Bank requires test arrangements, authentication methods or other security
devices to be used with respect to Instructions, any Instructions given by the
Company thereafter shall be given and processed in accordance with such terms
and conditions for the use of such arrangements, methods of devices as the
Bank may put into effect and modify from time to time. The Company shall
safeguard any testkeys, identification codes or other security devices which
the Bank shall make available to them. The Bank may electronically record any
Instructions given by telephone, and any other telephone discussions, with
respect to a Custody Account.
10. Authorized Persons. As used in this Agreement, the term
"Authorized Persons" means such officers or such agents of the Company as have
been designated by a resolution of the Board of Trustees of the Company, a
certified copy of which has been provided to the Bank, to act on behalf of the
Funds in the performance of any acts which Authorized Persons may do under
this Agreement. Such persons shall continue to be Authorized Persons until
such time as the Bank receives Instructions from Authorized Persons that any
such officer or agent is no longer an Authorized Person.
11. Nominees. Securities in a Custody Account which are ordinarily
held in registered form may be registered in the name of the Bank's nominee
or, as to any Securities in the possession of any entity other than the Bank,
in the name of such entity's nominee. The Company agrees to hold any such
nominee harmless from any liability as a holder of record of such Securities,
but not if such liability is a result of such nominee's negligence. The Bank
may without notice to the Company cause any such Securities to cease to be
registered in the name of any such nominee and to be registered in the name of
the Funds. In the event that any Securities registered in the name of the
Bank's nominee or held by one of its sub-custodians and registered in the name
of such sub-custodian's nominee are called for partial redemption by the
issuer of such Security, the Bank may allot, or cause to be allotted, the
called portion to the respective beneficial holders of such class of security
in any manner the Bank deems to be fair and equitable.
12. Standard of Care.
(a) The Bank shall be obligated to perform only such duties as
are set forth in this Agreement or expressly contained in instructions given
to Bank which are consistent with the provisions of this Agreement.
(i) The Bank will use reasonable care with respect to its obligations under
this Agreement and the safekeeping of Property. The Bank shall be liable to
the Funds and the Company for any loss which shall occur as the result of the
failure of a sub-custodian or any eligible foreign securities depository to
exercise reasonable care and without negligence with respect to the
safekeeping of such Property to the same extent that the Bank would be liable
to Funds and the Company if the Bank were holding such Property in Boston, MA.
In the event of any loss to Funds or the Company by reason of the failure or
negligent conduct of the Bank or its subcustodian or an eligible foreign
securities depository to exercise reasonable care, the Bank shall be liable to
Funds or the Company only to the extent of the Fund's or Company's direct
damages and expenses, which damages, for purposes of Property only shall, be
determined based on the market value of the Property which is the subject of
the loss at the date of such loss and without reference to any special
conditions or circumstances.
(ii) The Bank will not be responsible for any act, omission, default or for
the solvency of any broker or agent (other than as provided herein) which it
or a sub-custodian appoints and uses unless such appointment and use were made
or done negligently or in bad faith.
(iii) The Bank shall be indemnified by, and without liability to the Funds
involved and the Company for any action taken or omitted by the Bank whether
pursuant to Instructions or otherwise within the scope of this Agreement if
such act or omission was in good faith and without negligence. In performing
its obligations under this Agreement, the Bank may rely on the genuiness of
any document which it believes in good faith and without negligence to have
been validly executed.
(iv) The Company on behalf of the Funds involved, agrees to pay for and hold
the Bank harmless from any liability or loss resulting form the imposition or
assessment of any taxes or other governmental charges, and any related
expenses with respect to income from or Property in such Fund's Custody
Account and Deposit Account, assuming that the Company has in good faith
determined that the Bank has properly performed its duties hereunder.
(v) The Bank shall be entitled to rely, and may act upon the advice or
counsel (who may be counsel for the Company) on all matters and shall act
reasonably and in good faith pursuant to such advice. Notwithstanding the
foregoing, the Bank shall remain liable for the performance of its duties
hereunder and such counsel shall act reasonably and in good faith.
(vi) The Bank need not maintain any insurance for the exclusive benefit of
the Company.
(vii) Without limiting the foregoing, the Bank shall not be liable for any
loss which results from:
1) the general risk of investing, or
2) subject to Section 12(a)(i) hereof investing or holding Property in a
particular country including, but not limited to, losses resulting from
nationalization, expropriation or other governmental actions; regulation of
the banking or securities industry; currency restrictions, devaluations or
fluctuations; and market conditions which prevent the orderly execution of
securities transactions or affect the value of Property.
(viii) No party shall be liable to the other for any loss due to forces
beyond their control including but not limited to strikes or work stoppages,
acts of war or terrorism, insurrection, revolution, nuclear fusion, fission or
radiation, or acts of God.
(b) Consistent with and without limiting the first paragraph of
this Section 12, it is specifically acknowledged that the Bank shall have no
duty or responsibility to:
(i) Question Instructions or make any suggestions to Funds, Company or
Authorized Person regarding such Instructions;
(ii) Supervise or make recommendations with respect to investments or the
retention of Securities;
(iii) Subject to Section 12(a)(ii) hereof, evaluate or report to Funds,
Company or an Authorized Person regarding the financial condition of any
broker, agent or other party to which Securities are delivered or payments are
made pursuant to this Agreement; or
(iv) Review or reconcile trade confirmations received from brokers.
(c) The Bank shall provide to the Company, on an annual basis, a
report confirming that the arrangements hereunder remain in compliance with
the rules of the Securities and Exchange Commission governing such
arrangements.
13. Corporate Action. Whenever the Bank or its sub-custodian receives
information concerning the Securities which requires discretionary action by
the beneficial owner of the Securities (other than a proxy), such as
subscription rights, bonus, issues, stock repurchase plans and rights
offerings, or legal notices or other material intended to be transmitted to
securities holders ("Corporate Actions"), the Bank will give the Company
notice of such Corporate Actions to the extent that the Bank's central
corporate actions department has actual knowledge of a Corporate Action in
time to notify its customers. The Bank shall use its best efforts to ensure
that it receives all available Corporate Action information, interprets such
information concerning the Securities and promptly reports such information to
the Company.
When a rights entitlement or a fractional interest resulting from a
rights issue, stock dividend, stock split or similar Corporate Action is
received which bears an expiration date, the Bank or its sub-custodians will
endeavor to obtain Instructions from the Company or its Authorized Person, but
if Instructions are not received in time for the Bank to take timely action,
or actual notice of such Corporate Action was received too late to seek
Instructions, the Bank is authorized to sell such rights entitlement or
fractional interest and to credit the applicable Deposit Account with the
proceeds and to take any other action it deems, in good faith, to be
appropriate in which case, provided it has met the standard of care in Section
12 hereof, it shall be held harmless by the Company for any such action.
The Bank will deliver proxies to the Company or its designated agent
pursuant to special arrangements which may have been agreed to in writing
between the parties hereto. Such proxies shall be executed in the appropriate
nominee name relating to Securities in the Custody Account registered in the
name of such nominee but without indicating the manner in which such proxies
are to be voted; and where bearer Securities are involved, proxies will be
delivered in accordance with instructions from Authorized Persons.
14. Fees and Expenses.
(a) The Company will compensate the Bank for its services rendered
under this Agreement in accordance with the fees set forth in the Fee Schedule
annexed hereto as Schedule A and incorporated herein for the existing Funds.
Such Fee Schedule does not include out-of-pocket disbursements of the Bank for
which the Bank shall be entitled to bill separately. Out-of-pocket
disbursements may include only the items specified in the Schedule of Out-of-
Pocket charges annexed hereto as Schedule B and incorporated herein, which
schedule may be modified by the Bank if the Company consents in writing to the
modifications.
(b) The parties hereto will agree upon the compensation for acting as
custodian for any Fund hereafter established and designated, and at the time
that the Bank commences serving as such for said Fund, such agreement shall be
reflected in a Fee Schedule for that Fund, dated and signed by an officer of
each party hereto, which shall be attached to Schedule A of this Agreement.
(c) Any compensation agreed to hereunder may be adjusted from time to
time by attaching to Schedule A of this Agreement a revised Fee Schedule,
dated and signed by an Authorized Officer or authorized representative of each
party hereto.
(d) The Bank will bill the Company for each Fund as soon as
practicable after the end of each calendar month, and said billings will be
detailed in accordance with the Fee Schedule for the Company. The Company
will promptly pay to the Bank the amount of such billing.
(e) Subject to the Bank's proper performance of its duties hereunder,
the Company hereby agrees to hold the Bank harmless from any liability or loss
resulting from any taxes or other governmental charges, and any expenses
related thereto, which may be imposed, or assessed with respect to the Custody
Account with the Bank and also agrees to hold the Bank, its sub-custodians,
and their respective nominees harmless from any liability as a record holder
of Securities in such Custody Account. The Bank is authorized to charge the
account of the Company on behalf of the Funds involved for such items and the
Bank shall have a lien on Securities in such Custody Account and on cash in
such Deposit Account for any amount owing to the Bank in connection with such
Fund from time to time under this Agreement.
15. Effectiveness. This Agreement shall be effective on the date
first noted above.
16. Termination. This Agreement may be terminated by the Company or
the Bank by 60 days' written notice to the other, sent by registered mail,
provided that any termination by the Company shall be authorized by a
resolution of the Board of Trustees of the Company, a certified copy of which
shall accompany such notice of termination, and provided further, that such
resolution shall specify the names of persons to whom the Bank shall deliver
the Securities in each Custody Account and to whom the cash in each Deposit
Account shall be paid. If notice of termination is given by the Bank, the
Company shall, within 60 days following the giving of such notice, deliver to
the Bank a certified copy of a resolution of the Board of Trustees of the
Company specifying the names of the persons to whom the Bank shall deliver
such Securities and cash, after deducting therefrom any amounts which the Bank
determines to be owed to it under Section 14 hereof. If within 60 days
following the giving of a notice of termination by the Bank, the Bank does not
receive from the Company a certified copy of a resolution of the Board of
Trustees of the Company specifying the names of the persons to whom the cash
in each Deposit Account shall be paid and to whom the Securities in each
Custody Account shall be delivered, the Bank, at its election, may deliver
such Securities and pay such cash to a bank or trust company doing business in
the continental United States and qualified as a custodian under the
Investment Company Act of 1940, as amended, to be held and disposed of
pursuant to the provisions of this Agreement, or to Authorized Persons, or may
continue to hold such Securities and cash until a certified copy of one or
more resolutions as aforesaid is delivered to the Bank. The obligations of
the parties hereto regarding the use of reasonable obligations of the parties
hereto regarding the use of reasonable care, indemnities and payment of fees
and expenses shall survive the termination of this Agreement.
17. Limitation of Liability.
The Company and the Bank agree that the obligations of the Company 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 Company, individually, but are binding only upon the assets and property
of the Trust or of the appropriate Fund(s) thereof, as provided in the
Declaration of Trust of the Company. The execution and delivery of this
Agreement have been authorized by the Trustees of the Company, and signed by
an authorized officer of the Company, 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
Company individually or to impose any liability on any of them or any
shareholder of the Company personally, but shall bind only the assets and
property of the Company as provided in the Declaration of Trust.
18. Miscellaneous.
(a) Annexed hereto as Appendix A is a certification signed by two of the
present officers of the Company setting forth the names and the signatures of
the present Authorized Persons. The Company agrees to furnish to the Bank a
new certification in similar form in the event that any such present
Authorized Person ceases to be such an Authorized Person or in the event that
other or additional Authorized Persons are elected or appointed. Until such
new certification shall be received, the Bank shall be fully protected in
acting under the provisions of this Agreement upon Oral Instructions or
signatures of the present Authorized Persons as set forth in the last
delivered certification.
(b) Annexed hereto as Appendix B is a certification signed by two of the
present officers of the Company setting forth the names and the signatures of
the present officers of the Company. The Company agrees to furnish to the
Bank a new certification in similar form in the event any such present officer
ceases to be an officer of the Trust or in the event that other or additional
officers are elected or appointed. Until such new certification shall be
received, the Bank shall be fully protected in acting under the provisions of
this Agreement upon the signature of the officers as set forth in the last
delivered certification.
(c) Any notice or other instrument in writing, authorized or required by
this Agreement to be given to the Bank, shall be sufficiently given if
addressed to the Bank and mailed or delivered to it at its offices at One
Boston Place, Boston, Massachusetts 02108 or at such other place as the
Custodian may from time to time designate in writing.
(d) Any notice or other instrument in writing, authorized or required by
this Agreement to be given to the Company, shall be sufficiently given if
addressed to the Company and mailed or delivered to it at its offices at its
address stated on the first page hereof or at such other place as the Company
may from time to time designate in writing, with a copy to:
Hale and Dorr
60 State Street
Boston, Massachusetts 02109
Attention: Joseph P. Barri, Esq.
(e) This Agreement may not be amended or modified in any manner except by a
written agreement executed by both parties with the same formality as this
Agreement, (i) authorized and approved by a vote of the Board of Trustees of
the Company, including a majority of the members of the Board of Trustees of
the Company who are not "interested persons" of the Company (as defined in the
1940 Act), or (ii) authorized and approved by such other procedures as may be
permitted or required by the 1940 Act.
(f) 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 by the Company without the written
consent of the Bank, or by the Bank without the written consent of the Company
authorized or approved by a vote of the Board of Trustees of the Company, and
any attempted assignment without such written consent shall be null and void.
(g) The Company represents that a copy of the Declaration of Trust is on
file with the Secretary of The Commonwealth of Massachusetts and with the
Boston City Clerk.
(h) This Agreement shall be construed in accordance with the laws of The
Commonwealth of Massachusetts.
(i) The captions of the 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.
(j) 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.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement
to be executed by their respective representatives duly authorized as of the
day and year first above written.
THE PANAGORA FUNDS
By:
Name:
Title:
BOSTON SAFE DEPOSIT AND TRUST COMPANY
By:
Name:
Title:
APPENDIX A
We, Vincent Nave, Treasurer and Francis J. McNamara, Secretary, of The
PanAgora Funds, a business trust organized under the laws of The Commonwealth
of Massachusetts (the "Trust"), do hereby certify that:
The following individuals have been duly authorized as Authorized
Persons to give Oral Instructions and Written Instructions on behalf of the
Trust and the signatures set forth opposite their respective names are their
true and correct signatures:
Name Signature
Richard A. Crowell
Kristine M. Lino
James A. Rullo
Gwen Connor
Christine Donahue
Marilyn DeSantis
Elizabeth McSurdy
Susan McQuillan
Robert Dearth
Vincent Nave Francis J. McNamara, III
Date: _______________ Date: _______________
APPENDIX B
We, Richard A. Crowell, President and Francis J. McNamara, Secretary of
The PanAgora Funds, a business trust organized under the laws of The
Commonwealth of Massachusetts (the "Trust"), do hereby certify that:
The following individuals serve in the following positions with the
Trust and each individual has been duly elected or appointed to each such
position and qualified therefor in conformity with the Trust's Declaration of
Trust and the signatures set forth opposite their respective names are their
true and correct signatures:
Name Position Signature
Richard A. Crowell President
Vincent Nave Treasurer
Francis J. McNamara, III Secretary
Kristine M. Lino Investment Officer
James A. Rullo Investment Officer
Michael C. Kardok Assistant Treasurer
Richard W. Ingram Assistant Treasurer
Joseph P. Barri Assistant Secretary
David M. Elwood Assistant Secretary
Elizabeth Nystedt Assistant Secretary
APPENDIX C - INDIVIDUALS WITH ACCESS
I, Lynne E. Larkin, Secretary of Boston Safe Deposit and Trust Company,
a Massachusetts corporation (the "Custodian"), do hereby certify that:
The following twelve named individuals have been duly authorized by the
Executive Committee of the Board of Directors of the Custodian to have access
to the assets of The PanAgora Funds, a business trust organized under the laws
of The Commonwealth of Massachusetts, held by the Custodian in its capacity as
such:
Diane Contardo
Marie F. Culleton
Karen D. DeVitto
Joan M. Donahue
Claire J. Lurie
Eleanor L. Millan
Cynthia E. Peluso
Geraldine E. Ryan
Mary A. Sannella
Daniel J. Smith
Merton E. Thompson, III
George H. Whitney, III
Lynne E. Larkin
Boston Safe Deposit and Trust Company
Schedule A
PANAGORA
FEE SCHEDULE
CUSTODY SERVICES
I. Holding Charges
U.S. Assets
First $50 million of aggregate net assets 3.3 Basis Points
Next $50 million of aggregate net assets 1.7 Basis Points
Next $900 million of aggregate net assets 1.0 Basis Points
Next $2 billion of aggregate net assets .85 Basis Points
Excess .7 Basis Points
Non U.S. Assets
Group I 5.0 Basis Points
Group II
Equities
First $50 million 11.0 Basis Points
Next $50 million 9.0 Basis Points
Next $200 million 6.0 Basis Points
Excess 4.0 Basis Points
Bonds 4.0 Basis Points
Group III 11.0 Basis Points
Group IV 15.0 Basis Points
Group V 18.0 Basis Points
Group VI 15.0 Basis Points
A charge of $5 per security holding per month will also be assessed.
Schedule A - continued
PANAGORA
FEE SCHEDULE
CUSTODY SERVICES
II. Transaction Charges
U.S. Transactions
DTC eligible $10
Physical $30
Fed Book Entry $10
PTC eligible $17.50
Options $25
Futures $8
Non U.S. Futures $25
GNMA Paydowns $5
Repo - depository $10
- non-deposit $17
Commercial Paper $30
Euro-CD's (London) $30
Non U.S. Transactions
Group I $25
Group II $30
Group III $30
Group IV $45
Group V $60
Group VI $75
Third party FX $20
III. Country Groupings
Group I
Group II
Group III
Group IV
Group V
Group VI
Japan
Euroclear
Austria
Australia
Denmark
Mexico
Cedel
Canada
Belgium
Finland
Spain
Germany
Netherland
s
France
Sweden
Switzerlan
d
Hong Kong
Greece
Luxemburg
Italy
Indonesia
Malaysia
Jordan
Norway
Philippine
s
Singapore
Turkey
Thailand
Venezuela
Portugal
Argentina
Ireland
United
Kingdom
SCHEDULE B
The Trust will pay to the Custodian as soon as possible after the end of
each month the out-of-pocket expenses specified on this Schedule B and
reasonably incurred in connection with the assets of the Trust:
telephone
wire charges
courier services
stamp duty
registration
laurbank\misc\custody.doc
- - 3 -
ADMINISTRATION AGREEMENT
THIS ADMINISTRATION AGREEMENT is made as of June 1, 1993 by and between
THE BOSTON COMPANY ADVISORS, INC., a Massachusetts corporation ("Boston
Advisors"), and The PanAgora Funds, a Massachusetts business trust (the
"Trust").
WHEREAS, the Trust is registered as a diversified, open-end management
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act"), and currently consists of three separate investment portfolios,
PanAgora Global Fund, PanAgora International Fund and PanAgora Asset
Allocation Fund (together with all future investment portfolios of the Trust,
the "Funds"); and
WHEREAS, the Trust desires to retain Boston Advisors to render certain
administrative services to the Trust, and Boston Advisors is willing to render
such services;
WITNESSETH:
NOW, THEREFORE, in consideration of the promises and mutual convenants
herein contained, it is agreed between the parties hereto as follows:
1. Appointment. The Trust hereby appoints Boston Advisors to act as
Administrator of the Funds on the terms set forth in this Agreement. Boston
Advisors accepts such appointment and agrees to render the services herein set
forth for the compensation herein provided.
2. Delivery of Documents. The Trust has furnished Boston Advisors
with copies properly certified or authenticated of each of the following:
(a) Resolutions of the Trust's Board of Trustees authorizing the
appointment of Boston Advisors to provide certain administrative services to
the Funds and approving this Agreement;
(b) The Trust's Declaration of Trust filed with the Secretary of
State of The Commonwealth of Massachusetts and the Boston City Clerk on
January 27, 1993 and all amendments thereto (the "Declaration");
(c) The Trust's By-Laws and all amendments thereto (the "By-
Laws");
(d) The Investment Advisory Agreement between PanAgora Asset
Management, Inc. (the "Adviser") and the Trust on behalf of PanAgora Global
Fund dated as of May 19, 1993;
(e) The Investment Advisory Agreement between the Adviser and
the Trust on behalf of PanAgora International Fund dated as of May 19, 1993;
(f) The Investment Advisory Agreement between the Adviser and
the Trust on behalf of PanAgora Asset Allocation Fund dated as of May 19,
1993;
(g) The Custody Agreement between Boston Safe Deposit and Trust
Company (the "Custodian") and the Trust dated as of June 1, 1993 (the "Custody
Agreement");
(h) The Transfer Agency and Registrar Agreement between The
Shareholder Services Group, Inc. (the "Transfer Agent") and the Trust dated as
of June 1, 1993;
(i) The Registration Statement on Form N-1A (the "Registration
Statement") under the Securities Act of 1933, as amended (the "1933 Act") and
under the 1940 Act (File Nos. 33-57740 and 811-7464), as declared effective by
the Securities and Exchange Commission ("SEC") on June 1, 1993 relating to
shares of beneficial interest of the Trust, and all amendments thereto; and
(j) The Trust's most recent prospectus and statement of
additional information (the "Prospectus" and the "Statement of Additional
Information", respectively).
The Trust will furnish Boston Advisors from time to time with copies,
properly certified or authenticated, of all amendments of or supplements to
the foregoing. Furthermore, the Trust will provide Boston Advisors with any
other documents that Boston Advisors may reasonably request and will notify
Boston Advisors as soon as possible of any matter materially affecting the
performance of Boston Advisors of its services under this Agreement.
3. Duties as Administrator. Subject to the supervision and direction
of the Board of Trustees of the Trust, Boston Advisors, as Administrator, will
assist in supervising various aspects of the Funds' administrative operations
and undertakes to perform the following specific services:
(a) Maintaining office facilities (which may be in the offices
of Boston Advisors or a corporate affiliate);
(b) Furnishing statistical and research data, data processing
services, clerical services, and internal legal, executive and administrative
services and stationery 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) Accounting and bookkeeping services (including the
maintenance of such accounts, books and records of the Trust as may be
required by Section 31(a) of the 1940 Act and the rules thereunder);
(e) Internal auditing;
(f) Valuing each Fund's assets and calculating the net asset
value of the shares of each Fund at the close of regular trading on the New
York Stock Exchange (the "NYSE") on each day on which the NYSE is open for
regular trading and at such other times as the Board of Trustees may
reasonably request;
(g) Accumulating information for and, subject to approval by the
Trust's Treasurer, preparing reports to the Trust's shareholders of record and
the SEC including, but not necessarily limited to, Annual Reports and Semi-
Annual Reports on Form N-SAR;
(h) Preparing and filing various reports or other documents
required by federal, state and other applicable laws and regulations, other
than those filed or required to be filed by the Adviser or Transfer Agent;
(i) Preparing and filing each Fund's tax returns;
(j) Assisting the Adviser, at the Adviser's request, in
monitoring and developing compliance procedures for each Fund which will
include, among other matters, procedures to assist the Adviser in monitoring
compliance with each Fund's investment objective, policies, restrictions, tax
matters and applicable laws and regulations;
(k) Preparing and furnishing each Fund (at the Fund's request)
with performance information (including yield and total return information)
calculated in accordance with applicable U.S. securities laws and reporting to
external databases such information as may reasonably be requested; and
(l) Coordinating contractual relationships and communications
between the Trust and its contractual service providers.
In performing all services under this Agreement, Boston Advisors shall
act in conformity with Trust's Declaration and By-Laws; the 1940 Act, the
Investment Advisers Act of 1940, as amended, the 1933 Act and the Commodity
Exchange Act, as amended, and any laws, rules or regulations of governmental
authorities having jurisdiction with respect to any service to be performed by
Boston Advisors hereunder, and the investment objective, investment policies
and other practices and policies set forth in the Trust's Registration
Statement, as such Registration Statement and practices and policies may be
amended from time to time.
The Trust, including any of its officers or duly authorized employee or
agents, shall have access to all books and records maintained by Boston
Advisors that pertain to the Trust at all times during Boston Advisors' normal
business hours.
4. Allocation of Expenses. Boston Advisors shall bear all expenses
in connection with the performance of its services under this Agreement.
(a) Boston Advisors will from time to time employ or associate
with itself such person or persons as Boston Advisors may believe to be
particularly suited to assist it in performing services under this Agreement.
Such person or persons may be officers and employees who are employed by both
Boston Advisors and the Trust. The compensation of such person or persons
shall be paid by Boston Advisors and no obligation shall be incurred on behalf
of the Trust in such respect.
(b) Boston Advisors shall not be required to pay any of the
following expenses incurred by the Fund: membership dues in the Investment
Company Institute or any similar organization; investment advisory expenses;
costs of printing and mailing stock certificates, prospectuses, reports and
notices; interest on borrowed money; brokerage commissions; taxes and fees
payable to federal, state and other governmental agencies; fees of Trustees of
the Trust who are not affiliated with Boston Advisors; outside auditing
expenses; outside legal expenses; or other expenses not specified in this
Section 4 which may be properly payable by the Trust.
(c) For the services to be rendered, the facilities to be
furnished and the payments to be made by Boston Advisors, as provided for in
this Agreement, the Fund will pay Boston Advisors on the first business day of
each month a fee for the previous month at the annual rate of .15 of 1.00% of
the value of each Fund's average daily net assets which, for purposes of
calculating such fee, will be deemed to be the average daily value of the
Fund's total assets minus the sum of the Fund's liabilities; provided, that
the minimum fee for each Fund shall be no less than $60,000 per year and
provided further that Boston Advisers shall waive such minimum fee for the six
month period commencing with the date upon which the Registration Statement is
declared effective. The fee for the period from the date the Registration
Statement is declared effective by the SEC to the end of the month during
which the Registration Statement is declared effective shall be prorated
according to the proportion that such period bears to the full monthly period.
Upon any termination of this Agreement before the end of any month, the fee
for such part of a month shall be prorated according to the proportion which
such period bears to the full monthly period and shall be payable upon the
date of termination of this Agreement. For the purpose of determining fees
payable to Boston Advisors, the value of each Fund's net assets shall be
computed at the times and in the manner specified in the Registration
Statement.
(d) The Trust will compensate Boston Advisors for its services
rendered pursuant to this Agreement in accordance with the fees set forth
above. Such fees do not include out-of-pocket disbursements of Boston
Advisors for which Boston Advisors shall be entitled to bill separately. Out-
of-pocket disbursements may include only the items specified in Schedule A,
annexed hereto and incorporated herein, which schedule may be modified by
Boston Advisors if the Trust consents in writing to the modification.
(e) Boston Advisors will bill the Trust as soon as practicable
after the end of each calendar month, and said billings will be detailed in
accordance with the out-of-pocket schedule. The Trust will promptly pay to
Boston Advisors the amount of such billing.
5. Limitation of Liability. Boston Advisors shall not be liable for
any error of judgment or mistake of law or for any loss suffered by the Trust
in connection with the performance of its obligations and duties under this
Agreement, except a loss resulting from Boston Advisors' willful misfeasance,
bad faith or gross negligence in the performance of such obligations and
duties, or by reason of its reckless disregard thereof. The Trust will
indemnify Boston Advisors 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 arising
under this Agreement or relating to the performance of Boston Advisors'
obligations and duties hereunder and not resulting from the willful
misfeasance, bad faith or gross negligence of Boston Advisors in the
performance of such obligations and duties or by reason of its reckless
disregard thereof ("Disqualifying Conduct"). Boston Advisors will indemnify
the Trust 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
Disqualifying Conduct on the part of Boston Advisors.
6. Termination of Agreement.
(a) This Agreement shall become effective on the date hereof and
shall remain in force from year to year so long as such continuance is
specifically approved at least annually by the Board of Trustees of the Trust
or unless terminated pursuant to the provision of sub-section (b) of this
Section 6.
(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 Trust, or by vote of a
majority of the Board of Trustees of the Trust, or by Boston Advisors.
7. Amendment to this 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 Trust or Boston Advisors shall be
sufficiently given if addressed to the 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 Trust:
The PanAgora Funds
260 Franklin Street
Boston, Massachusetts 02110
Attention: Richard A. Crowell
Copy to:
Hale and Dorr
60 State Street
Boston, Massachusetts 02109
Attention: Joseph P. Barri, Esq.
To Boston Advisors:
The Boston Company Advisors, Inc.
Exchange Place - 025-004B
Boston, Massachusetts 02109
Attention: Francis J. McNamara, III
(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 Trust that are exchanged or received
pursuant to the performance of Boston Advisors' duties under this Agreement
shall remain confidential and shall not be voluntarily disclosed to any other
person, except as specifically authorized by the Trust
or as may be required by law.
The Trust and Boston Advisors 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 property of the Trust or of the appropriate Fund(s) thereof, as provided
in the Declaration. The execution and delivery of this Agreement by an
authorized officer of the Trust, acting as such, has been authorized by the
Trustees of the Trust 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
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 BOSTON COMPANY ADVISORS, INC.
By:
THE PANAGORA FUNDS
By:
SCHEDULE A
Out-of-Pocket Expenses
Administration Agreement
I. Authorized out-of-pocket expenses are the following:
telephone
wire charges
courier services
pricing service charges
bankfund\panagora\frmadmin.doc
- - 8 -
<PAGE>
THE PANAGORA FUNDS
Asset Allocation Fund
- --------------------------------------------------------------------------------
Portfolio of Investments November 30, 1993 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market Value
Shares (Note 1)
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS - 68.9%
Financial Services - 10.3%
200 American International Group, Inc. $17,225
300 AmSouth Bancorporation 8,850
300 Bank of New York, Inc. 16,650
200 Bankers Trust NY Corporation 15,300
800 Bear Stearns Companies, Inc. 17,800
200 Beneficial Corporation 14,750
200 Federal Home Loan Mortgage Corporation 9,600
400 Federal National Mortgage Association 30,200
400 First Union Corporation 16,250
400 Merrill Lynch & Company, Inc. 18,150
300 Morgan Stanley Group, Inc. 21,525
500 Morgan (J.P.) & Company, Inc. 35,438
500 Norwest Corporation 11,437
200 Primerica Corporation 8,000
500 SouthTrust Corporation 8,625
100 UNUM Corporation 4,925
- --------------------------------------------------------------------------------
254,725
- --------------------------------------------------------------------------------
Utilities - 9.7%
400 American Telephone & Telegraph Company 21,850
400 Ameritech Corporation 30,600
300 DQE, Inc. 10,125
500 Entergy Corporation 18,438
400 Illinois Power Company 8,800
1,100 MCI Communications Corporation 26,812
900 Niagara Mohawk Power Corporation 18,450
400 NYNEX Corporation 17,050
1,000 Philadelphia Electric Company (PECO Energy) 28,000
300 Potomac Electric Power Company 7,725
400 Southern Company 17,300
300 Southwestern Bell Corporation 12,750
400 Sprint Corporation 13,100
200 U S West, Inc. 9,350
- --------------------------------------------------------------------------------
240,350
- --------------------------------------------------------------------------------
Consumer Non-Durables - 8.8%
600 Coca-Cola 25,350
200 Crown Cork & Seal, Inc. 7,900
300 Gillette 18,750
200 Liz Claiborne 4,725
200 Nike, Inc. 9,575
200 PepsiCo 8,050
900 Philip Morris Companies, Inc. 50,288
700 Procter & Gamble 39,725
300 Reebok International Ltd 9,150
600 Seagram Ltd 16,575
100 Unilever N.V. 11,212
400 V.F. Corporation 17,450
- --------------------------------------------------------------------------------
218,750
- --------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
<PAGE>
THE PANAGORA FUNDS
Asset Allocation Fund
- --------------------------------------------------------------------------------
Portfolio of Investments (continued) November 30, 1993 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market Value
Shares (Note 1)
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (continued)
Energy - 7.7%
400 Ashland Oil, Inc. $13,250
500 Chevron Corporation 43,438
400 Dresser Industries, Inc. 7,800
400 Exxon Corporation 25,100
200 MAPCO, Inc. 12,100
100 Mobil Corporation 7,625
300 Penn Central Corporation 9,075
100 Royal Dutch Petroleum Company 10,100
500 Schlumberger Ltd 28,750
400 Texaco, Inc. 25,700
300 Unocal Corporation 8,137
- --------------------------------------------------------------------------------
191,075
- --------------------------------------------------------------------------------
Health Care - 7.2%
500 Abbot Laboratories 14,625
400 Baxter International Corporation 9,400
200 Becton, Dickinson 6,800
300 Forest Labs, Inc.** 13,912
300 Johnson & Johnson 13,088
800 Merck & Company 27,400
200 Pfizer, Inc. 13,300
600 Schering Plough Corporation 40,125
500 Syntex Corporation 8,562
800 Upjohn Company 25,000
100 Warner-Lambert Company 6,638
- --------------------------------------------------------------------------------
178,850
- --------------------------------------------------------------------------------
Technology - 7.2%
100 Apple Computer, Inc. 3,150
100 Autodesk, Inc. 4,450
100 Cabletron Systems, Inc.** 10,475
300 COMPAQ Computer Corporation** 21,712
400 Digital Equipment Corporation** 14,750
200 E-Systems, Inc. 8,375
700 Intel Corporation 43,050
200 Litton Industries, Inc.** 13,050
400 Loral Corporation 13,200
200 Microsoft Corporation** 16,000
200 Pitney Bowes, Inc. 8,400
500 Seagate Technology** 12,125
300 Sun Microsystem, Inc.** 7,988
- --------------------------------------------------------------------------------
176,725
- --------------------------------------------------------------------------------
Capital Goods - 6.9%
1,000 Boeing Company 38,625
300 Deere & Company 21,263
200 Fluor Corporation 8,475
800 General Electric Company 78,600
400 Raytheon Company 24,500
- --------------------------------------------------------------------------------
171,463
- --------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
<PAGE>
THE PANAGORA FUNDS
Asset Allocation Fund
- --------------------------------------------------------------------------------
Portfolio of Investments (continued) November 30, 1993 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market Value
Shares (Note 1)
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (continued)
Consumer Services - 5.4%
400 K mart Corporation $9,400
500 King World Productions, Inc.** 20,375
400 Kroger Company** 7,450
200 McDonald's Corporation 11,725
300 Melville Corporation 12,300
300 Penney (J.C.), Inc. 16,013
500 Rite Aid Corporation 8,125
400 Toys R Us, Inc.** 16,300
800 Wal-Mart Stores, Inc. 22,900
400 Woolworth Corporation 9,300
- --------------------------------------------------------------------------------
133,888
- --------------------------------------------------------------------------------
Basic Industries - 3.3%
300 Dow Chemical Company 17,437
400 FMC Corporation** 18,450
400 Lubrizol Corporation 12,800
500 Phelps Dodge Corporation 21,875
500 Union Carbide Corporation 10,375
- --------------------------------------------------------------------------------
80,937
- --------------------------------------------------------------------------------
Consumer Durables - 1.7%
200 Chrysler Corporation 10,550
500 Ford Motor Company 30,375
- --------------------------------------------------------------------------------
40,925
- --------------------------------------------------------------------------------
Transportation - 0.7%
200 American President Companies Ltd 11,000
100 Union Pacific Corporation 6,350
- --------------------------------------------------------------------------------
17,350
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS (Cost $1,739,961) 1,705,038
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Face
Value
- --------------------------------------------------------------------------------
<S> <C> <C>
U.S. TREASURY BILLS - 11.3%
U.S. Treasury Bills:
$240,000 2.990% due 12/16/93 239,800
40,000 2.880% due 12/30/93*** 39,906
- --------------------------------------------------------------------------------
TOTAL U.S. TREASURY BILLS (Cost $279,706) 279,706
- --------------------------------------------------------------------------------
COMMERCIAL PAPER - 18.1% (Cost $449,000)
449,000 General Electric Capital Corporation,
3.150% due 12/01/93 449,000
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS (Cost $2,468,667*) 98.3% 2,433,744
OTHER ASSETS AND LIABILITIES (Net) 1.7 41,421
- --------------------------------------------------------------------------------
NET ASSETS 100.0% 2,475,165
- --------------------------------------------------------------------------------
<FN>
* Aggregate cost for Federal tax purposes.
** Non-income producing security.
*** Security pledged as collateral for futures contracts.
</TABLE>
<TABLE>
<CAPTION>
OPEN FUTURES CONTRACTS TO BUY AT NOVEMBER 30, 1993:
Number of Unrealized
Contracts Depreciation
- ----------- --------------
<S> <C> <C>
2 Standard & Poor's 500 Index Futures, December 1993 (800)
- --------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
<PAGE>
THE PANAGORA FUNDS
Global Fund
- --------------------------------------------------------------------------------
Portfolio of Investments November 30, 1993 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market Value
Shares (Note 1)
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS - 83.8%
Belgium - 3.8%
888 ACEC Union Miniere $55,260
1,125 A.G Finance 81,006
81 Bekaert SA 44,273
146 CBR (Cimenteries) 45,930
1,713 Delhaize 59,054
1,621 Electrabel Com 281,199
343 Electrabel (AFUL) 59,501
541 Generale de Banque Ord. 132,133
154 Gevaert Photo Productions 36,256
817 Group Brussels Lambert SA 84,024
490 Ktedietbank 106,859
846 Petrofina SA 226,892
469 Royale Beige 67,282
290 Solvay ET Cie A 113,390
435 Tractebel Cap 114,269
- --------------------------------------------------------------------------------
1,507,328
- --------------------------------------------------------------------------------
Switzerland - 4.2%
79 Brown Boveri & Cie AG 53,000
37 Ciba Beigy AG 20,336
231 Ciba Beigy AG (Regd) 120,348
35 Credit Suisse Holdings 83,828
74 C.S. Holdings 34,905
75 Holderbank Financier Glarus AG 41,972
368 Nestle SA (Regd) 284,152
15 Roche Holdings AG (BR) 107,528
67 Roche Holdings AG Genuscheine 268,491
51 Sandoz AG (Regd) 122,998
13 Sandoz AG (ptg) 31,093
21 Schweiz Ruckversicherungs (Renaissance) 50,996
244 Schweizercher Bankverein (Redg) 37,714
185 Schweizerische Bankgelsellschaft 161,829
221 Schweizerischer Bankverein 70,673
205 SMH AG Neuenburg (Regd) 31,412
41 SMH AG Nuenberg (BR) 28,408
188 Union Bank of Switzerland 38,827
64 Zurich Versicherungs (BR) 60,887
42 Zurich Versicherung 40,097
- --------------------------------------------------------------------------------
1,689,494
- --------------------------------------------------------------------------------
Spain - 12.1%
26,400 Banco Bilbao Vizcaya 571,064
18,800 Banco Central Hispano Americano 408,000
10,900 Banco de Santander Ord 472,333
4,600 Banco Espanol de Credito 68,184
2,600 Gas Natural S.D.G. SA 138,667
3,300 Dragados & Constructoras SA Ord 46,809
</TABLE>
See Notes to Financial Statements.
<PAGE>
THE PANAGORA FUNDS
Global Fund
- --------------------------------------------------------------------------------
Portfolio of Investments (continued) November 30, 1993 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market Value
Shares (Note 1)
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (continued)
Spain - (Continued)
20,100 Empresa Nacional De Electric (Endesa) $912,340
90,500 Iberdrola SA 586,004
23,800 Repsol SA 668,425
80,300 Telefonica Nacional de Espana Ord 956,766
- --------------------------------------------------------------------------------
4,828,592
- --------------------------------------------------------------------------------
Hong Kong - 3.7%
6,000 Bank of East Asia 34,175
27,000 Cathay Pacific Airways 40,544
34,000 Cheung Kong Holdings 156,246
28,800 China Light & Power 169,631
20,000 Dairy Farm International 33,916
23,000 Hang Seng Bank Ltd. 174,175
18,000 Wharf Holdings 62,679
95,000 Hong Kong Telecommunications 180,777
20,000 Hong Kong & China Gas 49,709
35,000 Hutchison Whampoa 140,453
7,000 Jardine Matheson Holdings 59,353
22,000 New World Development Company 77,747
28,600 Sun Hung Kai Properties 177,709
15,000 Swire Pacific Ltd. A 103,883
- --------------------------------------------------------------------------------
1,460,997
- --------------------------------------------------------------------------------
Italy - 4.0%
19,700 Assicurazioni Generale 423,563
27,700 Banca Commerciale Italiana 70,564
16,400 Banco Ambrosiano Veneto 40,662
41,300 Credito Italiano S.P.A. 54,615
11,300 Fiat S.P.A. di Risp 13,008
45,700 Fiat S.P.A. Ord 101,570
17,300 Fiat S.P.A. Priv 19,286
4,800 Italcable 21,534
15,600 Italgas 41,579
12,760 Mediobanca S.P.A. 90,182
140,700 Montedison S.P.A. 64,960
39,100 Olivetti Group S.P.A. Ord 40,080
52,400 Pirelli S.P.A. Ord 57,217
4,900 RAS 71,535
2,300 RAS Di Risp 19,804
15,100 Edison 62,472
12,500 SME (Meridionale Finanziaria) 25,224
3,200 SAI (Soc Assic) 34,652
11,300 Saipem 19,880
128,300 SIP 231,658
35,700 SIP Di Risp 54,976
7,500 Sirti S.P.A. 37,943
- --------------------------------------------------------------------------------
1,596,964
- --------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
<PAGE>
THE PANAGORA FUNDS
Global Fund
- --------------------------------------------------------------------------------
Portfolio of Investments (continued) November 30, 1993 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market Value
Shares (Note 1)
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (continued)
Japan - 12.6%
13,000 Asahi Bank Limited $128,748
7,000 Asahi Glass Company 67,400
12,000 Bank of Tokyo 156,259
19,000 Dai Ichi Kangyo Bank 308,391
8,000 Daiwa Securities 83,631
19,000 Fuji Bank 304,906
4,000 Fuji Photo Film Ltd Ord 82,898
10,000 Fujitsu Ltd 66,208
19,000 Hitachi Ltd 133,810
5,000 Honda Motor Company 62,815
16,000 Industrial Bank of Japan 394,681
1,000 Ito-Yokado Company 48,327
5,000 Kansai Electric Power 125,172
7,000 Kirin Brewery 71,894
1,000 Kyocera Corporation 46,492
12,000 Matsushita Electric Industrial 149,656
8,000 Mitsubishi Corporation 74,828
8,000 Mitsubishi Estate Company 65,878
21,000 Mitsubishi Heavy Industries 115,351
8,000 Mitsubishi Trust & Banking 80,697
7,000 Mitsui Trust & Banking 53,278
10,000 NEC Corporation 70,977
5,000 Nippon Denso Company Ltd 72,444
47,000 Nippon Steel 129,730
16,000 Nissan Motor Company 103,439
12,000 Nomura Securities Company 187,070
16,000 Osaka Gas Company 68,959
21,000 Sakura Bank 250,344
1,000 Seven-Eleven Japan NPV 77,946
7,000 Sharp Corporation 87,299
1,000 Sony Corporation 42,824
21,000 Sumitomo Bank 342,779
4,000 Tohoku Electric Power 108,574
13,000 Tokai Bank 120,404
10,000 Tokio Marine & Fire Insurance Company 101,788
8,000 Tokyo Electric Power Company 214,947
17,000 Tokyo Gas Company Ltd. 73,581
22,000 Toyota Motor Company 330,857
- --------------------------------------------------------------------------------
5,005,282
- --------------------------------------------------------------------------------
Netherlands - 7.0%
6,400 ABN Amro Holdings 231,797
2,600 Ahold Koninklijke NV 61,250
1,100 Akzo NV Ord 101,541
1,500 Elsevier NV CVA 121,653
900 Heineken NV 93,306
</TABLE>
See Notes to Financial Statements.
<PAGE>
THE PANAGORA FUNDS
Global Fund
- --------------------------------------------------------------------------------
Portfolio of Investments (continued) November 30, 1993 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market Value
Shares (Note 1)
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (continued)
Netherlands - (continued)
6,100 International Nederlanden Groep CVA $266,511
7,500 Philips Electronics NV 145,548
12,400 Royal Dutch Petroleum 1,252,740
3,700 Unilever NV CVA 411,815
1,500 Wolters Kluwer CVA 82,192
- --------------------------------------------------------------------------------
2,768,353
- --------------------------------------------------------------------------------
Sweden - 1.9%
9,100 Astra AB Free Series A 179,316
1,900 Astra AB Free Series B 36,767
1,200 ASEA AB Free Series A 76,743
500 ASEA AB Free Series B 31,858
3,100 Ericsson (L.M.) Tele Free Series B 122,537
1,300 Electrolux AB Free Series B 44,484
1,800 Skanska AB Free Series B 33,770
1,100 Stora Kopparbergs Bergslaga Free Series A 47,115
3,400 Svenska Cellulosa A Ktiebolaget Free Series 51,351
4,000 Svenska Handelsbanken Series A 50,030
1,300 Volvo AB Free Series B 63,504
- --------------------------------------------------------------------------------
737,475
- --------------------------------------------------------------------------------
Singapore - 1.4%
1,200 City Developments 4,912
2,500 Development Bank of Singapore 22,964
4,000 Fraser & Neave Ord 38,243
17,000 Genting Berhad Myro (Registered) 178,467
1,000 Keppel Corporation Ord. 6,155
20,000 Malayan Banking 141,223
4,666 Overseas-Chinese Banking Corporation 37,618
40,000 Sime Darby BHD 88,983
3,000 Singapore International Airlines 20,809
700 Singapore Press Holdings 6,518
3,375 United Overseas Bank 26,151
- --------------------------------------------------------------------------------
572,043
- --------------------------------------------------------------------------------
United States - 33.1%
7,400 Abbott Laboratories 216,450
2,700 American Home Products Corporation 169,088
2,800 American International Group, Inc. 241,150
11,900 American Telephone & Telegraph Company 650,037
2,400 Ameritech Corporation 183,600
4,400 Amoco Corporation 234,850
1,400 Atlantic Richfield 145,250
3,100 BankAmerica Corporation 137,563
3,800 Bell Atlantic Corporation 228,000
4,400 BellSouth Corporation 251,350
4,600 Bristol-Myers Squibb 275,425
2,900 Cheveron Corporation 251,937
</TABLE>
See Notes to Financial Statements.
<PAGE>
THE PANAGORA FUNDS
Global Fund
- --------------------------------------------------------------------------------
Portfolio of Investments (continued) November 30, 1993 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market Value
Shares (Note 1)
- --------------------------------------------------------------------------------
<S> <C> <C>
United States - (continued)
3,100 Chrysler Corporation $163,525
11,500 Coca Cola Company 485,875
4,700 Disney (Walt) Company 186,825
2,400 Dow Chemical Company 139,500
6,000 duPont (EI) deNemours & Company 285,750
2,900 Eastman Kodak Company 176,538
11,000 Exxon Corporation 690,250
2,400 Federal National Mortgage Association 181,200
4,400 Ford Motor Company 267,300
8,400 GTE Corporation 311,850
7,600 General Electric Company 746,700
6,300 General Motors Corporation 333,112
2,200 Hewlett Packard Company 162,250
4,000 Home Depot, Inc. 165,500
3,700 Intel Corporation 227,550
5,100 International Business Machines Corporation 274,763
5,800 Johnson & Johnson 253,025
3,100 McDonald's Corporation 181,737
10,000 Merck & Company, Inc. 342,500
1,900 Minnesota Mining & Manufacturing Company 207,100
3,500 Mobil Corporation 266,875
2,400 Motorola, Inc. 225,000
3,700 NYNEX Corporation 157,713
3,800 Pacific Gas & Electric Company 130,625
3,700 Pacific Telesis Group 209,975
7,000 PepsiCo Inc. 281,750
2,800 Pfizer, Inc. 186,200
7,800 Philip Morris Companies, Inc. 435,825
6,000 Procter & Gambel Company 340,500
4,700 Royal Dutch Petroleum Company ADR 474,700
2,100 Schlumberger, Ltd. 120,750
3,100 Sears Roebuck & Company 168,562
5,300 Southwestern Bell Corporation 225,250
2,300 Texaco, Inc. 147,775
3,300 Time Warner Inc. 145,612
1,400 Unilever N.V. ADR 156,975
3,700 US West, Inc. 172,975
20,300 Wal-Mart Stores, Inc. 581,088
- --------------------------------------------------------------------------------
13,195,700
- --------------------------------------------------------------------------------
TOTAL COMMON STOCKS (Cost $34,370,116) 33,362,228
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Face
Value
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMERCIAL PAPER - 6.6% (Cost $2,642,000)
$2,642,000 General Electric Capital Corporation,
3.15% due 12/01/93 2,642,000
- --------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
<PAGE>
THE PANAGORA FUNDS
Global Fund
- --------------------------------------------------------------------------------
Portfolio of Investments (continued) November 30, 1993 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Face Market Value
Value (Note 1)
- --------------------------------------------------------------------------------
<S> <C> <C>
U.S. TREASURY BILL - 2.8% (Cost $1,100,000)
$1,100,000 U.S. Treasury Bill, 2.890% due 12/16/93 $1,100,000
- --------------------------------------------------------------------------------
Shares
- --------------------------------------------------------------------------------
RIGHTS AND WARRANTS - 0.0%
1,125 A.G. Fin, Rights, expire 12/07/93 1,115
11,600 Mediobanca, Rights, expire 12/03/93 3,911
115 CS Holdings, Warrants, expire 12/21/93 1,820
53 CS Holdings (BR), Warrants, expire 12/21/93 4,343
- --------------------------------------------------------------------------------
TOTAL RIGHTS AND WARRANTS (Cost $4,278) 11,189
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS (Cost $38,116,394*) 93.2% 37,115,417
OTHER ASSETS AND LIABILITIES (Net) 6.8 2,688,233
- --------------------------------------------------------------------------------
NET ASSETS 100.0% $39,803,650
- --------------------------------------------------------------------------------
<FN>
* Aggregate cost for federal tax purposes.
ADR - American Depository Receipt
</TABLE>
OPEN FUTURES CONTRACTS TO BUY AT NOVEMBER 30, 1993:
<TABLE>
<CAPTION>
Unrealized
Number of Appreciation/
Contracts (Depreciation)
--------- --------------
<S> <C> <C>
90 All Ordinary Index Future December 1993 (94,944)
21 Topix Index Future December 30 (572,471)
1 Japan Treasury 10 Year Index Future 10,307
9 US Treasury Note 10 Year Index Future (7,887)
- --------------------------------------------------------------------------------
(664,995)
- --------------------------------------------------------------------------------
OPEN FUTURES CONTRACTS TO SELL AT NOVEMBER 30, 1993:
11 Standard & Poor's 500 Index Future 36,075
- --------------------------------------------------------------------------------
Net Unrealized Depreciation of Open Futures Contracts ($628,920)
- --------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
<PAGE>
THE PANAGORA FUNDS
Global Fund
- --------------------------------------------------------------------------------
Portfolio of Investments November 30, 1993 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Percentage of Market Value
Sector Diversification Net Assets (Note 1)
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS:
Utility 18.9% $7,505,035
Financial Services 18.4% 7,310,119
Oil & Gas 10.4% 4,133,173
Basic Industries 6.2% 2,475,132
Consumer Services 5.6% 2,243,442
Technology 4.4% 1,742,551
Health Care Services 4.1% 1,636,839
Transportation 3.6% 1,438,704
Non-Durable Goods 3.4% 1,339,209
Food & Kindred Products 2.5% 986,141
Durable Goods 2.2% 876,959
Holding Companies 1.6% 632,550
Manufacturing 0.9% 343,038
Forestry Products & Paper 0.8% 305,566
Real Estate 0.7% 277,357
Other 0.3% 116,413
-----------
Total Common Stocks 83.8% 33,362,228
Commercial Paper 6.6% 2,642,000
U.S. Treasury Bill 2.8% 1,100,000
Warrants & Rights 0.0% 11,189
-----------
Total Investments 93.2% 37,115,417
Other Assets and Liabilities (Net) 6.8% 2,688,233
-----------
Net Assets 100.0% $39,803,650
-----------
-----------
</TABLE>
See Notes to Financial Statements.
<PAGE>
THE PANAGORA FUNDS
Global Fund
- --------------------------------------------------------------------------------
Schedule of Forward Foreign Exchange Contracts November 30, 1993 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Contract Market Value
Value Date (Note 1)
- --------------------------------------------------------------------------------
<S> <C> <C>
FORWARD FOREIGN EXCHANGE CONTRACTS TO BUY
1,743,173 Australian Dollars 12/06/93 $1,148,045
1,826,669 Great Britain Pound Sterling 12/07/93 2,711,749
363,000,000 Japanese Yen 12/07/93 3,329,021
- --------------------------------------------------------------------------------
(Contract Amount $7,262,153) $7,188,815
- --------------------------------------------------------------------------------
FORWARD FOREIGN EXCHANGE CONTRACTS TO SELL
16.973,000 German Duetsche Marks 12/07/93 ($9,886,158)
535,700,000 Japanese Yen 12/07/93 (4,912,828)
- --------------------------------------------------------------------------------
TOTAL FORWARD FOREIGN EXCHANGE CONTRACTS TO SELL
(Contract Amount $15,000,000) ($14,798,986)
- --------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
<PAGE>
THE PANAGORA FUNDS
International Equity Fund
- --------------------------------------------------------------------------------
Portfolio of Investments November 30, 1993 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market Value
Shares (Note 1)
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS - 81.2%
Austria - 2.0%
500 Creditanstalt Bank $31,027
100 EA Generali AG 32,560
600 Oesterreichische El Wirtsch 35,145
500 Omev AG 33,472
100 Wienerberger Baust 31,690
1,000 Z-Laenderbank Austria 88,732
- --------------------------------------------------------------------------------
252,626
- --------------------------------------------------------------------------------
Belgium - 1.5%
100 ACEC Union Miniere 6,223
200 A.G. Finance 14,401
200 Delhaize 6,895
100 Electrabel 17,347
100 Generale de Banque Ord 24,424
100 Group Brussels Lambert SA 10,284
100 Kredietbank 21,808
100 Pertofina Sa 26,819
100 Solvay Et Cie "A" 39,100
100 Tractebel Cap 26,269
- --------------------------------------------------------------------------------
193,570
- --------------------------------------------------------------------------------
Switzerland - 0.3%
18 Brown Boveri & Cie AG "A" 12,076
3 Ciba Geigy AG 1,563
1 Credit Suisse Holding 2,395
4 Nestle SA 3,089
1 Roche Holdings AG Genuschein 4,007
1 Sandoz AG 2,412
3 Schweizerishe Bankgesellscha 2,624
3 Schweizerisher Bankverein 959
4 SMH AG Neuenburg 613
14 Zurich Versichering - G 13,375
1 Zurich Versicherung 952
- --------------------------------------------------------------------------------
44,065
- --------------------------------------------------------------------------------
Germany - 10.3%
89 Allianz 148,303
280 BASF 44,210
330 Bayer 63,449
115 Beiersdor 56,282
350 Daimler Benz 145,742
300 Deutsche Bank 148,047
25 Douglas Holdings 8,375
300 Dresdner Bank 76,033
100 Hochtief 59,720
</TABLE>
See Notes to Financial Statements.
<PAGE>
THE PANAGORA FUNDS
International Equity Fund
- --------------------------------------------------------------------------------
Portfolio of Investments (continued) November 30, 1993 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market Value
Shares (Note 1)
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (continued)
Germany - (continued)
100 Karstadt $34,026
23 Linde 11,069
300 Mannesmann 64,812
50 Munchener Ruckversicherungs-G 110,991
120 M.A.N. Group 25,659
23 Pittler Maschinenfabrik 1,541
200 RWE Aktiengesellschaft 54,476
320 Siemens 134,705
100 Thyssen 13,838
290 VEBA Group 77,030
200 VIAG Group 53,660
- --------------------------------------------------------------------------------
1,331,968
- --------------------------------------------------------------------------------
Spain - 11.5%
7,200 Autopista Cesa 70,213
8,300 Banco Bilbao Vizcaya 179,539
6,200 Banco Central Hispano Americano 134,553
3,400 Banco de Santander 147,333
3,700 Banco Espanol de Credito 54,844
5,600 Empresa Nacional de Elec (Endesa) 254,185
900 Gas Natural S.D.G. SA 48,000
21,800 Iberdrola 141,159
7,100 Repsol 199,404
21,400 Telefonica Nacional de Espana 254,979
- --------------------------------------------------------------------------------
1,484,209
- --------------------------------------------------------------------------------
France - 5.7%
222 Alcatel Alsthom Cie Generale D'Electic 29,059
300 Axa Company 75,051
89 BSN 12,489
215 Carrefour 136,476
200 Compagnie Bancaire SA 17,689
495 Compagnie de Saint Gobain 45,864
500 Compagnie Financiere de Suez 28,555
256 Cie Generale des Eaux 112,388
200 Elf Sanofi 31,637
600 Euro Disney SCA 3,260
101 Gulibert SA New 24,331
200 Lafarge Coppee SA 13,969
100 L'Oreal 19,660
131 LVMH Moet Hennessey 81,323
100 Lyonnaise des Eaux DuMez 9,013
400 Michelin Group 12,244
551 Pechiney International 18,379
80 Pernod - Ricard 5,232
400 Rhone - Poulenc SA Ord "A" 10,007
</TABLE>
See Notes to Financial Statements.
<PAGE>
THE PANAGORA FUNDS
International Equity Fund
- --------------------------------------------------------------------------------
Portfolio of Investments (continued) November 30, 1993 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market Value
Shares (Note 1)
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (continued)
France - (continued)
73 Societe Generale Ord $8,645
220 Societe National Elf Aquitaine 15,144
400 Thompson - CSF 10,478
145 Union des Assurances de Paris 15,462
- --------------------------------------------------------------------------------
736,355
- --------------------------------------------------------------------------------
Great Britain - 7.4%
4,433 Arjo Wiggins Appleton 16,389
23,960 Chubb Security 130,563
6,566 General Electric 32,514
18,408 Glaxo Holdings 183,126
51,250 Hanson Trust P/C 216,113
3,600 Imperial Chemical Industries 39,929
60 Racal Electronics 178
5,250 RTZ Corporation 55,814
9,278 SmithKline Beecham "A" 53,451
19,449 Vodafone 153,053
6,900 Zeneca Group 77,863
- --------------------------------------------------------------------------------
958,993
- --------------------------------------------------------------------------------
Hong Kong - 2.8%
4,800 Cheung Kong Holdings 22,058
4,560 China Light & Power 26,858
3,300 Hang Seng Bank Ltd. 24,990
13,500 Hong Kong Telecommunications 25,690
16,700 Hong Kong & Shanghia Banking Corporation 184,835
10,800 Hutchison-Whampoa Ltd. 43,340
5,280 Sun Hung Kia Properties 32,808
- --------------------------------------------------------------------------------
360,579
- --------------------------------------------------------------------------------
Italy - 10.7%
254 Allanza Assicurazioni Di Risp 1,819
15,800 Assicurazioni Generali 339,710
32,500 Banca Comerciale Italiana 82,791
17,900 Banco Ambrosianno Veneto 44,381
53,100 Credito Italiano S.P.A. 70,219
12,400 Edison 51,302
4,000 Fiat S.P.A. Di Risp 4,605
48,600 Fiat S.P.A. Ord 108,016
19,900 Fiat S.P.A. Priv 22,184
4,100 Italcable 18,393
11,500 Italgas 30,651
12,870 Mediobanca 90,960
90,800 Monedison S.P.A. International 41,922
35,600 Olivetti Group S.P.A. Ord 36,492
29,500 Pirelli S.P.A. Ord 32,212
1,100 RAS di Resp 9,472
</TABLE>
See Notes to Financial Statements.
<PAGE>
THE PANAGORA FUNDS
International Equity Fund
- --------------------------------------------------------------------------------
Portfolio of Investments (continued) November 30, 1993 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market Value
Shares (Note 1)
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (continued)
Italy - (continued)
4,100 RAS International $59,856
1,800 Rinascente Ord 7,917
2,900 S.A.I. 31,404
5,000 Saipem International 8,796
112,100 SIP 202,408
29,800 SIP Di Risp 45,890
6,000 Sirti S.P.A. International 30,354
7,700 SME (Meridionale Finanziaria) 15,538
- --------------------------------------------------------------------------------
1,387,292
- --------------------------------------------------------------------------------
Japan - 22.5%
3,200 Ajinomoto Company, Inc. 32,866
7,100 Asahi Chemical Industry 36,851
3,200 Asahi Glass Company 30,812
4,000 Bank of Tokyo 52,086
1,600 Bridgestone Company 18,487
1,900 Canon, Inc. 23,870
1,600 Chugai Pharmaceutical 16,873
6,790 Dai Ichi Kangyo Bank 110,209
3,200 Dai Nippon Printing Company 44,897
800 Daido Steel Company 2,678
8,000 Daikyo Kanko 66,318
1,600 Daishowa Paper Manufacturing 18,634
1,600 Daiwa House Industry Company 21,128
2,400 Denki Kagaku Kogyo 5,612
5,100 Fuji Bank 81,843
3,200 Fujitsu Ltd. 21,187
7,100 Hitachi Ltd. 50,003
1,600 Honda Motor Company 20,101
800 House Food Industrial Company 18,267
4,800 Industrial Bank of Japan 118,404
6,500 Itochu Corporation 29,147
1,000 Ito-Yokado Company 48,326
2,400 Japan Airlines 12,985
1,680 Joyo Bank 11,215
800 Jufi Photo Film Ltd. 16,580
5,200 Kajima Corporation 39,387
1,600 Kamigumi Company 15,552
1,020 Kandenko Company 21,139
2,560 Kansai Electric Power 64,088
8,400 Kawasaki Steel Corporation 23,109
7,274 Kinki Nippon Railway Company 54,563
4,000 Kirin Brewery 41,082
2,400 Konatsu 15,560
800 Kyocera Corporation 37,194
</TABLE>
See Notes to Financial Statements.
<PAGE>
THE PANAGORA FUNDS
International Equity Fund
- --------------------------------------------------------------------------------
Portfolio of Investments (continued) November 30, 1993 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market Value
Shares (Note 1)
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (continued)
Japan - (continued)
800 Kyushu Electric Power Company, Inc. $20,247
800 Maeda Road Construction 14,525
800 Marudai Food Company, Ltd. 5,832
5,600 Matsushita Electric Industrial 69,839
8,790 Mitsubishi Bank 209,574
4,000 Mitsubishi Estate Company 32,939
14,300 Mitsubishi Heavy Industry 78,548
7,100 Mitsubishi Kasei Company 27,410
4,800 Mitsubishi Trust & Banking 48,418
2,400 Mitsui Marine & Fire 17,276
4,000 Mitsui Teatsu Chemicals Inc. 11,224
6,400 Mitsui Trust & Banking 48,712
1,600 Mitsui & Company 9,757
3,200 NEC Corporation 22,712
2,400 Nikko Kyodo Company, Ltd. 8,253
2,400 Nikon 15,956
300 Nintendo Company 17,442
1,600 Nippon Light Metal Company 7,439
3,200 Nippon Oil Company 19,661
19,900 Nippon Steel 54,928
3,200 Nippon Yusen Kaisha 16,198
2,400 Oji Paper 19,719
6,400 Sakura Bank 76,295
800 Sanwa Shutter Corporation 6,823
1,010 Seven-Eleven, Japan 78,725
1,600 Shizuoka Bank 18,196
1,800 Snow Brand Milk Products Company, Ltd. 11,884
1,060 Sony Corporation 45,394
5,693 Sumitomo Bank 92,926
3,200 Sumitomo Electric Industry 33,453
8,150 Sumitomo Trust & Banking 75,484
1,600 Taiyo Fisher Company 4,519
4,000 Takeda Chemical Industries 41,449
3,200 Tokai Bank 29,638
3,200 Tokio Marine & Fire Insurance 32,572
3,040 Tokyo Electric Power Company 81,680
5,180 Tokyu Corporation 29,498
4,800 Toyobo Company 13,205
5,986 Toyota Motor Company 90,023
2,400 Ube Industries, Ltd. 6,360
800 Yakult Honsha 11,004
2,000 Yamanouchi Pharmaceutical Company 37,231
4,000 Yasuda Trust & Banking 24,392
11,100 Yokogawa Electric Corporation 76,341
- --------------------------------------------------------------------------------
2,914,754
- --------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
<PAGE>
THE PANAGORA FUNDS
International Equity Fund
- --------------------------------------------------------------------------------
Portfolio of Investments (continued) November 30, 1993 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market Value
Shares (Note 1)
- --------------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCKS (continued)
Netherlands - 1.5%
300 ABM Amro Holding $10,865
200 Ahold Koninklijke 4,712
63 Akzo NV Ord 5,816
230 Elsevier NV CVA 18,653
75 Heineken NV 7,776
487 International Nederlanden Groep CVA 21,277
500 Philips Electronics 9,703
800 Royal Dutch Petroleum 80,822
275 Unilever NV CVA 30,608
- --------------------------------------------------------------------------------
190,232
- --------------------------------------------------------------------------------
Norway - 0.0%
140 Orka Borregaard "A" Free 4,949
- --------------------------------------------------------------------------------
Sweden - 1.1%
6,500 Astra AB "A" Free 128,083
1,000 Astra AB "A" Free 19,351
- --------------------------------------------------------------------------------
147,434
- --------------------------------------------------------------------------------
Singapore - 3.9%
11,875 Development Bank of Singapore 109,081
16,683 Overseas-Chinese Banking Corporation 134,484
38,900 Sime Darby BHD 86,536
5,600 Singapore Press Holding 77,336
12,488 United Overseas Bank 96,760
- --------------------------------------------------------------------------------
504,197
- --------------------------------------------------------------------------------
TOTAL COMMON STOCK (Cost $10,725,529) 10,511,223
- --------------------------------------------------------------------------------
PREFERRED STOCK - 0.1% (Cost $20,013)
300 Credit Anstalt Bank Pref 18,517
- --------------------------------------------------------------------------------
RIGHTS - 0.1%
200 A.G. Finance Rights, expire 12/7/93 198
256 Cie Generale des Eaux Rights, expire 12/16/93 1,076
11,700 Mediobanca Rights, expire 12/3/93 3,945
- --------------------------------------------------------------------------------
TOTAL RIGHTS (Cost $0) 5,219
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Face
Value
- --------------------------------------------------------------------------------
<S> <C> <C>
U.S. TREASURY BILL - 0.4% (Cost $49,873)
$50,000 U.S. Treasury Bill, 2.940% due 12/16/93 49,850
- --------------------------------------------------------------------------------
COMMERCIAL PAPER - 12.8% (Cost $1,657,000)
1,657,000 General Electric Capital Corporation,
3.150% due 12/01/93 1,657,000
- --------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
<PAGE>
THE PANAGORA FUNDS
International Equity Fund
- --------------------------------------------------------------------------------
Portfolio of Investments (continued) November 30, 1993 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Market Value
(Note 1)
- --------------------------------------------------------------------------------
<S> <C> <C>
TOTAL INVESTMENTS (Cost $12,452,415*) 94.6% $12,241,809
OTHER ASSETS AND LIABILITIES (Net) 5.4 704,546
- --------------------------------------------------------------------------------
NET ASSETS 100.0% $12,946,355
- --------------------------------------------------------------------------------
<FN>
*Aggregate cost for Federal tax purposes.
</TABLE>
OPEN FUTURES CONTRACTS TO BUY AT NOVEMBER 30, 1993:
<TABLE>
<CAPTION>
Unrealized
NUMBER OF Appreciation/
CONTRACTS (Depreciation)
--------- --------------
<S> <C> <C>
40 All Ordinary Index Future December 1993 $32,923
8 Topix Index Future December 1993 (113,724)
1 Toronto 35 Index Future December 1993 4,024
- --------------------------------------------------------------------------------
(76,777)
- --------------------------------------------------------------------------------
OPEN FUTURES CONTRACTS TO SELL AT NOVEMBER 30, 1993:
5 Financial Times Stock Exchange 100 Index December 1993 391
- --------------------------------------------------------------------------------
Net Unrealized Depreciation of Open Futures Contracts ($76,386)
- --------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
<PAGE>
THE PANAGORA FUNDS
International Equity Fund
- --------------------------------------------------------------------------------
Portfolio of Investments November 30, 1993 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Percentage of Market Value
Sector Diversification Net Assets (Note 1)
- --------------------------------------------------------------------------------
<S> <C> <C>
Common Stocks:
Energy & Utility 16.7% $2,157,800
Financial Services 16.3% 2,113,345
Banking & Finance 14.2% 1,838,263
Basic Industries 7.2% 925,685
Durable Goods 6.1% 783,305
Consumer Services 5.8% 747,109
Health Care & Personal Services 4.1% 530,412
Manufacturing 3.0% 390,076
Transportation 2.8% 358,032
Construction & Building 1.8% 229,128
Holding Companies 1.0% 132,501
Non-Durable Goods 0.8% 109,028
Technology 0.6% 80,579
Real Estate 0.5% 65,747
Forestry Products & Paper 0.4% 54,742
Other 0.1% 13,988
----------
Total Common Stocks 81.3% 10,529,740
Commercial Paper 12.8% 1,657,000
U.S. Treasury Bill 0.4% 49,850
Rights 0.1% 5,219
----------
Total Investments 94.6% 12,241,809
Other Assets and Liabilities (Net) 5.4% 704,546
----------
Net Assets 100.0% $12,946,355
----------
----------
</TABLE>
See Notes to Financial Statements.
<PAGE>
THE PANAGORA FUNDS
International Equity Fund
- --------------------------------------------------------------------------------
Schedule of Forward Foreign Exchange Contracts November 30, 1993 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Contract
Value Market Value
Date (Note 1)
- --------------------------------------------------------------------------------
<S> <C> <C>
FORWARD FOREIGN EXCHANGE CONTRACTS TO BUY
1,522,765 Australian Dollars 12/06/93 $1,002,886
370,079,500 Japanese Yen 12/06/93 3,393,867
- --------------------------------------------------------------------------------
TOTAL FORWARD FOREIGN EXCHANGE CONTRACTS TO BUY
(Contract Amount $4,468,426) $4,396,753
- --------------------------------------------------------------------------------
FORWARD FOREIGN EXCHANGE CONTRACTS TO SELL
(Contract Amount $402,255)
2,383,600 French Francs 12/06/93 ($401,457)
- --------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
<PAGE>
THE PANAGORA FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
November 30, 1993 (unaudited)
<TABLE>
<CAPTION>
PANAGORA PANAGORA
ASSET PANAGORA INTERNATIONAL
ALLOCATION GLOBAL EQUITY
FUND FUND FUND
------------- ------------- ---------------
<S> <C> <C> <C>
ASSETS
Investments, at value (Cost $2,468,667, $38,116,394,
and $12,452,415) (Note 1)
See accompanying schedules:
Securities.............................................. $ 2,433,744 $ 37,115,417 12,241,809
Cash....................................................... 1,250 568,154 1,435,583
Segregated cash collateral for futures contacts............ - 2,609,764 -
Receivable for forward foreign exchange contracts to sell.. - 15,000,000 402,255
Forward foreign exchange contracts to buy, at value
(Contract Cost $7,262,153, $4,468,426)
See accompanying schedules............................... - 7,188,815 4,396,753
Receivable from investment adviser 42,637 3,638 13,857
Unamortized organization costs (Note 2).................... 18,822 18,845 18,845
Dividends and interest receivable.......................... 4,242 65,501 39,607
Receivable for investment securities sold.................. - - 1,397
------------- ------------- ------------
Total Assets............................................. 2,500,695 62,570,134 18,550,106
------------- ------------- ------------
LIABILITIES
Forward foreign exchange contracts to sell, at value
(Contract cost $15,000,000, $402,255) (Note 1)
See accompanying schedule................................ - 14,798,986 401,457
Payable for forward foreign exchange contracts to buy...... - 7,262,153 4,468,426
Service fees payable....................................... 7,500 7,500 7,500
Transfer agent fees payable (Note 2)....................... 2,550 3,300 2,800
Custodian fees payable (Note 2)............................ 1,655 29,648 16,725
Administration fees payable (Note 2)....................... 560 14,612 6,333
Payable for investment securities purchased................ - - 606,459
Net unrealized depreciation of futures contracts (Note 1).. 800 628,920 76,386
Accrued expenses and other payables........................ 12,465 21,365 17,665
------------- ------------- ------------
Total Liabilities ....................................... 25,530 22,766,484 5,603,751
------------- ------------- ------------
NET ASSETS................................................. $ 2,475,165 $ 39,803,650 $ 12,946,355
------------- ------------- ------------
------------- ------------- ------------
NET ASSETS CONSIST OF:
Undistributed net investment income........................ $ 7,408 $ 74,011 $ 23,569
Accumulated net realized gain on
securities sold, forward foreign exchange contracts,
foreign currency, futures contracts and net other assets. 13,307 334,247 295,379
Net unrealized depreciation on securities,
forward foreign exchange contracts, foreign currency,
futures contracts and net other assets................... (35,723) (1,514,560) (349,898)
Paid-in capital..................... 2,490,173 40,909,952 12,977,305
------------- ------------- ------------
$ 2,475,165 $ 39,803,650 $ 12,946,355
------------- ------------- ------------
------------- ------------- ------------
Net Asset Value and redemption price per share of
beneficial interest outstanding......................... $ 10.16 $ 10.34 $ 9.99
------------- ------------- ------------
------------- ------------- ------------
Number of Fund shares outstanding.......................... 243,601 3,848,465 1,295,380
------------- ------------- ------------
------------- ------------- ------------
</TABLE>
See Notes to Financial Statements.
<PAGE>
THE PANAGORA FUNDS
STATEMENTS OF OPERATIONS
For the Period Ended November 30, 1993 (unaudited)*
<TABLE>
<CAPTION>
PANAGORA PANAGORA
ASSET PANAGORA INTERNATIONAL
ALLOCATION GLOBAL EQUITY
FUND FUND FUND
------------- ------------- ---------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest................................................... $ 7,728 $ 68,030 $ 15,961
Dividends (Net of foreign withholding taxes of $5,853 and
$18,602 for the PanAgora Global Fund and the PanAgora
International Equity Fund, respectively)................. 4,347 104,734 104,071
------------- ------------- ------------
Total investment income.................................. 12,075 172,764 120,032
------------- ------------- ------------
EXPENSES:
Transfer agent fees (Note 2)............................... 15,125 20,103 15,778
Trustees' fees and expenses (Note 2)....................... 4,719 4,719 4,719
Investment advisory fees (Note 2).......................... 2,483 69,126 51,682
Custodian fees (Note 2).................................... 1,659 29,664 21,714
Administration fees (Note 2)............................... 623 14,813 9,690
Amortization of organization costs (Note 5)................ 2,085 2,062 2,062
Legal and audit fees....................................... 13,297 14,797 14,797
Service fees............................................... 7,500 7,500 7,500
Other...................................................... 1,339 8,733 8,660
Fees waived and expenses reimbursed by investment
adviser (Note 2)......................................... (45,120) (72,764) (65,539)
------------- ------------- ------------
Total expenses.......................................... 3,710 98,753 71,063
------------- ------------- ------------
NET INVESTMENT INCOME...................................... 8,365 74,011 48,969
------------- ------------- ------------
NET REALIZED AND UNREALIZED GAIN\
(LOSS) ON INVESTMENTS (Notes 1 and 3):
Realized gain/(loss) from:
Security transactions.................................... (446) 606,362 373,356
Futures Contracts........................................ 13,753 217,440 -
Forward foreign exchange contracts....................... - (356,238) (85,071)
Foreign currency transactions............................ - 28,279 13,380
Other.................................................... - (161,596) (6,286)
------------- ------------- ------------
Net realized gain during the period........................ 13,307 334,247 295,379
------------- ------------- ------------
Net change in unrealized appreciation/(depreciation) of:
Securities.............................................. (34,923) (1,000,977) (210,606)
Futures Contracts....................................... (800) (628,920) (76,386)
Forward foreign exchange contracts...................... - 127,676 (70,875)
Foreign currency and net other assets................... - (12,339) 7,969
------------- ------------- ------------
Net unrealized depreciation during the period.............. (35,723) (1,514,560) (349,898)
------------- ------------- ------------
Net realized and unrealized loss on investments............ (22,416) (1,180,313) (54,519)
------------- ------------- ------------
NET DECREASE IN NET ASSETS
RESULTING FROM OPERATIONS................................ $ (14,051) $ (1,106,302) $ (5,550)
- ----------------------------------------------------------- ------------- ------------- ------------
------------- ------------- ------------
<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
Period Ended November 30, 1993*
<TABLE>
<CAPTION>
PANAGORA PANAGORA
ASSET PANAGORA INTERNATIONAL
ALLOCATION GLOBAL EQUITY
FUND FUND FUND
------------- ------------- ---------------
<S> <C> <C> <C>
Net investment income...................................... $ 8,365 $ 74,011 $ 48,969
Net realized gain on securities sold, forward foreign
exchange contracts, foreign currency transactions and
futures contracts during the period..................... 13,307 334,247 295,379
Net unrealized depreciation of securities,
forward foreign exchange contracts, foreign
currency, futures contracts and net other
assets during the period................................. (35,723) (1,514,560) (349,898)
------------- ------------- ------------
Net decrease in net assets resulting from
operations.............................................. (14,051) (1,106,302) (5,550)
Distributions to shareholders from net
investment income........................................ (957) - (25,400)
Net increase in net assets from Fund
share transactions (Note 4)............................. 2,456,173 40,876,952 12,944,305
------------- ------------- ------------
Net increase in net assets................................. 2,441,165 39,770,650 12,913,355
NET ASSETS:
Beginning of period........................................ 34,000 33,000 33,000
------------- ------------- ------------
End of period (including undistributed net
investment income of $7,408, $74,011, and
$23,569, respectively)................................... $ 2,475,165 $ 39,803,650 $ 12,946,355
- ----------------------------------------------------------- ------------- ------------- ------------
------------- ------------- ------------
<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 period.*
<TABLE>
<CAPTION>
Six Months
Ended
11/30/93
(unaudited)
-------------
<S> <C>
Operating performance:
Net asset value, begining of period........................... $10.00
-------------
Income from investment operations:
Net investment income+........................................ 0.04
Net realized and unrealized gain on investments++............. 0.13
-------------
Total from investment operations....................... 0.17
-------------
Distributions:
Dividends from net investment income.......................... (0.01)
Net asset value, end of period................................ $10.16
-------------
-------------
Total return+++............................................... 1.70%
-------------
-------------
Ratios/supplemental data:
Net assets, end of period (in 000's).......................... $2,475
Ratio of operating expenses to average net assets++++......... 0.90% **
Ratio of net investment income to average net assets.......... 2.02% **
Portfolio turnover rate....................................... 0%
<FN>
- -----------------
* The Fund commenced operations on June 1, 1993.
** Annualized.
+ Net investment loss per share before waiver of fees and reimbursement of
expenses by investment adviser was $0.18 for the six months from
June 1, 1993, commencement of operations, through November 30, 1993.
++ 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 was 11.94% for the six months from
June 1, 1993, commencement of operations, through November 30, 1993.
</TABLE>
See Notes to Financial Statements.
<PAGE>
THE PANAGORA FUNDS
Global Fund
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
For a Fund share outstanding throughout the period.*
<TABLE>
<CAPTION>
Six Months
Ended
11/30/93
(unaudited)
-------------
<S> <C>
Operating performance:
Net asset value, begining of period........................... $10.00
-------------
Income from investment operations:
Net investment income+........................................ 0.02
Net realized and unrealized gain on investments++ 0.32
-------------
Total from investment operations....................... 0.34
-------------
Distributions:
Dividends from net investment income..........................
Net asset value, end of period................................ $10.34
-------------
-------------
Total return+++............................................... 3.40%
-------------
-------------
Ratios/supplemental data:
Net assets, end of period (in 000's).......................... $39,804
Ratio of operating expenses to average net assets++++......... 1.00% **
Ratio of net investment income to average net assets.......... 0.75% **
Portfolio turnover rate....................................... 63%
<FN>
- -----------------
* The Fund commenced operations on June 1, 1993.
** Annualized.
+ Net investment loss per share before waiver of fees and reimbursement of
expenses by investment adviser was $0.00 for the six months from June 1,
1993, commencement of operations, through November 30, 1993.
++ 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 was 1.76% for the six months from June 1,
1993, commencement of operations, through November 30, 1993.
</TABLE>
See Notes to Financial Statements.
<PAGE>
THE PANAGORA FUNDS
International Equity Fund
- --------------------------------------------------------------------------------
Financial Highlights
- --------------------------------------------------------------------------------
For a Fund share outstanding throughout the period.*
<TABLE>
<CAPTION>
Six Months
Ended
11/30/93
(unaudited)
-------------
<S> <C>
Operating performance:
Net asset value, begining of period........................... $10.00
-------------
Income from investment operations:
Net investment income+........................................ 0.04
Net realized and unrealized gain on investments............... (0.03)
-------------
Total from investment operations........................ 0.01
-------------
Distributions:
Dividends from net investment income.......................... (0.02)
Net asset value, end of period................................ $9.99
-------------
-------------
Total return++................................................ 0.08%
-------------
-------------
Ratios/supplemental data:
Net assets, end of period (in 000's)......................... $12,946
Ratio of operating expenses to average net assets+++......... 1.10% **
Ratio of net investment income to average net assets......... 0.76% **
Portfolio turnover rate...................................... 73%
<FN>
- -----------------
* The Fund commenced operations on June 1, 1993.
** Annualized.
+ Net investment loss per share before waiver of fees and reimbursement o
adviser was $(0.02) for the six months from June 1, 1993, commencement
through November 30, 1993.
++ Total return represents aggregate total return for the period indicated
+++ Annualized expense ratio before waiver of fees and reimbursement of expenses
by investment adviser was 2.24% for the six months from June 1, 1993,
commencement of through November 30, 1993.
</TABLE>
See Notes to Financial Statements.
<PAGE>
The PanAgora Funds
NOTES TO FINANCIAL STATEMENTS (Unaudited)
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 (the
"Funds"): PanAgora Asset Allocation Fund, PanAgora Global Fund and PanAgora
International Equity Fund. 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, the 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
Fund each day, depending on the daily fluctuation of the value of the contract.
-1-
<PAGE>
The PanAgora Funds
NOTES TO FINANCIAL STATEMENTS (Unaudited)(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 (Unaudited)(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.
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"). American
Express Company ("American Express") owns 100% of Holdings' issued and
outstanding common stock, which represents approximately 92% of Holdings' issued
and outstanding voting stock. The remainder of Holdings' voting stock is owned
by Nippon Life. 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>
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.
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 may voluntarily waive and reimburse a portion or
all of their respective fees and expenses otherwise payable to them. For the
period ended November 30, 1993, PanAgora voluntarily waived fees and reimbursed
expenses as follows:
-3-
<PAGE>
The PanAgora Funds
NOTES TO FINANCIAL STATEMENTS (Unaudited)(Continued)
<TABLE>
<CAPTION>
Fees Expenses
Waived Reimbursed
------ ----------
<S> <C> <C>
PanAgora Asset Allocation Fund $ 2,483 $42,637
PanAgora Global Fund 69,126 3,638
PanAgora International Equity Fund 51,682 13,857
</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 period ended November 30, 1993 were
as follows:
<TABLE>
<CAPTION>
Purchases Sales
--------- -----
<S> <C> <C>
PanAgora Asset Allocation Fund $ 1,739,961 -
PanAgora Global Fund 43,349,036 $9,498,708
PanAgora International Equity Fund 17,992,881 7,580,233
</TABLE>
At November 30, 1993, 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 - $ 34,923
PanAgora Global Fund - 1,000,977
PanAgora International Equity Fund - 210,606
</TABLE>
4. SHARES OF BENEFICIAL INTEREST
At November 30, 1993, an unlimited number of shares of beneficial interest
without par value were authorized. Changes in shares of beneficial interest
were as follows:
-4-
<PAGE>
<TABLE>
<CAPTION>
Period Ended
November 30, 1993*
-----------------------------
PanAgora Asset Allocation Fund: Shares Amount
- ------------------------------- ----------- -----------
<S> <C> <C>
Sold . . . . . . . . . . . . . . . 240,813 $ 2,462,403
Issued as reinvestment of
dividends. . . . . . . . . . . . 94 957
Redeemed . . . . . . . . . . . . . (706) (7,187)
----------- -----------
Net increase . . . . . . . . . . . 240,201 $ 2,456,173
----------- -----------
----------- -----------
</TABLE>
<TABLE>
<CAPTION>
Period Ended
November 30, 1993*
-----------------------------
PanAgora Global Fund: Shares Amount
- --------------------- ----------- -----------
<S> <C> <C>
Sold . . . . . . . . . . . . . . . 3,953,159 $42,031,143
Issued as reinvestment of
dividends . . . . . . . . . . . - -
Redeemed . . . . . . . . . . . . . (107,994) (1,154,191)
----------- -----------
Net increase . . . . . . . . . . . 3,845,165 $40,876,952
----------- -----------
----------- -----------
</TABLE>
<TABLE>
<CAPTION>
Period Ended
November 30, 1993*
-----------------------------
PanAgora International Equity Fund: Shares Amount
- ----------------------------------- ----------- -----------
<S> <C> <C>
Sold . . . . . . . . . . . . . . . 1,292,731 $12,950,976
Issued as reinvestment of
dividends . . . . . . . . . . . 2,337 25,400
Redeemed . . . . . . . . . . . . . (2,988) (32,071)
----------- -----------
Net increase . . . . . . . . . . . 1,292,080 $12,944,305
----------- -----------
----------- -----------
<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.
-5-
STOCK PURCHASE AGREEMENT
This Agreement is made this 13th day of April, 1993 between PanAgora
Asset Management, Inc., a Delaware corporation ("PanAgora"), and The PanAgora
Funds, a Massachusetts business trust (the "Trust"), on behalf of the PanAgora
Asset Allocation Fund, an investment portfolio of the Trust (the "Portfolio").
WHEREAS, the Portfolio wishes to sell and PanAgora wishes to purchase
3,400 shares of beneficial interest of the Portfolio at a purchase price of
$10.00 per share (collectively, the "Shares"); and
WHEREAS, PanAgora is purchasing the Shares for the purpose of providing
the initial capitalization of the Portfolio.
NOW, THEREFORE, the parties hereto agree as follows:
1. Simultaneously with the execution of this Agreement, PanAgora is
delivering to the Portfolio funds in the amount of $34,000 in payment for the
Shares.
2. PanAgora agrees that it is purchasing the Shares for investment
and has no present intention of redeeming or reselling the Shares.
EXECUTED as of the date first set forth above.
PANAGORA ASSET MANAGEMENT, INC.
By:
President
THE PANAGORA FUNDS, on behalf of the
PanAgora Asset Allocation Fund, an investment portfolio of The PanAgora
Funds
By:
President
STOCK PURCHASE AGREEMENT
This Agreement is made this 13th day of April, 1993 between PanAgora
Asset Management, Inc., a Delaware corporation ("PanAgora"), and The PanAgora
Funds, a Massachusetts business trust (the "Trust"), on behalf of the PanAgora
Global Fund, an investment portfolio of the Trust (the "Portfolio").
WHEREAS, the Portfolio wishes to sell and PanAgora wishes to purchase
3,300 shares of beneficial interest of the Portfolio at a purchase price of
$10.00 per share (collectively, the "Shares"); and
WHEREAS, PanAgora is purchasing the Shares for the purpose of providing
the initial capitalization of the Portfolio.
NOW, THEREFORE, the parties hereto agree as follows:
1. Simultaneously with the execution of this Agreement, PanAgora is
delivering to the Portfolio funds in the amount of $33,000 in payment for the
Shares.
2. PanAgora agrees that it is purchasing the Shares for investment
and has no present intention of redeeming or reselling the Shares.
EXECUTED as of the date first set forth above.
PANAGORA ASSET MANAGEMENT, INC.
By:
President
THE PANAGORA FUNDS, on behalf of the
PanAgora Global Fund, an investment portfolio of The PanAgora Funds
By:
President
STOCK PURCHASE AGREEMENT
This Agreement is made this 13th day of April, 1993 between PanAgora
Asset Management, Inc., a Delaware corporation ("PanAgora"), and The PanAgora
Funds, a Massachusetts business trust (the "Trust"), on behalf of the PanAgora
International Equity Fund, an investment portfolio of the Trust (the
"Portfolio").
WHEREAS, the Portfolio wishes to sell and PanAgora wishes to purchase
3,300 shares of beneficial interest of the Portfolio at a purchase price of
$10.00 per share (collectively, the "Shares"); and
WHEREAS, PanAgora is purchasing the Shares for the purpose of providing
the initial capitalization of the Portfolio.
NOW, THEREFORE, the parties hereto agree as follows:
1. Simultaneously with the execution of this Agreement, PanAgora is
delivering to the Portfolio funds in the amount of $33,000 in payment for the
Shares.
2. PanAgora agrees that it is purchasing the Shares for investment
and has no present intention of redeeming or reselling the Shares.
EXECUTED as of the date first set forth above.
PANAGORA ASSET MANAGEMENT, INC.
By:
President
THE PANAGORA FUNDS, on behalf of the
PanAgora International Equity Fund, an investment portfolio of The
PanAgora Funds
By:
President
