As filed with the Securities and Exchange Commission on July 27, 1995
1933 Act Registration No. 33-57740
1940 Act Registration No. 811-7464
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 / X /
Pre-Effective Amendment No. ----- / /
Post-Effective Amendment No. 3 ----- / X /
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 / X /
-----
Amendment No. 5 / X / -----
(Check appropriate box or boxes)
THE PANAGORA INSTITUTIONAL FUNDS
(Exact name of registrant as specified in Charter)
260 Franklin Street
Boston, Massachusetts 02110
(Address of Principal Executive Offices)
Registrant's Telephone Number,
including Area Code: 617-439-6300
Copy to:
Richard A. Crowell Joseph P. Barri, Esq.
PanAgora Asset Management, Inc. Hale and Dorr
260 Franklin Street Sixty State Street
Boston, Massachusetts 02110 Boston, Massachusetts 02109
(Name and Address of Agent for Service)
It is proposed that this filing will become effective (check appropriate box):
_______immediately upon filing pursuant to paragraph (b), or
x on August 1, 1995 pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a)(1), or
on __________pursuant to paragraph (a)(1)
_______75 days after filing pursuant to paragraph (a)(2)
_______on ___________ pursuant to paragraph (a) (2) of Rule 485.
If appropriate, check the following box:
_______this post-effective amendment designates a new effective
date for a previously filed post-effective amendment.
The Registrant has previously filed a declaration of indefinite
registration of its shares of beneficial interest pursuant to
Rule 24f-2 under the Investment Company Act of 1940, as amended.
The Registrant filed the notice required by Rule 24f-2 for its
most recent fiscal year on July 25, 1995.
<PAGE> 2
CROSS REFERENCE SHEET
(as required by Rule 495)
<TABLE>
<CAPTION>
THE PANAGORA INSTITUTIONAL FUNDS
N-1A ITEM NO.------------- LOCATION--------
<S> <C>
PART A
Item 1. Cover Page Cover Page
Item 2. Synopsis Investor Summary
Item 3. Condensed Financial Information Expense Information;
Financial Highlights
Item 4. General Description of Cover Page; Investor
Registrant Summary; Investment
Objectives and Policies;
Description of Securities
and Investment Techniques
and Related Risks;
Additional Investment
Information; Organization
and Shares of the Trust
Item 5. Management of the Fund Management of the Trust
Item 5a. Management's Discussion of (Contained in the Annual
Fund Performance Report of the Registrant)
Item 6. Capital Stock and Other Dividends, Distributions and
Securities Taxes; Organization and
Shares of the Trust
Item 7. Purchase of Securities Being Purchase of Shares; Net
Offered Asset Value
Item 8. Redemption or Repurchase Redemption of Shares
Item 9. Pending Legal Proceedings Not Applicable
PART B
Item 10. Cover Page Cover Page
Item 11. Table of Contents Table of Contents
<PAGE> 3
N-1A ITEM NO.------------- LOCATION--------
Item 12. General Information and History Not Applicable
Item 13. Investment Objectives and Additional Information on
Policies Fund Investments and
Strategies and Related
Risks; Investment
Restrictions
Item 14. Management of the Fund Trustees and Officers
Item 15. Control Persons and Principal Trustees and Officers
Holders of Securities
Item 16. Investment Advisory and Other Investment Advisory and
Services Other Services;
Miscellaneous
Item 17. Brokerage Allocation and Other Portfolio Transactions
Practices
Item 18. Capital Stock and Other General Information About
Securities the Trust
Item 19. Purchase, Redemption and Purchase and Redemption
Pricing of Securities Being Information; Net Asset Value
Offered
Item 20. Tax Status Taxes
Item 21. Underwriters Investment Advisory and
Other Services
Item 22. Calculation of Performance Date Performance Information
Item 23. Financial Statements Financial Statements
</TABLE>
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 INSTITUTIONAL FUNDS
P.O. BOX 1537
BOSTON, MASSACHUSETTS 02205-1537
PROSPECTUS AUGUST 1, 1995
The PanAgora Institutional Funds, formerly, 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 dis-
tributor.
Each Fund has a different investment objective which is described in de-
tail 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 in-
come. The Fund attempts to achieve its objective by actively allocating
assets among U.S. equity securities, investment grade fixed-income securi-
ties, 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 corre-
sponding 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 rela-
tive 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 per-
centages.
PANAGORA INTERNATIONAL EQUITY FUND. The Fund's primary investment objec-
tive is to maximize total return, consisting primarily of capital appreci-
ation. 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 disci-
plines. When the Adviser determines that international equity markets are
fairly priced relative to each other, the Fund's investments in interna-
tional equity markets will be generally weighted in accordance with the
Morgan Stanley Capital International-Europe Australia Far East GDP Index.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SE-
CURITIES 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.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
Investor Summary 1
Expense Information 4
Financial Highlights 5
Investment Objectives and Polices 6
Description of Securities and Investment Techniques and Related Risks 11
Additional Investment Information 21
Management of the Trust 23
Purchase of Shares 25
Redemption of Shares 27
Net Asset Value 28
Dividends, Distribution and Taxes 29
Organization and Shares of the Trust 31
Performance Information 32
</TABLE>
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 in-
vestors seeking more detailed information, the Statement of Additional In-
formation dated August 1, 1995, 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 refer-
ence 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 particu-
lar state.
INVESTOR SUMMARY
The following summary is qualified in its entirety by the more detailed
information appearing elsewhere in this Prospectus.
THE PANAGORA INSTITUTIONAL FUNDS
The Trust, formerly The PanAgora Funds, a diversified open-end management
investment company registered under the Investment Company Act of 1940, as
amended (the "1940 Act"), currently consists of three separately managed
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. Accordingly, purchases of
shares are subject to certain minimum investment requirements. See "Pur-
chasing Shares", below.
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 capi-
tal appreciation and current income. In order to achieve its investment
objective, the PanAgora Asset Allocation Fund actively allocates its as-
sets among U.S. equity securities, investment grade fixed-income securi-
ties, cash and cash equivalents. In order to achieve its investment objec-
tive, the PanAgora Global Fund actively allocates its assets among global
equity, fixed-income and currency markets. The PanAgora International Eq-
uity Fund's investment objective is to maximize total return, consisting
primarily of capital appreciation. Current income is a secondary objec-
tive. In order to achieve its investment objective, the Fund actively al-
locates 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 GDP 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 Ad-
viser's proprietary asset allocation disciplines is the belief that in-
vestment opportunities (i.e., return) are primarily derived from asset
class and market selections. Investment opportunities arising from indi-
vidual security selection, while important, are viewed as secondary to op-
portunities arising from asset class and market selections. For more com-
plete information on each Fund's investment objective and policies, in-
cluding 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 but is not higher than the fees paid
by many funds investing primarily in a portfolio of international equity
securities. Funds Distributor, Inc. serves as distributor of the shares of
each of the Funds. Investors Bank & Trust Company serves as the Funds' Ad-
ministrator, Transfer Agent and Custodian. See "Management of the Trust".
PURCHASING SHARES
The minimum initial purchase for each Fund is $100,000 and the minimum ad-
ditional 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 distribu-
tion 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 by 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 re-
quest in proper form. See "Redemption of Shares".
DIVIDENDS AND REINVESTMENT
Each Fund intends to pay dividends from net investment income, if earned,
at least annually. Each Fund will make distributions from net short and
long-term capital gains annually, if earned. Additional distributions may
be made if necessary for a Fund to avoid federal income or excise taxes.
Any dividends and distribution payments will be reinvested, at net asset
value, in additional full and fractional shares of a Fund unless the
shareholder notifies the Transfer Agent in writing requesting payments in
cash. See "Dividends, Distributions and Taxes".
RISK FACTORS
None of the Funds above constitutes a complete investment program. In ad-
dition, 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 will vary inversely in response to changes in pre-
vailing interest rates. The foreign securities in which the PanAgora Glo-
bal and International Equity Funds may invest, including the foreign secu-
rities of issuers located in developing countries, may be subject to cer-
tain 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 repur-
chase agreements, lending portfolio securities, purchasing and selling op-
tions, 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 "Descrip-
tion of Securities and Investment Techniques and Related Risks" and "Addi-
tional Investment Information".
EXPENSE INFORMATION
<TABLE>
<CAPTION>
PANAGORA PANAGORA PANAGORA
ASSET ALLOCATION GLOBAL INTERNATIONAL
FUND FUND EQUITY FUND
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Charge Imposed on Purchases None None None
Maximum Sales Charge Imposed on Reinvested
Dividends None None None
Deferred Sales Charge Imposed on Redemptions None None None
ANNUAL FUND OPERATING EXPENSES
(AS A PERCENTAGE OF AVERAGE DAILY NET
ASSETS)
Advisory Fees (after expense limitation)* 0.00% 0.29% 0.00%
Other Expenses (after expense limitation)* 0.90% 0.71% 1.10%
Rule 12b-1 Fees None None None
Total Fund Operating Expenses* 0.90% 1.00% 1.10%
<FN>
* The Advisory Fees, Other Expenses and Total Fund Operating Expenses
shown in the table for each Fund reflect an expense limitation currently
in effect. The Adviser has agreed to waive all or a portion of its advi-
sory fee and to limit the expenses of each Fund to the extent necessary
to limit Total Fund Operating Expenses of each Fund, on an annualized
basis, as follows: 0.90% of the average daily net assets of the PanAgora
Asset Allocation Fund; 1.00% of the average daily net assets of the Pan-
Agora Global Fund; and 1.10% of the average daily net assets of the
PanAgora International Equity Fund. This voluntary agreement may be ter-
minated 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. In the absence of the expense limi-
tation, Advisory Fees for the PanAgora Asset Allocation Fund, PanAgora
Global Fund and PanAgora International Equity Fund would have been
0.60%, 0.70% and 0.80%, respectively, Other Expenses would have been
2.47%, 0.71% and 2.05%, respectively, and Total Fund Operating Expenses
would have been 3.07%, 1.41% and 2.85%, respectively, for the fiscal
year ended May 31, 1995.
</FN>
</TABLE>
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:
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
<S> <C> <C> <C> <C>
PanAgora Asset Allocation Fund $ 9 $29 $50 $111
PanAgora Global Fund $10 $32 $55 $122
PanAgora International Equity Fund $11 $35 $61 $134
</TABLE>
The purpose of the table and hypothetical expense example is to assist in-
vestors in understanding the various direct and indirect costs and ex-
penses that an investment in a Fund will bear. The costs and expenses in-
cluded in the table and hypothetical example are based on estimated fees
and expenses for the fiscal year ending May 31, 1995. The hypothetical ex-
pense example above assumes reinvestment of all dividends and distribu-
tions and that the percentage amounts listed under "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 past or 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 selected financial highlights are derived from the Trust's
audited financial statements included in the Trust's Annual Report to
Shareholders. The financial statements and report of Coopers & Lybrand
L.L.P., independent accountants, included in the Annual Report to Share-
holders for the Trust's fiscal year ended May 31, 1995 are incorporated by
reference into this prospectus. The following data should be read in con-
junction with such financial statements, related notes, and other finan-
cial information incorporated by reference into this prospectus. The An-
nual Report, which contains additional unaudited performance information,
is available without charge and upon request by calling 1-800-423-6041.
For a portfolio share outstanding throughout each period:
<TABLE>
<CAPTION>
PANAGORA
PANAGORA ASSET PANAGORA INTERNATIONAL
ALLOCATION FUND GLOBAL FUND EQUITY FUND
YEAR YEAR YEAR YEAR YEAR YEAR
ENDED ENDED ENDED ENDED ENDED ENDED
MAY 31, MAY 31, MAY 31, MAY 31, MAY 31, MAY 31,
1995 1994* 1995 1994* 1995 1994*
<S> <C> <C> <C> <C> <C> <C>
Operating performance:
Net asset value, beginning of period $10.01 $10.00 $10.48 $10.00 $10.75 $10.00
Income from investment operations:
Net investment income+ 0.22 0.14 0.21 0.11 0.33 0.11
Net realized and unrealized gain
on investments++ 1.18 0.02 0.79 0.76 0.19 0.89
Total from investment operations 1.40 0.16 1.00 0.87 0.52 1.00
Distributions:
Distributions from net investment
income (0.15) (0.10) -- (0.10) (0.13) (0.03)
Distributions in excess of net
investment income -- -- -- (0.29) (0.06) (0.22)
Distributions from capital gains -- (0.05) (0.09) -- (0.27) --
Distributions in excess of capital
gains -- -- -- -- (0.19) --
Total from investment operations (0.15) (0.15) (0.09) (0.39) (0.65) (0.25)
Net asset value, end of period $11.26 $ 10.01 $11.39 $10.48 $ 10.62 $10.75
Total return+++ 14.13% 1.63% 9.67% 8.68% 5.09% 10.12%
Ratios/supplemental data:
Net assets, end of period (in
000's) $7,289 $2,871 $51,319 $41,758 $17,960 $14,955
Ratio of operating expenses to
average net assets++++ 0.90% 0.90% 1.00% 1.00% 1.10% 1.10%
Ratio of net investment income to
average net assets 2.46% 2.08% 1.61% 1.23% 1.39% 0.93%
Portfolio turnover rate 77% 50% 160% 187% 218% 160%
<FN>
* The Funds commenced operations on June 1, 1993.
+ Net investment income (loss) per share before giving effect to ex-
pense limitation arrangement by investment adviser was $0.03 and
($0.39) for the PanAgora Asset Allocation Fund, $0.16 and $0.07 for
the PanAgora Global Fund and ($0.08) and ($0.05) for the PanAgora In-
ternational Equity Fund for the years ended May 31, 1995 and May 31,
1994, respectively.
++ The amount shown at this caption for each share outstanding through-
out 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 indi-
cated, based on the market value for the periods indicated.
++++ Annualized expense ratio before giving effect to expense limitation
arrangement by investment adviser was 3.07% and 8.96% for the PanAg-
ora Asset Allocation Fund, 1.41% and 1.53% for the PanAgora Global
Fund and 2.85% and 2.42% for the PanAgora International Equity Fund
for the years ended May 31, 1995 and May 31, 1994, respectively.
</FN>
</TABLE>
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 con-
stitutes a complete investment program. There can, of course, be no assur-
ance 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, in-
ternational) 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 aris-
ing from individual security selection, while important, are viewed as
secondary to opportunities arising from asset class and market selections.
Since 1982, the Adviser and/or its investment management professionals
have developed and continue to develop valuation techniques designed to
evaluate worldwide asset classes and markets.
In implementing the disciplines, the Adviser establishes percentage guide-
lines (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 eval-
uating 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 asset
classes and markets should be frequent (at least monthly), but relatively
modest (a few percentage points). Under normal market conditions, the cor-
relation 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 con-
ditions 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 uti-
lizes more traditional analysis, focusing on such components as value and
growth potential, diversification and trading liquidity. Although individ-
ual securities purchased by a Fund will generally be included in the un-
derlying indices used to formulate the Guidelines, the Funds may purchase
securities not included in such indices when deemed appropriate by the Ad-
viser. A more detailed discussion of each Fund's individual security se-
lection process is included in the section describing the investment ob-
jectives 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 in-
struments 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 li-
quidity. The Adviser attempts to select equity securities which, as a
portfolio, have investment characteristics, such as industry representa-
tion, dividend yield and capitalization, and investment performance simi-
lar 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"). The Fund's holdings may include
securities of foreign issuers traded on the NYSE (excluding ADRs). In se-
lecting 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 Corpora-
tion ("S&P"), and unrated securities and securities rated by other nation-
ally 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 ap-
proximately 10 years, although the Fund may invest in longer- or shorter-
term securities when, in the opinion of the Adviser, investment opportuni-
ties 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, bank-
ers' 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 may engage 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 em-
ployed 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 re-
turn, consisting of capital appreciation and current income. The Fund at-
tempts to achieve its objective by actively allocating assets among global
equity, fixed- income and currency markets based on the Adviser's propri-
etary allocation disciplines. When the Adviser determines that global cap-
ital markets are fairly priced relative to each other and relative to cor-
responding 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 un-
sponsored American Depository Receipts ("ADRs"), European Depository Re-
ceipts ("EDRs") and Global Depository Receipts ("GDRs"). The Fund's U.S.
equity investments include large, intermediate and small capitalization
companies, primarily included in the S&P 500 Composite Stock Index. Al-
though the Fund may invest anywhere in the world, the Fund's non-
U.S.equity investments are in equity markets listed in the Morgan Stanley
Capital International World Index (the "MSCI World Index"). As of the date
of this Prospectus, the MSCI World Index currently includes the equity
markets of Australia, Austria, Belgium, Canada, Denmark, Finland, France,
Germany, Hong Kong, Italy, Japan, Malaysia, the Netherlands, New Zealand,
Norway, Singapore, Spain, Sweden, Switzerland, the United Kingdom and the
United States. Because the MSCI World Index primarily includes highly cap-
italized companies, the Fund's non-U.S.equity investments will reflect
this trend. The Fund may also invest in securities of closed-end invest-
ment companies.
Fixed-income securities in which the PanAgora Global Fund may invest in-
clude all types of U.S. and non-U.S. debt securities such as bonds, deben-
tures, 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 gov-
ernments, governmental entities and supranational issuers. The Fund's U.S.
fixed-income investments are rated investment-grade and are generally in-
cluded in the Lehman Aggregate Index. Investment-grade fixed-income secu-
rities 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 rec-
ognized 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 su-
pranational issuers and are generally included in the Salomon Brothers'
World Government Bond Index, which currently includes Australia, Austria,
Belgium, Canada, Denmark, France, Germany, Italy, Japan, the Netherlands,
Spain, Sweden, the United Kingdom and the United States. Typically, the
average maturity of fixed-income securities selected by the Adviser is ap-
proximately 10 years, although the Fund may invest in longer- or shorter-
term securities when, in the opinion of the Adviser, investment opportuni-
ties warrant.
For temporary defensive purposes, the Fund may invest, without limitation,
in a wide range of cash and cash equivalents, including short-term securi-
ties issued by U.S. and non-U.S. governments, their agencies and instru-
mentalities, 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 tech-
niques are described in detail in "Description of Securities and Invest-
ment Techniques and Related Risk Factors" below. In addition, in order to
achieve its investment objectives, the Fund may engage in options and fu-
tures 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 mar-
kets 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 GDP
Index, which is an index consisting of twenty developed equity markets,
weighted by their Gross Domestic Products.
In establishing Guidelines for the PanAgora International Equity Fund, the
Adviser utilizes the MSCI-EAFE GDP Index. The Adviser will deviate from
the asset allocation weightings of the MSCI-EAFE GDP Index based on its
views of the potential investment return to be derived from such devia-
tion.
The Fund seeks to achieve its investment objectives by investing in equity
securities allocated across a broad range of global markets. Equity secu-
rities in which the Fund may invest include common stocks of non-U.S. com-
panies and preferred stocks, debt instruments convertible into common
stocks and securities having common stock characteristics (such as war-
rants and rights to purchase common stock) of such companies. The Fund may
also invest in sponsored and unsponsored ADRs, EDRs and GDRs. In general,
the Fund's investments are expected to be broadly diversified over a num-
ber of countries including, but not limited to, Australia, Austria, Bel-
gium, Canada, Denmark, Finland, France, Germany, Hong Kong, Ireland,
Italy, Japan, the Netherlands, New Zealand, Norway, Singapore, Spain, Swe-
den, Switzerland and the United Kingdom and, subject to the limitation
that no more than 10% of the Fund's assets taken at cost will be invested
in one or more of the following countries: Argentina, Brazil, Chile,
Greece, Indonesia, Korea, Malaysia, Mexico, Philippines, Portugal, Thai-
land 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 impor-
tant to the growth of the country. Within countries, the Fund invests pri-
marily in major established companies which are listed and traded on prin-
cipal exchanges. The Fund may also invest in securities of closed-end in-
vestment companies.
For temporary defensive purposes, the Fund may invest, without limitation,
in a wide range of cash and cash equivalents, including short-term securi-
ties issued by U.S. and non-U.S. governments, their agencies and instru-
mentalities 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 international in-
vesting, the Fund engages in certain currency management techniques. These
techniques are described in detail in "Description of Securities and In-
vestment Techniques and Related Risk Factors" below. In addition, in order
to achieve its investment objectives, the Fund may invest 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 em-
ployed 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 in-
vestments over a stated period of time) may tend to be higher than pre-
vailing 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 securi-
ties may also change as general levels of interest rates fluctuate. When
interest rates increase, the value of a portfolio of fixed-income securi-
ties 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 in-
terest; however, such securities may have speculative characteristics and
therefore may involve greater risks than higher rated securities.
U.S. Government Securities. The Funds may invest in obligations issued or
guaranteed as to both principal and interest by the U.S. government, its
agencies or instrumentalities ("U.S. Government Securities"). Some U.S.
Government Securities, such as U.S. Treasury bills, notes and bonds, are
supported by the full faith and credit of the United States. Others, such
as obligations issued or guaranteed by U.S. government agencies or instru-
mentalities 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 se-
curities of the Federal Home Loan Banks), (iii) the discretionary author-
ity 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 secu-
rities for delayed delivery. In such transactions, delivery of the securi-
ties occurs beyond the normal settlement periods, but no payment or deliv-
ery 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 de-
livery basis may increase a Fund's overall investment exposure and in-
volves 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 also
involves the risk that the prices available in the market on the delivery
date may be greater than those obtained in the sale transaction. Finally,
such transactions involve some risk to a Fund if the other party should
default on its obligations and the Fund is delayed or prevented from re-
covering the collateral or completing the transaction. The Fund will es-
tablish 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 in-
terest payments on underlying collateral to different series or classes of
the obligations. CMOs of different classes are generally retired in se-
quence as the underlying mortgage loans in the mortgage pool are repaid.
In the event of sufficient early prepayments on such mortgages, the class
or series of CMO first to mature generally will be retired prior to its
maturity. Thus, the early retirement of a particular class or series of
CMO held by a Fund would have the same effect as the prepayment of mort-
gages underlying other mortgage- backed securities.
Government Stripped Mortgage-Backed Securities are mortgage-backed securi-
ties issued or guaranteed by FNMA, the Government National Mortgage Asso-
ciation ("GNMA"), and the Federal Home Loan Mortgage Corporation
("FHLMC"). These securities represent beneficial ownership interests in
either periodic principal distributions ("POs") or interest distributions
("IOs") 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 inter-
est 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 en-
tities.
To the extent that a Fund purchases mortgage-related or mortgage-backed
securities at a premium, mortgage foreclosures and prepayments of princi-
pal by mortgagors (which may be made at any time without penalty) may re-
sult 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 ad-
dition, like other debt securities, the value of mortgage-related securi-
ties will generally fluctuate in response to market interest rates.
The yield to maturity on an IO class of stripped mortgage-backed securi-
ties is extremely sensitive not only to changes in prevailing interest
rates but also to the rate of principal payments (including prepayments)
on the underlying assets, and a rapid rate of principal payments may have
a material adverse effect on the Fund's yield to maturity to the extent it
invests in IOs. If the underlying assets experience greater than antici-
pated prepayments of principal, the Fund may fail to fully recoup its ini-
tial investment in these securities. Conversely, POs tend to increase in
value if prepayments are greater than anticipated and decline if prepay-
ments are slower than anticipated. Government Stripped Mortgage-Backed Se-
curities 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 sup-
ported 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 instrumentali-
ties, 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, GDRs or similar securities representing interests
in the common stock of foreign issuers if such issues are available that
are consistent with a Fund's investment objective. Depository receipts
generally evidence an ownership interest in corresponding securities on
deposit with a financial institution. 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, in bearer form, are designed for use in European securities markets.
GDRs may be traded in any public or private securities market and may rep-
resent securities held by institutions located anywhere in the world. The
underlying securities are not always denominated in the same currency as
the ADRs, EDRs or GDRs. Although investment in the form of ADRs, EDRs or
GDRs facilitates trading in foreign securities, it does not mitigate the
risks associated with investing in foreign securities. The issuers of un-
sponsored ADRs, EDRs and GDRs are not obligated to disclose material in-
formation in the United States and therefore such information may not be
reflected in the market value of the unsponsored ADRs, EDRs and GDRs.
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 re-
porting standards comparable to those applicable to U.S. issuers. The se-
curities markets in many of the foreign countries in which the Funds in-
vest 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 national-
ization or expropriation of assets, imposition of currency or exchange
controls, or confiscatory taxation, as well as political or social insta-
bility which could adversely affect U.S. investments in those countries.
Foreign settlement procedures and trade regulations may involve certain
risks (such as delay in payment or delivery of securities or in the recov-
ery of a Fund's assets held abroad) and investors in foreign securities
incur higher transaction costs than investors in U.S. securities, includ-
ing higher costs in making securities transactions, as well as foreign
government taxes which may reduce the investment return of the Funds. Fi-
nally, 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 is-
sued by companies located in developing countries, which are countries in
the initial stages of their industrialization cycles. Investing in the eq-
uity and debt markets of developing countries involves exposure to eco-
nomic 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 in-
vestors.
Although the Funds (except the PanAgora Asset Allocation Fund) may invest
in securities denominated in foreign currencies, each Fund values its se-
curities 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 fa-
vorable and unfavorable currency exchange-rate developments, the Funds are
subject to the possible imposition of exchange control regulations or cur-
rency 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 in-
clude U.S. Government Securities maturing within one year (including re-
purchase agreements collateralized by such securities). The Funds may also
invest in obligations of banks which at the date of investment have capi-
tal, 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, corpo-
rations and finance companies. The commercial paper purchased by the Pa-
nAgora Asset Allocation Fund consists of U.S. dollar-denominated obliga-
tions 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 for-
eign 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 in-
vest 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 in-
vest will be borne indirectly by the shareholders of the Fund.
CURRENCY TRANSACTIONS
To effectively manage exposure to currency fluctuations, the PanAgora Glo-
bal and PanAgora International Equity Funds may alter asset class or mar-
ket exposure in accordance with its investment policies, buy or sell for-
eign currencies, 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 nor-
mal 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 Fu-
tures" below.
FORWARD FOREIGN CURRENCY TRANSACTIONS
As described in "Currency Transactions" above, the PanAgora Global and Pan-
Agora 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 ob-
ligation 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 for-
eign currency approximating the value of some or all of the Fund's securi-
ties denominated in such foreign currency. The precise matching of the
forward contract amounts and the value of the securities involved will not
generally be possible since the future value of such securities in foreign
currencies will change as a consequence of market movements in the value
of those securities between the date the forward contract is entered into
and the date it matures. At the maturity of a forward contract, the Fund
may either sell a portfolio security and make delivery of the foreign cur-
rency, or it may retain the security and terminate its contractual obliga-
tion to deliver the foreign currency by purchasing an "offsetting" con-
tract with the same currency trader obligating it to purchase, on the same
maturity date, the same amount of the foreign currency. The Funds may re-
alize a gain or loss from currency transactions. A Fund's ability to en-
gage in forward contracts may also be limited by tax considerations.
In the alternative, the Funds may engage in currency "cross hedging" when,
in the opinion of the Adviser, the historical relationship among foreign
currencies suggests that the Fund may achieve the same protection for a
foreign security at reduced cost through the use of a forward foreign cur-
rency contract relating to a currency other than the U.S. dollar or the
foreign currency in which the security is denominated. By engaging in
cross hedging transactions, the Funds assume the risk of imperfect corre-
lations between the subject currencies.
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 evi-
denced by the options. However, in return for the premium, the Fund for-
feits 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 un-
derlying security at the specified price at any time during the option pe-
riod. In contrast, a call option gives to its purchaser the right to com-
pel the writer of the option to sell the option holder an underlying secu-
rity 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 out-
standing. 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 advan-
tage to the purchaser of a call option is that it may hedge against an in-
crease 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 In-
ternational Equity Funds may also purchase and sell options traded on rec-
ognized 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) for the same reasons for which they
use currency forwards. 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 equiva-
lents 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 assign-
ing 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 Fi-
nancial 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 fu-
tures contracts and purchase and write options on futures contracts to
hedge against changes in interest rates, securities prices or currency ex-
change rates or for certain non-hedging purposes (but not for leverage).
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 Commod-
ity Futures Trading Commission. A Fund will not enter into futures con-
tracts or options thereon for non-hedging purposes, if immediately there-
after, 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. The successful use of the strategies described above fur-
ther depends on the Adviser's ability to forecast market movements cor-
rectly. 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. Certain provisions of the Internal Revenue
Code and certain regulatory requirements may limit a Fund's ability to en-
gage in index futures and options transactions.
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 entitle-
ments 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 trans-
actions. 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 invest-
ment technique were never used. Interest rate swaps do not involve the de-
livery 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 con-
tractually entitled to receive.
MISCELLANEOUS INVESTMENT TECHNIQUES
Repurchase Agreements. In a repurchase agreement, a Fund buys a security
subject to the right and obligation to sell it back to the seller at the
same price plus accrued interest. These transactions must be fully collat-
eralized 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 in or
prevented from liquidating the collateral. The Funds will enter into re-
purchase 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 se-
curities that are not readily marketable, unless the Board of Trustees de-
termines, 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 Securi-
ties 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 in 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 repur-
chase agreements with banks and broker-dealers. Reverse repurchase agree-
ments 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 con-
tinues to receive principal and interest payments on these securities. The
Funds will deposit cash or cash equivalents or a combination of both in a
segregated account with their custodian equal in value to their obliga-
tions with respect to reverse repurchase agreements. Reverse repurchase
agreements involve the risk that the market value of the securities re-
tained by a Fund may decline below the price of the securities the Fund
has sold but is obligated to repurchase under the agreement. In the event
the buyer of securities under a reverse repurchase agreement files for
bankruptcy or becomes insolvent, a Fund's use of the proceeds of the
agreement may be restricted pending a determination by the other party or
its trustee or receiver, whether to enforce the Fund's obligation to re-
purchase the securities. Reverse repurchase agreements are considered bor-
rowings 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
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 pol-
icies 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 re-
sult of portfolio securities lending.
2. Each Fund may not purchase the securities of issuers conducting
their principal business activities in the same industry if, immedi-
ately 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, tele-
phone companies are considered to be a separate industry from water,
gas or electric utilities, personal credit finance companies and busi-
ness 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 pos-
sible, 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. Brokerage commissions in transactions on non-
U.S. markets are generally fixed and are often higher than in the U.S.
where commissions are negotiated. In the over-the-counter markets, securi-
ties (i.e., debt securities) are generally traded on a net basis with the
dealers acting as principal for their own accounts without a stated com-
mission.
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, secu-
rities 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 supervi-
sion 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 informa-
tion 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 advi-
sory services to its institutional clients throughout the world. Fifty
percent of PanAgora's outstanding voting stock is owned by Nippon Life In-
surance Company and fifty percent of such stock is owned by Lehman Broth-
ers Inc. As of May 31, 1995, PanAgora managed approximately $12 billion in
assets for various individual and institutional accounts, including the
following registered investment companies: the S&P 100 Plus Portfolio, a
portfolio of Principal Preservation Portfolios, Inc.; the Preferred Asset
Allocation Fund, a portfolio of the Preferred Group of Mutual Funds; and
Trust for TRAK Investments.
Under its Advisory Agreements with the Trust, the Adviser continually man-
ages each Fund. Its responsibilities include the purchase, retention and
disposition of each Fund's portfolio securities and other assets. In addi-
tion, the Adviser administers certain of the Trust's business affairs,
performs various shareholder servicing functions to the extent these ser-
vices 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 the fol-
lowing annual rates of each Fund's average daily net assets:
<TABLE>
<CAPTION>
FUND ANNUAL RATE
<S> <C>
PanAgora Asset Allocation Fund 0.60%
PanAgora Global Fund 0.70%
PanAgora International Equity Fund 0.80%
</TABLE>
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 Advi-
sory 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 tem-
porarily agreed, under certain circumstances, to reduce or not impose its
management fee and absorb 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 securi-
ties administrators, the Adviser will reduce its fee payable on behalf of
such Fund by the amount of such excess but only to the extent of the
Fund's advisory fee. The Advisor has agreed to pay to Funds Distributor,
Inc., the Trust's distributor, as compensation for certain distribution
services rendered to the Trust, a monthly fee at the annual rate of 0.03%
of the average daily net assets of each Fund, or a minimum annual fee of
$15,000, whichever is higher.
Kristine M. Lino, Portfolio Manager of the Adviser since April, 1990, has
been the portfolio manager primarily responsible for the day-to-day man-
agement of the PanAgora Global and International Equity Funds since Octo-
ber, 1994. From the commencement of operations of the Funds on June 1,
1993 to October, 1994, Ms. Lino was responsible for the management of the
PanAgora Asset Allocation Fund.
Edgar E. Peters has been Director of Tactical Asset Allocation for the Ad-
viser since 1990. He has been responsible for the day-to-day management of
the PanAgora Asset Allocation Fund since its inception on June 1, 1993.
Mr. Peters has also had management responsibilities with respect to the
Global Fund since May, 1995.
Jarrod W. Wilcox has been the Director of Global Investments for the
Adviser since November, 1994, and oversees the management of the PanAgora
Global and International Equity Funds. Prior to that, Mr. Wilcox was the
Director of International Equities at Batterymarch Financial Management
from January, 1991 to October, 1994. From September, 1985 to January,
1991, he was the Chief Investment Officer at Colonial Management Associ-
ates.
ADMINISTRATOR, CUSTODIAN AND TRANSFER AGENT
The Trust has entered into Administration, Custodian and Transfer Agency
and Service Agreements with Investors Bank & Trust Company ("Investors
Bank"), 89 South Street, Boston, Massachusetts 02111.
Investors Bank generally assists in all matters relating to the adminis-
tration of the Funds, including the coordination and monitoring of any
third parties furnishing services to the Funds, the preparation and main-
tenance of financial and accounting records, and the provision of the nec-
essary office space, equipment and personnel to perform administrative and
clerical functions. Investors Bank is not involved in the investment deci-
sions made with respect to the Funds.
Investors Bank also serves as the transfer agent of the Trust. Investors
Bank maintains the records of each shareholder's account, processes pur-
chases and redemptions of the Funds' shares, acts as dividend and distri-
bution disbursing agent and performs other shareholder servicing func-
tions. Shareholder inquiries should be addressed to The PanAgora Institu-
tional Funds at P.O. Box 1537, Boston, Massachusetts 02205-1537.
As compensation for its services as Administrator, Custodian and Transfer
Agent of the Trust, Investors Bank receives a monthly fee at the annual
rate of 0.10% of the average daily net assets of each Fund, subject to
certain annual minimum fees, plus transaction fees and any applicable
shareholder account charges.
DISTRIBUTOR
Funds Distributor, Inc., ("Funds Distributor") serves as the distributor
of shares of the Trust pursuant to a Distribution Agreement with the
Trust. Funds Distributor assists in the sale of shares of the Funds upon
the terms described herein.
Additional information regarding the services performed by the Administra-
tor, Custodian, Distributor and Transfer Agent is provided in the State-
ment of Additional Information.
PURCHASE OF SHARES
Shares of any Fund may be purchased on any Business Day at the net asset
value next determined after receipt of the order in proper form by the
Transfer Agent. A "Business Day" means any day on which the NYSE is open.
There is no sales charge in connection with the purchase of shares. The
Trust reserves the right, in its sole discretion, to reject any purchase
offer and to suspend the offering of shares. The minimum initial invest-
ment is $100,000 and subsequent investments will be accepted only in
amounts of $2,500 or greater. The Trust reserves the right to vary the
initial investment minimum and minimums for additional investments at any
time. In addition, the Trust may waive the minimum initial investment re-
quirement 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 in-
vestment 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 deliv-
ered to the Fund by the investor upon receipt from the issuer. Investors
who are permitted to transfer such securities should consult their tax ad-
visor to determine any tax consequences, including the recognition of
gains or losses, associated with such transfer. Securities will not be ac-
cepted 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 cur-
rent market quotations are readily available for such securities; and (ii)
the investor represents and warrants that all securities offered to be ex-
changed 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 re-
strictions regarding this policy, see "Purchase and Redemption Informa-
tion" in the Statement of Additional Information.
PURCHASES BY MAIL
Shares may be purchased initially by completing the PanAgora Institutional
Funds Account Application accompanying this Prospectus and mailing it, to-
gether with a check payable to the appropriate Fund for each account an
investor wishes to open, to:
The PanAgora Institutional Funds
P. O. Box 1537
Boston, Massachusetts 02205-1537
Subsequent investments in an existing account in any Fund may be made at
any time by sending to the Transfer Agent at the above address a check
payable to the appropriate Fund, along with either (i) a subsequent order
form which may be obtained from the Transfer Agent or (ii) a letter stat-
ing the amount of the investment, the name of the Fund and the account
number in which the investment is to be made. Investors should indicate
the name of the appropriate Fund and account number on all correspondence.
PURCHASES BY WIRE
Shares of any Fund may be purchased by wiring federal funds to the Trans-
fer Agent. Orders for shares purchased by wire must be transmitted by
telephone by calling The PanAgora Institutional Funds at 1-800-423-6041.
Following notification to the Transfer Agent, federal funds and registra-
tion instructions should be wired through the Federal Reserve System to:
Investors Bank & Trust Company
Boston, Massachusetts
ABA No. 011001438
For: The PanAgora Institutional Funds DDA No. 999273824
[Name of Fund]
[Account Registration, including account number]
All investors making initial investments by wire must promptly complete
The PanAgora Institutional Funds Account Application accompanying this
Prospectus and forward it to the Transfer Agent. Investors should be aware
that some banks may charge wire fees. REDEMPTIONS WILL NOT BE PROCESSED
UNTIL THE PANAGORA INSTITUTIONAL FUNDS ACCOUNT APPLICATION HAS BEEN RE-
CEIVED BY THE TRANSFER AGENT.
RETIREMENT PLANS
The Funds' investment objectives may make them a suitable investment for
part or all of the assets held in various tax-deferred retirement plans,
including Individual Retirement Accounts, simplified employee pension
plans, 403(b) plans and employer-sponsored retirement plans. Investors de-
siring further information concerning investment in the Funds by these
plans should contact the Transfer Agent.
REPORTS TO SHAREHOLDERS
Shareholders of each Fund receive an annual report containing audited fi-
nancial statements and a semiannual report. A printed confirmation for
each transaction will be provided by the Transfer Agent. Any dividends and
distributions paid by a Fund are also reflected in the monthly statements
issued by the Transfer Agent. A year-to-date statement for any account
will be provided upon request made to the Transfer Agent. Shareholders
with inquiries regarding a Fund may call The PanAgora Institutional Funds
at 1-800-423- 6041 or write to The PanAgora Institutional Funds at P.O.
Box 1537, Boston, Massachusetts 02205-1537.
REDEMPTION OF SHARES
HOW TO REDEEM
Shareholders may redeem shares of a Fund without charge upon request on
any Business Day at the net asset value next determined after receipt of
the redemption request. Redemption requests may be made by telephoning The
PanAgora Institutional Funds at 1-800-423-6041 or by a written request ad-
dressed to the Transfer Agent. The letter of instruction must specify the
number of shares to be redeemed, the Fund from which shares are being re-
deemed, the account number, payment instructions and the exact registra-
tion 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 Institutional Funds Ac-
count Application. In order to verify the authenticity of telephone re-
demption requests, the Trust's telephone representatives will request that
the caller provide certain information unique to the account. If the
caller is unable to provide such information, telephone redemption re-
quests will not be processed and the redemption must be completed by mail.
As long as the Trust's telephone representatives comply with the proce-
dures described above, neither the Trust nor Investors Bank will be liable
for any losses due to fraudulent or unauthorized transactions. Finally, it
may be difficult to implement telephone redemptions in times of drastic
economic or market changes.
Additional documentation may be required by the Transfer Agent in order to
establish that a redemption request has been properly authorized. A re-
demption request will not be considered to have been received in proper
form until such additional documentation has been submitted to the Trans-
fer Agent. The payment of redemption proceeds for shares of a Fund re-
cently 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 Institutional Funds Account Application, unless payment by check
has been requested. For redemption requests received by the Transfer Agent
by 4:00 p.m., Eastern time, redemption proceeds ordinarily will be wired
the next Business Day.
After a wire has been initiated by the Transfer Agent, neither the Trans-
fer Agent nor the Trust assumes any further responsibility for the perfor-
mance of intermediaries or the shareholder's bank in the transfer process.
If a problem with such performance arises, the shareholder should deal di-
rectly with such intermediaries or bank.
A shareholder may change the bank designated to receive redemption pro-
ceeds by providing written notice to the Transfer Agent which has been
signed by the shareholder or its authorized representative. This signature
must be guaranteed by a financial institution which is an acceptable guar-
antor as defined under Rule 17AD-15 of the Securities Exchange Act of 1934
as amended. If the financial institution participates in the medallion
program, it must use the "Medallion Guaranteed" stamp. Notarization is not
acceptable.
NET ASSET VALUE
The net asset value per share of each Fund is normally calculated as of
the close of regular trading on the NYSE, currently 4:00 p.m. Eastern
time, on each Business Day (i.e., Monday through Friday, except for New
Year's Day, President's Day, Good Friday, Memorial Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas 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 ac-
crued 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 mar-
ket 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 tech-
niques. 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 in-
volves 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 se-
curity. While this method provides certainty in valuation, it may result
in periods in which the value of the security, as determined by the amor-
tized 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 mar-
ket value does not, in the Adviser's opinion, reflect fair value are val-
ued at fair value using methods determined in good faith by the Board of
Trustees.
A Fund's portfolio securities from time to time may be listed on foreign
exchanges which trade on days when the NYSE is closed. As a result, the
net asset value of the Fund may be significantly affected by such trading
on days when shareholders have no access to the Fund.
DIVIDENDS, DISTRIBUTIONS AND TAXES
Each Fund intends to pay dividends from its net investment income at least
annually and may make distributions from net short-term gains annually.
Each Fund also distributes at least annually substantially all of the net
long-term capital gains in excess of available net short-term capital
losses, if any, for each taxable year. Additional distributions may be
made if necessary for a Fund to avoid federal income or excise taxes. Div-
idends and distributions are made in additional shares of the same Fund
or, at the shareholder's election, in cash. The election to reinvest divi-
dends 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 divi-
dends 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 has elected to be treated as a regulated investment company under Sub-
chapter M of the Internal Revenue Code of 1986, as amended (the "Code")
and intends to qualify for such treatment for each taxable year. To qual-
ify as a regulated investment company, each Fund must satisfy certain re-
quirements relating to the sources of its income, diversification of its
assets and distribution of its income to shareholders. As a regulated in-
vestment 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 require-
ments of the Code.
Dividends paid by a Fund from its net investment income, certain net real-
ized foreign exchange gain, the excess of net short-term capital gain over
net long-term capital loss and original issue discount or market discount
income will be taxable to shareholders as ordinary income. Dividends paid
by a Fund from any excess of net long-term capital gain over net short-
term capital loss will be taxable as long-term capital gains regardless of
how long the shareholders have held their shares. These tax consequences
will apply regardless of whether distributions are received in cash or re-
invested in shares. A portion of a Fund's dividends attributable to the
dividends it receives (if any) from U.S. domestic corporations is gener-
ally 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 Oc-
tober, November or December and paid in January of the following year are
taxable to shareholders as if received on December 31 of the year in which
they are declared. Shareholders will be informed annually about the amount
and character of distributions received from a Fund for federal income tax
purposes.
Individuals and certain other classes of shareholders may be subject to
31% backup withholding of federal income tax on dividends, redemptions and
exchanges if they fail to furnish their correct taxpayer identification
number and certain certifications or if they are otherwise subject to such
withholding. Individuals, corporations and other shareholders that are not
U.S. persons under the Code are subject to different tax rules and may be
subject to withholding at the rate of 30% (or a lower rate provided by an
applicable tax treaty) on amounts treated as ordinary dividends from a
Fund.
A Fund that invests in foreign securities may be subject to foreign with-
holding or other foreign taxes on income (possibly including, in some
cases, capital gains) earned on such securities. In any year in which Pan-
Agora Global Fund or PanAgora International Equity Fund qualifies, it may
make an election that would permit certain of its taxable shareholders to
take a credit or a deduction for foreign income taxes paid by such Fund.
Each shareholder would then treat as additional income his or her propor-
tionate share of the amount of foreign income taxes paid by such Fund. For
some years, these Funds may be unable or may not elect to pass such taxes
through to their shareholders, who consequently would not be entitled to
tax credits or deductions with respect to such taxes.
Investors should consider the tax implications of buying shares immedi-
ately prior to a distribution. Investors who purchase shares shortly be-
fore the record date for a distribution will pay a per share price that
includes the value of the anticipated distribution and will be taxed on
any taxable distribution even though it may represent a return of a por-
tion of the purchase price. Redemptions and exchanges of shares are tax-
able events on which a shareholder may recognize a gain or loss.
If for any taxable year, a Fund's total distributions exceed its current
and, if any, accumulated earnings and profits, 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 sharehold-
er's adjusted basis in the shares) and thereafter as a gain from a deemed
sale of the shares.
In addition to federal taxes, a shareholder may be subject to state, local
or foreign taxes on payments received from a Fund. A state income (and
possibly local income and/or intangible property) tax exemption is gener-
ally available to the extent a Fund's distributions are derived from in-
terest on (or, in the case of intangible taxes, the value of its assets is
attributable to) certain U.S. Government obligations, provided in some
states that certain thresholds for holdings of such obligations and/or re-
porting requirements are satisfied. 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 fi-
nancial institutions, tax-exempt entities, insurance companies and non-
U.S. persons.
ORGANIZATION AND SHARES OF THE TRUST
The PanAgora Funds was formed as a business trust under the laws of The
Commonwealth of Massachusetts on January 27, 1993, commenced investment
operations on June 1, 1993, and a name change was approved by the Board of
Trustees to The PanAgora Institutional Funds on July 21, 1995, with an ef-
fective date of August 1, 1995. A copy of the Declaration of Trust is on
file with the Secretary of State of The Commonwealth of Massachusetts. The
Board of Trustees of the Trust is responsible for the overall management
and supervision of the affairs of the Trust. The Trust is an open-end, di-
versified management investment company with an unlimited number of autho-
rized shares of beneficial interest. 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 Fund and PanAgora In-
ternational 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, but may in the future establish additional
series without the need for shareholder approval. 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 as-
sets 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 benefi-
cial 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 sharehold-
ers. 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 pertain-
ing to that Fund except for the election of Trustees and the ratification
of independent accountants. For example, shareholders of each Fund are re-
quired 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 ef-
fective only as to that Fund. The Trust does not intend to hold share-
holder 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 writ-
ten request of shareholders entitled to vote at least 10% of the outstand-
ing shares of the Trust, or Fund, as the case may be. In addition, if ten
or more shareholders of record who have held shares for at least six
months and who hold in the aggregate either shares having a net asset
value of $25,000 or 1% of the outstanding shares, whichever is less, seek
to call a meeting for the purpose of removing a Trustee, the Trust has
agreed to provide certain information to such shareholders and generally
assist their efforts.
As of July 3, 1995, the following entities owned 25% or more of the out-
standing voting securities of the Funds: PanAgora Asset Allocation Fund:
American Express Trust Company f/b/o American Express Trust Retirement
Service Plan (41.0%); Information Alliance Pension Plan Trust (38.7%);
PanAgora Global Fund: Rush Presbyterian-St. Luke's Medical Center Endow-
ment Fund (50.5%); Rush Presbyterian-St. Luke's Medical Center Pension
Fund (37.5%); PanAgora International Equity Fund: Bankers Trust TR Premark
Retirement Savings Plan (70.9%).
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 share-
holders. A Fund's total return may be calculated on an annualized and ag-
gregate basis for various periods (which periods will be stated in the ad-
vertisement). Average annual return reflects the average percentage change
per year in value of an investment in a Fund. Aggregate total return re-
flects 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 invest-
ments 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 sat-
isfy their investment objective, advertisements regarding the Fund may
discuss total return as reported by various financial publications. Adver-
tisements 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 Capital International
- -- Europe Australia Far East GDP Index; Morgan Stanley Capital Interna-
tional World Index; Salomon Brothers Corporate Bond Index; Dow Jones Com-
posite Average or its component indices; Standard & Poor's 500 Composite
Stock Index or its component indices; The New York Stock Exchange compos-
ite 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 publica-
tions 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 ana-
lyze 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 INSTITUTIONAL FUNDS ACCOUNT APPLICATION
Send to: The PanAgora Institutional Funds
P.O. Box 1537, MFD23
Boston, MA 02205-1537
I. ACCOUNT INFORMATION
Name of Account Owner Unless otherwise indicated, Co-Owners
will be registered as joint tenants
Name of Co-Owner (if applica- with right of survivorship.
ble)
Street or P.O. Box Telephone Number
City Taxpayer Identification Number
State Zip Code US Citizen, Resident or Entity
Yes No
II. ADDRESS FOR CONFIRMATION/STATEMENTS
Confirmations and statements will be sent to the party listed in Section
I. If additional statements are needed, please list to whom they should be
sent:
Daily Confirmations Monthly Statements
(limit of one): (unlimited, additional addresses can be listed
on a separate page):
III. INVESTMENT INFORMATION
PanAgora Asset Allocation Fund $
PanAgora Global Fund $
PanAgora International Equity Fund $
IV. DIVIDEND/DISTRIBUTIONS REMITTANCE PLANS
CHECK APPROPRIATE BOX (SEE "DIVIDENDS, DISTRIBUTIONS AND TAXES" IN THE
PROSPECTUS)
All distributions will be reinvested if no item is checked.
Cash Reinvested
V. REDEMPTIONS
I/we authorize The PanAgora Institutional Funds and the Transfer Agent to
honor telephone instructions for my/our account. In an effort to confirm
that telephone requests are genuine, the Funds employ reasonable proce-
dures which currently include, but are not limited to, requiring the
caller to provide certain information unique to the account. As long as
the Trust's telephone representatives comply with these procedures neither
the Trust nor the Transfer Agent will be liable for any losses due to
fraudulent or unauthorized transactions.
Permit redemption of shares via telephone
Redemptions requested via telephone will only be wired to pre-existing
bank account instructions. No bank instruction changes will be accepted
via telephone.
If you do not authorize telephone redemptions, only written transaction
instructions will be accepted; each request must contain the signature of
the owner(s) exactly as the name(s) appear in the registration with a sig-
nature guarantee by a member of the New York Stock Exchange's Medallion
Signature program, or certain banks, savings and loan institutions, credit
unions, securities dealers, securities exchanges, clearing agencies and
registered securities associations in accordance with a regulation of the
Securities and Exchange Commission and acceptable to the Funds and the
Transfer Agent.
VI. REDEMPTION AND DIVIDEND WIRE INSTRUCTIONS
Proceeds of any redemptions and dividend disbursements (if applicable)
should be wired to my/our bank as follows:
Bank Name ABA Number
Street Address
City State Zip Code
Account Name Account Number
VII. AUTHORIZED SIGNERS
By the execution of this PanAgora Institutional Fund Application, the un-
dersigned represents and warrants that it has full right, power and au-
thority to make the investment applied for pursuant to this Application
and is acting for itself or in some fiduciary capacity in making such in-
vestment, and the individual(s) signing on behalf of the registered own-
er(s) represent and warrant that they are duly authorized to sign this Ap-
plication and to purchase and redeem shares of the Funds described in the
accompanying Prospectus on behalf of the undersigned. THE UNDERSIGNED AF-
FIRMS THAT IT HAS RECEIVED A CURRENT PANAGORA INSTITUTIONAL FUNDS PROSPEC-
TUS AND HAS REVIEWED THE SAME, AND AGREES TO BE BOUND BY THE TERMS DE-
TAILED THEREIN, AND AS AMENDED FROM TIME TO TIME.
Signature Print Name and Title, if any
VIII. CERTIFICATION
TAXPAYER IDENTIFICATION NUMBER
Under penalties of perjury, the account owner named in Section I above
certifies that:
(1) The number shown on this form is the account owner's correct Taxpayer
Identification Number (or the account owner has applied or is applying
for such number), and;
(2) The account owner is not subject to backup withholding because the ac-
count owner(a) is exempt from backup withholding, (b) has not been no-
tified by the Internal Revenue Service (IRS) that the account owner is
subject to backup withholding as a result of failure to represent 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 ac-
count owner has received IRS notice that backup withholding currently ap-
plies because of underreporting of dividends on the account owner's re-
turn. (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 CERTIFICATION 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
SIGNATURE:
DATE:
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER
Federal law requires that taxable distributions and proceeds of redemp-
tions be reported to the IRS and that 31% be withheld if you fail to pro-
vide your correct Taxpayer Identification Number (TIN) and the certifica-
tions in Section VIII, or you are otherwise subject to backup withholding.
Amounts withheld and forwarded to the IRS can be credited as a payment of
tax when completing your Federal income tax return. For most individual
taxpayers, the TIN is your social security number. Special rules apply for
certain accounts. For example, for an account established under the Uni-
form Gift to Minors Act, the TIN of the minor should be furnished. If you
do not have a TIN, you may apply for one using the forms available at
local offices of the Social Security Administration of the IRS. Recipients
exempt from backup withholding, including corporations and certain other
entities, should provide their TIN and complete the appropriate items in
Section VIII of the application to avoid possible erroneous withholding.
Non-resident aliens and foreign entities may be subject to non-resident
alien withholding of up to 30% on certain distributions received from the
Funds and must provide certain certifications on IRS Form W-8 to avoid
backup withholding with respect to other payments. For further informa-
tion, see IRC Sections 1441, 1442 and 3406, or consult your tax advisor.
WISCONSIN RESIDENTS ONLY
Annual Income:
Net Worth:
Investment Objective:
I decline to provide the above information.
Signature as Registered Date
Signature as Registered Date
<PAGE> 1
THE PANAGORA INSTITUTIONAL FUNDS
P. O. BOX 1537
BOSTON, MASSACHUSETTS 02205-1537
1-800-423-6041
STATEMENT OF ADDITIONAL INFORMATION
August 1, 1995
The PanAgora Institutional Funds, formerly, The PanAgora Funds
(the "Trust"), is an open-end, management investment company currently
consisting of three separate investment series (individually, a "Fund"
and collectively, the "Funds"), each having separate and distinct investment
objectives and policies. This Statement of Additional Information provides
supplementary information pertaining to the following Funds:
* PanAgora Asset Allocation Fund
* PanAgora Global Fund
* PanAgora International Equity Fund
This Statement of Additional Information is not a prospectus, and should
be read only in conjunction with the Trust's Prospectus dated August 1, 1995,
as amended or supplemented from time to time. A copy of the Prospectus may be
obtained without charge from Funds Distributor, Inc., the Trust's Distributor,
by calling 1-800-423-6041 or writing to the address above.
<PAGE> 2
<TABLE>
<CAPTION>
TABLE OF CONTENTS PAGE
<S> <C>
Introduction 3
Additional Information on Fund Investments
and Strategies and Related Risks 3
Investment Restrictions 15
Trustees and Officers 18
Investment Advisory and Other Services 20
Portfolio Transactions 22
Purchase and Redemption Information 23
Net Asset Value 24
Performance Information 24
Taxes 25
General Information About the Trust 28
Miscellaneous 30
Appendix 31
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.
<PAGE> 3
INTRODUCTION
The Trust is an open-end, management investment company
currently offering shares in the following three separate
investment series: PanAgora Asset Allocation Fund, PanAgora
Global Fund, and PanAgora International Equity Fund (each a
"Fund", collectively the "Funds"). Each of the Funds is
classified as "diversified" within the meaning of the Investment
Company Act of 1940, as amended (the "1940 Act"). The Trust was
organized as a Massachusetts business trust on January 27, 1993
and commenced investment operations on June 1, 1993.
PanAgora Asset Management, Inc. (the "Adviser") serves as the
Funds' investment adviser. Funds Distributor, Inc. (the
"Distributor") serves as the Funds' principal underwriter and
distributor.
The information contained in this Statement of Additional
Information generally supplements the information contained in
the Trust's Prospectus. No investor should invest in a Fund
without first reading the Prospectus. Capitalized terms used
herein and not otherwise defined have the same meaning ascribed
to them in the Prospectus. Appendix A attached hereto contains
a description of the securities ratings provided by certain
nationally recognized statistical ratings organizations.
ADDITIONAL INFORMATION ON FUND INVESTMENTS
AND STRATEGIES AND RELATED RISKS
The following supplements the information contained in the
Prospectus concerning the investment objectives and policies of
each Fund.
COMMERCIAL PAPER
Commercial paper is a short-term, unsecured negotiable
promissory note of a U.S. or non-U.S. issuer. A Fund may invest
in short-term debt obligations denominated in U.S. dollars or
selected foreign currencies that at the time of investment are
rated at least A-2 by Standard & Poor's Corporation ("S&P") or
P-2 by Moody's Investors Service, Inc. ("Moody's") or, if
unrated, are issued or guaranteed as to payment of principal and
interest by companies having an outstanding unsecured debt issue
currently rated A or better by S&P or A or better by Moody's, or
if unrated, are, in the opinion of the Adviser, of comparable
quality. A Fund also may invest in variable rate master demand
notes which typically are issued by large corporate borrowers
providing for variable amounts of principal indebtedness and
periodic adjustments in the interest rate according to the terms
of the instrument. Demand notes are direct lending arrangements
between a Fund and an issuer, and are not normally traded in a
secondary market. A Fund, however, may demand payment of
principal and accrued interest at any time. In addition, while
demand notes generally are not rated, their issuers must satisfy
the same criteria as those set forth above for issuers of
commercial paper. The Adviser will consider the 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 asubstantial body of federal law and
<PAGE> 4
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 and for certain tax purposes, a
repurchase agreement is considered to be a loan from the Fund to
the seller of the obligation. For other purposes, 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
<PAGE> 5
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
<PAGE> 6
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 or tranches,
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 or tranches
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.
<PAGE> 7
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.
<PAGE> 8
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 affiliated
persons of the Fund. The Board of Trustees will make a
determination that the fee paid to the placing broker is
reasonable.
By lending portfolio securities, a Fund can increase its income
by continuing to receive interest or dividends on the loaned securities
as well as by either investing the cash collateral in short-term
instruments or obtaining yield in the form of interest paid by the
borrower when U.S. government securities are used as collateral. A Fund
will comply with the following conditions whenever it loans securities:
(i) the Fund must receive at least 100% cash collateral or equivalent
securities from the borrower; (ii) the borrower must increase the
collateral whenever the market value of the securities loaned rises above
the level of the collateral; (iii) the Fund must be able to terminate the
loan at any time; (iv) the Fund must receive reasonable interest on the
loan, as well as any dividends, interest or other distributions on the
loaned securities, and any increase in market value; (v) the Fund may
pay only reasonable custodian fees in connection with the loan; and (vi)
voting rights on the loaned securities may pass to the borrower
<PAGE> 9
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."
<PAGE> 10
AMERICAN, EUROPEAN, CONTINENTAL AND GLOBAL 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 denominated 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. GDRs may be
traded in any public or private securities market and may
represent securities held by institutions located anywhere in
the world.
OPTIONS ON SECURITIES, SECURITIES INDICES AND FOREIGN CURRENCIES
Each of the Funds may write covered put and covered 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 Fund 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
<PAGE> 11
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
<PAGE> 12
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 if the option is exercised, which may have a value
higher than the exercise price. Conversely, the writing of a put
option on a futures contract generates a premium which may
partially offset an increase in the price of securities that a
Fund intends to purchase. However, a Fund becomes obligated to
purchase a futures contract if the option is exercised which may
have a value lower than the exercise price. Thus, the loss
incurred by a Fund in writing options on futures is potentially
unlimited and may exceed the amount of the premium received.
The Funds will incur transaction costs in connection with the
writing of options on futures.
<PAGE> 13
The holder or writer of an option on a futures contract may
terminate its position by selling or purchasing an offsetting
option on the same series. There is no guarantee that such
closing transactions can be effected. The Funds' ability to
establish and close out positions on such options will be
subject to the development and maintenance of a liquid market.
The Funds may use options on futures contracts solely for bona
fide hedging or other non-hedging purposes as described below.
OTHER CONSIDERATIONS. The Funds will engage in futures and
related options transactions only for bona fide hedging or other
non-hedging purposes as permitted by CFTC regulations. A Fund
will determine that the price fluctuations in the futures
contracts and options on futures used for hedging purposes are
substantially related to price fluctuations in securities or
instruments held by the Fund or securities or instruments which
they expect to purchase. The Funds' futures transactions will
be entered into for traditional hedging purposes -- i.e.,
futures contracts will be sold to protect against a decline in
the price of securities that a Fund owns or futures contracts
will be purchased to protect a Fund against an increase in the
price of securities that a Fund intends to purchase. As
evidence of this hedging intent, each Fund expects that, on 75%
or more of the occasions on which it takes a long futures or
option position (involving the purchase of futures contracts),
the Fund will have purchased, or will be in the process of
purchasing, equivalent amounts of related securities or assets
in the cash market at the time when the futures or option
position is closed out. However, in particular cases, when it
is economically advantageous for a Fund to do so, a long futures
position may be terminated or an option may expire without the
corresponding purchase of securities or other assets.
As an alternative to compliance with the bona fide hedging
definition, a CFTC regulation permits a Fund to elect to comply
with a different test under which the aggregate initial margin
and premiums required to establish positions in futures
contracts and related options for non-hedging purposes (net of
the amount the positions are "in the money") may not exceed 5%
of the Fund's net assets. The Funds will engage in transactions
in futures contracts and related options only to the extent such
transactions are consistent with the requirements of the
Internal Revenue Code of 1986, as amended, for maintaining their
qualification as regulated investment companies for federal
income tax purposes. See "Taxes."
A Fund will be required, in connection with transactions in
futures contracts and the writing of options on futures
contracts to make margin deposits, which will be held by the
Trust's custodian for the benefit of the futures commission
merchant through whom the Fund engages in such futures contracts
and option transactions. These transactions involve brokerage
costs, require margin deposits and, in the case of futures
contracts and options obligating a Fund to purchase securities,
require a Fund to segregate cash or high-grade debt securities
in an account maintained with the Trust's custodian to cover
such contracts and options.
While transactions in futures contracts and options on futures
may reduce certain risks, such transactions themselves entail
certain other risks. Thus, unanticipated changes in interest
rates or securities prices may result in a poorer overall
performance for a Fund than if it had not entered into any
futures contracts or options transactions. The other risks
associated with the use of futures contracts and options thereon
are (i) imperfect correlation between the change in market value
of the securities held by a Fund and the prices of the futures
and options and (ii) the possible absence of a liquid secondary
market for a futures contract or option and the resulting
inability to close a futures position prior to its maturity date.
In the event of an imperfect correlation between a futures
position and portfolio position which is intended to be
protected, the desired protection may not be obtained and the
Fund may be exposed to risk of loss. The risk of imperfect
correlation may be minimized by investing in contracts whose
price behavior is expected to resemble that of a Fund's
underlying securities. The risk that the Funds will be unable
to close out a futures position will be minimized by entering
into such transactions on a national exchange with an active and
liquid secondary market.
<PAGE> 14
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
<PAGE> 15
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 statistical ratings 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,
<PAGE> 16
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
<PAGE> 17
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 uncovered 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.
<PAGE>18
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.
</TABLE>
<TABLE>
<CAPTION>
Positions Principal Occupation During
Name, Address and Age With Trust Past Five Years
<S> <C> <C>
Richard A. Crowell, Ph.D.* Chairman and Vice Chairman of Adviser since
260 Franklin Street President October 1994; President and
Boston, MA 02110 Managing Director of the
Age: 54 Adviser from January 1990 to
October 1994; 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 and
29 Vine Street Estimating and Information
Reading, MA 01867 Systems; Quebecor Printing
Age: 36 (U.S.) Corporation, since
August 1992; Vice President
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 Counselors,
136 Pecora Way an investment consulting firm,
Menlo Park, CA 94028 since 1982; and previously,
Age: 69 1952 to 1982, employed by
Wells Fargo Bank, most
recently as Chief Investment
Officer and Manager, Wells
Fargo Investment Advisors.
Paul J. Jasinski Chief Accounting Managing Director, Investors
Investors Bank & Trust Officer, Chief Bank & Trust Company, since
Company Financial May 1990; Vice President, Bank
89 South Street Officer and of New England, since July
Boston, MA 02111 Treasurer 1985.
Age: 48
Debra M. Brown Secretary Director, Investors Bank &
Investors Bank & Trust Trust Company, since June
Company 1992; and previously served as
89 South Street Assistant Vice President and
Boston, MA 02111 Counsel with The Boston
Age: 33 Company Advisors, Inc.
<PAGE> 19
Positions Principal Occupation During
Name, Address and Age With Trust Past Five Years
Timothy F. Osborne Assistant Officer and Account Manager
Investors Bank & Trust Treasurer Reporting and Compliance,
Company Investors Bank & Trust
89 South Street Company, since May 1995; and
Boston, MA 02111 previously Supervisor, Mutual
Age: 28 Fund Administration and
Compliance with Mutual Fund
Services Company from December
1992 to May 1995; and Senior
Associate, Coopers & Lybrand
L.L.P. from June 1989 to
December 1992.
Joseph P. Barri, Esq. Assistant Partner, the law firm of Hale
Hale and Dorr Secretary and Dorr and secretary to the
60 State Street mutual funds in The Pioneer
Boston, MA 02109 Family of Funds.
Age: 49
</TABLE>
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. The following table provides information concerning
the compensation paid to Trustees during the fiscal year ended
May 31, 1995. The Fund does not provide any pension or
retirement benefits to Trustees. In addition, Mr. Crowell, an
officer and employee of the Fund, was paid no remuneration
during the fiscal year ended May 31, 1995 for his service as a
Trustee.
<TABLE>
<CAPTION>
Name of Person, Position Aggregate Compensation Total Compensation from
from Registrant Registrant and Fund
Complex Paid to Trustees
<S> <C> <C>
Susan Smick, Trustee $9,000 $9,000
James R. Vertin, Trustee $9,000 $9,000
</TABLE>
As of the date of this Statement of Additional Information, the
Trustees and officers of the Trust, as a group, owned less than
1% of the outstanding shares of any Fund. Each of the following
shareholders owned 5% or more of a Fund's shares as of July 3, 1995:
<TABLE>
<CAPTION>
NAME OF PORTFOLIO SHAREHOLDER AND ADDRESS PERCENTAGE OF SHARES OWNED
<S> <C> <C>
Asset Allocation Fund American Express Trust Company 41.04%
FBO American Express Trust
Retirement Services Plans
1200 Northstar West
P.O. Box 534
Minneapolis, MN 55440-0534
<PAGE> 20
NAME OF PORTFOLIO SHAREHOLDER AND ADDRESS PERCENTAGE OF SHARES OWNED
Asset Allocation Fund Information Alliance Pension 38.67%
(Continued) Plan Trust
Box 3079
Pittsfield, MA 01202
PanAgora Asset Management, Inc. 14.72%
PanAgora Corporate Account
Attn Mike Turpin
260 Franklin Street
22nd Floor
Boston, MA 02110
Global Fund Rush Presbyterian St Lukes 50.52%
Medical Center Endowment Fund
1700 W Vanburen Street Ste 265
Chicago, IL 60612
Rush Presbyterian St Lukes 37.51%
Medical Center Pension Fund
1700 W Vanburen Street Ste 265
Chicago, IL 60612
Society National Bank TR 8.62%
FBO Beckwith Machinery Company
P.O. Box 94870
Cleveland, OH 44101-4870
International Equity Bankers Trust TR 70.93%
Fund Premark Retirement Savings Plan
34 Exchange Place
Jersey City, NJ 07302
The Minneapolis Foundation 24.73%
A200 Foshay Square
821 Marquette Avenue
Minneapolis, MN 55402
</TABLE>
INVESTMENT ADVISORY AND OTHER SERVICES
THE ADVISER
PanAgora Asset Management, Inc. serves as the Trust's
investment adviser. The Adviser, the services provided by it
pursuant to the advisory agreement with respect to each Fund
(the "Advisory Agreement"), and the fees payable by each Fund to
the Adviser for such services are described in detail in the
Prospectus. As described in the Prospectus, the Adviser manages
the investment portfolio of each Fund pursuant to the terms of
the Advisory Agreement between the Adviser and the Trust with
respect to each Fund. During the fiscal year ended May 31,
1994, the total dollar amounts earned by the Adviser with
respect to the advisory services provided to each Fund were as
follows: PanAgora Asset Allocation Fund, $10,719; PanAgora
Global Fund, $218,254; and PanAgora International Equity Fund,
$110, 440. During the fiscal year ended May 31, 1994, the
Adviser waived fees and/or reimbursed expenses as follows:
PanAgora Asset Allocation Fund, $144,044; PanAgora
<PAGE> 21
Global Fund, $160,977; and PanAgora International Equity Fund,
$186,509. During the fiscal year ended May 31, 1995, the total
dollar amounts earned by the Adviser with respect to the
advisory services provided to each Fund were as follows:
PanAgora Asset Allocation Fund, $35,173; PanAgora Global Fund,
$313,880; and PanAgora International Equity Fund, $120,808.
During the fiscal year ended May 31, 1995, the Advisor waived
fees and/or reimbursed expenses as follows: PanAgora Asset
Allocation Fund, $127,269; PanAgora Global Fund, $185,514; and
PanAgora International Equity Fund, $264,572.
The Advisory Agreement provides that the Adviser shall not be
liable for any error of judgment or mistake of law or for any
loss suffered by the Trust or any Fund in connection with the
performance of the Adviser's obligations under its agreement
with the Trust, except a loss resulting from willful
misfeasance, bad faith or gross negligence on the part of the
Adviser in the performance of its duties or from reckless
disregard of its duties and obligations thereunder.
The Advisory Agreement provides that it will continue in effect
only if such continuance is specifically approved annually by
the Trustees, including a majority of the Trustees who are not
parties to the Advisory Agreement or "interested persons" (as
such term is defined in the 1940 Act) of such parties, or by a
vote of a majority of the outstanding shares of the affected
Fund. The Advisory Agreement is terminable as to each Fund by
vote of the Board of Trustees, or by the holders of a majority
of the outstanding shares of the affected Fund, at any time
without penalty on 60 days' written notice to the Adviser. The
Adviser may terminate the Advisory Agreement as to one or more
Funds at any time without penalty on 60 days' written notice to
the Trust. The Advisory Agreement terminates automatically in
the event of its assignment (as such term is defined in the 1940
Act).
THE ADMINISTRATOR, CUSTODIAN AND TRANSFER AGENT
As described in the Prospectus, Investors Bank & Trust Company
("Investors Bank"), 89 South Street, Boston, Massachusetts
02111, serves as the Trust's administrator pursuant to an
administration agreement (the "Administration Agreement").
Pursuant to the Administration Agreement, Investors Bank has
agreed to maintain certain office facilities for the Trust,
furnish statistical and research data, clerical services, and
stationery and office supplies; prepare and file various reports
with the appropriate regulatory agencies including the
Commission and state securities commissions; and provide
accounting and bookkeeping services for the Funds.
The Administration Agreement provides that Investors Bank shall
not be liable under the Administration Agreement except for bad
faith or gross negligence in the performance of its duties or
from the reckless disregard by it of its duties and obligations
thereunder.
As described in the Prospectus, Investors Bank also serves as
the custodian and the transfer and dividend disbursing agent for
the Trust. Pursuant to a transfer agency agreement with the
Trust, Investors Bank (i) maintains shareholder accounts, and
(ii) makes periodic reports to the Trust's Board of Trustees
concerning the operations of each Fund.
Pursuant to a custodian agreement with the Trust, Investors
Bank (i) maintains custody of each Fund's assets, (ii) maintains
a separate account in the name of each Fund, (iii) holds and
transfers portfolio securities on account of each Fund, (iv)
accepts receipts and makes disbursements of money on behalf of
each Fund, (v) collects and receives all income and other
payments and distributions on account of each Fund's portfolio
securities, (vi) computes each Fund's net asset value, net
investment income and realized capital gains, if any, and (vii)
makes periodic reports to the Trust's Board of Trustees
concerning each Fund's operations. Subject to approval by the
Trust's Board of Trustees, Investors Bank may contract with one
or more foreign or domestic banks or companies to serve as
foreign sub-custodian on behalf of the Trust, provided that,
with respect to such sub-custodians, Investors Bank remains
responsible for the performance of all its duties under the
custodian agreement with the Trust.
For a description of the fees payable by each Fund under the
administration, transfer agency and custodian agreements, see
"Management of the Trust" in the Prospectus. During the fiscal
year ended May 31, 1995, Investors Bank received $322,060 and
The Boston Company Advisors, Inc. received $217,321 with respect
to administrative services provided to each Fund. During the
fiscal year ended May 31, 1994, The Boston Company Advisers,
Inc. received $212,866 with respect to administrative services
provided to each Fund, and waived fees and reimbursed certain
expenses of each Fund in the amount of $30,000.
<PAGE> 22
THE DISTRIBUTOR
The Trust has entered into a distribution agreement (the
"Distribution Agreement") pursuant to which Funds Distributor,
Inc. (the "Distributor"), as agent, serves as principal
underwriter for the continuous offering of shares of each Fund.
The Distributor has agreed to use its best efforts to solicit
orders for the purchase of shares of each Fund, although it is
not obligated to sell any particular amount of shares. No
compensation is payable by the Trust to the Distributor for such
distribution services; however, the Adviser has agreed to pay to
the Distributor a monthly fee at an annual rate of 0.03% of the
average daily net assets of each Fund or a minimum annual fee of
$15,000, whichever is higher. For the fiscal years ended May
31, 1995 and May 31, 1994, the Distributor received $19,741 and
$15,000, respectively, for services as principal underwriter.
The Distribution Agreement provides that it will continue in
effect 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 any such
party. The Distribution Agreement is terminable, as to a Fund,
by vote of the Board of Trustees, or by the holders of a
majority of the outstanding shares of the Fund, at any time
without penalty on 60 days' written notice to the Trust and
Adviser. The Distributor or Adviser may terminate the
Distribution Agreement at any time without penalty on 90 days'
written notice to the Trust.
PORTFOLIO TRANSACTIONS
Subject to the general supervision of the Board of Trustees,
the Adviser makes decisions with respect to and places orders
for all purchases and sales of portfolio securities for the
Funds. In executing portfolio transactions, the Adviser seeks to
obtain the best net results for the Fund, taking into account
such factors as price (including the applicable brokerage
commission or dealer spread), size of the order, difficulty of
execution and operational facilities of the firm involved. The
primary consideration of the Adviser in selecting broker-dealers
is best execution at the most favorable price.
OTC issues, including corporate debt securities and securities
issued by the U.S. government, its agencies and
instrumentalities, are normally traded on a "net" basis (i.e.,
without commission) through dealers, or otherwise involve
transactions directly with the issuer of an instrument. The
cost of foreign and domestic securities purchased from
underwriters includes an underwriting commission or concession,
and the prices at which securities are purchased from and sold
to dealers include a dealer's mark-up or mark-down. With
respect to OTC transactions, the Adviser will normally deal
directly with dealers who make a market in the instruments
involved except in those circumstances where more favorable
prices and execution are available elsewhere.
In the Advisory Agreement, the Adviser agrees to select
broker-dealers in accordance with guidelines established by the
Trust's Board of Trustees from time to time and in accordance
with Section 28(e) of the Securities Exchange Act of 1934, as
amended. In assessing the terms available for any transaction,
the Adviser shall consider all factors it deems relevant,
including the breadth of the market in the security, the price
of the security, the financial condition and execution
capability of the broker-dealer, and the reasonableness of the
commission, if any, both for the specific transaction and on a
continuing basis. In addition, the Advisory Agreement authorizes
the Adviser, subject to the prior approval of the Trust's Board
of Trustees, to cause a Fund to pay a broker-dealer which
furnishes brokerage and research services a higher commission
than that which might be charged by another broker-dealer for
effecting the same transaction, provided that the Adviser
determines in good faith that such commission is reasonable in
relation to the value of the brokerage and research services
provided by such broker-dealer, viewed in terms of either the
particular transaction or the overall responsibilities of the
Adviser to the Fund. Such brokerage and research services might
consist of reports and statistics on specific companies or
industries, general summaries of groups of bonds and their
comparative earnings and yields, or broad overviews of the
securities markets and the economy. Management of the Trust
does not believe that it is possible to estimate the proportion
or amount of the Funds' portfolio transactions directed to
broker-dealers solely because such services were provided.
<PAGE> 23
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.
During the fiscal year ended May 31, 1994, PanAgora Asset
Allocation Fund, PanAgora Global Fund and PanAgora International
Equity Fund paid brokerage commissions in the amounts of $1,942,
$150,191 and $90,530, respectively. During the fiscal year
ended May 31, 1995, PanAgora Asset Allocation Fund, PanAgora
Global Fund and PanAgora International Equity Fund paid
brokerage commissions in the amounts of $7,898, $275,234 and
$119,291, respectively. During the fiscal year ended May 31,
1995, the Adviser, on behalf of the PanAgora Asset Allocation
Fund and the PanAgora Global Fund, placed transactions having an
approximate dollar value of $6,679,738 and $5,188,576,
respectively (constituting 72.0% and 4.6%, respectively, of each
Fund's transactions, on which approximately $5,739 and $2,863,
respectively, of commissions were paid) with brokers and dealers
to recognize research, statistical and quotation services the
Adviser considered to be particularly useful to it and its
affiliates.
PORTFOLIO TURNOVER
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.
PURCHASE AND REDEMPTION INFORMATION
The Trust will not generally issue shares of the Funds for
consideration other than cash. At the Trust's sole discretion, however, it
may issue shares of the Funds for consideration other than cash in connection
with a bona fide reorganization, statutory merger, or other acquisition of
portfolio securities (other than municipal debt securities issued by state
political subdivisions or their agencies or instrumentalities), provided (i)
the securities meet the
<PAGE> 24
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. Amortized cost valuation
involves initially valuing a security at its cost, and
thereafter, assuming a constant amortization to maturity of any
discount or premium, regardless of the impact of fluctuating
interest rates on the market value of the security. While this
method provides certainty in valuation, it may result in periods
in which the value of the security, as determined by amortized
cost, may be higher or lower than the price the Fund would
receive if the Fund sold the security.
Other assets and assets whose market value does not, in the
Adviser's opinion, reflect fair value are valued at fair value
using methods determined in good faith by the Board of Trustees.
PERFORMANCE INFORMATION
Each Fund that advertises its "average annual total return"
computes such return by determining the average annual
compounded rate of return during specified periods that equates
the initial amount invested to the ending
<PAGE> 25
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 hypothetical $1,000
payment made at the beginning of the 1, 5 or 10 year
(or other) periods at the end of the applicable
period (or a fractional portion thereof);
P = hypothetical initial payment of $1,000; and
n = period covered by the computation, expressed in years.
Each Fund that advertises its "aggregate total return" computes
such returns by determining the aggregate compounded rates of
return during specified periods that likewise equate the initial
amount invested to the ending redeemable value of such
investment. The formula for calculating aggregate total return
is as follows:
Aggregate Total Return = [(ERV) - 1]
P
The above calculations are made assuming that (1) all dividends
and capital gain distributions are reinvested on the
reinvestment dates at the price per share existing on the
reinvestment date, (2) all recurring fees charged to all
shareholder accounts are included, and (3) for any account fees
that vary with the size of the account, a mean (or median)
account size in the Fund during the periods is reflected. The
ending redeemable value (variable "ERV" in the formula) is
determined by assuming complete redemption of the hypothetical
investment after deduction of all nonrecurring charges at the
end of the measuring period.
The average annual total return for PanAgora Asset Allocation
Fund, PanAgora Global Fund and PanAgora International Equity
Fund was 14.13%, 9.67% and 5.09%, respectively for the one year
period ended May 31, 1995, and 7.70%, 9.18% and 7.58%,
respectively, for the life of the Funds through that date.
TAXES
Each Fund has elected to be treated as a regulated investment
company under Subchapter M of the Internal Revenue Code of 1986,
as amended, (the "Code") and intends to qualify for such
treatment for each taxable year. 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 derived with respect to its business of
investing in such stock, securities or foreign currencies (the
"90% gross income test"); (b) derive less than 30% of its annual
gross income from the sale or other disposition of stock or
securities or other investments, including options and futures
contracts on stocks, securities or indices and certain foreign
currencies or foreign currency options, futures or forward
contracts, held less than three months (the "short-short test");
and (c) diversify its holdings so that, at the end of each
quarter of its taxable year, (i) at least 50% of the market
value of the Fund's total (gross) assets is represented by cash
and cash items (including receivables), U.S. Government
securities, securities of other regulated investment companies
and other securities limited, in respect of any one issuer, to
an amount 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.
<PAGE> 26
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 may provide that qualifying income under the 90%
gross income test will not include gains from foreign currency
transactions or instruments that are not directly related to a
Fund's principal business of investing in stock or securities or
options and futures with respect to stock or securities. Using
foreign currency positions or entering into foreign currency
options, futures and forward contracts (including synthetic
positions) for purposes other than hedging currency risk with
respect to existing or future portfolio securities may not
qualify as "directly-related" under these tests. The federal
income tax rules applicable to interest rate swaps and
synthetic investments involving currency positions are unclear
in certain respects, and PanAgora Global Fund and PanAgora
International Equity Fund may be required to limit their use of
these transactions in order to comply with the requirements for
qualification as a regulated investment company.
Each Fund will not be subject to federal income tax on any of
its investment company taxable income (generally all of its
taxable net income other than the excess of net long-term
capital gain over net short-term capital loss) and net capital
gain (which equals the excess, if any, of net long-term capital
gain over net short-term capital loss) that are distributed to
shareholders in accordance with certain timing requirements with
respect to any taxable year, provided that the Fund timely
distributes at least 90% of its investment company taxable
income for such year and qualifies as a regulated investment
company. However, if a Fund retains any investment company
taxable income or net capital gain, it will be subject to
federal income tax at regular corporate rates on the amount
retained. Further, in order to avoid a nondeductible 4% federal
excise tax, each Fund must distribute (or be deemed to have
distributed) by December 31 of each calendar year at least 98%
of its ordinary income for such year, at least 98% of the excess
of its capital gains over its capital losses (generally computed
on the basis of the one-year period ending on October 31 of such
year), and all ordinary income and the excess of capital gains
over capital losses for the previous year that were not
distributed in such year and on which the Fund paid no federal
income tax. In determining amounts to be distributed, each Fund
will take into account capital loss carryforwards, if any, from
prior years. At May 31, 1995, the PanAgora Global Fund had a
capital loss carryforward for U.S. federal income tax purposes
of approximately $683,000 available to offset future capital
gains which will expire on May 31, 2003. The PanAgora Asset
Allocation and International Equity Funds had no capital loss
carryfowards at May 31, 1995.
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 interest, dividends, rents, royalties or capital
gains) or hold at least 50% of their assets in investments
producing such passive income ("passive foreign investment
companies"), such Funds could be subject to federal income tax
and additional interest charges on "excess distributions"
received from such companies or gain from the sale of stock in
such companies, even if all income or gain actually received by
a Fund is timely distributed to its shareholders. The Funds
would not be able to pass through to their shareholders any
credit or deduction for such a tax. Certain elections may, if
available, ameliorate these adverse tax consequences, but any
such election could require a Fund to recognize taxable income
or gain without the concurrent receipt of cash. Accordingly, a
Fund may limit and/or manage its investments in such passive
foreign investment companies to minimize its tax liability or
maximize its return from these investments.
A Fund's transactions in options or financial futures contracts
will give rise to taxable gain or loss and will be subject to
special tax rules, the effect of which may be to accelerate
income to the Fund, defer Fund losses, cause adjustments in the
holding periods of Fund securities and/or convert long-term
capital gains into short-term capital gains (or short-term
capital losses into long-term capital losses). For example,
certain listed non-equity options written or purchased by a Fund
(including options and futures contracts on securities and
securities indices) are required to be
<PAGE> 27
"marked to market" (i.e., treated as if closed out) on the last
day of each taxable year, and any associated gain or loss is
generally required to be treated as 60% long-term and 40%
short-term capital gain or loss, with adjustments subsequently
made to any gain or loss realized upon an actual disposition of
these positions. When the Fund enters into certain hedging
positions involving options or futures contracts that
substantially diminish its risk of loss with respect to other
positions, certain tax "straddle" rules may operate to alter the
amount, timing or character of gains or losses realized. The
tax provisions described above applicable to options and futures
contracts may affect the amount, timing and character of each
Fund's distributions to shareholders. The short-short test
described above may limit each Fund's ability to use options and
futures transactions. Certain tax elections may be available to
a Fund to mitigate some of the unfavorable consequences
described in this paragraph.
Section 988 of the Code contains special tax rules applicable
to certain foreign currency transactions and instruments that
may affect the amount, timing and character of income, gain or
loss recognized by PanAgora Global Fund and PanAgora
International Equity Fund and hence of their distributions to
shareholders. Under these rules, foreign exchange gain or loss
realized with respect to foreign currencies and certain futures
and options thereon, foreign currency-denominated debt
instruments, foreign currency forward contracts, and foreign
currency-denominated payables and receivables will generally be
treated as ordinary income or loss, although in some cases
elections may be available that would alter this treatment . If
the net foreign exchange loss treated as ordinary loss under
Section 988 of the Code were to exceed a Fund's investment
company taxable income (computed without regard to such loss)
for a taxable year, the resulting loss would not be deductible
by the Fund or its shareholders in future years. Net loss, if
any, from certain foreign currency transactions or instruments
could exceed net investment income otherwise calculated for
accounting purposes with the result being either the omission of
one or more dividends or a portion of a Fund's dividends being
treated as a return 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 generally cause it to realize income prior to the
receipt of cash payments with respect to these securities. In
order to distribute this income, maintain its qualification as a
regulated investment company, and avoid federal income or excise
taxes, the Fund may be required to liquidate portfolio
securities that it might otherwise have continued to hold.
PanAgora Global Fund and PanAgora International Equity Fund
anticipate that they will be subject to foreign withholding or
other foreign taxes on their income (possibly including, in some
cases, capital gains) from foreign securities. Tax conventions
between certain countries and the U.S. may reduce or eliminate
such taxes. If more than 50% of such a Fund's total assets at
the close of a taxable year of such Fund consist of stock or
securities of foreign corporations, such Fund will qualify to
file an election with the Internal Revenue Service for such year
pursuant to which shareholders of the Fund would be required to
(i) include in ordinary gross income (in addition to taxable
dividends actually received) their pro rata shares of foreign
income taxes paid by the Fund even though not actually received
by such shareholders, and (ii) treat such respective pro rata
portions as foreign income taxes paid by them, for which they
may be entitled to U.S. federal income tax credits or
deductions, subject to applicable limitations under the Code.
These Funds will consider making such an election if they are
eligible to do so and, if they cannot or do not so elect, will
be entitled to deduct such taxes in computing their
distributable income.
For federal income tax purposes, distributions by a Fund,
whether reinvested in additional shares or paid in cash,
generally will be taxable to shareholders. Shareholders
receiving a distribution in the form of newly issued shares will
be treated for federal income tax purposes as receiving a
distribution in an amount equal to the amount of cash they would
have received had they elected to receive cash and will have a
cost basis in each share received equal to such amount divided
by the number of shares received. Distributions designated as
derived from a Fund's dividend income, if any, that would be
eligible for the dividends received deduction if the Fund were
not a regulated investment company will be eligible, subject to
certain holding period and debt-financing restrictions, for the
70% dividends received deduction for corporations. Eligible
dividends are those received by a Fund from U.S. domestic
corporations and distributed to shareholders and properly
designated as eligible by the Fund. The entire eligible
dividend, including the deducted amount, is considered in
determining the excess, if any, of a corporate shareholder's
adjusted current earnings over its 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.
<PAGE> 28
Different tax treatment, including penalties on certain excess
contributions and deferrals, certain pre-retirement and
post-retirement distributions, and certain prohibited
transactions is accorded to accounts maintained as qualified
retirement plans. Shareholders should consult their tax advisers
for more information.
When a shareholder's shares are sold, redeemed or otherwise
disposed of, the shareholder will generally recognize gain or
loss equal to the difference between the shareholder's adjusted
tax basis in the shares and the cash, or fair market value of
any property, received. Assuming the shareholder holds the
shares as a capital asset at the time of such sale or other
disposition, such gain or loss should be capital in nature, and
long-term if the shareholder has held the shares for more than
one year, otherwise short-term. If, however, a shareholder
receives a capital gain dividend with respect to shares and such
shares are sold or redeemed when they have a tax holding period
of six months or less, then any loss the shareholder realizes on
the sale or redemption will be treated as a long-term capital
loss to the extent of such capital gain dividend. Additionally,
any loss realized on a sale or redemption of shares of a Fund
will be disallowed to the extent the shares disposed of are
replaced with other shares of the same Fund within a period of
61 days beginning 30 days before and ending 30 days after the
shares are disposed of, such as pursuant to an automatic
dividend reinvestment.
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 backup 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. On July 21, 1995, the
Board of Trustees approved a name change of the Trust from The
PanAgora Funds to The PanAgora Institutional Funds, effective
August 1, 1995.
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.
<PAGE> 29
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 or class thereof if it determines that the continuation
of the Trust or a series or class thereof is not in the best
interest of the Trust or such series or class, or their
respective shareholders as a result of factors or events
adversely affecting the ability of the Trust or such series or
class to conduct its business and operations in an economically
viable manner.
SHAREHOLDER AND TRUSTEE LIABILITY
Under Massachusetts law, shareholders of a Massachusetts
business trust may, under certain circumstances, be held
personally liable as partners for the obligations of the trust.
However, the Trust's Declaration of Trust provides that
shareholders shall not be subject to any personal liability in
connection with the assets of the Trust, for the acts or
obligations of the Trust or any series thereof, and that every
note, bond, contract, order or other undertaking made by the
Trust shall contain a provision to the effect that the
shareholders are not personally liable thereunder. The
Declaration of Trust provides for indemnification out of a
Fund's property of any shareholder of the Fund held personally
liable solely by reason of his being or having been a
shareholder of the Fund and not because of his acts or omissions
or some other reason. Thus, the risk of a shareholder's
incurring financial loss on account of shareholder liability is
limited to circumstances in which a Fund would be unable to meet
its obligations.
The Declaration of Trust further provides that all persons
having any claim against the Trustees or the Trust shall look
solely to the Trust property for payment; that no Trustee,
officer, employee or agent of the Trust or any series thereof,
shall be subject to any personal liability to any person, other
than to the Trust or its shareholders, in 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.
<PAGE> 30
MISCELLANEOUS
INDEPENDENT ACCOUNTANTS AND FINANCIAL STATEMENTS
Coopers & Lybrand L.L.P., 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. The Report of
Independent Accountants and financial statements included in the
Fund's Annual Report for the fiscal year ended May 31, 1995,
filed electronically on July 27, 1995, are incorporated by
reference into this Statement of Additional Information. The
financial highlights in the Prospectus and the financial
statements incorporated by reference into the Prospectus and
Statement of Additional Information have been so included and
incorporated in reliance upon the report of the independent
accoutants, given on their authority as experts in auditing and
accounting.
COUNSEL
The law firm of Hale and Dorr, 60 State Street, Boston,
Massachusetts 02109, serves as counsel to the Trust.
SHAREHOLDER APPROVALS
As used in this Statement of Additional Information and in the
Prospectus, "a majority of the outstanding shares" of a Fund
means the lesser of (a) 67% of the shares of the particular Fund
represented at a meeting at which the holders of more than 50%
of the outstanding shares of such Fund are present in person or
by proxy, or (b) more than 50% of the outstanding shares of such
Fund.
REGISTRATION STATEMENT
The Trust has filed with the Commission, 450 Fifth Street,
N.W., Washington, D.C. 20549, a Registration Statement under the
Securities Act of 1933, as amended, with respect to the shares
of the Funds to which this Statement of Additional Information
relates. If further information is desired with respect to the
Trust, the Funds or such shares, reference is made to the
Registration Statement and the exhibits filed as a part thereof.
<PAGE> 30
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.
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:
<PAGE> 31
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 1 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
<PAGE> 31
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 audited financial statements for the
fiscal year ended May 31, 1995 are incorporated by
reference into the Registrant's Prospectus and Statement of
Additional Information from the Registrant's 1995 Annual
Report to Shareholders, which has previously been filed
electronically on July 27, 1995. The financial statements
included are:
1. Statement of Net Assets as of May 31, 1995;
2. Statement of Operations for the fiscal year ended
May 31, 1995;
3. Statement of Changes in Net Assets for the fiscal year
ended May 31, 1995;
4. Selected Per Share Data and Ratios for the fiscal
year ended May 31, 1995;
5. Notes to Financial Statements.
6. Supporting Schedule: Portfolio of Investments
Owned as of May 31, 1995.
(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.
1(d). Amendment No. 2 dated July 21, 1995 to Declaration of Trust.
2(a). By-Laws of Registrant is hereby incorporated by reference
from Pre-Effective Amendment No. 1 to the Registrant's
<PAGE> 2
Registration Statement on Form N-1A (File No. 33-57740)
as filed with the Securities and Exchange Commission on
April 26, 1993.
2(b). Amendment No.1 dated July 21, 1995 to the By-Laws.
3. Not applicable.
4(a). Form of Specimen Share Certificate for Shares of the
PanAgora Asset Allocation Fund is hereby incorporated by
reference from Post-Effective Amendment No.1 to the
Registrant's Registration Statement on Form N-1A (File
No. 33-57740) as filed with the Securities and Exchange
Commission on January 3, 1994.
4(b). Form of Specimen Share Certificate for Shares of the
PanAgora Global Fund is hereby incorporated by reference
from Post-Effective Amendment No. 1 to the Registrant's
Registration Statement on Form N-1A (File No. 33-57740)
as filed with the Securities and Exchange Commission on
January 3, 1994.
4(c). Form of Specimen Share Certificate for Shares of the
PanAgora International Equity Fund is hereby incorporated
by reference from Post-Effective Amendment No. 1 to the
Registrant's Registration Statement on Form N-1A (File
No. 33-57740) as filed with the Securities and Exchange
Commission on January 3, 1994.
5(a). Investment Advisory Agreement between PanAgora Asset
Management, Inc. and Registrant on behalf of PanAgora
Asset Allocation Fund is hereby incorporated by reference
from Post-Effective Amendment No. 1 to the Registrant's
Registration Statement on Form N-1A (File No. 33-57740)
as filed with the Securities and Exchange Commission on
January 3, 1994.
5(b). Investment Advisory Agreement between PanAgora Asset
Management, Inc. and Registrant on behalf of PanAgora
Global Fund is hereby incorporated by reference from
Post-Effective Amendment No. 1 to the Registrant's
Registration Statement on Form N-1A (File No. 33-57740)
as filed with the Securities and Exchange Commission on
January 3, 1994.
5(c). Investment Advisory Agreement between PanAgora Asset
Management, Inc. and Registrant on behalf of PanAgora
International Equity Fund is hereby incorporated by
reference from Post-Effective Amendment No. 1 to the
Registrant's Registration Statement on Form N-1A (File
No. 33-57740) as filed with the Securities and Exchange
Commission on January 3, 1994.
6. Distribution Agreement between Registrant, Funds
Distributor, Inc. and PanAgora Asset Management, Inc. is
hereby incorporated by reference from Post-Effective
Amendment No. 1 to the Registrant's Registration
Statement on Form N-1A (File No. 33-57740) as filed with
the Securities and Exchange Commission on January 3,
1994.
<PAGE> 3
7. Not Applicable.
8. Custody Agreement between Registrant and Investors Bank &
Trust Company is hereby incorporated by reference from
Post-Effective Amendment No. 2 to the Registrant's
Registration Statement on Form N-1A (File No. 33-57740)
filed with the Securities and Exchange Commission on
August 22, 1994.
9(a). Administration Agreement between Registrant and Investors
Bank & Trust Company is hereby incorporated by reference
from Post-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
August 22, 1994.
9(b). Transfer Agency and Service Agreement between Registrant
and Investors Bank & Trust Company is hereby incorporated
by reference from Post-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 August 22, 1994.
10. Opinion and Consent of Counsel is hereby incorporated by
reference from Pre-Effective Amendment No. 2 to the
Registrant's Registration Statement on Form N-1A (File
No. 33-57740) as filed with the Securities and Exchange
Commission on May 26, 1993.
11. Consent of Independent Public Accountants
12. Not applicable.
13(a). Form of Stock Purchase Agreement between PanAgora Asset
Management, Inc. and Registrant on behalf of PanAgora
Asset Allocation Fund is hereby incorporated by reference
from Post-Effective Amendment No. 1 to the Registrant's
Registration Statement on Form N-1A (File No. 33-57740)
as filed with the Securities and Exchange Commission on
January 3, 1994.
13(b). Form of Stock Purchase Agreement between PanAgora Asset
Management, Inc. and Registrant on behalf of PanAgora
Global Fund is hereby incorporated by reference from
Post-Effective Amendment No. 1 to the Registrant's
Registration Statement on Form N-1A (File No. 33-57740)
as filed with the Securities and Exchange Commission on
January 3, 1994.
13(c). Form of Stock Purchase Agreement between PanAgora Asset
Management, Inc. and Registrant on behalf of PanAgora
International Equity Fund is hereby incorporated by
reference from Post-Effective Amendment No. 1 to the
Registrant's Registration Statement on Form N-1A (File
No. 33-57740) as filed with the Securities and Exchange
Commission on January 3, 1994.
14. Not Applicable.
15. Not Applicable.
<PAGE> 4
16. Not Applicable.
17(a). Power of Attorney of Susan Smick is hereby incorporated
by reference from Post-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 August 22, 1994.
17(b). Power of Attorney of James R. Vertin is hereby incorporated
by reference from Post-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 August 22, 1994.
17(c). Financial Data Schedule
Item 25. PERSONS CONTROLLED BY OR UNDER
COMMON CONTROL WITH REGISTRANT
The Registrant does not directly or indirectly control any
person. Shareholders who own more than 25% of a portfolio's
shares as of July 3, 1995 are as follows:
<TABLE>
<CAPTION>
PERCENTAGE OF
NAME OF FUND SHAREHOLDER SHARES OWNED
<S> <C> <C>
Asset Allocation Fund American Express Trust Company 41.04 %
FBO American Express Trust
Retirement Service Plan
Information Alliance Pension 38.67 %
Plan Trust
Global Fund Rush-Presbyterian-St. Luke's 50.52%
Medical Center Endowment Fund
Rush-Presbyterian-St. Luke's 37.51%
Medical Center Pension Fund
International Equity Bankers Trust TR Premark Retirement 70.92%
Fund Savings Plan
</TABLE>
PanAgora Asset Management, Inc., the Registrant's investment
adviser (the "Adviser") is a Delaware corporation. Fifty percent
of the Adviser's outstanding voting stock is owned by Nippon
Life Insurance Company and fifty percent of such stock is owned
by Lehman Brothers, Inc.
<PAGE> 5
Item 26. Number of Holders of Securities
The following information is as of July 3, 1995:
<TABLE>
<CAPTION>
Fund Number of Record Holders
<S> <C>
PanAgora Asset Allocation Fund 8
PanAgora Global Fund 20
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
Registrant, Funds Distributor, Inc. and the Adviser provides
for indemnification of the Registrant, the Registrant's
trustees and officers and any person who controls the Trust
within the meaning of Section 15 of the Securities Act of
1933, as amended (the "Act").
Insofar as indemnification for liability arising under the
Act may be permitted to directors, officers and controlling
persons of the Registrant pursuant to the foregoing provisions,
or otherwise, the Registrant has been advised that in the
opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the
Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than
the payment by the Registrant of expenses incurred or paid by a
trustee, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is
asserted by such trustee, officer or controlling person in
connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a
court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issue.
Item 28. Business and Other Connections of Investment Adviser
All of the information required by this item is set forth in
the Form ADV, as amended, of PanAgora Asset Management, Inc.
(File No. 801-35497). The following sections of such Form
ADV are incorporated herein by reference:
(a) Items 1 and 2 of Part II
(b) Section 6, Business Background, of each Schedule D.
Item 29. Principal Underwriter
(a) Funds Distributor, Inc., the principal underwriter of
the Registrant, currently acts as a principal
underwriter, depositor or investment adviser for the
following investment companies: BJB Investment Funds,
CS First Boston Investment Funds, The Fremont Mutual
Funds, HT Insight Funds, Inc., The Munder Funds and
Sierra Trust Funds.
<PAGE> 6
(b) Directors and Officers of Funds Distributor, Inc. are
as follows:
</TABLE>
<TABLE>
<CAPTION>
Positions and Offices Positions and Offices
Name with Underwriter with Registrant
<S> <C> <C>
William J. Nutt Director None
Marie E. Connolly President, Chief Executive None
Officer and
Compliance Officer
John M. Gomez Director None
John E. Pelletier Senior Vice President, None
General Counsel, Secretary
and Clerk
Richard W. Healey Senior Vice President None
Rui M. Moura Senior Vice President None
Donald R. Roberson Senior Vice President None
Joseph F. Tower, III Senior Vice President,
Treasurer and Chief Financial None
Officer
Eric B. Fischman Vice President and Associate None
General Counsel
Frederick C. Dey Vice President None
Lynne H. Johnson Vice President None
Dale F. Lampe Vice President None
</TABLE>
(c) Not Applicable.
Item 30. Location of Accounts and Records
The Declaration of Trust, By-Laws and minute books
of the Registrant are in the physical possession of PanAgora Asset
Management, Inc., 260 Franklin Street, Boston, Massachusetts 02110.
All other books, records, accounts and other documents required to
be maintained under Section 31(a) of the Investment Company Act of
1940 and the rules promulgated thereunder are in the physical
possession of Investors Bank & Trust Company, 89 South Street,
Boston, Massachusetts 02111.
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.
The Registrant undertakes to furnish each person to whom a
prospectus is delivered a copy of the Registrant's latest annual report to
shareholders, upon request and without charge.
<PAGE> 7
A copy of the Declaration of Trust of The PanAgora Institutional
Funds is on file with the Secretary of State of The Commonwealth of
Massachusetts and notice is hereby given that this instrument is executed
on behalf of the Registrant by an officer of the Registrant as an officer
and not individually and the obligations of or arising out of this
instrument are not binding upon any of the Trustees, officers or
shareholders individually but are binding only upon the assets and
property of each Fund of the Registrant.
<PAGE> 8
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933
and the Investment Company Act of 1940, the Registrant certifies
that it meets all the requirements for effectiveness of this
Post-Effective Amendment No. 3 to its Registration Statement
pursuant to Rule 485(b) under the Securities Act of 1933 and has
duly caused this Post-Effective Amendment No. 3 to such
Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Boston
and The Commonwealth of Massachusetts, on the 21st day of July,
1995.
THE PANAGORA INSTITUTIONAL FUNDS
By: /s/ Richard A. Crowell
Richard A. Crowell
President
Pursuant to the requirements of the Securities Act of
1933, this PostEffective Amendment No. 3 to the Registrant's
Registration Statement has been signed below by the following
persons in the capacities and on the dates indicated:
<TABLE>
<CAPTION>
Signature Date
<S> <C>
/s/ Richard A. Crowell July 21, 1995
Richard A. Crowell
President and Chairman
of the Board of Trustees
(Principal Executive Officer)
/s/ Paul J. Jasinski July 21, 1995
Paul J. Jasinski
Chief Accounting Officer,
Chief Financial Officer and Treasurer
/s/ Susan Smick July 21, 1995
Susan Smick
Trustee
/s/ James R. Vertin July 21, 1995
James R. Vertin
Trustee
<PAGE> 9
EXHIBIT INDEX
</TABLE>
<TABLE>
<CAPTION>
Sequential
Exhibit Page
Number Document Title Number
<S> <C> <C>
1(d). Amendment No. 2 dated
July 21, 1995 to Declaration of Trust
2(b). Amendment No. 1 dated
July 21, 1995 to By-Laws
11. Consent of Independent Public
Accountants
17. Financial Data Schedule
</TABLE>
<PAGE> 1
DECLARATION OF TRUST
OF
THE PANAGORA FUNDS
260 Franklin Street
Boston, Massachusetts 02110
Dated January 27, 1992
<PAGE> 2
TABLE OF CONTENTS
Page
ARTICLE I - NAME AND DEFINITIONS........................................ 1
Section 1.1. Name................................................. 1
Section 1.2. Definitions.......................................... 1
ARTICLE II - TRUSTEES................................................... 3
Section 2.1. General Powers....................................... 3
Section 2.2. Investments.......................................... 4
Section 2.3. Legal Title.......................................... 6
Section 2.4. Issuance and Repurchase of Shares.................... 6
Section 2.5. Delegation; Committees............................... 6
Section 2.6. Collection and Payment............................... 6
Section 2.7. Expenses............................................. 7
Section 2.8. Manner of Acting; By-laws............................ 7
Section 2.9. Miscellaneous Powers................................. 7
Section 2.10. Principal Transactions............................... 8
Section 2.11. Litigation........................................... 8
Section 2.12. Number of Trustees................................... 9
Section 2.13. Election and Term.................................... 9
Section 2.14. Resignation and Removal.............................. 9
Section 2.15. Vacancies............................................ 9
Section 2.16. Delegation of Power to Other
Trustees............................................. 10
ARTICLE III - CONTRACTS................................................. 10
Section 3.1. Distribution Contract................................ 10
Section 3.2. Advisory or Management Contract...................... 11
Section 3.3. Administration Agreement............................. 11
Section 3.4. Service Agreement.................................... 11
Section 3.5. Transfer Agent....................................... 12
Section 3.6. Custodian............................................ 12
Section 3.7. Affiliations of Trustees or
Officers, Etc........................................ 12
Section 3.8. Compliance with 1940 Act............................. 13
ARTICLE IV - LIMITATIONS OF LIABILITY OF SHAREHOLDERS,
TRUSTEES AND OTHERS........................................ 13
Section 4.1. No Personal Liability of
Shareholders, Trustees, Etc.......................... 13
Section 4.2. Non-Liability of Trustees, Etc....................... 14
Section 4.3. Mandatory Indemnification............................ 14
<PAGE> 3
Section 4.4. No Bond Required of Trustees......................... 16
Section 4.5. No Duty of Investigation; Notice
in Trust Instruments, Etc............................ 16
Section 4.6. Reliance on Experts, Etc............................. 17
ARTICLE V - SHARES OF BENEFICIAL INTEREST............................... 17
Section 5.1. Beneficial Interest.................................. 17
Section 5.2. Rights of Shareholders............................... 17
Section 5.3. Trust Only........................................... 18
Section 5.4. Issuance of Shares................................... 18
Section 5.5. Register of Shares................................... 18
Section 5.6. Transfer of Shares................................... 19
Section 5.7. Notices.............................................. 19
Section 5.8. Treasury Shares...................................... 19
Section 5.9. Voting Powers........................................ 19
Section 5.10. Meetings of Shareholders............................. 20
Section 5.11. Series or Class Designation.......................... 20
Section 5.12. Assent to Declaration of Trust....................... 24
ARTICLE VI - REDEMPTION AND REPURCHASE OF SHARES........................ 25
Section 6.1. Redemption of Shares................................. 25
Section 6.2. Price................................................ 25
Section 6.3. Payment.............................................. 25
Section 6.4. Effect of Suspension of Determination
of Net Asset Value................................... 25
Section 6.5. Repurchase by Agreement.............................. 26
Section 6.6. Redemption of Shareholder's
Interest............................................. 26
Section 6.7. Redemption of Shares in Order to
Qualify as Regulated Investment
Company; Disclosure of Holding....................... 26
Section 6.8. Reductions in Number of Outstanding
Shares Pursuant to Net Asset Value
Formula.............................................. 27
Section 6.9. Suspension of Right of Redemption.................... 27
ARTICLE VII - DETERMINATION OF NET ASSET VALUE, NET
INCOME AND DISTRIBUTIONS.................................. 28
Section 7.1. Net Asset Value...................................... 28
Section 7.2. Distributions to Shareholders........................ 28
Section 7.3. Determination of Net Income;
Constant Net Asset Value;
Reduction of Outstanding Shares...................... 29
Section 7.4. Power to Modify Foregoing
Procedures........................................... 30
<PAGE> 4
Page
ARTICLE VIII - DURATION; TERMINATION OF TRUST OR A
SERIES OR CLASS; AMENDMENT; MERGERS, ETC................. 31
Section 8.1. Duration............................................. 31
Section 8.2. Termination of the Trust or a
Series or a Class.................................... 31
Section 8.3. Amendment Procedure.................................. 32
Section 8.4. Merger, Consolidation and
Sale of Assets....................................... 33
Section 8.5. Incorporation........................................ 34
ARTICLE X - MISCELLANEOUS............................................... 35
Section 9.1. Execution and Filing................................. 35
Section 9.2. Governing Law........................................ 35
Section 9.3. Counterparts......................................... 35
Section 9.4. Reliance by Third Parties............................ 35
Section 9.5. Provisions in Conflict with Law
or Regulations....................................... 36
<PAGE> 5
DECLARATION OF TRUST
OF
THE PANAGORA FUNDS
Dated January 27, 1993
DECLARATION OF TRUST made this 27th day of January, 1993 by
Richard A. Crowell (together with all other persons from time to
time duly elected, qualified and serving as Trustees in accordance with
the provisions of Article II hereof, the "Trustees").
NOW, THEREFORE, the Trustees declare that all money and
property contributed to the trust fund hereunder shall be held
and managed in trust under this Declaration of Trust as herein
set forth below.
ARTICLE I
NAMES AND DEFINITIONS
Section 1.1. Name. The name of the trust created hereby is
"The PanAgora Funds" (the "Trust").
Section 1.1. Definitions. Wherever they are used herein, the
following terms have the following respective meanings:
(a) "Administrator" means the party, other than the Trust, to
the contract described in Section 3.3 hereof.
(b) "By-laws" means the By-laws referred to in Section 2.8
hereof, as amended from time to time.
(c) "Class" means any division of shares within a Series,
which Class is or has been established within such Series in
accordance with the provisions of Article V hereof.
(d) The terms "Commission" and "Interested Person" have the
meanings given them in the 1940 Act. Except as such term may be
otherwise defined by the Trustees in conjunction with the
establishment of any Series of Shares, the term "vote of a
majority of the Shares outstanding and entitled to vote" shall
have the same meaning as is assigned to the term "vote of a
majority of the outstanding voting securities" in the 1940 Act.
(e) "Custodian" means any Person other than the Trust who has
custody of any Trust Property as required by Section 17(f) of
the 1940 Act, but does not include a system for the central
handling of securities described in said Section 17(f).
<PAGE> 6
(f) "Declaration" means this Declaration of Trust as amended
from time to time. Reference in this Declaration of Trust to
"Declaration," "hereof," "herein" and "hereunder" shall be
deemed to refer to this Declaration rather than exclusively to
the article or section in which such words appear.
(g) "Distributor" means the party, other
(k) "Investment Adviser" means the party, other than the
Trust, to the contract described in Section 3.2 hereof.
(l) The "1940 Act" means the Investment Company Act of 1940,
as amended from time to time.
(m) "Person" means and includes individuals, corporations,
partnerships, trusts, associations, joint ventures and other
entities, whether or not legal entities, and governments and
agencies and political subdivisions thereof.
(n) "Prospectus" means the Prospectus and the Statement of
Additional Information included in the Registration Statement of
the Trust under the Securities Act of 1933 as such Prospectus
and Statement of Additional Information may be amended or
supplemented and filed with the Commission from time to time.
(o) "Series" individually or collectively means the
separately managed component(s) of the Trust (or, if the Trust
shall have only one such component, then that one) as may be
established and designated from time to time by the Trustees
pursuant to Section 5.11 hereof.
(p) "Shareholder" means a record owner of Outstanding Shares.
(q) "Shares" means the equal proportionate units of interest
into which the beneficial interest in the Trust shall be divided
from time to time, including the Shares of any and all Series or
of any Class within any Series (as the context may require)
which may be established by the Trustees, and includes fractions
<PAGE> 7
of Shares as well as whole Shares. "Outstanding Shares" means those
Shares shown from time to time on the books of the Trust or its
Transfer Agent as then issued and outstanding, but shall not include
Shares which have been redeemed or repurchased by the Trust and
which are at the time held in the treasury of the Trust.
(r) "Transfer Agent" means any Person other than the Trust who
maintains the Shareholder records of the Trust, such as the list
of Shareholders, the number of Shares credited to each account,
and the like.
(s) "Trust" means The PanAgora Funds.
(t) The "Trustees" means the persons who have signed this
Declaration, so long as they shall continue in office in
accordance with the terms hereof, and all other persons who now
serve or may from time to time be duly elected, qualified and
serving as Trustees in accordance with the provisions of Article
II hereof, and reference herein to a Trustee or the Trustees
shall refer to such person or persons in this capacity or their
capacities as trustees hereunder.
(u) "Trust Property" means any and all property, real or
personal, tangible or intangible, which is owned or held by or
for the account of the Trust or the Trustees, including any and
all assets of or allocated to any Series or Class, as the
context may require.
ARTICLE II
TRUSTEES
Section 2.1. General Powers. The Trustees shall have
exclusive and absolute control over the Trust Property and over
the business of the Trust to the same extent as if the Trustees
were the sole owners of the Trust Property and business in their
own right, but with such powers of delegation as may be
permitted by this Declaration. The Trustees shall have power to
conduct the business of the Trust and carry on its operations in
any and all of its branches and maintain offices both within and
without The Commonwealth of Massachusetts, in any and all states
of the United States of America, in the District of Columbia,
and in any and all commonwealths, territories, dependencies,
colonies, possessions, agencies or instrumentalities of the
United States of America or foreign governments, and to do all
such other things and execute all such instruments as they deem
necessary, proper or desirable in order to promote the interests
of the Trust although such things are not herein specifically
mentioned. Any determination as to what is in the interests of
the Trust made by the Trustees in good faith shall be conclusive.
<PAGE> 8
In construing the provisions of this Declaration, the
presumption shall be in favor of a grant of power to the
Trustees.
The enumeration of any specific power herein shall not be
construed as limiting the aforesaid powers. Such powers of the
Trustees may be exercised without order of or resort to any
court.
Section 2.2. Investments. The Trustees shall have the power:
(a) To operate as and carry on the business of an investment
company, and exercise all the powers necessary and appropriate
to the conduct of such operations.
(b) To invest in, hold for investment, or reinvest in, cash;
mortgages; securities, including common, preferred and
preference stocks and mortgage-backed and mortgage-related
securities; warrants; subscription rights; profit-sharing
interests or participations and all other contracts for or
evidences of equity interests; bonds, debentures, bills, time
notes and all other evidences of indebtedness; negotiable or
non-negotiable instruments; government securities, including
securities of any state, municipality or other political
subdivision, or any governmental or quasi-governmental agency or
instrumentality; and money market instruments including bank
certificates of deposit, finance paper, commercial paper,
bankers' acceptances and all kinds of repurchase agreements, of
any corporation, company, trust, association, firm or other
business organization however established, and of any country,
state, municipality or other political subdivision, or any
governmental or quasi-governmental agency or instrumentality;
and the Trustees shall be deemed to have the foregoing powers
with respect to any additional securities in which the Trust or
any Series thereof may invest should the Fundamental
Restrictions be amended.
(c) To acquire (by purchase, subscription or otherwise) to
hold, to trade in and deal in, to acquire any rights or options
to purchase or sell, to sell or otherwise dispose of, to lend
and to pledge any such securities, to enter into repurchase
agreements, reverse repurchase agreements, firm commitment
agreements and forward foreign currency exchange contracts, to
purchase and sell options on securities, indices, currency and
other financial assets, and futures contracts and options on
futures contracts of all descriptions and to engage in all types
of hedging and risk-management transactions.
(d) To exercise all rights, powers and privileges of ownership
or interest in all securities and repurchase agreements included
in the Trust Property, including the right to vote thereon and
otherwise act with respect thereto and to do all acts for the
preservation, protection, improvement and
<PAGE> 9
enhancement in value of all such securities and repurchase
agreements.
(e) To acquire (by purchase, lease or otherwise) and to hold,
use, maintain, develop and dispose of (by sale or otherwise) any
property, real or personal, including cash or foreign currency,
and any interest therein.
(f) To borrow money and in this connection issue notes or
other evidences of indebtedness; to secure borrowings by
mortgaging, pledging or otherwise subjecting as security the
Trust Property; and to endorse, guarantee or undertake the
performance of any obligation or engagement of any other Person
and to lend Trust Property.
(g) To aid by further investment any corporation, company,
trust, association or firm, any obligation of or interest in
which is included in the Trust Property or in the affairs of
which the Trustees, in their capacity as Trustees, have any
direct or indirect interest; to do all acts and things designed
to protect, preserve, improve or enhance the value of such
obligation or interest; and to guarantee or become surety on any
or all of the contracts, stocks, bonds, notes, debentures and
other obligations of any such corporation, company, trust,
association or firm.
(h) To enter into a plan or distribution and any related
agreements whereby the Trust may finance directly or indirectly
any activity which is primarily intended to result in sales of
Shares.
(i) To adopt on behalf of the Trust or any Series thereof an
alternative purchase plan providing for the issuance of multiple
Classes of Shares (as authorized herein at Section 5.11), such
Shares being differentiated on the basis of purchase method and
allocation of distribution expenses.
(j) In general to carry on any other business in connection
with or incidental or any of the foregoing powers, to do
everything necessary, suitable or proper for the accomplishment
of any purpose or the attainment of any object or the
furtherance of any power hereinbefore set forth, either alone or
in association with others, and to do every other act or thing
incidental or appurtenant to or arising out of or connected with
the aforesaid business or purposes, objects or powers.
The foregoing clauses shall be construed both as objects and
powers, and the foregoing enumeration of specific powers shall
not be held to limit or restrict in any manner the general
powers of the Trustees.
<PAGE> 10
The Trustees shall not be limited to investing in obligations
maturing before the possible termination of the Trust, nor shall
the Trustees be limited by any law limiting the investments
which may be made by fiduciaries.
Section 2.3. Legal Title. Legal title to all the Trust
Property shall be vested in the Trustees as joint tenants except
that the Trustees shall have power to cause legal title to any
Trust Property to be held by or in the name of one or more of
the Trustees, or in the name of the Trust or any Series of the
Trust, or in the name of any other Person as nominee, on such
terms as the Trustees may determine, provided that the interest
of the Trust therein is deemed appropriately protected. The
right, title and interest of the Trustees in the Trust Property
and the Trust Property of each Series of the Trust shall vest
automatically in each Person who may hereafter become a Trustee.
Upon the termination of the term of office, resignation,
removal or death of a Trustee he shall automatically cease to
have any right, title or interest in any of the Trust Property,
and the right title and interest of such Trustee in the Trust
Property shall vest automatically in the remaining Trustees.
Such vesting and cessation of title shall be effective whether
or not conveyancing documents have been executed and delivered.
Section 2.4. Issuance and Repurchase of Shares. The Trustees
shall have the power to issue, sell, repurchase, redeem, retire,
cancel, acquire, hold, resell, reissue, dispose of, transfer and
otherwise deal in Shares and, subject to the provisions set
forth in Articles VI and VII and Section 5.11 hereof, to apply
to any such repurchase, redemption, retirement, cancellation or
acquisition of Shares any funds or property of the Trust,
whether capital or surplus or otherwise, to the full extent now
or hereafter permitted by the laws of The Commonwealth of
Massachusetts governing business corporations.
Section 2.5. Delegation; Committees. The Trustees shall have
power, consistent with their continuing exclusive authority over
the management of the Trust and the Trust Property, to delegate
from time to time to such of their number or to officers,
employees or agents of the Trust the doing of such things and
the execution of such instruments either in the name of the
Trust of any Series of the Trust or the names of the Trustees or
otherwise as the Trustees may deem expedient, to the same extent
as such delegation is permitted by the 1940 Act.
Section 2.6. Collection and Payment. Subject to Section 5.11
hereof, the Trustees shall have power to collect all property
due to the Trust; to pay all claims, including taxes, against
the Trust Property; to prosecute, defend, compromise or abandon
any claims relating to the Trust Property; to foreclose any
security interest securing any obligations, by virtue of which
any property is owed to the Trust; and to enter into releases,
agreements and
<PAGE> 11
other instruments.
Section 2.7. Expenses. Subject to Section 5.11 hereof, the
Trustees shall have the power to incur and pay any expenses
which in the opinion of the Trustees are necessary or incidental
to carry out any of the purposes of this Declaration, and to pay
reasonable compensation from the funds of the Trust to
themselves as Trustees. The Trustees shall fix the compensation
of all officers, employees and Trustees of the Trust.
Section 2.8. Manner of Acting; By-laws. Except as otherwise
provided herein or in the By-laws, any action to be taken by the
Trustees may be taken by a majority of the Trustees present at a
meeting of Trustees (a quorum being present), including any
meeting held by means of a conference telephone circuit or
similar communications equipment by means of which all persons
participating in the meeting can hear each other, or by written
consents of a majority of the entire number of Trustees then in
office. The Trustees may adopt By-laws not inconsistent with
this Declaration to provide for the conduct of the business of
the Trust and may amend or repeal such By-laws to the extent
such power is not reserved to the Shareholders.
Notwithstanding the foregoing provisions of this Section 2.8
and in addition to such provisions or any other provision of
this Declaration or the By-laws, the Trustees may by resolution
appoint a committee consisting of less than the whole number of
Trustees then in office, which committee may be empowered to act
for and bind the Trustees and the Trust, as if the acts of such
committee were the acts of all the Trustees then in office, with
respect to the institution, prosecution, dismissal, settlement,
review or investigation of any action, suit or proceeding which
shall be pending or threatened to be brought before any court,
administrative agency or other adjudicatory body.
Section 2.9. Miscellaneous Powers. Subject to Section 5.11
hereof, the Trustees shall have the power to: (a) employ or
contract with such Persons as the Trustees may deem desirable
for the transaction of the business of the Trust or any Series
thereof; (b) enter into joint ventures, partnerships and any
other combinations or associations; (c) remove Trustees or fill
vacancies in or add to their number, elect and remove such
officers and appoint and terminate such agents or employees as
they consider appropriate, and appoint from their own number,
and terminate, any one or more committees which may exercise
some or all of the power and authority of the Trustees as the
Trustees may determine; (d) purchase, and pay for out of Trust
Property or Trust Property of the appropriate Series of the
Trust, insurance policies insuring the Shareholders, Trustees,
officers, employees, agents, investment advisers,
administrators, distributors, selected dealers or independent
<PAGE> 12
contractors of the Trust against all claims arising by reason of
holding any such position or by reason of any action taken or
omitted by any such Person in such capacity, whether or not
constituting negligence, or whether or not the Trust would have
the power to indemnify such Person against such liability; (e)
establish pension, profit-sharing, share purchase, and other
retirement, incentive and benefit plans for any Trustees,
officers, employees and agents of the Trust; (f) to the extent
permitted by law, indemnify any person with whom the Trust or
any Series thereof has dealings, including the Investment
Adviser, the Administrator, the Distributor, the Transfer Agent
and selected dealers, to such extent as the Trustees shall
determine; (g) guarantee indebtedness or contractual obligations
of others; (h) determine and change the fiscal year of the Trust
or any Series thereof and the method by which its or their
accounts shall be kept; and (i) adopt a seal for the Trust, but
the absence of such seal shall not impair the validity of any
instrument executed on behalf of the Trust.
Section 2.10. Principal Transactions. Except in transactions
not permitted by the 1940 Act or rules and regulations adopted
by the Commission, the Trustees may, on behalf of the Trust, buy
any securities from or sell any securities to, or lend any
assets of the Trust or any Series thereof to any Trustee or
officer of the Trust or any firm of which any such Trustee or
officer is a member acting as principal, or have any such
dealings with the Investment Adviser, Distributor or Transfer
Agent or with any Interested Person of such Person; and the
Trust or a Series thereof may employ any such Person, or firm or
company in which such Person is an Interested Person, as broker,
legal counsel, registrar, transfer agent, dividend disbursing
agent or custodian upon customary terms.
Section 2.11. Litigation. The Trustees shall have the power
to engage in and to prosecute, defend, compromise, abandon or
adjust by arbitration, or otherwise, any actions, suits,
proceedings, disputes, claims and demands relating to the Trust,
and out of the assets of the Trust or any Series thereof to pay
or to satisfy any debts, claims or expenses incurred in
connection therewith, including those of litigation, and such
power shall include without limitation the power of the Trustees
or any appropriate committee thereof, in the exercise of their
or its good faith business judgment, to dismiss any action,
suit, proceeding, dispute, claim or demand, derivative or
otherwise, brought by any person, including a Shareholder in its
own name or the name of the Trust, whether or not the Trust or
any of the Trustees may be named individually therein or the
subject matter arises by reason of business for or on behalf of
the Trust.
<PAGE 13>
Section 2.12. Number of Trustees. The number of Trustees
shall be such number as shall be fixed from time to time by a
written instrument signed by a majority of the Trustees,
provided, however, that the number of Trustees shall in no event
be less than one (1) nor more than fifteen (15); provided,
however, that after any Shares of the Trust become registered
under the Securities Act of 1933, as amended, the number of
Trustees shall not be less than two (2).
Section 2.13. Election and Term. Except for the Trustees
named herein or appointed to fill vacancies pursuant to Section
2.15 hereof, the Trustees may succeed themselves and shall be
elected by the Shareholders owning of record a plurality of the
Shares voting at a meeting of Shareholders on a date fixed by
the Trustees. Except in the event of resignations or removals
pursuant to Section 2.14 hereof, each Trustee shall hold office
until such time as less than a majority of the Trustees holding
office have been elected by Shareholders. In such event the
Trustees then in office shall call a Shareholders' meeting for
the election of Trustees. Except for the foregoing
circumstances, the Trustees shall continue to hold office and
may appoint successor Trustees.
Section 2.14. Resignation and Removal. Any Trustee may resign
his trust (without the need for any prior or subsequent
accounting) by an instrument in writing signed by him and
delivered to the other Trustees and such resignation shall be
effective upon such delivery, or at a later date according to
the terms of the instrument. Any of the Trustees may be removed
(provided the aggregate number of Trustees after such removal
shall not be less than two) for cause, by the action of
two-thirds of the remaining Trustees or by action of the holders
of two-thirds of the outstanding Shares of the Trust (for
purposes of determining the circumstances and procedures under
which any such removal by the Shareholders may take place, the
provisions of Section 16(c) of the 1940 Act (or any successor
provisions) shall be applicable to the same extent as if the
Trust were subject to the provisions of that Section). Upon the
resignation or removal of a Trustee, or his otherwise ceasing to
be a Trustee, he shall execute and deliver such documents as the
remaining Trustees shall require for the purpose of
memorializing the conveyance to the Trust or the remaining
Trustees of any Trust Property held in the name of the resigning
or removed Trustee. Upon the incapacity or death of any
Trustee, his legal representative shall execute and deliver on
his behalf such documents as the remaining Trustees shall
require as provided in the preceding sentence.
Section 2.15. Vacancies. The term of office of a Trustee shall
terminate and a vacancy shall occur in the event of his death,
retirement, resignation, removal, bankruptcy, adjudicated
incompetence or other capacity to perform the duties of the
office of a Trustee. No such vacancy shall operate
<PAGE> 14
to annul the Declaration or the revoke any existing agency
created pursuant to the terms of the Declaration. In the case
of an existing vacancy, including a vacancy existing by reason
of an increase in the number of Trustees, subject to the
provisions of Section 16(a) of the 1940 Act, the remaining
Trustees shall fill such vacancy by the appointment of such
other person as they in their discretion shall see fit, made by
a written instrument signed by a majority of the Trustees then
in office. Any such appointment shall not become effective,
however, until the person named in the written instrument of
appointment shall have accepted in writing such appointment and
agreed in writing to be bound by the terms of the Declaration.
An appointment of a Trustee may be made in anticipation of a
vacancy to occur at a later date by reason of retirement,
resignation or increase in the number of Trustees, provided that
such appointment shall not become effective prior to such
retirement, resignation or increase in the number of Trustees.
Whenever a vacancy in the number of Trustees shall occur, until
such vacancy is filled as provided in this Section 2.15, the
Trustees in office, regardless of their number, shall have all
the powers granted to the Trustees and shall discharge all the
duties imposed upon the Trustees by the Declaration. A written
instrument certifying the existence of such vacancy signed by a
majority of the Trustees in office shall be conclusive evidence
of the existence of such vacancy.
Section 2.16. Delegation of Power to Other Trustees. Any
Trustee may, by power of attorney, delegate his power for a
period not exceeding six (6) months at any one time to any other
Trustee or Trustees; provided, that in no case shall fewer than
two (2) Trustees personally exercise the powers granted to the
Trustees under this Declaration except as herein otherwise
expressly provided.
ARTICLE III
CONTRACTS
Section 3.1. Distribution Contract. The Trustees may in their
discretion from time to time enter into an exclusive or
non-exclusive distribution contract or contracts providing for
the sale of the Shares to net the Trust or the applicable Series
of the Trust not less than the amount provided for in Section
7.1 of Article VII hereof, whereby the Trustees may either agree
to sell the Shares to the other party to the contract or appoint
such other party as their sales agent for the Shares, and in
either case on such terms and conditions, if any, as may be
prescribed in the By-laws, and such further terms and conditions
as the Trustees may in their discretion determine not
inconsistent with the provisions of this Article III or the
<PAGE> 15
By-laws; and such contract may also provide for the repurchase
of the Shares by such other party as agent of the Trustees.
Section 3.2. Advisory or Management Contract. Subject to
approval by a vote of a majority of Shares outstanding and
entitled to vote, the Trustees may in their discretion from time
to time enter into one or more investment advisory or management
contracts or, if the Trustees establish multiple Series,
separate investment advisory or management contracts with
respect to one or more Series whereby the other party or parties
to any such contracts shall undertake to furnish the Trust or
such Series management, investment advisory, administration,
accounting, legal, statistical and research facilities and
services, promotional or marketing activities and such other
facilities and services, if any, as the Trustees shall from time
to time consider desirable and all upon such terms and
conditions as the Trustees may in their discretion determine.
Notwithstanding any provisions of the Declaration, the Trustees
may authorize the Investment Advisers, or any of them, under any
such contracts (subject to such general or specific instructions
as the Trustees may from time to time adopt) to effect
purchases, sales, loans or exchanges of portfolio securities and
other investments of the Trust on behalf of the Trustees or may
authorize any officer, employee or Trustee to effect such
purchases, sales, loans or exchanges pursuant to recommendations
of such Investment Advisers, or any of them (and all without
further action by the Trustees). Any such purchases, sales,
loans and exchanges shall be deemed to have been authorized by
all of the Trustees.
Section 3.3. Administration Agreement. The Trustees may in
their discretion from time to time enter into an administration
agreement or, if the Trustees establish multiple Series or
Classes, separate administration agreements with respect to each
Series or Class, whereby the other party to such agreement shall
undertake to manage the business affairs of the Trust or a
Series or Class thereof and furnish the Trust or a Series or
Class thereof with office facilities, and shall be responsible
for the ordinary clerical, bookkeeping and recordkeeping
services at such office facilities, and other facilities and
services, if any, and all upon such terms and conditions as the
Trustees may in their discretion determine.
Section 3.4. Service Agreement. The Trustees may in their
discretion from time to time enter into service agreements with
respect to one or more Series or Classes of Shares whereby the
other parties to such service agreements will provide
administration and/or support services pursuant to
administration plans and service plans, and all upon such terms
and conditions as the Trustees in their discretion may determine.
<PAGE> 16
Section 3.5. Transfer Agent. The Trustees may in their
discretion from time to time enter into a transfer agency and
shareholder service contract whereby the other party to such
contract shall undertake to furnish transfer agency and
shareholder services to the Trust. The contract shall have such
terms and conditions as the Trustees may in their discretion
determine not inconsistent with the Declaration. Such services
may be provided by one or more Persons.
Section 3.6. Custodian. The Trustees may appoint or otherwise
engage one or more banks or trust companies, each having an
aggregate capital, surplus and undivided profits (as shown in
its last published report) of at least two million dollars
($2,000,000), to serve as Custodian with authority as its agent
but subject to such restrictions, limitations and other
requirements, if any, as may be contained in the By-Laws of the
Trust. The Trustees may also authorize the Custodian to employ
one or more sub-custodians, including such foreign banks and
securities depositories as meet the requirements of the
applicable provisions of the 1940 Act and rules and regulations
adopted by the Commission, and upon such terms and conditions as
may be agreed upon between the Custodian and such sub-custodian,
to hold securities and other assets of the Trust and to perform
the acts and services of the Custodian, subject to applicable
provisions of law and resolutions adopted by the Trustees.
Section 3.7. Affiliations of Trustees or Officers, Etc. The
fact that:
(i) any of the Shareholders, Trustees or officers of the
Trust or any Series thereof is a shareholder, director, officer,
partner, trustee, employee, manager, adviser or distributor of or
for any partnership, corporation, trust, association or other
organization, or of or for any parent or affiliate of any
organization, with which a contract of the character described in
Section 3.1, 3.2, 3.3 or 3.4 hereof or for services as custodian,
transfer agent or disbursing agent or for related services may
have been or may hereafter be made, or that any such organization,
or any parent or affiliate thereof, is a Shareholder of or has an
interest in the Trust, or
(ii) any partnership, corporation, trust, association or
other organization with which a contract or the character
described in Section 3.1, 3.2, 3.3 or 3.4 hereof or for services
as custodian, transfer agent or for disbursing agent or for related
services may have been or may hereafter be made also has any one
or more of such contracts with one or more other partnerships,
corporations, trusts, associations or other organizations, or has
other business or interests, shall not affect the
<PAGE> 17
validity of any such contract or disqualify any Shareholder,
Trustee or officer of the Trust from voting upon or executing
the same or create any liability or accountability to the
Trust or its Shareholders.
Section 3.8. Compliance with 1940 Act. Any contract entered
into pursuant to Section 3.1 or 3.2 hereof shall be consistent
with and subject to the requirements of Section 15 of the 1940
Act (including any amendment thereof or other applicable Act of
Congress hereafter enacted), as modified by any applicable order
or orders of the Commission, with respect to its continuance in
effect, its termination and the method of authorization and
approval of such contract or renewal thereof.
ARTICLE IV
LIMITATIONS OF LIABILITY OF SHAREHOLDERS,
TRUSTEES AND OTHERS
Section 4.1. No Personal Liability of Shareholders, Trustees,
Etc. No Shareholder shall be subject to any personal liability
whatsoever to any Person in connection with Trust Property or
the acts, obligations or affairs of the Trust or any Series
thereof. No Trustee, officer, employee or agent of the Trust or
any Series thereof shall be subject to any personal liability
whatsoever to any Person, other than to the Trust or its
Shareholders, in connection with Trust Property or the affairs
of the Trust, except to the extent arising from bad faith,
willful misfeasance, gross negligence or reckless disregard of
his duties with respect to such Person; and all such Persons
shall look solely to the Trust Property, or to the Trust
Property of one or more specific Series of the Trust if the
claim arises from the conduct of such Trustee, officer, employee
or agent with respect to only such Series, for satisfaction of
claims of any nature arising in connection with the affairs of
the Trust. If any Shareholder, Trustee, officer, employee or
agent, as such, of the Trust or any Series thereof, is made a
party to any suit or proceeding to enforce any such liability of
the Trust or any Series thereof, he shall not, on account
thereof, be held to any personal liability. The Trust shall
indemnify and hold each Shareholder harmless from and against
all claims and liabilities to which such Shareholder may become
subject by reason of his being or having been a Shareholder, and
shall reimburse such Shareholder or former Shareholder (or his
or her heirs, executors, administrators or other legal
representatives or in the case of a corporation or other entity,
its corporate or other general successor) out of the Trust
Property for all legal and other expenses reasonably incurred by
him in connection with any such claim or liability. The
indemnification and reimbursement required by the preceding
sentence shall be made only out of
<PAGE> 18
assets of the one or more Series whose Shares were held by said
Shareholder at the time the act or event occurred which gave
rise to the claim against or liability of said Shareholder. The
rights accruing to a Shareholder under this Section 4.1 shall
not impair any other right to which such Shareholder may be
lawfully entitled, nor shall anything herein contained restrict
the right of the Trust or any Series thereof to indemnify or
reimburse a Shareholder in any appropriate situation even though
not specifically provided herein.
Section 4.2. Nonliability of Trustees, Etc. No Trustee,
officer, employee or agent of the Trust or any Series thereof
shall be liable to the Trust, its Shareholders, or to any
Shareholder, Trustee, officer, employee or agent thereof for any
action or failure to act (including without limitation the
failure to compel in any way any former or acting Trustee to
redress any breach of trust) except for his own bad faith,
willful misfeasance, gross negligence or reckless disregard of
the duties involved in the conduct of his office.
Section 4.3. Mandatory Indemnification. (a) Subject to the
exceptions and limitations contained in paragraph (b) below:
(i) every person who is, or has been, a Trustee or officer of
the Trust (including any individual who serves at its request
as director, officer, partner, trustee or the like of another
organization in which it has any interest as a shareholder,
creditor or otherwise) shall be indemnified by the Trust, or
by one or more Series thereof if the claim arises from his or
her conduct with respect to only such Series, to the fullest
extent permitted by law against all liability and against all
expenses reasonably incurred or paid by him in connection with
any claim, action, suit or proceeding in which he becomes
involved as a party or otherwise by virtue of his being or
having been such a Trustee or officer and against amounts paid
or incurred by him in the settlement thereof;
(ii) the words "claim," "action," "suit" or "proceeding"
shall apply to all claims, actions, suits or proceedings
(civil, criminal or other, including appeals), actual or
threatened; and the words "liability" and "expenses" shall
include, without limitation, attorneys' fees, costs, judgments,
amounts paid in settlement, fines, penalties and other
liabilities.
(b) No indemnification shall be provided hereunder to a
Trustee or officer:
<PAGE> 19
(i) against any liability to the Trust, a Series thereof or
the Shareholders by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct
of his office;
(ii) with respect to any matter as to which he shall have been
finally adjudicated not to have acted in good faith in the reasonable
belief that his action was in the best interest of the Trust or a Series
thereof;
(iii) in the event of a settlement or other disposition not
involving a final adjudication as provided in paragraph (b)(ii)
resulting in a payment by a Trustee or officer, unless there has been a
determination that such Trustee or officer did not engage in willful
misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office:
(A) by the court or other body approving the settlement or
other disposition;
(B) based upon a review of readily available facts (as
opposed to a full trial-type inquiry) by (x) vote of a majority of
the Non-interested Trustees acting on the matter (provided that a
majority of the Non-interested Trustees then in office act on the
matter) or (y) written opinion of independent legal counsel; or
(C) by a vote of a majority of the Shares outstanding and
entitled to vote (excluding Shares owned of record or beneficially
by such individual).
(c) The rights of indemnification herein provided may be insured
against by policies maintained by the Trust, shall be severable, shall not
affect any other rights to which any Trustee or officer may now or hereafter
be entitled, shall continue as to a person who has ceased to be such Trustee or
officer and shall inure to the benefit of the heirs, executors, administrators
and assigns of such a person. Nothing contained herein shall affect any rights
to indemnification to which personnel of the Trust or any Series thereof other
than Trustees and officers may be entitled by contract or otherwise under law.
(d) Expenses of preparation and presentation of a defense to any claim,
action, suit or proceeding of the character described in paragraph (a) of this
Section 4.3 may be advanced by the Trust or a Series thereof prior to final
disposition thereof upon receipt of an undertaking by or on behalf of the
recipient to repay such amount if it is ultimately determined that he is not
entitled to indemnification under this Section 4.3, provided that either:
<PAGE> 20
(i) such undertaking is secured by a surety bond or some
other appropriate security provided by the recipient, or the
Trust or the affected Series thereof shall be insured against
losses arising out of any such advances; or
(ii) a majority of the Non-interested Trustees acting
on the matter (provided that a majority of the Non-interested
Trustees act on the matter) or an independent legal counsel in
a written opinion shall determine, based upon a review of
readily available facts (as opposed to a full trial-type
inquiry), that there is reason to believe that the recipient
ultimately will be found entitled to indemnification.
As used in this Section 4.3, a "Non-interested Trustee" is
one who (i) is not an "Interested Person" of the Trust
(including anyone who has been exempted from being an
"Interested Person" by any rule, regulation or order of the
Commission) and (ii) is not involved in the claim, action, suit
or proceeding.
Section 4.4. No Bond Required of Trustees. No Trustee
shall be obligated to give any bond or other security for the
performance of any of his duties hereunder.
Section 4.5. No Duty of Investigation; Notice in Trust
Instruments, Etc. No purchaser, lender, transfer agent or other
Person dealing with the Trustee or any officer, employee or
agent of the Trust or any Series thereof shall be bound to make
any inquiry concerning the validity of any transaction
purporting to be made by the Trustee or by said officer,
employee or agent or be liable for the application of money or
property paid, loaned or delivered to or on the order of the
Trustees or of said officer, employee or agent. Every
obligation, contract, instrument, certificate, Share, other
security of the Trust or any Series thereof or undertaking, and
every other act or thing whatsoever executed in connection with
the Trust shall be conclusively presumed to have been executed
or done by the executors thereof only in their capacity as
Trustees under this Declaration or in their capacity as
officers, employees or agents of the Trust or a Series thereof.
Every written obligation, contract, instrument, certificate,
Share, other security of the Trust or any Series thereof or
undertaking made or issued by the Trustees may recite that the
same is executed or made by them not individually, but as
Trustees under the Declaration, and that the obligations of the
Trust or a Series thereof under any such instrument are not
binding upon any of the Trustees or Shareholders individually,
but bind only the Trust Property or the Trust Property of the
applicable Series, and may contain any further recital which
they may deem appropriate, but the omission of such recital
shall not operate to bind the Trustees or the Shareholders
individually. The Trustees shall at all times maintain
insurance for the protection of the Trust
<PAGE> 21
Property, including the Trust Property of any Series of the
Trust, the Trustees, Shareholders, officers, employees and
agents of the Trust or any Series thereof in such amount as the
Trustees shall deem adequate to cover possible tort liability,
and such other insurance as the Trustees in their sole judgment
shall deem advisable.
Section 4.6. Reliance on Experts, Etc. Each Trustee,
officer or employee of the Trust or any Series thereof shall, in
the performance of his duties, be fully and completely justified
and protected with regard to any act or any failure to act
resulting from reliance in good faith upon the books of account
or other records of the Trust or any Series thereof, upon an
opinion of legal counsel, or upon reports made to the Trust or
any Series thereof by any of its officers or employees or by the
Investment Adviser, the Administrator, the Distributor, the
Transfer Agent, selected dealers, accountants, appraisers or
other experts or consultants selected with reasonable care by
the Trustees, officers or employees of the Trust, regardless of
whether such legal counsel or expert may also be a Trustee.
ARTICLE V
SHARES OF BENEFICIAL INTEREST
Section 5.1. Beneficial Interest. The interest of the
beneficiaries hereunder shall be divided into transferable
Shares of beneficial interest without par value. The number of
such Shares of beneficial interest authorized hereunder is
unlimited. The Trustees shall have the exclusive authority
without the requirement of Shareholder approval to establish and
designate one or more Series of Shares and one or more Classes
thereof as the Trustees deem necessary or desirable Each Share
of any Series shall represent an equal proportionate share in
the assets of that Series with each other Share in that Series.
Subject to the provisions of Section 5.11 hereof, the Trustees
may also authorize the creation of additional Series of Shares
(the proceeds of which may be invested in separate,
independently managed portfolios) and additional Classes of
Shares within any Series. All Shares issued hereunder
including, without limitation, Shares issued in connection with
a dividend in Shares or a split in Shares, shall be fully paid
and nonassessable by the Trust.
Section 5.2. Rights of Shareholders. The ownership of the
Trust Property of every description and the right to conduct any
business hereinbefore described are vested exclusively in the
Trustees, and the Shareholders shall have no interest therein
other than the beneficial interest conferred by their Shares,
and they shall have no right to call for any partition or
division of any property, profits, rights or interests of the
Trust nor can they be called upon to share or assume any losses
of the Trust
<PAGE> 22
or suffer an assessment of any kind by virtue of their ownership
of Shares except as provided in Section 7.3 hereof. The Shares
shall be personal property giving only the right specifically
set forth in this Declaration. The Shares shall not entitle
the holder to preference, preemptive, appraisal, conversion or
exchange rights, except as the Trustees may determine with
respect to any Series or Class of Shares.
Section 5.3. Trust Only. It is the intention of the
Trustees to create only the relationship of Trustee and
beneficiary between the Trustees and each Shareholder from time
to time. It is not the intention of the Trustees to create a
general partnership, limited partnership, joint stock
association, corporation, bailment or any form of legal
relationship other than a trust. Nothing in this Declaration
shall be construed to make the Shareholders, either by
themselves or with the Trustees, partners or members of a joint
stock association.
Section 5.4. Issuance of Shares. The Trustees in their
discretion may from time to time without vote of the
Shareholders, issue Shares, in addition to the then issued and
outstanding Shares and Shares held in the treasury, to such
party or parties and for such amount and type of consideration,
including cash or property, at such time or times and on such
terms as the Trustees may deem best, except that only Shares
previously contracted to be sold may be issued during any period
when the right of redemption is suspended pursuant to Section
6.9 hereof, and may in such manner acquire other assets
(including the acquisition of assets subject to, and in
connection with the assumption of liabilities) and businesses.
In connection with any issuance of Shares, the Trustees may
issue fractional Shares and Shares held in its treasury. The
Trustees may from time to time divide or combine the Shares of
the Trust or, if the Shares be divided into Series or Classes
of the Trust, of any Series or Class thereof, into a greater or
lesser number without thereby changing the proportionate
beneficial interests in the Trust or in the Trust Property
allocated or belonging to such Series or Class. Contributions
to the Trust or any Series or Class thereof may be accepted for,
and Shares shall be redeemed as, whole Shares and/or 1/1,000ths
of a Share or integral multiples thereof.
Section 5.5. Register of Shares. A register shall be kept
at the principal office of the Trust or an office of the
Transfer Agent which shall contain the names and addresses of
the Shareholders and the number of Shares held by them
respectively and a record of all transfers thereof. Such
register shall be conclusive as to who are the holders of the
Shares and who shall be entitled to receive dividends or
distributions or otherwise to exercise or enjoy the rights of
Shareholders. No Shareholder shall be entitled to receive
payment of any dividend or distribution, nor to have
<PAGE> 23
notice given to him as provided herein or in the By-laws, until
he has given his address to the Transfer Agent or such other
officer or agent of the Trust as shall keep the said register
for entry thereon. It is not contemplated that certificates
will be issued for the Shares; however, the Trustees, in their
discretion, may authorize the issuance of share certificates and
promulgate appropriate rules and regulations as to their use.
Section 5.6. Transfer of Shares. Shares shall be
transferable on the records of the Trust only by the record
holder thereof or by his agent thereunto duly authorized in
writing, upon delivery to the Trustees or the Transfer Agent of
a duly executed instrument of transfer, together with such
evidence of the genuineness of each such execution and
authorization and of other matters as may reasonably be
required. Upon such delivery the transfer shall be recorded on
the register of the Trust. Until such record is made, the
Shareholder of record shall be deemed to be the holder of such
Shares for all purposes hereunder and neither the Trustees nor
any transfer agent or registrar nor any officer, employee or
agent of the Trust shall be affected by any notice of the
proposed transfer.
Any person becoming entitled to any Shares in consequence
of the death, bankruptcy or incompetence of any Shareholder, or
otherwise by operation of law, shall be recorded on the register
of Shares as the holder of such Shares upon production of the
proper evidence thereof to the Trustees or the Transfer Agent,
but until such record is made, the Shareholder of record shall
be deemed to be the holder of such Shares for all purposes
hereunder and neither the Trustees nor any Transfer Agent or
registrar nor any officer or agent of the Trust shall be
affected by any notice of such death, bankruptcy or
incompetence, or other operation of law.
Section 5.7. Notice. Any and all notice to which any
Shareholder may be entitled and any and all communications shall
be deemed duly served or given if mailed, postage prepaid, and
addressed to any Shareholder of record at his last known address
as recorded on the register of the Trust.
Section 5.8. Treasury Shares. Shares held in the treasury
of the Trust shall, until resold pursuant to Section 5.4 hereof,
not confer any voting rights on the Trustees, nor shall such
Shares be entitled to any dividends or other distributions
declared with respect to the Shares.
Section 5.9. Voting Powers. Subject to the provisions of
Section 5.11 hereof, the Shareholders shall have power to vote
only (i) for the election of Trustees as provided in Section
2.13 hereof; (ii) with respect to any investment advisory or
management contract entered into pursuant to Section
<PAGE> 24
3.2 hereof; (iii) with respect to termination of the Trust or a
Series or Class thereof as provided in Section 8.2 hereof; (iv)
with respect to any amendment of this Declaration to the extent
and as provided in Section 8.3 hereof; (v) with respect to any
merger, consolidation or sale of assets as provided in Section
8.4 hereof; (vi) with respect to incorporation of the Trust to
the extent and as provided in Section 8.5 hereof; (vii) to the
same extent as the stockholders of a Massachusetts business
corporation as to whether or not a court action, proceeding or
claim should or should not be brought or maintained derivatively
or as a class action on behalf of the Trust or any Series
thereof or the Shareholders of either; (viii) with respect to
any plan adopted pursuant to Rule 12b-1 (or any successor rule)
under the 1940 Act, and related matters, to the extent required
under the 1940 Act; and (ix) with respect to such additional
matters relating to the Trust as may be required by this
Declaration, the By-laws or any registration of the Trust as an
investment company under the 1940 Act with the Commission (or
any successor agency) or as the Trustees may consider necessary
or desirable. Each whole Share shall be entitled to one vote as
to any matter on which it is entitled to vote and each
fractional Share shall be entitled to a proportionate fractional
vote. There shall be no cumulative voting in the election of
Trustees. Until Shares are issued, the Trustees may exercise
all rights of Shareholders and may take any action required by
law, this Declaration or the By-laws to be taken by
Shareholders. The By-laws may include further provisions for
Shareholders' votes and meetings and related matters.
Section 5.10. Meetings of Shareholders. No annual or
regular meetings of Shareholders are required. Special meetings
of the Shareholders, including meetings involving only the
holders of Shares of one or more but less than all Series or
Classes of the Trust, may be called at any time by the Chairman
of the Board, the President or any Vice-President of the Trust,
and shall be called by the President or the Secretary of the
Trust at the request, in writing or by resolution, of a majority
of the Trustees, or at the written request of the holder or
holders of ten percent (10%) or more of the total number of
Shares then issued and outstanding of the Trust or any Series
thereof entitled to vote at such meeting. Any such request
shall state the purpose of the proposed meeting.
Section 5.11. Series or Class Designation. (a) Without
limiting the authority of the Trustees set forth in Section 5.1
hereof to establish and designate any further Series, it is
hereby confirmed that the Trust consists of the presently
Outstanding Shares of three Series (the "Existing Series").
<PAGE> 25
(b) Without limiting the authority of the Trustees set forth in
section 5.1 hereof to establish and designate any further
Classes, it is hereby confirmed that each Series of the Trust's
Shares consist of a single Class.
(c) The Shares of the Existing Series and each Class thereof
herein established and designated and any Shares of any further
Series and Classes that may from time to time be established and
designated by the Trustees shall be established and designated,
and the variations in the relative rights and preferences as
between the different Series shall be fixed and determined, by
the Trustees (unless the Trustees otherwise determine with
respect to further Series or Classes at the time of establishing
and designating the same); provided, that all Shares shall be
identical except that there may be variations so fixed and
determined between different Series or Classes thereof as to
investment objective, policies and restrictions, purchase price,
payment obligations, distribution expenses, service fees, rights
of redemption, special and relative rights as to dividends and
on liquidation, conversion rights, exchange rights and
conditions under which the several Series shall have separate
voting rights, all of which are subject to the limitations set
forth below. All references to Share in this Declaration shall
be deemed to be Shares of any or all Series or Classes as the
context may require.
(d) As to any Existing Series and Classes, both heretofore
and herein established and designated, and any further division
of Shares of the Trust into additional Series or Classes, the
following provisions shall be applicable:
(i) The number of authorized Shares and the number of
Shares of each Series or Class of the Trust that may be issued
shall be unlimited. The Trustees may classify or reclassify
any unissued Shares or any Shares previously issued and
reacquired of any Series or Class into one or more Series or
one or more Classes that may be established and designated
from time to time. The Trustees may hold as treasury shares
(of the same or some other Series or Class), reissue for such
consideration and on such terms as they may determine, or
cancel any Shares of any Series or Class reacquired by the
Trust at their discretion from time to time.
(ii) All consideration received by the Trust for the
issue or sale of Shares of a particular Series, together with
all assets in which such consideration is invested or
reinvested, all income, earnings, profits and proceeds
thereof, including any proceeds derived from the sale,
exchange or liquidation of such assets, and any funds or
payments derived from any reinvestment of such proceeds in
whatever form the same may be, shall irrevocably belong to
<PAGE> 26
that Series for all purposes, subject only to the rights of creditors of
such Series and except as may otherwise be required by applicable tax
law, and shall be so recorded upon the books of account of the Trust.
In the event that there are any assets, income, earnings, profits and
proceeds thereof, funds or payments which are not readily identifiable
as belonging to any particular Series, the Trustees shall allocate them
among any one or more of the Series established and designated from
time to time in such manner and on such basis as they, in their sole
discretion, deem fair and equitable. Each such allocation by the
Trustees shall be conclusive and binding upon the Shareholders of all
Series for all purposes. No holder of Shares of any Series shall have
any claim on or right to any assets allocated or belonging to any other
Series.
(iii) The assets belonging to each particular Series shall be
charged with the liabilities of the Trust in respect of that Series or
Series or Class or Classes thereof, and any general liabilities,
expenses, costs, charges or reserves of the Trust which are not readily
identifiable as belonging to any particular Series shall be allocated
and charged by the Trustees to and among any one or more of the Series
established and designated from time to time in such manner and on such
basis as the Trustees in their sole discretion deem fair and equitable.
Each allocation of liabilities, expenses, costs, charges and reserves by
the Trustees shall be conclusive and binding upon the Shareholders of
all Series and Classes for all purposes. The Trustees shall have full
discretion, to the extent not inconsistent with the 1940 Act, to
determine which items are capital; and each such determination and
allocation shall be conclusive and binding upon the Shareholders. The
assets of a particular Series of the Trust shall, under no
circumstances, be charged with liabilities attributable to any
other Series or Class thereof of the Trust. All persons extending credit
to, or contracting with or having any claim against a particular Series
or Class thereof of the Trust shall look only to the assets of that
particular Series for payment of such credit, contract or claim.
(iv) The power of the Trustees to pay dividends and make
distributions shall be governed by Section 7.2 of this Declaration with
respect to any Series or Class which represents the interests in the
assets of the Trust immediately prior to the establishment of two or
more Series or Classes. With respect to any other Series or Class,
dividends and distributions on Shares of a particular Series or Class
may be paid with
<PAGE> 27
such frequency as the Trustees may determine, which may be daily or
otherwise, pursuant to a standing resolution or resolutions adopted only
once or with such frequency as the Trustees may determine, to the holders
of Shares of that Series or Class, from such of the income and capital
gains, accrued or realized, from the assets belonging to that Series, as
the Trustees may determine, after providing for actual and accrued
liabilities belonging to that Series or Class. All dividends and
distributions on Shares of a particular Series or Class shall be
distributed pro rata to the Shareholders of that Series or Class in
proportion to the number of Shares of that Series or Class held by such
Shareholders at the time of record established for the payment of such
dividends or distributions.
(v) Each Share of a Series of the Trust shall represent a
beneficial interest in the net assets of such Series. Each holder of
Shares of a Series or Class shall be entitled to receive his pro rata
share of distributions of income and capital gains made with respect to
such Series or Class net of expenses. Upon redemption of his Shares or
indemnification for liabilities incurred by reason of his being or
having been a Shareholder of a Series of the Trust, such Shareholder
shall be paid solely out of the funds and property of such Series. Upon
liquidation or termination of a Series or Class of the Trust, Shareholders
of such Series or Class shall be entitled to receive a pro rata share of
the net assets of such Series or Class. A Shareholder of a particular
Series or Class of the Trust shall not be entitled to participate in a
derivative or class action on behalf of any other Series or the
Shareholders of any other Series or Class of the Trust.
(vi) On each matter submitted to a vote of Shareholders, all
Shares of all Series and Classes shall vote as a single class;
provided, however, that (1) as to any matter with respect to which a
separate vote of any Series or Class is required by the 1940 Act, by
attributes of any Series or Class, as determined by the Trustees, or by
any plan adopted pursuant to Rule 12b-1 (or any successor rule) under
the 1940 Act, such requirements as to a separate vote by that Series or
Class shall apply; (2) to the extent that a matter referred to in clause
(1) above affects more than one Class or Series and the interests of
each such Class or Series in the matter are identical, as determined by
the Trustees, then, subject to clause (3) below, the Shares of all such
affected Classes or Series shall vote as a single class; (3) as to any
matter which does not affect the interests of a particular Series or
Class, only the holders of Shares of the one or more affected Series or
Classes shall be entitled to vote; and (4) the provisions of the
following sentence shall apply. On any matter that pertains to any
<PAGE> 28
particular Class of a particular Series or to any expenses with respect to
any Series which matter may be submitted to a vote of Shareholders, only
the holders of Shares of the affected Class or that Series, as the case
may be, shall be entitled to vote except that: (X) to the extent said
matter affects Shares of another Class or Series, the holders of such
other Shares shall also be entitled to vote, and in such cases Shares of
the affected Class or Series, as the case may be, shall be voted in the
aggregate together with such other Shares; and (Y) to the extent that said
matter does not affect Shares of a particular Class of such Series, said
Shares shall not be entitled to vote (except where otherwise required by
law or permitted by the Trustees acting in their sole discretion) even
though the matter is submitted to a vote of the Shareholders of any other
Class or Series. The Trustees may, in conjunction with the establishment
of any further Series or Classes of Shares, establish conditions under
which the several Series or Classes of Shares shall have separate voting
rights or no voting rights.
(vii) Except as otherwise provided in this Article V, the
Trustees shall have the power to determine the designations, preferences,
privileges, payment obligations, limitations and rights, including voting
and dividend rights, of each Class and Series of Shares. Subject to
compliance with the requirements of the 1940 Act, the Trustees shall have
the authority to provide that the holders of Shares of any Series or Class
shall have the right to convert or exchange said Shares into Shares of one
or more Series or Classes of Shares in accordance with such requirements,
conditions and procedures as may be established by the Trustees.
(viii) The establishment and designation of any Series or Class
of Shares shall be effective upon the execution by a majority of the then
Trustees of an instrument setting forth such establishment and designation
and the relative rights and preference of such Series or Class, or as
otherwise provided in such instrument. At any time that there are no
Shares outstanding of any particular Series or Class previously
established and designated, the Trustees may by an instrument executed by
a majority of their number abolish that Series or Class and the
establishment and designation thereof. Each instrument referred to in
this section shall have the status of an amendment to this Declaration.
Section 5.12. Assent to Declaration of Trust. Every Shareholder, by
virtue of having become a Shareholder, shall be held to have expressly
assented and agreed to the terms hereof and to have become a party hereto.
<PAGE> 29
ARTICLE VI
REDEMPTION AND REPURCHASE OF SHARES
Section 6.1. Redemption of Shares. (a) All Shares of the Trust shall
be redeemable, at the redemption price determined in the manner set out in
this Declaration. Redeemed or repurchased Shares may be resold by the Trust.
The Trust may require any Shareholder to pay a sales charge to the Trust, the
Distributor, or any other person designated by the Trustees upon redemption or
repurchase of Shares in such amount and upon such conditions as shall be
determined from time to time by the Trustees.
(b) The Trust shall redeem Shares of the Trust or any Series or Class
thereof at the price determined as hereinafter set forth, upon the
appropriately verified written application of the record holder thereof (or
upon such other form of request as the Trustees may determine) at such office
or agency as may be designated from time to time for that purpose by the
Trustees. The Trustees may from time to time specify additional conditions,
not inconsistent with the 1940 Act, regarding the redemption of Shares in the
then effective Prospectus of the Trust.
Section 6.2. Price. Shares shall be redeemed at a price based on their
net asset value determined as set forth in Section 7.1 hereof as of such time
as the Trustees shall have theretofore prescribed by resolution. In the
absence of such resolution, the redemption price of Shares deposited shall be
based on the net asset value of such Shares next determined as set forth in
Section 7.1 hereof after receipt of such application. The amount of any
contingent deferred sales charge or redemption fee payable upon redemption of
Share may be deducted from the proceeds of such redemption.
Section 6.3. Payment. Payment of the redemption price of Shares of the
Trust or any Series or Class thereof shall be made in cash or in property to
the Shareholder at such time and in the manner, not inconsistent with the 1940
Act or other applicable laws, as may be specified from time to time in the then
effective Prospectus of the Trust, subject to the provisions of Section 6.4
hereof. Notwithstanding the foregoing, the Trustees may withhold from such
redemption proceeds any amount arising (i) from a liability of the redeeming
Shareholder to the Trust or (ii) in connection with any federal or state tax
withholding requirements.
Section 6.4. Effect of Suspension of Determination of Net Asset Value.
If, pursuant to Section 6.9 hereof, the Trustees shall declare a suspension of
the determination of net asset value with respect to Shares of the Trust or any
Series or Class thereof, the rights of Shareholders (including those who shall
have applied for redemption pursuant to Section 6.1 hereof but who shall
<PAGE> 30
not yet have received payment) to have Shares redeemed and paid for by the
Trust or a Series or Class thereof shall be suspended until the termination of
such suspension is declared. Any record holder who shall have his redemption
right so suspended may, during the period of such suspension, by appropriate
written notice of revocation at the office or agency where application was
made, revoke any application for redemption not honored and withdraw any Share
certificates on deposit. The redemption price of Shares for which redemption
applications have not been revoked shall be based on the net asset value of
such Shares next determined as set forth in Section 7.1 hereof after the
termination of such suspension, and payment shall be made within seven (7) days
after the date upon which the application was made plus the period after such
application during which the determination of net asset value was suspended.
Section 6.5. Repurchase by Agreement. The Trust may repurchase Shares
directly, or through the Distributor or another agent designated for the
purpose, by agreement with the owner thereof at a price not exceeding the net
asset value per share determined as of the time when the purchase or contract
of purchase is made or the net asset value as of any time which may be later
determined pursuant to Section 7.1 hereof; provided, that payment is not made
for the Shares prior to the time as of which such net asset value is
determined.
Section 6.6. Redemption of Shareholder's Interest. The Trustees, in
their sole discretion, may cause the Trust to redeem all of the Shares of one
or more Series or Classes held by any Shareholder if the value of such Shares
held by such Shareholder is less than the minimum amount established from time
to time by the Trustees.
Section 6.7. Redemption of Shares in Order to Qualify as Regulated
Investment Company; Disclosure of Holding. (a) If the Trustees shall, at any
time and in good faith, be of the opinion that direct or indirect ownership of
Shares or other securities of the Trust has or may become concentrated in any
Person to an extent which would disqualify the Trust or any Series thereof as a
regulated investment company under the Internal Revenue Code of 1986, as
amended, then the Trustees shall have the power by lot or other means deemed
equitable by them (i) to call for redemption by any such Person a number, or
principal amount, of Shares or other securities of the Trust or any Series
thereof sufficient to maintain or bring the direct or indirect ownership of
Shares or other securities of the Trust or any Series thereof into conformity
with the requirements for such qualification and (ii) to refuse to transfer or
issue Shares or other Securities of the Trust or any Series thereof to any
Person whose acquisition of the Shares or other securities of the Trust or any
Series thereof in question would result in such disqualification. The
<PAGE> 31
redemption shall be effected at the redemption price and in the manner provided
in Section 6.1 hereof.
(b) The holders of Shares or other securities of the Trust or any Series
thereof shall upon demand disclose to the Trustees in writing such information
with respect to direct and indirect ownership of Shares or other securities of
the Trust or any Series thereof as the Trustees deem necessary to comply with
the provisions of the Internal Revenue Code of 1986, as amended, or to comply
with the requirements of any other taxing authority.
Section 6.8. Reductions in Number of Outstanding Shares Pursuant to Net
Asset Value Formula. The Trust may also reduce the number of Outstanding
Shares of the Trust or any Series thereof pursuant to the provisions of Section
7.3 hereof.
Section 6.9. Suspension of Right of Redemption. The Trustees may declare
a suspension of the right of redemption or postpone the date of payment or
redemption for the whole or any part of any period (i) during which the New
York Stock Exchange is closed other than customary weekend and holiday
closings, (ii) during which trading on the New York Stock Exchange is
restricted, (iii) during which an emergency exists as a result of which
disposal by the Trust or a Series thereof of securities owned by it is not
reasonably practicable or it is not reasonably practicable for the Trust or a
Series thereof fairly to determine the value of its net assets, or (iv) during
any other period when the Commission may for the protection of Shareholders of
the Trust by order permit suspension of the right of redemption or postponement
of the date of payment or redemption; provided, that applicable rules and
regulations of the Commission shall govern as to whether the condition
prescribed in clause (ii), (iii) or (iv) exist. Such suspension shall take
effect at such time as the Trust shall specify but not later than the close of
business on the business day next following the declaration of suspension, and
thereafter there shall be no right of redemption or payment on redemption until
the Trust shall declare the suspension at an end, except that the suspension
shall terminate in any event on the first day on which said stock exchange
shall have reopened or the period specified in clause (ii) or (iii), as the
case may be, shall have expired (as to which, in the absence of an official
ruling by the Commission, the determination of the Trustees shall be
conclusive). In the case of a suspension of the right of redemption, a
Shareholder may either withdraw his request for redemption or receive payment
based on the net asset value existing after the termination of the suspension.
<PAGE> 32
ARTICLE VII
DETERMINATION OF NET ASSET VALUE,
NET INCOME AND DISTRIBUTIONS
Section 7.1. Net Asset Value. The net asset value of each Outstanding
Share of the Trust shall be determined on such days and at such time or time
as the Trustees may determine. The value of the assets of the Trust or any
Series thereof may be determined (i) by a pricing service which utilizes
electronic pricing techniques based on general institutional trading, (ii)
by appraisal of the securities owned by the Trust or any Series thereof, (iii)
in certain cases, at amortized cost, or (iv) by such other method as shall be
deemed to reflect the fair value thereof, determined in good faith by or under
the direction of the Trustees. From the total value of said assets, there
shall be deducted all indebtedness, interest, taxes, payable or accrued,
including estimated taxes on unrealized book profits, expenses and management
charges accrued to the appraisal date, net income determined and declared as a
distribution and all other items in the nature of liabilities which shall be
deemed appropriate, as incurred by or allocated to the Trust or any Series or
Class thereof. The resulting amount which shall represent the total net assets
of the Trust or Series or Class thereof shall be divided by the number of Share
of the Trust or Series or Class thereof outstanding at the time and the quotient
so obtained shall be deemed to be the net asset value of the Shares of the
Trust or Series or Class thereof. The net asset value of the Shares shall be
determined at least once on each business day, as of the close of regular
trading on the New York Stock Exchange or as of such other time or times as the
Trustees shall determine. The power and duty to make the daily calculations
may be delegated by the Trustees to the Investment Adviser, the Administrator,
the Custodian, the Transfer Agent or such other Person as the Trustees by
resolution may determine. The Trustees may suspend the daily determination of
net asset value to the extent permitted by the 1940 Act. It shall not be a
violation of any provision of this Declaration if Shares are sold, redeemed or
repurchased by the Trust at a price other than one based on net asset value if
the net asset value is affected by one or more errors inadvertently made in the
pricing of portfolio securities or in accruing income, expense or liabilities.
Section 7.2. Distributions to Shareholders. (a) The Trustees shall from
time to time distribute ratably among the Shareholders of the Trust or any
Series or Class thereof such proportion of the net profits, surplus (including
paid-in surplus), capital or assets of the Trust or such Series or Class held
by the Trustees as they may deem proper. Such distributions may be made in
cash or property (including without limitation any type of obligations of the
Trust or any Series thereof or any assets of either), and the Trustees may
<PAGE> 33
distribute ratably among the Shareholders of the Trust or Series or Class
thereof additional Shares of the Trust or Series or Class thereof issuable
hereunder in such manner, at such times, and on such terms as the Trustees may
deem proper. Such distributions may be among the Shareholders of the Trust or
Series or Class thereof at the time of declaring a distribution or among the
Shareholders of the Trust or Series or Class thereof at such other date or time
or dates or times as the Trustees shall determine. The Trustees may in their
discretion determine that, solely for the purposes of such distributions,
Outstanding Shares shall exclude Shares for which orders have been placed
subsequent to a specified time on the date the distribution is declared or on
the next preceding day if the distribution is declared as of a day on which
Boston banks are not open for business, all as described in the then effective
Prospectus. The Trustees may always retain from the net profits such amount as
they may deem necessary to pay the debts or expenses of the Trust or any Series
or Class thereof or to meet obligations of the Trust or any Series or Class
thereof, or as they may deem desirable to use in the conduct of the Trust's
affairs or to retain for future requirements or extensions of the business.
The Trustees may adopt and offer to Shareholders such dividend reinvestment
plans, cash dividend payout plans or related plans as the Trustees shall deem
appropriate. The Trustees may in their discretion determine that an account
administration fee or other similar charge may be deducted directly from the
income and other distributions paid on Shares to a Shareholder's account in
each Series or Class of the Trust.
(b) Inasmuch as the computation of net income and gains for federal
income tax purposes may vary from the computation thereof on the books, the
above provisions shall be interpreted to give the Trustees the power in their
discretion to distribute for any fiscal year as ordinary dividends and as
capital gains distributions, respectively, additional amounts sufficient to
enable the Trust or any Series thereof to avoid or reduce liability for taxes.
Section 7.3. Determination of Net Income; Constant Net Asset Value;
Reduction of Outstanding Shares. Subject to Section 5.11 hereof, the net
income of the Series and Classes of the Trust shall be determined in such
manner as the Trustees shall provide by resolution. Expenses of the Trust and
Series and Classes thereof, including advisory or management fees, shall be
accrued each day. Each Class shall bear only expenses relating to its Shares
and an allocable share of Series expenses in accordance with such policies as
may be established by the Trustees from time to time and as are not
inconsistent with the provisions of this Declaration or the Internal Revenue
Code of 1986, as amended, or any applicable document filed by the Trust with the
Commission. Such net income may be determined by or under the direction of the
Trustees as of the
<PAGE> 34
close of regular trading on the New York Stock Exchange on each day on which
such market is open or as of such other time or times as the Trustees shall
determine, and, except as provided herein, all the net income of any Series or
Class of the Trust, as so determined, may be declared as a dividend on the
Outstanding Shares of such Series or Class. The Trustees shall have the a
uthority at any time and for any reason to reduce the number of Shares of any
Series or Class by reducing the number of full and fractional Shares
outstanding in any such Series or Class. Without limiting the generality of
the foregoing, if, for any reason, the net income of any Series or Class of
the Trust determined at any time is a negative amount or for any other reason,
the Trustees shall have the power with respect to such Series or Class (i) to
offset each Shareholder's pro rata share of such negative amount from the
accrued dividend account of such Shareholder, (ii) to reduce the number of
Outstanding Shares of such Series or Class by reducing the number of Shares
in the account of each such Shareholder by that number of full and fractional
Shares which represents such Shareholder's pro rata amount of such excess
negative net income, or (iii) to cause to be recorded on the books of the
Trust an asset account in the amount of such negative net income, which account
may be reduced by such amount; provided, that the same shall thereupon become
the property of the Trust with respect to such Series or Class and shall not
be paid to any Shareholder, and provided, further, that dividends shall not be
declared upon the Outstanding Shares of such Series or Class on or after the
day such negative net income is experienced, until such asset account is reduced
to zero. The Trustees shall have full discretion to determine whether any cash
or property received shall be treated as income or as principal and whether any
item of expense shall be charged to the income or the principal account, and
their determination made in good faith shall be conclusive upon the
Shareholders. In the case of stock dividends received, the Trustees shall have
full discretion to determine, in the light of the particular circumstances, how
much if any of the value thereof shall be treated as income, the balance, if
any, to be treated as principal.
Section 7.4. Power to Modify Foregoing Procedures. Notwithstanding
any of the foregoing provisions of this Article VII, but subject to Section
5.11 hereof, the Trustees may prescribe, in their absolute discretion, such
other bases and times for determining the per Share net asset value of the
Shares of the Trust or any Series or Class thereof or net income of the Trust
or any Series or Class thereof, or the declaration and payment of dividends and
distributions as they may deem necessary or desirable. Without limiting the
generality of the foregoing, the Trustees may establish several Series or
Classes of Shares in accordance with Section 5.11 hereof, and declare dividends
thereon in accordance with Section 5.11(d)(iv) hereof.
<PAGE> 35
ARTICLE VIII
DURATION; TERMINATION OF TRUST OR A SERIES OR CLASS;
AMENDMENT; MERGERS, ETC.
Section 8.1. Duration. The Trust shall continue without limitation of
time but subject to the provisions of this Article VIII.
Section 8.2. Termination of the Trust or a Series or a Class. (a) The
Trust or any Series or Class thereof may be terminated by (i) the affirmative
vote of the holders of not less than two-thirds of the Shares outstanding and
entitled to vote at any meeting of Shareholders of the Trust or the appropriate
Series or Class thereof, (ii) by an instrument or instruments in writing
without a meeting, consented to by the holders of two-thirds of the Shares of
the Trust or the appropriate Series or Class thereof; provided, however, that
if such termination is recommended by the Trustees, the vote or written
consent of the holders of a majority of the Shares of the Trust or the
appropriate Series or Class thereof outstanding and entitled to vote shall
be sufficient authorization for such termination, or (iii) notice to
Shareholders by means of an instrument in writing signed by a majority of
the Trustees, stating that a majority of the Trustees has determined that
the continuation of the Trust or a Series or a 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. Such factors and events may include (but
are not limited to) the inability of the Trust or such Series to maintain
its assets at an appropriate size, changes in laws or regulations governing
the Trust or such Series or Class or affecting assets of the type in which
the Trust or such Series invests or economic developments or trends having
a significant adverse impact on the business or operations of the Trust or
such Series or Class. Upon the termination of the Trust or any Series or
Class thereof:
(i) The Trust or such Series or Class shall carry on no business
except for the purpose of winding up its affairs;
(ii) The Trustees shall proceed to wind up the affairs of the Trust
or such Series or Class and all of the powers of the Trustees under this
Declaration shall continue until the affairs of the Trust or such Series
or Class shall have been wound up, including the power to fulfill or
discharge the contracts of the Trust or such Series or Class, collect its
assets, sell, convey, assign, exchange, transfer or otherwise dispose of
all or any part of the remaining Trust Property or Trust Property
<PAGE> 36
allocated or belonging to such Series or Class to one or more Persons at
public or private sale for consideration which may consist in whole or in
part of cash, securities or other property of any kind, discharge or pay
its liabilities, and do all other acts appropriate to liquidate its
business; provided, that any sale, conveyance, assignment, exchange,
transfer or other disposition of all or substantially all the Trust
Property or Trust Property allocated or belonging to such Series or Class
that requires Shareholder approval in accordance with Section 8.4 hereof
shall receive the approval so required; and
(iii) After paying or adequately providing for the payment of all
liabilities, and upon receipt of such releases, indemnities and refunding
agreements as they deem necessary for their protection, the Trustees may
distribute the remaining Trust Property or the remaining Trust Property
of the terminated Series or Class, in cash or in kind or partly each,
among the Shareholders of the Trust or such Series or Class according
to their respective rights.
(b) After termination of the Trust or any Series or Class thereof and
distribution to the Shareholders as herein provided, a majority of the Trustees
shall execute and lodge among the records of the Trust and file with the Office
of the Secretary of State of The Commonwealth of Massachusetts an instrument
in writing setting forth the fact of such termination, and the Trustees shall
thereupon be discharged from all further liabilities and duties with respect
to the Trust or the terminated Series or Class, and the rights and interests
of all Shareholders of the Trust or the terminated Series or Class shall
thereupon cease.
Section 8.3. Amendment Procedure. (a) All rights granted to the
Shareholders under this Declaration are granted subject to the reservation of
the right to amend this Declaration as herein provided. The provisions of
this Declaration (whether or not related to the rights of Shareholders) may be
amended at any time by an instrument in writing signed by a majority of the
Trustees (or by an officer of the Trust pursuant to the vote of a majority of
the Trustees) when the amendment is authorized in accordance with Section 5.9
hereof by vote of a majority of the Shares outstanding and entitled to vote,
except that amendments (i) establishing and designating any new Series or
Classes of Shares not established and designated in Section 5.11 hereof, (ii)
terminating and/or liquidating the Trust or any Series or Class thereof as
provided in Section 8.2 hereof, (iii) necessary to conform this Declaration to
the requirements of applicable federal or state laws or regulations or the
requirements of the regulated investment company provisions of the Internal
Revenue Code of 1986, as amended, (iv) requested or required by any U.S. or
foreign governmental agency or by a state "Blue Sky" commissioner or similar
<PAGE> 37
official, (v) necessary or desirable to change the name of the Trust or any
Series or Class thereof, (vi) adding to the duties or obligations of the
Trustees or surrendering any rights or powers granted to the Trustees herein,
(vii) curing any ambiguity, correcting or supplementing any provision herein
which may be inconsistent with any other provision herein or making any other
provisions with respect to matters or question arising under this Declaration
which are not inconsistent with the provisions of this Declaration, (viii)
eliminating or modifying any provision of this Declaration which incorporates,
memorializes or sets forth an existing requirement imposed by or under any
federal or state statute or any rule, regulation or interpretation thereof or
thereunder or any rule, regulation, interpretation or guideline of any federal
or state agency, now or hereafter in effect, including without limitation,
requirements set forth in the 1940 Act and the rules and regulations adopted
by the Commission (and interpretations thereof), to the extent any change in
applicable law liberalizes, eliminates or modifies any such requirement, or
(ix) that do not adversely affect the rights of Shareholders hereunder, shall
not require authorization by Shareholder vote; provided, that the Trustees
shall not be liable for failing to make an amendment of the type described
in clause (iv) or (viii) above.
(b) No amendment may be made under this Section 8.3 which would change
any rights with respect to any Shares of the Trust or any Series or Class
thereof by reducing the amount payable thereon upon liquidation of the Trust
or such Series or Class or by diminishing or eliminating any voting rights
pertaining thereto, except with the vote or consent of the holders of
two-thirds of the Shares of the Trust or such Series or Class outstanding
and entitled to vote. Nothing contained in this Declaration shall permit
the amendment of this Declaration to impair the exemption from personal
liability of the Shareholders, Trustees, officers, employees and agents of
the Trust or to permit assessments upon Shareholders.
(c) A certificate signed by a majority of the Trustees setting forth
an amendment and reciting that it was duly adopted by the Shareholders or by
the Trustees as aforesaid or a copy of the Declaration, as amended, and
executed by a majority of the Trustees, shall be conclusive evidence of such
amendment when lodged among the records of the Trust.
Section 8.4. Merger, Consolidation and Sale of Assets. The Trust or any
Series thereof may merge or consolidate with any other corporation,
association, trust or other organization or may sell, lease or exchange all
or substantially all of the Trust Property or Trust Property allocated or
belonging to such Series, including its good will, upon such terms and
conditions and for such consideration when and as authorized at any meeting
of Shareholders called for
<PAGE> 38
the purpose by the affirmative vote of the holders of two-thirds of the Shares
of the trust or such Series outstanding and entitled to vote, or by an
instrument or instruments in writing without a meeting, consented to by the
holders of two-thirds of the Shares of the Trust or such Series; provided,
however, that, if such merger, consolidation, sale, lease or exchange is
recommended by the Trustees, the vote or written consent of the holders of a
majority of the Shares of the Trust or such Series outstanding and entitled to
vote shall be sufficient authorization; and any such merger, consolidation,
sale, lease or exchange shall be deemed for all purposes to have been
accomplished under and in accordance with the laws of The Commonwealth of
Massachusetts.
Section 8.5. Incorporation. With the approval of the holders of a
majority of the Shares of the Trust or any Series thereof outstanding and
entitled to vote, the Trustees may cause to be organized or assist in
organizing a corporation or corporations under the laws of any jurisdiction
or any other trust, partnership, association or other organization to take
over all of the Trust Property or the Trust Property allocated or belonging
to such Series or to carry on any business in which the Trust or such Series
shall directly or indirectly have any interest, and to sell, convey and
transfer the Trust Property or the Trust Property allocated or belonging to
such Series to any such corporation, trust, association or organization in
exchange for the shares or securities thereof or otherwise, and to lend money
to, subscribe for the shares or securities of, and enter into any contracts
with, any such corporation, trust, partnership, association or organization,
or any corporation, partnership, trust, association or organization in which
the Trust or such Series holds or is about to acquire shares or any other
interest. The Trustees may also cause a merger or consolidation between the
Trust or any successor thereto and any such corporation, trust, partnership,
association or other organization if and to the extent permitted by law, as
provided under applicable law then in effect. Nothing contained herein shall
be construed as requiring approval of Shareholder for the Trustees to organize
or assist in organizing one or more corporations, trusts, partnerships,
association or other organizations and selling, conveying or transferring a
portion of the Trust Property to such organization or entities.
<PAGE> 39
ARTICLE IX
MISCELLANEOUS
Section 9.1. Execution and Filing. This Declaration and any amendment
hereto shall be filed in the office of the Secretary of State of The
Commonwealth of Massachusetts and in such other places as may be required
under the laws of The Commonwealth of Massachusetts and may also be filed or
recorded in such other places as the Trustees deem appropriate. Each amendment
so filed shall be accompanied by a certificate signed and acknowledged by a
Trustee stating that such action was duly taken in a manner provided herein,
and unless such amendment or such certificate sets forth some later time for
the effectiveness of such amendment, such amendment shall be effective upon
its execution. A restated Declaration, integrating into a single instrument
all of the provisions of the Declaration which are then in effect and
operative, may be executed from time to time by a majority of the Trustees and
filed with the Secretary of State of The Commonwealth of Massachusetts. A
restated Declaration shall, upon execution, be conclusive evidence of all
amendments contained therein and may thereafter be referred to in lieu of the
original Declaration and the various amendments thereto.
Section 9.2. Governing Law. This Declaration is executed by the
Trustees and delivered in The Commonwealth of Massachusetts and with reference
to the laws thereof, and the rights of all parties hereto and the validity and
construction of every provision hereof shall be subject to and construed
according to the laws of said Commonwealth.
Section 9.3. Counterparts. This Declaration may be simultaneously
executed in several counterparts, each of which shall be deemed to be an
original, and such counterparts, together, shall constitute one and the same
instrument, which shall be sufficiently evidenced by any such original
counterpart.
Section 9.4. Reliance by Third Parties. Any certificate executed by an
individual who, according to the records of the Trust, appears to be a Trustee
hereunder, certifying as to (a) the number or identity of Trustees or
Shareholders, (b) the due authorization of the execution of any instrument or
writing, (c) the form of any vote passed at a meeting of Trustees or
Shareholders, (d) the fact that the number of Trustees or Shareholders present
at any meeting or executing any written instrument satisfies the requirements
of this Declaration, (e) the form of any By-laws adopted by or the identity of
any officers elected by the Trustees, or (f) the existence of any fact or facts
which in any manner relate to the affairs of the Trust, shall be conclusive
evidence as to the matters so certified in favor of any Person dealing with the
Trustees and their successors.
<PAGE> 40
Section 9.5. Provisions in Conflict with Law or Regulations. (a) The
provisions of this Declaration are severable, and if the Trustees shall
determine, with the advice of legal counsel, that any of such provisions is in
conflict with the 1940 Act, the regulated investment company provisions of the
Internal Revenue Code of 1986, as amended, or with other applicable laws and
regulations, the conflicting provision shall be deemed never to have
constituted a part of this Declaration; provided, however, that such
determination shall not affect any of the remaining provisions of this
Declaration or render invalid or improper any action taken or omitted prior to
such determination.
(b) If any provision of this Declaration shall be held invalid or
unenforceable in any jurisdiction, such invalidity or unenforceability shall
attach only to such provision in such jurisdiction and shall not in any manner
affect such provision in any other jurisdiction or any other provision of this
Declaration in any jurisdiction.
IN WITNESS WHEREOF, the undersigned has executed this instrument this
27th day of January, 1993.
/s/Richard A. Crowell
Richard A. Crowell
26 Plymouth River Road
Hingham, Massachusetts 02043
<PAGE> 41
COMMONWEALTH OF MASSACHUSETTS)
) ss.
COUNTY OF SUFFOLK )
On this 27th day of January, 1993, before me personally appeared Richard
A. Crowell, to me known to be the person described in and who executed the
foregoing Declaration of Trust of The PanAgora Funds, and acknowledged that
he executed the same as his free act and deed.
IN WITNESS WHEREOF, I have hereunto set of hand and affixed my official
seal this 27th day of January, 1993.
/s/ Suzanne Oram
Notary Public
(Notary Seal) My Commission Expires: March 7, 1997
<PAGE> 42
THE PANAGORA FUNDS
Amendment No. 1 to Declaration of Trust
1. Section 5.1 of the Declaration of Trust dated January 27, 1993, (the
"Declaration") of The PanAgora Funds (the "Trust") provides that the
Declaration may be amended to establish and designate new Series of Shares
by an instrument in writing executed by a majority of the Trustees of the
Trust and setting forth such establishment and designation and the relative
rights and preferences of such Series.
2. Section 5.11 of the Declaration states that the Trust shall consist
of three Series but does not identify such Series.
3. The undersigned, being the sole Trustee of the Trust, (a) hereby
amends the Declaration by designating and establishing three Series of Shares
to be known respectively as "PanAgora Asset Allocation Fund," "PanAgora Global
Fund" and PanAgora International Equity Fund," each such new Series to have
the relative rights and preferences set forth in Subsections (i) through
(viii) of Section 5.11(d) of the Declaration, and (b) hereby determines
pursuant to Section 8.3 of the Declaration that the foregoing amendment shall
be effective upon its execution by the sole Trustees of the Trust.
WITNESS my hand this 10th day of April, 1993.
/s/ Richard A. Crowell
Richard A. Crowell
<PAGE> 43
COMMONWEALTH OF MASSACHUSETTS)
) ss.
COUNTY OF SUFFOLK )
On this 10th day of April, 1993, before me personally appeared Richard A.
Crowell, to me known to be the person who executed the foregoing Amendment
No. 1 to Declaration of Trust of The PanAgora Funds, and acknowledged that
he executed the same as his free act and deed.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal this 10th day of April, 1993.
/s/ Donna A. Pace
Notary Public
(Notary Seal) My Commission Expires: Sept. 14, 1995
<PAGE> 44
THE PANAGORA FUNDS
Amendment No. 2 to the Declaration of Trust
The undersigned, Trustees of The PanAgora Funds (the "Funds"), do
hereby certify that pursuant to Article I, Section 1.1 and Article VIII,
Section 8.3 of the Declaration of Trust dated January 27, 1992, the following
resolutions were duly adopted by the Board of Trustees at a Regular Meeting
of the Board held on July 21, 1995:
RESOLVED, that the name of The PanAgora Funds (the "Funds")
previously established and designated pursuant to the Article I,
Section 1.1 of the Funds' Declaration of Trust be modified and
amended to be renamed The PanAgora Institutional Funds effective
August 1, 1995; and
FURTHER RESOLVED, that the appropriate officers of the Funds be, and
each hereby is, authorized to execute and file any notices required
to be filed reflecting the foregoing changes; to execute amendments
to the Funds' Declaration of Trust and By-Laws reflecting the
foregoing change; and to execute and file all requisite certificates,
documents and instruments and to take such other actions required to
cause said amendment to become effective and to pay all requisite
fees and expenses incident thereto.
IN WITNESS WHEREOF, the undersigned Trustees have hereunto set their
hands this 21st day of July, 1995.
/s/ Richard A. Crowell
Richard A. Crowell, Ph.D.
/s/ Susan Smick
Susan Smick
/s/ James R. Vertin
James R. Vertin
<PAGE> 1
BY-LAWS
of
THE PANAGORA FUNDS
ARTICLE I
Officers and Their Election
SECTION 1. Officers. The Officers of The PanAgora Funds (the "Trust") shall
be a Chairman, a President, a Treasurer, a Secretary and such other officers
with such other titles as provided for herein or as the Trustees may from time
to time elect. It shall not be necessary for any Trustee or other officer to
be a holder of shares in the Trust.
SECTION 2. Election of Officers. The Treasurer and Secretary shall be chosen
annually by the Trustees. The Chairman and President shall be chosen annually
by and from the Trustees. Two or more offices may be held be a single person
except the offices of President and Secretary. The officers shall hold office
until their successors are duly chosen and qualified.
SECTION 3. Resignations and Removals. Any officer of the Trust may resign by
filing a written resignation with the President, the Trustees or the Secretary,
which resignation shall take effect upon such filing unless it is specified to
be effective at some other time or upon the happening of some other event. Any
officer may be removed at any time, with or without cause, by vote of a
majority of the Trustees.
SECTION 4. Vacancies. The Trustees may fill any vacancy occurring in any
office for any reason and may, in their discretion, leave unfilled for such
period as they may determine any offices other than those of Chairman,
President, Treasurer and Secretary. Each such successor shall hold office
until his successor is duly chosen and qualified.
ARTICLE II
Powers and Duties of Officers and Trustees
SECTION 1. Trustees. The business and affairs of the Trust shall be managed
by the Trustees, and they shall have all powers necessary and desirable to
fully carry out that responsibility.
<PAGE> 2
SECTION 2. Executive and Other Committees. The Trustees may elect from their
own number an Executive Committee to consist of not less than three nor more
than five members, which Committee shall have the power and duty to conduct the
current and ordinary business of the Trust, and such other powers and duties
as the Trustees may from time to time delegate to such Committee. The Trustees
may also elect from their own number other Committees from time to time, the
number composing such Committees and the powers conferred upon the same to be
determined by vote of the Trustees.
SECTION 3. Chairman of the Trustees. The Chairman shall preside at all
meetings of the Trustees and he may be the chief executive, financial and
accounting officer of the Trust. The Chairman may also perform such other
duties as the Trustees may from time to time designate.
SECTION 4. President. The President shall be the chief operating officer of
the Trust and, subject to the authority of the Trustees, shall have general
supervision over the business and policies of the Trust. The President shall
have full power and authority to bind the Trust and in connection therewith
may execute and deliver in the name and on behalf of the Trust any and all
agreements, instruments, notes and writings of any nature that he may consider
necessary or appropriate in connection with the management of the Trust. The
President shall perform such duties in addition to all of the foregoing as
the Trustees may from time to time designate.
SECTION 5. Treasurer. The Treasurer may be the principal financial and
accounting officer of the Trust. He shall deliver all funds and securities
of the Trust which may come into his hands to such bank(s) or trust compan(ies)
as the Trustees shall employ as Custodian(s) in accordance with Section 3.6 of
the Declaration of Trust and these By-Laws. He shall have the custody of the
seal of the Trust. He shall make annual reports in writing of the business
conditions of the Trust, which reports shall be preserved upon the records of
the Trust, and he shall furnish such other reports regarding the business and
condition of the Trust as the Trustees may from time to time require. The
Treasurer shall perform such duties in addition to all of the foregoing as the
Trustees or the President may from time to time designate.
<PAGE> 3
SECTION 6. Secretary. The Secretary shall record in books kept for the
purpose all votes and proceedings of the Trustees and the shareholders of
the Trust at their respective meetings. The Secretary shall perform such
duties and possess such powers in addition to the foregoing as the Trustees
or the President may from time to time designate.
SECTION 7. Vice Presidents. Each Vice President of the Trust shall perform
such duties and possess such powers as the Trustees or the President may from
time to time designate. In the event of the absence, inability or refusal to
act of the President, the Vice President (or if there shall be more than one,
the Vice Presidents in the order determined by the Trustees) shall perform the
duties of the President and when so performing shall have all the powers of and
be subject to all the restrictions upon the President.
SECTION 8. Assistant Treasurer. The Assistant Treasurer of the Trust shall
perform such duties and possess such powers as the Trustees, the President or
the Treasurer may from time to time designate.
ARTICLE III
Shareholders' Meetings
SECTION 1. General. Voting powers and meetings of shareholders of the Trust
shall be governed by applicable provisions of law, the Declaration of Trust
and as hereinafter provided by these By-Laws.
SECTION 2. Special Meetings. A special meeting of the shareholders of any
series of the Trust shall be called by the Secretary whenever ordered by the
Trustees or requested in writing by the holder or holders of at least one-tenth
of the outstanding shares of any such series entitled to vote at such meeting.
If the Secretary, when so ordered or requested, refuses or neglects for more
than two days to call such special meeting, the Trustees or the Shareholders
so requesting may, in the name of the Secretary, call the meeting by giving
notice thereof in the manner required when notice is given by the Secretary.
SECTION 3. Record Dates. The Trustees may fix, in advance, a date as the
record date for the purpose of determining shareholders of the Trust entitled
to notice of, or to vote at, any meeting of shareholders, or shareholders of
the Trust entitled to receive payment of any dividend or the allotment of any
<PAGE> 4
other rights, or in order to make a determination of shareholders for any
other proper purpose. Such date in any case shall be not more than 90 days
prior to the date on which the particular action requiring such determination
of shareholders is to be taken.
SECTION 4. Notices. Except as above provided, notices of any special meeting
of the shareholders shall be given by the Secretary by delivering or mailing,
postage prepaid, to each shareholder entitled to vote at said meeting, a
written or printed notification of such meeting, at least fifteen days before
the meeting, to such address as may be registered with the Trust by the
shareholder.
SECTION 5. Quorum and Voting. The holders of a majority of the outstanding
shares of the Trust shall be present in person or by proxy in order to
constitute a quorum for the transaction of business at any meeting of
shareholders of the Trust, except that a majority of the outstanding shares of
any series of the Trust entitled to vote at the meeting shall be present in
person or by proxy in order to constitute a quorum with respect to such series
for the transaction of business at any meeting of shareholders with respect to
any matters upon which the shareholders of each series vote separately. Only
the shareholders of record shall be entitled to vote. Each whole share shall
be entitled to one vote as to any matter and each fractional share shall be
entitled to a proportionate fractional vote. In the absence of a quorum, a
majority of the shares of each series of the Trust present at the meeting in
person or by proxy may adjourn a meeting from time to time until a quorum shall
be present.
SECTION 6. Adjournment. A meeting of shareholders may be adjourned from time
to time without further notice, other than as announced at the meeting, to a
date not more than 120 days after the original record date. At any such
adjourned meeting, any action may be taken that could have been taken at the
meeting originally called.
SECTION 7. Action by Consent. Any action which may be taken by shareholders
of the Trust may be taken without a meeting if all of the shareholders of the
Trust or the applicable series of the Trust entitled to vote on the matter
consent to the action in writing and the written consents are filed with the
records of the meetings of shareholders. Such consent shall be treated for
all purposes as a vote taken at a meeting of shareholders.
<PAGE> 5
SECTION 8. Place of Meeting. All special meetings of the shareholders shall
be held at the principal place of business of the Trust in Boston,
Massachusetts or at such other place in the United States as the Trustees may
designate.
ARTICLE IV
Trustees' Meetings
SECTION 1. Meetings. Meetings of the Trustees shall be called orally or in
writing by the Chairman or at his order or direction or by any two other
Trustees, and if the Secretary when so requested refuses or fails for more than
one day to call such meeting, the Chairman, or such two other Trustees, may in
the name of the Secretary call such meeting by giving due notice in the manner
required when notice is given by the Secretary.
SECTION 2. Quorum. A majority of the Trustees shall constitute a quorum for
the transaction of business.
SECTION 3. Notices. Except as otherwise provided, notice of any meeting of
the Trustees shall by given by the Secretary to each Trustee, by mailing to
him, postage prepaid, addressed to him at his address as registered on the
books of the Trust or, if not so registered, at his last known address, a
written or printed notification of such meeting at least three days before
the meeting or by delivering such notice to him at least two days before the
meeting, or by telephoning him or by sending to him at least one day before
the meeting, by prepaid telegram, addressed to him at his said registered
address, if any, or if he has no such registered address, at his last known
address, notice of such meeting.
SECTION 4. Place of Meeting. All meetings of the Trustees shall be held at
the principal place of business of the Trust in Boston, Massachusetts, or at
such other place within or without The Commonwealth of Massachusetts as the
person or persons requesting said meeting to be called may designate, but any
meeting of the Trustees may adjourn to any other place.
SECTION 5. Special Action. When all the Trustees shall be present at any
meeting, however called, or wherever held, or shall assent to the holding of
the meeting without notice, or after the meeting shall sign a written assent
thereto on the record of such meeting, the acts of such meeting shall be
valid as if such meeting had been regularly held.
<PAGE> 6
SECTION 6. Action by Consent. Any action by the Trustees may be taken without
a meeting if a written consent thereto is signed by a majority of the Trustees
and filed with the records of the Trustees' meetings, or by telephone consent
of a majority of the Trustees, provided a quorum of Trustees participate in
any such telephone meeting. Such consents shall be treated as votes of the
Trustees for all purposes; provided, however, that no such consent shall be
effective if the Investment Company Act of 1940, as amended, requires that a
particular action be taken only at a meeting of the Trustees.
ARTICLE V
Shares of Beneficial Interest
SECTION 1. Beneficial Interest. The beneficial interest in the Trust and the
status of the owners thereof shall be defined, established and governed by
applicable provisions of law, the Declaration of Trust and as herein provided
by these By-Laws.
SECTION 2. Transfers. Shares may be transferred on the books of the Trust by
written request to the Trust or its transfer agent, with such proof of
authority or of the authenticity of signature as the Trust or its transfer
agent may reasonably require. Except as may be otherwise required by law,
by the Declaration of Trust or by these By-Laws, the Trust shall be entitled
to treat the record holder of shares of beneficial interest as shown on its
books as the owner of such shares for all purposes, including the payment of
dividends and the right to vote with respect thereto, regardless of any
transfer, pledge or other disposition of such shares until the shares have
been transferred on the books of the Trust in accordance with the requirements
of these By-Laws.
ARTICLE VI
Inspection of Books
The Trustees shall from time to time determine whether and to what
extent, and at what time and places, and under what conditions and regulations
the accounts and books of the Trust or any of them shall be open to inspection
by the shareholders of the Trust; and no shareholder shall have any right to
inspect any account or book or document of the Trust except as conferred by
law or otherwise by the Trustees or by resolution of the shareholders of the
Trust.
<PAGE> 7
ARTICLE VII
Custodian
The Custodian(s) employed by the Trust pursuant to Section 3.6 of the
Declaration of Trust shall be required to enter into a contract with the Trust
which shall contain in substance the following provisions:
(a) The Trust shall cause all securities and funds owned by the Trust
to be delivered or paid to the Custodian(s).
(b) The Custodian(s) shall receive and receipt for any moneys due to
the Trust and deposit the same in its own banking department and
in such other banking institutions, if any, as the Custodian(s) and
the Trustees may approve. The Custodian(s) shall have the sole
power to draw upon any such account.
(c) The Custodian(s) shall release and deliver securities owned by the
Trust in the following cases only:
(1) Upon the sale of such securities for the account of the Trust
and receipt of payment therefor;
(2) To the issuer thereof or its agent when such securities are
called, redeemed, retired or otherwise become payable;
provided, that in any such case, the cash is to be delivered
to Custodian(s);
(3) To the issuer thereof or its agent for transfer into the name
of the Trust, the Custodian(s) or a nominee of either, or for
exchange for a different number of bonds or certificates
representing the same aggregate face amount or number of
units; provided, that in any such case the new securities are
to be delivered to the Custodian(s);
(4) To the broker selling the same for examination, in accord with
the "street delivery" custom;
(5) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, reorganization or
readjustment of the securities of the issuer of such
<PAGE> 8
securities or pursuant to provisions to any deposit agreement;
provided, that, in any such case, the new securities and cash,
if any, are to be delivered to the Custodian(s);
(6) In the case of warrants, rights, or similar securities, the
surrender thereof in the exercise of such warrants, rights or
similar securities or the surrender of interim receipts or
temporary securities for definitive securities;
(7) To any pledge by way of pledge or hypothecation to secure any
loan; and
(8) For deposit in a system for the central handling of
securities.
(d) The Custodian(s) shall pay out moneys of the Trust only upon the
purchase of securities for the account of the Trust and the
delivery in due course of such securities to the Custodian(s), or
in connection with the conversion, exchange or surrender or
securities owned by the Trust as set forth in paragraph (c) above,
or for the redemption or repurchase of shares issued by the Trust
or for the making of any disbursements authorized by the Trustees
pursuant to the Declaration of Trust or these By-Laws, or for the
payment of any expense or liability incurred by the Trust;
provided, that, in every case where payment is made by the
Custodian(s) in advance of receipt of the securities purchased,
the Custodian(s) shall be absolutely liable to the Trust for such
securities to the same extent as if the securities had been
received by the Custodian(s).
(e) The Custodian(s) shall make deliveries of securities and payments
of cash only upon written instructions signed or initialed by such
officer or officers or other agent or agents of the Trust as may be
authorized to sign or initial such instructions by resolution of
the Trustees; it being understood that the Trustees may from time
to time authorize a different person or persons to sign or initial
instructions for different purposes.
The contract between the Trust and the Custodian(s) may contain any such
other provisions not inconsistent with the provisions of Section 3.6 of the
Declaration of Trust or with these By-Laws as the Trustees may approve.
<PAGE> 9
Such contract shall be terminable by either party upon written notice
to the other within such time not exceeding sixty days as may be specified in
the contract; provided, however, that upon termination of the contract or
inability of the Custodian(s) to continue to serve, the Custodian(s) shall,
upon written notice of appointment of another bank or trust company as
custodian, deliver and pay over to such successor custodian all securities
and moneys held by it for account of the Trust. In such case, the Trustees
shall promptly appoint a successor custodian, but in the event that no
successor custodian can be found having the required qualifications and
willing to serve, it shall be the duty of the Trustees to call as promptly
as possible a special meeting of the shareholders of the Trust to determine
whether the Trust shall function without a custodian or shall be liquidated.
If so directed by vote of the holders of a majority of the outstanding shares
of the Trust, the Custodian(s) shall deliver and pay over all property of
the Trust held by it as specified in such vote.
Such contract shall also provide that, pending appointment of a
successor custodian or a vote of the shareholders of the Trust specifying
some other disposition of the funds and property, the Custodian(s) shall
not deliver funds and property of the Trust to the Trust, but may deliver
them to a bank or trust company doing business in Boston, Massachusetts,
of its own selection having aggregate capital, surplus and undivided profits,
as shown by its last published report, of not less than $2,000,000 as the
property of the Trust to be held under terms similar to those on which they
were held by the retiring custodian.
Any sub-custodian employed by the Custodian(s) pursuant to authorization
to do so granted by the Trust pursuant to Section 3.6 of the Declaration of
Trust shall be required to enter into a contract with the Custodian containing
in substance the same provisions as those described in paragraphs (a) through
(e) above, except that any contract with a sub-custodian performing its duties
outside the United States and its territories and possessions may omit or
limit any of such conditions; provided, that any such omission or limitation
shall be expressly approved by a majority of the Trustees of the Trust.
<PAGE> 10
ARTICLE VIII
Amendments
These By-Laws, or any of them, may be altered, amended or repealed, or
new By-Laws may be adopted by (i) a vote of a majority of the shares of
the Trust outstanding and entitled to vote or (ii) by the Trustees;
provided, however, that no By-Law may be amended, adopted or repealed by the
Trustees if such amendment, adoption or repeal requires, pursuant to laws,
the Declaration of Trust or these By-Laws, a vote of the shareholders.
ARTICLE IV
Miscellaneous Provisions
SECTION 1. Seal. The seal of the Trust shall be circular in form bearing
the inscription:
"THE PANAGORA FUNDS"
"A MASSACHUSETTS BUSINESS TRUST 1993"
SECTION 2. Fiscal Year. The fiscal year of the Trust shall be the period
of twelve months ending on the last day of December in each calendar
year; provided, however, that the Trustees may from time to time change
the fiscal year.
SECTION 3. Reports to Shareholders. The Trustees shall at least
semi-annually submit to the shareholders a written financial report of
the transactions of the Trust including financial statements which shall at
least annually be certified by independent public accountants.
SECTION 4. Voting of Securities. Except as the Trustees may otherwise
designate, the President or Treasurer may waive notice of, and act as, or
appoint any person or persons to act as, proxy or attorney-in-fact for the
Trust (with or without power of substitution) at any meeting of shareholders
or shareholders of any corporation or other organization, the securities of
which may be held by the Trust.
<PAGE> 11
SECTION 5. Evidence of Authority. A certificate by the Secretary or
Assistant Secretary, or a temporary Secretary, as to any action taken
by the shareholders, Trustees, any committee, officer or representative of
the Trust shall as to all persons who rely on the certificate in good faith
be conclusive evidence of such action.
SECTION 6. Declaration of Trust. All references in these By-Laws to the
"Declaration of Trust" shall be deemed to refer to the Declaration of Trust of
the Trust dated January 27, 1993, and known as "The PanAgora Funds", as amended
and in effect from time to time.
SECTION 7. Severability. Any determination that any provision of these
By-Laws is for any reason inapplicable, illegal or ineffective shall not
affect or invalidate any other provision of these By-Laws or the Declaration
of Trust.
SECTION 8. Pronouns. All pronouns used in these By-Laws shall be deemed
to refer to the masculine, feminine or neuter, singular or plural, as the
identify of the person or persons may require.
<PAGE> 12
THE PANAGORA FUNDS
Amendment No. 1 to the By-Laws
The undersigned, Secretary of The PanAgora Funds (the "Funds"), does
hereby certify that pursuant to Article I, Section 1.1 and Article VIII,
Section 8.3 of the Declaration of Trust dated January 27, 1992 and Article
VIII of the By-Laws adopted by the Board on May 19, 1993, the following
resolutions were duly adopted by the Board of Trustees at a Regular Meeting
of the Board held on July 21, 1995:
RESOLVED, that the name of The PanAgora Funds (the "Funds") previously
established and designated pursuant to the Article I, Section 1.1 of
the Funds' Declaration of Trust be modified and amended to be renamed
The PanAgora Institutional Funds effective August 1, 1995; and
FURTHER RESOLVED, that the appropriate officers of the Funds be, and
each hereby is, authorized to execute and file any notices required to
be filed reflecting the foregoing changes; to execute amendments to
the Funds' Declaration of Trust and By-Laws reflecting the foregoing
change; and to execute and file all requisite certificates, documents
and instruments and to take such other actions required to cause said
amendment to become effective and to pay all requisite fees and
expenses incident thereto.
IN WITNESS WHEREOF, the undersigned has hereunto set her hand this 21st
day of July, 1995.
/s/ Debra M. Brown
Debra M. Brown
Secretary
CONSENT OF INDEPENDENT ACCOUNTANTS
To the Board of Trustees of
The PanAgora Institutional Funds:
We hereby consent to the following with respect to Post-Effective
Amendment No. 3 to the Registration Statement on Form N-1A (File No. 33-57740)
under the Securities Act of 1933, as amended, of The PanAgora Institutional
Funds (formerly The PanAgora Funds):
1. The incorporation by reference of our report dated July 21, 1995
accompanying the Annual Report dated May 31, 1995 of The PanAgora
Institutional Funds, in the Statement of Additional Information.
2. The reference to our firm under the heading "Financial Highlights"
in the Prospectus.
3. The reference to our firm under the heading "Independent
Accountants and Financial Statements" in the Statement of
Additional Information.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
July 27, 1995
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from PanAgora
Funds from N-SAR for the period ended May 31, 1995 and is qualified in its entirely
by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 1
<NAME> PANAGORA ASSET ALLOCATION FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1995
<PERIOD-END> MAY-31-1995
<INVESTMENTS-AT-COST> 7085733
<INVESTMENTS-AT-VALUE> 7400760
<RECEIVABLES> 305322
<ASSETS-OTHER> 12568
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 7718650
<PAYABLE-FOR-SECURITIES> 174726
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 254752
<TOTAL-LIABILITIES> 429478
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 6587723
<SHARES-COMMON-STOCK> 647486
<SHARES-COMMON-PRIOR> 286748
<ACCUMULATED-NII-CURRENT> 69716
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 339931
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 291802
<NET-ASSETS> 7289172
<DIVIDEND-INCOME> 116491
<INTEREST-INCOME> 80174
<OTHER-INCOME> 0
<EXPENSES-NET> 52717
<NET-INVESTMENT-INCOME> 143948
<REALIZED-GAINS-CURRENT> 333529
<APPREC-INCREASE-CURRENT> 381058
<NET-CHANGE-FROM-OPS> 858535
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 91258
<DISTRIBUTIONS-OF-GAINS> 471
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 412762
<NUMBER-OF-SHARES-REDEEMED> 61034
<SHARES-REINVESTED> 9010
<NET-CHANGE-IN-ASSETS> 4418339
<ACCUMULATED-NII-PRIOR> 11000
<ACCUMULATED-GAINS-PRIOR> 13837
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 35173
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 179986
<AVERAGE-NET-ASSETS> 5862109
<PER-SHARE-NAV-BEGIN> 10.01
<PER-SHARE-NII> .22
<PER-SHARE-GAIN-APPREC> 1.18
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> .15
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.26
<EXPENSE-RATIO> .009
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains financial information extracted from PanAgora Funds
form N-SAR for the period ended May 31, 1995 and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 2
<NAME> PANAGORA GLOBAL FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1995
<PERIOD-END> MAY-31-1995
<INVESTMENTS-AT-COST> 47174023
<INVESTMENTS-AT-VALUE> 50293278
<RECEIVABLES> 243673
<ASSETS-OTHER> 1555541
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 52092492
<PAYABLE-FOR-SECURITIES> 61540
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 711801
<TOTAL-LIABILITIES> 773341
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 47837075
<SHARES-COMMON-STOCK> 4507291
<SHARES-COMMON-PRIOR> 3985823
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (308828)
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (287754)
<ACCUM-APPREC-OR-DEPREC> 4078658
<NET-ASSETS> 51319151
<DIVIDEND-INCOME> 753171
<INTEREST-INCOME> 416204
<OTHER-INCOME> 0
<EXPENSES-NET> 448529
<NET-INVESTMENT-INCOME> 720846
<REALIZED-GAINS-CURRENT> 100572
<APPREC-INCREASE-CURRENT> 3657374
<NET-CHANGE-FROM-OPS> 4478792
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 0
<DISTRIBUTIONS-OF-GAINS> 388372
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 675793
<NUMBER-OF-SHARES-REDEEMED> 191958
<SHARES-REINVESTED> 37633
<NET-CHANGE-IN-ASSETS> 9561579
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 74161
<OVERDISTRIB-NII-PRIOR> 1118599
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 313880
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 634043
<AVERAGE-NET-ASSETS> 44839970
<PER-SHARE-NAV-BEGIN> 10.48
<PER-SHARE-NII> .21
<PER-SHARE-GAIN-APPREC> .79
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> .09
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.39
<EXPENSE-RATIO> .01
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
This schedule contains summary financial information extracted from PanAgora
Funds form N-SAR for the period ended May 31, 1995 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<SERIES>
<NUMBER> 3
<NAME> PANAGORA INTERNATIONAL EQUITY FUND
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> MAY-31-1995
<PERIOD-END> MAY-31-1995
<INVESTMENTS-AT-COST> 16810031
<INVESTMENTS-AT-VALUE> 17275583
<RECEIVABLES> 249639
<ASSETS-OTHER> 613169
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 18138391
<PAYABLE-FOR-SECURITIES> 74911
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 103369
<TOTAL-LIABILITIES> 178280
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 17793753
<SHARES-COMMON-STOCK> 1690476
<SHARES-COMMON-PRIOR> 1390597
<ACCUMULATED-NII-CURRENT> 223909
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> 640290
<ACCUM-APPREC-OR-DEPREC> 582739
<NET-ASSETS> 17960111
<DIVIDEND-INCOME> 212146
<INTEREST-INCOME> 163598
<OTHER-INCOME> 0
<EXPENSES-NET> 166103
<NET-INVESTMENT-INCOME> 209641
<REALIZED-GAINS-CURRENT> 24937
<APPREC-INCREASE-CURRENT> 5233
<NET-CHANGE-FROM-OPS> 239811
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 309580
<DISTRIBUTIONS-OF-GAINS> 743906
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1228449
<NUMBER-OF-SHARES-REDEEMED> 1030778
<SHARES-REINVESTED> 102208
<NET-CHANGE-IN-ASSETS> 3005544
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 391111
<OVERDISTRIB-NII-PRIOR> 2131
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 120808
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 430675
<AVERAGE-NET-ASSETS> 15101015
<PER-SHARE-NAV-BEGIN> 10.75
<PER-SHARE-NII> .33
<PER-SHARE-GAIN-APPREC> .19
<PER-SHARE-DIVIDEND> 0
<PER-SHARE-DISTRIBUTIONS> .65
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.62
<EXPENSE-RATIO> .011
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
