<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
FILED BY THE REGISTRANT /X/ FILED BY A PARTY OTHER THAN THE REGISTRANT / /
- --------------------------------------------------------------------------------
Check the appropriate box:
/ / Preliminary Proxy Statement
/X/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
/ / Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
NAME OF COMPANY
(Name of Registrant as Specified In Its Charter)
NAME OF COMPANY
(Name of Person(s) Filing Proxy Statement)
PAYMENT OF FILING FEE (CHECK THE APPROPRIATE BOX):
/X/ No fee required.
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
4) Proposed maximum aggregate value of transaction:
5) Total fee paid:
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
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<PAGE> 2
THE PANAGORA INSTITUTIONAL FUNDS
PANAGORA ASSET ALLOCATION FUND
PANAGORA INTERNATIONAL EQUITY FUND
260 FRANKLIN STREET
BOSTON, MASSACHUSETTS 02110
1-800-423-6041
------------------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
------------------------
TO BE HELD JANUARY 22, 1998
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders (the
"Meeting") of the PanAgora Asset Allocation Fund and the PanAgora International
Equity Fund (each a "Fund" and collectively the "Funds") will be held at the
offices of The PanAgora Institutional Funds (the "Trust"), at 260 Franklin
Street, Boston, Massachusetts 02110, at 10:00 a.m. (Boston time) on Thursday,
January 22, 1998. Each Fund is a series of the Trust, a Massachusetts business
trust. The purpose of the Meeting is to consider and act upon the following
proposals:
(1) To approve the terms of a new Investment Management Agreement
between each Fund and PanAgora Asset Management, Inc.;
(2) To ratify the selection of Coopers & Lybrand L.L.P. as independent
public accountants for each Fund for the fiscal year ending May 31, 1998;
and
(3) To transact such other business as may properly come before the
Meeting or any adjournments thereof.
YOUR BOARD OF TRUSTEES RECOMMENDS THAT YOU VOTE IN FAVOR OF PROPOSALS (1) AND
(2)
Shareholders of record as of the close of business on December 1, 1997 are
entitled to notice of and to vote at the Meeting or any adjournment thereof.
By Order of the Board of Trustees,
/s/ Andrew S. Josef
Andrew S. Josef, Secretary
December 17, 1997
Boston, Massachusetts
YOUR VOTE IS IMPORTANT
WHETHER OR NOT YOU EXPECT TO BE PRESENT AT THE MEETING, PLEASE COMPLETE AND
RETURN THE ENCLOSED FORM OF PROXY IN THE ACCOMPANYING ENVELOPE, WHICH REQUIRES
NO POSTAGE IF MAILED IN THE UNITED STATES. YOU MAY STILL VOTE IN PERSON IF YOU
ATTEND THE MEETING.
<PAGE> 3
THE PANAGORA INSTITUTIONAL FUNDS
PANAGORA ASSET ALLOCATION FUND
PANAGORA INTERNATIONAL EQUITY FUND
260 FRANKLIN STREET
BOSTON, MASSACHUSETTS 02110
1-800-423-6041
------------------------
PROXY STATEMENT
------------------------
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD JANUARY 22, 1998
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Trustees of The PanAgora Institutional Funds (the
"Trust"), a Massachusetts business trust. The proxies will be used at the
Special Meeting of Shareholders (the "Meeting") of the two series of the Trust,
the PanAgora Asset Allocation Fund and the PanAgora International Equity Fund
(each a "Fund" and collectively the "Funds"), to be held on Thursday, January
22, 1998 at 10:00 a.m. (Boston time). The Meeting will be held at the offices of
the Trust, at 260 Franklin Street, Boston, Massachusetts 02110.
The Board of Trustees (the "Board") has fixed the close of business on
December 1, 1997 as the record date for the determination of shareholders of
each Fund entitled to notice of and to vote at the Meeting. On the record date,
2,808,484 shares of beneficial interest of the PanAgora Asset Allocation Fund
were outstanding and 2,322,443 shares of beneficial interest of the PanAgora
International Equity Fund were outstanding.
On the record date, the Trustees and Officers of the Trust owned less than
1% of each Fund's outstanding shares. The following shareholders were deemed to
be the beneficial owners of more than 5% of each Fund's shares as of the record
date:
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP PERCENT OF THE FUND
- -------------------------------------------------------- -------------------- -------------------
PANAGORA ASSET ALLOCATION FUND
<S> <C> <C>
Kessler Institute for Rehabilitation.................... 1,903,857 67.8%
1199 Pleasant Valley Way
West Orange, NJ 07052
Information Alliance Pension Plan Trust................. 383,843 13.7%
Box 3079
Pittsfield, MA 01202
American Express Trust Company.......................... 332,536 11.8%
FBO American Express Trust
Retirement Services Plans
c/o Nancy Jendro N10/996
P. O. Box 534
Minneapolis, MN 55440-0534
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP PERCENT OF THE FUND
- -------------------------------------------------------- -------------------- -------------------
PANAGORA INTERNATIONAL EQUITY FUND
<S> <C> <C>
Bankers Trust TR........................................ 1,455,374 62.7%
Premark Retirement Savings Plan
34 Exchange Place
Jersey City, NJ 07302
Northwest Bank Minnesota................................ 425,362 18.3%
as custodian for
The Minneapolis Foundation
Investment Partnership
733 Marquette Avenue
Minneapolis, MN 55479-0036
Electric Energy Inc..................................... 277,201 11.9%
Employees Revised Retirement Plan
c/o Boston Safe Deposit Trust Company
One Cabot Road
Medford, MA 02155
</TABLE>
This Proxy Statement, the attached Notice and the enclosed proxy card will
be mailed to shareholders of each Fund on or about December 17, 1997. EACH
FUND'S ANNUAL REPORT FOR THE FISCAL YEAR ENDED MAY 31, 1997 HAS PREVIOUSLY BEEN
MAILED TO SHAREHOLDERS. ADDITIONAL COPIES OF EACH ANNUAL REPORT MAY BE OBTAINED
FREE OF CHARGE FROM FUNDS DISTRIBUTOR, INC., THE TRUST'S DISTRIBUTOR, BY CALLING
1-800-432-6041 OR WRITING TO THE ADDRESS ON THE FRONT COVER.
PROPOSAL 1
APPROVAL OF NEW INVESTMENT MANAGEMENT AGREEMENTS
INTRODUCTION
PanAgora Asset Management, Inc. ("PanAgora") acts as the investment manager
to each Fund pursuant to investment management agreements entered into by each
Fund and PanAgora (each a "Current Investment Management Agreement" and
collectively the "Current Investment Management Agreements"). Each of Lehman
Brothers Inc. ("Lehman") and Nippon Life Insurance Company ("Nippon Life") own
50% of the outstanding common stock of PanAgora. On November 25, 1997, Putnam
Investments, Inc. ("Putnam") entered into an agreement with Lehman pursuant to
which Putnam has agreed to purchase the 50% equity interest in PanAgora owned by
Lehman (the "Transaction"). Following completion of the Transaction, PanAgora
will be owned jointly by Putnam and Nippon Life.
Consummation of the Transaction may constitute an "assignment," as that
term is defined in the Investment Company Act of 1940, as amended (the "1940
Act"), of each of the Current Investment Management Agreements. As required by
the 1940 Act, each of the Current Investment Management Agreements provides for
its automatic termination in the event of its assignment. In anticipation of the
Transaction, a new investment management agreement (each a "New Investment
Management Agreement" and collectively the "New Investment Management
Agreements") between each Fund and PanAgora is being proposed for approval by
shareholders of each Fund. The New Investment Management Agreement for each Fund
is identical to the corresponding Current Investment Management Agreement in all
respects except for the date on which each Agreement takes effect and the date
on which each Agreement must initially be renewed by the Trustees of the Trust.
THE APPROVAL OF THIS PROPOSAL BY THE SHAREHOLDERS OF EACH FUND WILL NOT RESULT
IN AN INCREASE IN THE RATE OF THE MANAGEMENT FEE OR OTHER EXPENSES PAYABLE BY
EACH FUND.
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<PAGE> 5
BOARD OF TRUSTEES RECOMMENDATION
On October 8, 1997, the Board, including the Trustees who are not parties
to either New Investment Management Agreement and are not "interested persons"
(as defined under the 1940 Act) of PanAgora, Putnam or Lehman (the "Independent
Trustees"), voted to approve the New Investment Management Agreements and to
recommend their approval to shareholders. The Board recommends that the
shareholders of each Fund vote in favor of the approval of the New Investment
Management Agreements.
For information about the factors the Board considered in making its
recommendation, please see "Board of Trustees' Evaluation" below.
INFORMATION ABOUT THE TRANSACTION
PanAgora is a registered investment adviser with approximately $15 billion
in assets under management as of October 30, 1997. Fifty percent of PanAgora's
outstanding voting stock is owned by Nippon Life, 2-2 Yurakucho 1-chrome
Chiyoda-KU, Tokyo, 100, Japan, and the remaining fifty percent is currently
owned by Lehman, 3 World Financial Center, 200 Vesey Street, New York, New York
10285.
On November 25, 1997, Putnam signed a purchase and sale agreement with
Lehman pursuant to which Putnam will purchase Lehman's entire holding of
PanAgora stock, together with Lehman's 50% interest in an investment adviser
based in the United Kingdom and also jointly owned by Nippon Life. Pursuant to
the terms of the agreement, the Transaction is subject to certain conditions
being satisfied prior to closing, including the approval by clients whose
advisory contracts represent at least 85% of PanAgora's advisory fee revenues.
If the Transaction is consummated, Putnam will acquire 50% of the
outstanding voting stock of PanAgora, which may be deemed to constitute a change
in control of PanAgora. A change in control of PanAgora would constitute an
"assignment" of each Current Investment Management Agreement and would result in
the automatic termination of those Agreements. In order to eliminate any
uncertainty as to the effectiveness of the investment advisory arrangements for
the Funds following the Transaction, the Board has approved and presents to the
shareholders of each Fund for their approval New Investment Management
Agreements.
Putnam provides investment management services to mutual funds and other
institutional investors. As of November 1, 1997, Putnam's assets under
management were in excess of $200 billion.
Putnam has advised PanAgora and the Board that it does not expect the
Transaction to have an adverse effect on operations of PanAgora or on PanAgora's
ability to provide high quality advisory services to its clients. In addition,
Putnam anticipates that all of PanAgora's investment advisory personnel and
management team will continue in their present capacities after the Transaction.
All fees and expenses incurred by the Funds relating to the New Investment
Management Agreements and this Proxy Statement will be paid by Putnam and
Lehman. None of the Trust, the Funds or their shareholders will incur any
related expenses.
DESCRIPTION OF CURRENT AND PROPOSED AGREEMENTS
EXCEPT FOR ITS DATE OF EFFECTIVENESS AND DATE OF RENEWAL, EACH NEW
INVESTMENT MANAGEMENT AGREEMENT IS IDENTICAL IN ALL RESPECTS TO ITS
CORRESPONDING CURRENT INVESTMENT MANAGEMENT AGREEMENT.
Under each of the Current and New Investment Management Agreements,
PanAgora provides each Fund, subject to the supervision of the Board, with
continuing investment management services. PanAgora's responsibilities include
the purchase, retention and disposition of each Fund's portfolio securities and
other assets. In addition, PanAgora administers certain of the Trust's business
affairs, performs various shareholder servicing functions to the extent these
services are not provided by other organizations and monitors and
3
<PAGE> 6
evaluates the performance of the Trust's service providers. For these services,
the Trust, on behalf of each Fund, pays PanAgora a monthly fee at the following
annual rates of each Fund's average daily net assets which was equal to the
following aggregate amounts for the most recent fiscal year ended May 31, 1997:
<TABLE>
<CAPTION>
MANAGEMENT
ACCRUED FEE ABSENT
MANAGEMENT MANAGEMENT EXPENSE
FUND ASSETS FEE RATE FEE PAID LIMITATION
- ------------------------------------------------ ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
PanAgora Asset Allocation Fund.................. 36,081,000 0.60% -0-* $ 99,468*
PanAgora International Equity Fund.............. 26,496,000 0.80% -0-* $191,889*
</TABLE>
- ---------------
* PanAgora has voluntarily agreed to waive all or a portion of its advisory fee
and to limit the expenses of each Fund to the extent necessary to limit each
Fund's total operating expenses to 0.90% of the average daily net assets of
the Asset Allocation Fund and to 1.10% of the average daily net assets of the
International Equity Fund.
The Trust, on behalf of each Fund, is responsible for all expenses other
than those expressly assumed by PanAgora under the terms of the Current or New
Investment Management 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, administration fees, expenses of issuing
reports to shareholders, legal fees, auditing and tax fees, blue sky fees, fees
of the Securities and Exchange Commission, insurance expenses and Independent
Trustees fees.
Each of the Current and New Investment Management Agreements provides that
it will continue in effect for an initial term of two years from its date of
execution (which, in the case of the New Investment Management Agreements, is
expected to be approximately the time of the consummation of the Transaction)
and thereafter so long as it is approved at least annually in accordance with
the 1940 Act. The 1940 Act requires that, after the initial two-year term, all
investment management agreements be approved at least annually by (i) the vote,
cast in person at a meeting called for that purpose, of a majority of the
Independent Trustees and (ii) the majority vote of the full Board or the vote of
a majority of the outstanding voting securities (as defined in the 1940 Act) of
each Fund. Each of the Current and New Investment Management Agreements
terminates automatically in the event of its assignment, and may be terminated
by the Trust at any time without penalty on 60 days' written notice to PanAgora
and by PanAgora without penalty on 60 days' written notice to the Trust. Each of
the Current and New Investment Management Agreements generally may be amended
only by the affirmative vote of the holders of a "majority of the outstanding
voting securities" of each Fund.
The Board last approved the continuance of each Current Investment
Management Agreement at a meeting held on October 8, 1997 for the one year
period beginning October 31, 1997. The sole initial shareholder of the PanAgora
Asset Allocation Fund and the sole initial shareholder of the PanAgora
International Equity Fund approved their respective Current Investment
Management Agreements on May 31, 1993. The Current Investment Management
Agreement for the Panagora Asset Allocation Fund is dated May 19, 1993. The
Current Investment Management Agreement for the Panagora International Equity
Fund is dated May 31, 1993.
The Current and New Investment Management Agreements provide that PanAgora
shall not be liable for any error in judgment or mistake of law or for any loss
suffered by the Trust or either Fund in connection with the performance of
PanAgora's obligations under its agreement with the Trust, except a loss
resulting from wilful misfeasance, bad faith or gross negligence on the part of
PanAgora in the performance of its duties or from reckless disregard of its
obligations and duties.
4
<PAGE> 7
BOARD OF TRUSTEES' EVALUATION
The Trustees, including the Independent Trustees, reviewed all materials
provided by PanAgora, Putnam, and its affiliates, and requested and received all
information which they deemed relevant to form a judgment as to whether the New
Investment Management Agreements are in the best interests of each Fund and its
shareholders.
A primary consideration of the Independent Trustees was Putnam's
representation that it expects no reduction in the scope and quality of advisory
and other services to be provided by PanAgora under each New Investment
Management Agreement from that provided by PanAgora under the Current Investment
Management Agreements. The Independent Trustees considered the fact that each
New Investment Management Agreement would, except for the dates of effectiveness
and initial renewal, have terms and conditions identical to those of the Current
Investment Management Agreements. The Independent Trustees also considered
certain representations of PanAgora and Putnam, described below, with respect to
their plans for each Fund.
The Trustees determined that the advisory fee rates under the Current and
New Investment Management Agreements represent fee rates negotiated at
arm's-length between each Fund and PanAgora based on a variety of factors,
including the nature and quality of the services provided by PanAgora to each
Fund and the reasonableness of the overall compensation paid by each Fund to
PanAgora. The Trustees also noted that PanAgora may receive research services
from brokers in connection with portfolio securities transactions for each Fund.
The Trustees realize that research services furnished by brokers through which
the Fund affects securities transactions may be used by PanAgora in advising
other accounts that it advises. Conversely, research services furnished to
PanAgora in connection with other accounts PanAgora advises may be used by
PanAgora in advising each Fund. However, no material change in brokerage
arrangements is contemplated to result from the approval of the New Investment
Management Agreements.
PanAgora also furnished the Independent Trustees with information regarding
the Transaction, including information regarding the terms of the Transaction
and information regarding Putnam and its subsidiaries. PanAgora advised the
Independent Trustees that it did not expect that the Transaction would have an
adverse effect on the operations of the Funds or their shareholders. Putnam also
advised the Independent Trustees that the purchase and sale agreement for the
Transaction, by its terms, does not contemplate any changes in the structure or
operations of PanAgora, the Funds or the Trust. Putnam representatives have
informed the Trustees that both Putnam and PanAgora currently intend to maintain
the separate existence of the Funds and the Trust, and intend not to change the
advisory personnel and management team of PanAgora.
On October 8, 1997, the Trustees of the Trust, including the Independent
Trustees, unanimously approved the New Investment Management Agreements.
ADDITIONAL INFORMATION
The principal executive officers and directors of PanAgora are: Richard A.
Crowell, Vice Chairman; Bruce Clarke, President, Chief Operating Officer and a
Director; Michael Turpin, Treasurer and Director of Finance and Administration;
and Peter Rathjens, Director of Global Investments. Edgar Peters, Paul
Samuelson, Randolph Petralia, Karen Muller, Haruaki Deguchi, Ian Lowitt,
Masahiro Yamada and Hideichiro Kobayashi are all Directors of PanAgora. Mr.
Crowell is also President of the Trust. Haruaki Deguchi, Hideichiro Kobayashi
and Masahiro Yamada are also employees of Nippon Life. Ian Lowitt, Karen Muller
and Randolph Petralia are also employees of Lehman, and they will be replaced by
Directors designated by Putnam upon consummation of the Transaction.
5
<PAGE> 8
The Trust's administrator is Investors Bank & Trust Company, 200 Clarendon
Street, Boston, Massachusetts 02116. The principal underwriter for the
continuous offering of shares of the Funds is Funds Distributor, Inc., 60 State
Street, Boston, Massachusetts 02109.
PanAgora serves as the subadviser to the Preferred Asset Allocation Fund
(the "Preferred Fund") with net assets of approximately $128,884,756 as of June
30, 1997. The Preferred Fund is a series of The Preferred Group of Mutual Funds,
a registered open-end investment company. PanAgora receives a fee based on that
portion of the assets of the Preferred Fund which are subadvised by PanAgora.
The subadvisory fee is calculated based on the average quarterly net asset value
determined as of the last business day of each month in the calendar quarter at
the annual rate of 0.50% of the first $10 million of assets, 0.40% of the next
$40 million of assets, 0.20% of the next $50 million of assets and 0.10% of the
assets in excess of $100 million.
PORTFOLIO TRANSACTIONS
All orders for the purchase or sale of portfolio securities are placed on
behalf of each Fund by PanAgora pursuant to authority contained in the Current
and New Investment Management Agreements. In selecting brokers or dealers,
PanAgora considers factors relating to execution on the best overall terms
available, including, but not limited to: the size and type of the transaction;
the nature and character of the markets of the security to be purchased or sold;
the execution efficiency, settlement capability and financial condition of the
dealer; the dealer's execution services rendered on a continuing basis; and the
reasonableness of any dealer spreads. The primary consideration of PanAgora in
selecting brokers or dealers is best execution at the most favorable price.
PanAgora may select broker-dealers which provide brokerage and/or research
services to each Fund and/or other investment companies or accounts managed by
PanAgora. Such research services must be lawful and appropriate assistance to
PanAgora in the performance of its investment decision making responsibilities
and could include: advice concerning the value of securities; the advisability
of investing in, purchasing or selling securities; the availability of
securities or the purchasers or sellers of securities; furnishing analysis and
reports concerning issuers, industries, securities, economic factors and trends,
portfolio strategy and performance of accounts; and effecting securities
transactions and performing functions incidental thereto (such as clearance and
settlement).
If PanAgora determines in good faith that the amount of commissions charged
by a broker is reasonable in relation to the value of the brokerage and research
services provided by such broker, each Fund may pay commissions to such broker
in an amount greater than the amount another firm may charge. This information
might be useful to PanAgora in providing services to each Fund as well as to
other investment companies or accounts managed by PanAgora, although not all of
such research may be useful to the Funds. Conversely, such information provided
to PanAgora by brokers and dealers through whom other clients of PanAgora effect
securities transactions might be useful to PanAgora in providing services to the
Fund. The receipt of such research is not expected to reduce PanAgora's normal
independent research activities. However, it enables PanAgora to avoid the
additional expense which might otherwise be incurred if it were to attempt to
develop comparable information through its own staff.
REQUIRED VOTE
Approval of the New Investment Management Agreements will require the
consent of a "majority of the outstanding voting securities" of each Fund (as
defined in the 1940 Act), which means, with respect to each Fund, the
affirmative vote of the lesser of (i) more than 50% of the outstanding shares of
the Fund or (ii) 67% or more of the shares of the Fund present at a meeting if
more than 50% of the outstanding shares of the Fund are represented at the
meeting in person or by proxy. THE BOARD UNANIMOUSLY RECOMMENDS THAT THE
SHAREHOLDERS OF EACH FUND VOTE IN FAVOR OF PROPOSAL 1.
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<PAGE> 9
PROPOSAL 2
RATIFICATION OF THE
SELECTION OF INDEPENDENT ACCOUNTANTS
The Board, including a majority of the Independent Trustees, has selected
Coopers & Lybrand L.L.P. to act as independent accountants for each Fund for the
current fiscal year ending May 31, 1998. Coopers & Lybrand L.L.P. are
independent accountants and have advised the Funds that they have no direct
financial interest or material indirect financial interest in the Funds.
Representatives of Coopers & Lybrand L.L.P. are not expected to be present at
the Special Meeting but will have an opportunity to make a statement if they
attend and so desire. If they attend, such representatives would be available to
respond to appropriate questions posed by shareholders or management.
REQUIRED VOTE
Ratification of the selection of independent accountants requires the
affirmative vote of a majority of the shares of each Fund cast at the Meeting in
person or by proxy. THE BOARD UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS OF
EACH FUND VOTE IN FAVOR OF THIS PROPOSAL 2.
OTHER MATTERS
The Board is not aware of any other business to be brought before the
Meeting except as described above. Should any other matters requiring a vote of
shareholders properly come before the meeting, the proxy in the accompanying
form will confer upon the person or persons entitled to vote the shares
represented by such proxy the discretionary authority to vote the shares as to
any other matters in accordance with their best judgment in the interests of the
Trust and/or each Fund.
PROXIES, QUORUM AND VOTING AT THE MEETING
A proxy executed by a shareholder may be revoked at any time prior to its
exercise by execution of a superseding proxy, by submission of a written notice
of revocation to the Secretary of the Trust or by attending the Meeting and
voting in person. All properly executed and unrevoked proxies received in time
for the Meeting will be voted in accordance with the instructions contained in
the proxies. If no instruction is given, the persons named as proxies will vote
the shares represented thereby in favor of the matters set forth in the attached
Notice and will use their best judgment in connection with the transaction of
such other business as may properly come before the Meeting or any adjournment
thereof.
A majority of the shares entitled to vote, either present in person or
represented by proxy, constitutes a quorum for the transaction of business with
respect to any proposal (unless otherwise noted in the Proxy Statement). In the
event that at the time any session of the Meeting is called to order a quorum is
not present in person or by proxy, the persons named as proxies may vote those
proxies which have been received to adjourn the Meeting to a later date. In the
event that a quorum is present but sufficient votes in favor of any of the
Proposals have not been received, the persons named as proxies may propose one
or more adjournments of the Meeting to permit further solicitation of proxies
with respect to such Proposals. Any such adjournment with respect to a Fund will
require the affirmative vote of more than one half of the shares of that Fund
present in person or by proxy at the session of the Meeting to be adjourned. The
persons named as proxies will vote those proxies which they are entitled to vote
in favor of any such Proposal in favor of such an adjournment and will vote
those proxies required to be voted against any such Proposal against any such
adjournment. A shareholder vote may be taken on one or more of the Proposals in
the proxy statement prior to such adjournment if sufficient votes for its
approval have been received and it is otherwise appropriate. Such vote
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<PAGE> 10
will be considered final regardless of whether the Meeting is adjourned to
permit additional solicitation with respect to any other Proposal.
Shares of a Fund represented at the Meeting (including shares which abstain
or do not vote with respect to one or more of the Proposals) will be counted for
purposes of determining whether a quorum, with respect to that Fund's
shareholders, is present at the Meeting. Abstentions will be treated as shares
that are present and entitled to vote for purposes of determining the number of
shares that are present and entitled to vote with respect to any particular
Proposal, but will not be counted as a vote in favor of such Proposal.
Accordingly, an abstention from voting on a Proposal has the same legal effect
as a vote against the Proposal.
Adoption by the shareholders of Proposal (1) requires the affirmative vote
of the lesser of (i) 67% or more of the voting securities of the Fund present at
the Meeting if the holders of more than 50% of the shares of the fund are
present or represented by proxy at the Meeting, or (ii) 50% or more of the
outstanding shares of the Fund. If a broker or nominee holding shares in "street
name" indicates on the proxy that it does not have discretionary authority to
vote as to any Proposal, those shares will not be considered as present and
entitled to vote as to that Proposal. Accordingly, a "broker non-vote" has no
effect on the voting in determining whether a Proposal has been adopted pursuant
to item (i) above, provided that the holders of more than 50% of the outstanding
shares (excluding the "broker non-votes") of the Fund are present or represented
by proxy. However, with respect to determining whether a Proposal has been
adopted pursuant to item (ii) above, because shares represented by a "broker
non-vote" are considered outstanding shares, a "broker non-vote" has the same
legal effect as a vote against such Proposal.
SHAREHOLDER PROPOSALS
Each Fund is not required to hold annual meetings of shareholders and does
not currently intend to hold such a meeting in 1999. Instead, meetings will be
held only when and if required. Shareholders proposals for inclusion in the
proxy statement for any subsequent meeting must be received by the Trust at 260
Franklin Street, Boston, Massachusetts 02110 within a reasonable time before any
such meeting.
SIMULTANEOUS MEETINGS
The meeting of shareholders of each Fund will be held simultaneously. If a
Fund shareholder at the meeting objects to the holding of a simultaneous meeting
and moves for an adjournment of the Meeting to a time promptly after the
simultaneous meetings, the persons named as proxies will vote in favor of such
adjournment.
EXPENSES AND METHODS OF SOLICITATION
The cost of preparing, assembling and mailing this proxy statement and the
attached Notice of Special Meeting of Shareholders and the accompanying proxy
card will be borne by Putnam and Lehman. In addition to soliciting proxies by
mail, PanAgora may, at its expense, have one or more Fund officers,
representatives or compensated third-party agents, including PanAgora, aid in
the solicitation of proxies by personal interview or telephone and telegraph and
may request brokerage houses and other custodians, nominees and fiduciaries to
forward proxy soliciting material to the beneficial owners of the shares held of
record by such persons.
Each Fund may also arrange to have votes recorded by telephone. The
telephone voting procedure is designed to authenticate shareholders' identities,
to allow shareholders to authorize the voting of their shares in accordance with
their instructions and to confirm that their instructions have been properly
recorded. Each Fund has been advised by counsel that these procedures are
consistent with the requirements of applicable law. If these procedures were
subject to a successful legal challenge, such votes would not be counted at the
8
<PAGE> 11
Meeting. Each Fund is unaware of any such challenge at this time. Shareholders
would be called at the phone number PanAgora has in its records for their
accounts, and would be asked for their Social Security number or other
identifying information. The shareholders would then be given an opportunity to
authorize proxies to vote their shares at the Meeting in accordance with their
instructions. To ensure that the shareholders' instructions have been recorded
correctly, they will also receive a confirmation of their instructions in the
mail. A special toll-free number will be available in case the information
contained in the confirmation is incorrect.
Persons holding shares as nominees will be reimbursed by Putnam and Lehman,
upon request, for the reasonable expenses of mailing soliciting materials to the
principals of the accounts.
PANAGORA INSTITUTIONAL FUNDS
PANAGORA ASSET ALLOCATION FUND
PANAGORA INTERNATIONAL EQUITY FUND
December 17, 1997
9
<PAGE> 12
PROXY
THE PANAGORA INSTITUTIONAL FUNDS
PANAGORA INTERNATIONAL EQUITY FUND
PROXY FOR THE SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD JANUARY 22, 1998
The undersigned, having received notice of the meeting and management's
proxy statement therefor, and revoking all prior proxies, hereby appoint(s)
Richard A. Crowell, Paul J. Jasinski and Andrew S. Josef, each of them,
attorneys or attorney of the undersigned (with full power of substitution in
them and each of them) for and in the name(s) of the undersigned to attend the
Special Meeting of Shareholders of the Panagora International Equity Fund (the
"Fund") of The PanAgora Institutional Funds (the "Trust") to be held on
Thursday, January 22, 1998 at 10:00 a.m. (Boston time) at the offices of the
Trust, 260 Franklin Street, Boston, Massachusetts 02110 (the "Meeting"), and any
adjourned session or sessions thereof, and there to vote and act upon the
following matters (as more fully described in the accompanying Proxy Statement)
in respect of all shares of the Fund which the undersigned will be entitled to
vote or act upon, with all the powers the undersigned would possess if
personally present:
(1) To approve the terms of a new Investment Management Agreement between
the Fund and PanAgora Asset Management, Inc.:
<TABLE>
<S> <C> <C>
[ ] FOR [ ] AGAINST [ ] ABSTAIN
</TABLE>
(2) To ratify the selection of Coopers & Lybrand LLP as independent public
accountants for the Fund for the fiscal year ending May 31, 1998:
<TABLE>
<S> <C> <C>
[ ] FOR [ ] AGAINST [ ] ABSTAIN
</TABLE>
IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER BUSINESS
AS MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENT THEREOF.
(continued, and to be signed, on other side)
<PAGE> 13
(continued from other side)
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED BY THE
UNDERSIGNED. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR PROPOSAL 1
AND FOR PROPOSAL 2.
Dated: , 1998
------------------------------------
-----------------------------------------------
--------------------------------
SIGNATURE(S)
In signing, please write name(s)
exactly as appearing hereon. When
signing as attorney, executor,
administrator or other fiduciary,
please give your full title as
such. Joint owners should each
sign personally.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES OF THE TRUST AND
SHOULD BE RETURNED AS SOON AS POSSIBLE IN THE ENVELOPE PROVIDED
<PAGE> 14
PROXY
THE PANAGORA INSTITUTIONAL FUNDS
PANAGORA ASSET ALLOCATION FUND
PROXY FOR THE SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD JANUARY 22, 1998
The undersigned, having received notice of the meeting and management's
proxy statement therefor, and revoking all prior proxies, hereby appoint(s)
Richard A. Crowell, Paul J. Jasinski and Andrew S. Josef, each of them,
attorneys or attorney of the undersigned (with full power of substitution in
them and each of them) for and in the name(s) of the undersigned to attend the
Special Meeting of Shareholders of the Panagora Asset Allocation Fund (the
"Fund") of The PanAgora Institutional Funds (the "Trust") to be held on
Thursday, January 22, 1998 at 10:00 a.m. (Boston time) at the offices of the
Trust, 260 Franklin Street, Boston, Massachusetts 02110 (the "Meeting"), and any
adjourned session or sessions thereof, and there to vote and act upon the
following matters (as more fully described in the accompanying Proxy Statement)
in respect of all shares of the Fund which the undersigned will be entitled to
vote or act upon, with all the powers the undersigned would possess if
personally present:
(1) To approve the terms of a new Investment Management Agreement between
the Fund and PanAgora Asset Management, Inc.:
<TABLE>
<S> <C> <C>
[ ] FOR [ ] AGAINST [ ] ABSTAIN
</TABLE>
(2) To ratify the selection of Coopers & Lybrand LLP as independent public
accountants for the Fund for the fiscal year ending May 31, 1998:
<TABLE>
<S> <C> <C>
[ ] FOR [ ] AGAINST [ ] ABSTAIN
</TABLE>
IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER BUSINESS
AS MAY PROPERLY COME BEFORE THE MEETING OR ANY ADJOURNMENT THEREOF.
(continued, and to be signed, on other side)
<PAGE> 15
(continued from other side)
THE SHARES REPRESENTED BY THIS PROXY WILL BE VOTED AS DIRECTED BY THE
UNDERSIGNED. IF NO DIRECTION IS GIVEN, THIS PROXY WILL BE VOTED FOR PROPOSAL 1
AND FOR PROPOSAL 2.
Dated: , 1998
------------------------------------
-----------------------------------------------
--------------------------------
SIGNATURE(S)
In signing, please write name(s)
exactly as appearing hereon. When
signing as attorney, executor,
administrator or other fiduciary,
please give your full title as
such. Joint owners should each
sign personally.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF TRUSTEES OF THE TRUST AND
SHOULD BE RETURNED AS SOON AS POSSIBLE IN THE ENVELOPE PROVIDED
