|
|
|
|
|
|
|
|
|
|
Previous: PANAGORA FUNDS, 24F-2NT, 1997-07-30 |
Next: VAN KAMPEN MERRITT INSURED INCOME TRUST SERIES 30, 497J, 1997-07-30 |
THE PANAGORA INSTITUTIONAL FUNDS
ANNUAL REPORT
MAY 31, 1997
The PanAgora Institutional Funds
President's Letter
July 10, 1997
Dear Fellow Shareholders:
These are exciting investment times. As I write this letter, the U.S. stock
market is charging ahead to unprecedented levels and international stock markets
are surging as well. As these events unfold, investors face new challenges.
Consequently, I am pleased to present the fourth annual report of The PanAgora
Institutional Funds. The PanAgora Institutional Funds started in 1993 to provide
investors with investment vehicles in the form of mutual funds implementing
specific investment strategies. The PanAgora Institutional Funds make these
strategies available to institutional investors including pension funds,
foundations and endowment funds and 401(k) plans to individual investors.
The PanAgora Institutional Funds currently offer two series. The PanAgora Asset
Allocation Fund invests in a mix of U.S. stocks, bonds and cash equivalents. The
PanAgora International Equity Fund invests in stocks outside the U.S.
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 Advisor's proprietary asset allocation disciplines.
During the past year, stock prices have soared and bonds have been stagnant.
Corporate earnings growth was much stronger than Wall Street analysts expected.
The U.S. economy is seeing the fruits of a very painful period of corporate
restructuring. Despite the pain, the strategy paid off. The U.S. economy, which
was largely written off at the beginning of the decade, has now become the envy
of the world.
Unfortunately, with success also comes overconfidence. Many analysts now believe
that the spectacular earnings from corporate restructuring will continue
indefinitely into the future. The Wall Street consensus is that we have entered
a "new era" where the U.S. economy can continue to have substantial economic
growth, low unemployment, and low inflation. As a result, a speculative bubble
of dangerous proportions has developed in the U.S. stock market. The U.S. stock
market has reached unprecedented levels with the highest Price/Book ratio and
lowest dividend yield on record.
On March 25, 1997, the Federal Reserve changed policy from one of monetary
expansion to one of restriction, raising the Fed Funds rate by 25 basis points.
The stated goal of Fed policy is to slow economic growth before inflation
pressures develop. Extreme valuations in the face of a slowing economy and
rising interest rates are a dangerous combination. The risk is high for a
substantial stock market correction. As a result, the Asset Allocation Fund
moved out of the U.S. equity market in the second quarter of 1997 (includes the
notional value of futures contracts). We believe a fully defensive position is
warranted.
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 objective by
actively allocating assets among international equity markets based on the
Advisor's proprietary asset allocation disciplines. The International Equity
Fund continues its strategy of investing 90% of the assets in major
international developed countries of Europe and Asia and 10% in Emerging
Markets.
Value added from developed markets country selection was hindered by some
unusual patterns in returns since January 1997, low price-to-book countries
(representing better values) have underperformed high price-to-book countries
(more overpriced markets). And, over the recent quarter characterized by
advancing world equity markets, the smaller market countries have underperformed
slightly. Despite these short-term trends, we remain convinced that our
value-strategy focusing on countries with more growth potential will provide
superior long term returns.
In the developed markets, the Fund is overweighted in Europe. In particular, we
are investing in some of the smaller countries such as Austria and Finland.
Austria has a strong economy, a strong currency through its close economic ties
with Germany and provides good value. We are underweight in Asia, in particular,
Japan and Hong Kong. Although Hong Kong seems slightly undervalued, we are
concerned about how the "one country, two systems" plan will work in practice.
And, we are concerned about efforts of the new government to curb real estate
speculation.
Our 10% investment in Emerging Markets has been productive, especially during
1997 as emerging markets performed better than developed markets, on average. We
are invested in these markets because, over the long-term, they offer the
potential for strong growth. In fact, the growth potential of these countries
continues to attract huge institutional investments. Individually, these markets
do have high risk. In the International Equity Fund, the risk is managed by
diversification and emphasis on the emerging markets with better value.
Thank you for your continuing interest in The PanAgora Institutional Funds. We
look forward to serving you.
Sincerely,
Richard A. Crowell
President
The PanAgora Institutional Funds
PANAGORA ASSET ALLOCATION FUND
MAY 31, 1997
CUMULATIVE TOTAL RETURN (UNAUDITED)
- --------------------------------------------------------------------------------
PanAgora Asset Allocation Fund
One Year 12.68%*
Average Annual Since Inception (6/1/93) 12.15%*
* Total returns for the Fund reflect expenses waived and reimbursed, if
applicable, by the Advisor. Without such waivers and reimbursements, total
returns would be lower.
- --------------------------------------------------------------------------------
The PanAgora Asset Allocation Fund had a neutral to overweighted position in
equities and an underweighted position in bonds for much of the fiscal year.
This allowed the Fund to participate in the rise in the equity markets through
the early part of 1997, and was spared the mediocre performance in the bond
market. However, on March 25, 1997, the Federal Reserve moved to raise interest
rates to slow a rapidly growing economy and relieve the inflationary pressures
that were building. The Fund moved to a low to zero position in equities and an
overweighted position in bonds. After an initial drop, the stock market came
back to new highs based primarily, we believe, on speculation. While the Fund
did not participate in this advance, the risk of a substantial correction has
never been higher. As a result, as of 5/31/97 the Fund was fully defensive on
the equity market. The asset allocation stood at 70% bonds, 30% cash, and 0%
equities (includes notional value . of futures contracts).
HYPOTHETICAL ILLUSTRATION OF $10,000 INVESTED IN
PANAGORA ASSET ALLOCATION FUND (UNAUDITED)
a b c
May 1993 $10,000 $10,000 $10,000
Aug 1993 $10,210 $10,367 $10,418
Nov 1993 $10,170 $10,401 $10,396
Feb 1994 $10,388 $10,590 $10,409
May 1994 $10,163 $10,425 $10,069
Aug 1994 $10,509 $10,934 $10,260
Nov 1994 $10,224 $10,509 $10,077
Feb 1995 $10,792 $11,367 $10,594
May 1995 $11,600 $12,528 $11,226
Aug 1995 $12,496 $13,278 $11,420
Nov 1995 $13,071 $14,394 $11,855
Feb 1996 $13,583 $15,311 $11,890
May 1996 $14,041 $16,091 $11,717
Aug 1996 $13,743 $15,765 $11,887
Nov 1996 $15,498 $18,405 $12,573
Feb 1997 $16,058 $19,318 $12,526
May 1997 $15,822 $20,826 $12,692
a PanAgora Asset Allocation Fund
b S&P 500 Composite Stock price Index
c Lehman Brothers Aggregate Bond Index
Note: The performance shown represents past performance and is not a guarantee
of future results. A fund's share price and investment return will vary with
market conditions and principal value of shares, when redeemed, may be more or
less than original cost.
S&P 500 Composite Stock Price Index is an index composed of 500 widely held
common stocks listed on the New York Stock Exchange, American Stock Exchange and
over-the-counter market.
Lehman Brothers Aggregate Bond Index is composed of the Lehman Government
Corporate Index and the Mortgage Backed Securities Index and includes treasury
issues, agency issues, corporate bond issues and mortgage-backed securities.
** Assumes the reinvestment of all dividends and distributions.
PANAGORA INTERNATIONAL EQUITY FUND
MAY 31, 1997
CUMULATIVE TOTAL RETURN (UNAUDITED)
- --------------------------------------------------------------------------------
PanAgora International Equity Fund
One Year 6.51%*
Average Annual Since Inception (6/1/93) 7.34%*
* Total returns for the Fund reflect expenses waived and reimbursed, if
applicable, by the Advisor. Without such waivers and reimbursements,
total returns would be lower.
- --------------------------------------------------------------------------------
The PanAgora International Equity Fund's primary investment objective is to
maximize total return, consisting primarily of capital appreciation. Current
income is a secondary objective. The Fund attempts to achieve its objective by
actively allocating assets among international equity markets based on the
Advisor's proprietary asset allocation disciplines. The International Equity
Fund continues its strategy of investing 90% of the assets in major
international developed countries of Europe and Asia and 10% in Emerging
Markets.
For the fiscal year ending on May 31, 1997, the International Equity Fund's
return trailed the MSCI EAFE GDP benchmark return by 224bp. Emerging market
investments provided 100bp of value added largely originating from our country
selection decisions. On the other hand, developed markets country selection and
our Japanese stock selection detracted from performance. Value added from
developed markets country selection has been hindered by some unusual patterns
in returns. Since January 1997, low price-to-book countries (representing better
values) have underperformed high price-to-book countries (more overpriced
markets), and over the recent calendar quarter characterized by advancing world
equity markets, the smaller market countries have underperformed slightly; for
instance, Austria, a relatively small country, registered a flat return and thus
our overweight position resulted in a recent loss of 22bp of value added.
Despite these short term trends, we remain convinced that our value, small cap
strategy and our emerging markets position will provide superior long term
returns. At present, the Fund is overweight Europe, in particular some of the
smaller countries like Austria and Finland, and is underweight in Asia, in
particular Japan and Hong Kong.
HYPOTHETICAL ILLUSTRATION OF $10,000 INVESTED IN
PANAGORA INTERNATIONAL EQUITY FUND (UNAUDITED)
a b c
May 1993 $10,000 $10,000 $10,000
Aug 1993 $10,910 $10,864 $10,739
Nov 1993 $9,948 $10,056 $9,875
Feb 1994 $11,196 $11,520 $11,450
May 1994 $11,012 $11,656 $11,356
Aug 1994 $11,616 $12,125 $11,902
Nov 1994 $11,073 $11,517 $11,338
Feb 1995 $10,603 $11,296 $10,940
May 1995 $11,573 $12,215 $11,916
Aug 1995 $11,356 $12,331 $11,963
Nov 1995 $11,134 $12,371 $12,198
Feb 1996 $11,934 $13,104 $12,785
May 1996 $12,455 $13,488 $13,189
Aug 1996 $12,022 $13,198 $12,904
Nov 1996 $12,654 $13,986 $13,634
Feb 1997 $12,477 $13,719 $13,200
May 1997 $13,277 $14,673 $14,185
a PanAgora International Equity Fund
b MSCI EAFE-GDP Index
c MSCI EAFE Index
Note: The performance shown represents past performance and is not a guarantee
of future results. A fund's share price and investment return will vary with
market conditions and principal value of shares, when redeemed, may be more or
less than original cost.
Morgan Stanley Capital International EAFE Index is a composite portfolio
consisting of equity total returns, excluding foreign dividends withheld, for
the countries of Europe, Australia, New Zealand and countries in the Far East,
weighted based on each country's aggregate market capitalization.
Morgan Stanley Capital International EAFE - GDP Index is a composite portfolio
consisting of equity total returns for the countries of Europe, Australia, New
Zealand and countries in the Far East, weighted based on each country's gross
domestic product.
** Assumes the reinvestment of all dividends and distributions.
PANAGORA ASSET ALLOCATION FUND
PORTFOLIO OF INVESTMENTS
MAY 31, 1997
<TABLE>
<CAPTION>
SHARE MARKET PERCENT OF
DESCRIPTION AMOUNT VALUE (NOTE 1) NET ASSETS
- ----------------------------------------------------------------------------------------------------------------------------------
COMMON STOCK
<S> <C> <C> <C>
AEROSPACE & DEFENSE
Lockheed Martin Corp 400 $ 37,450 0.1%
---------------
AIRLINES
US Airways Group Inc* 5,100 177,225 0.5%
---------------
AUTOMOTIVE
Ford Motor Co 7,200 270,000
General Motors Corp 5,100 291,975
Goodyear Tire & Rubber Co 1,500 87,750
---------------
649,725 1.8%
---------------
BANKING
Bankamerica Corp 600 70,125
Bankers Trust New York Corp 300 25,387
Barnett Banks Inc 1,200 63,150
Chase Manhattan Corp 1,624 153,468
Citicorp 1,300 148,687
First Chicago NBD Corp 1,462 86,624
Golden West Financial Corp 1,000 67,750
Nationsbank Corp 1,800 105,975
Norwest Corp 2,300 123,050
PNC Bank Corp 2,200 92,125
Wells Fargo & Co 200 52,700
---------------
989,041 2.7%
---------------
BEVERAGES, FOOD & TOBACCO
Archer Daniels Midland 1,200 24,000
Coca-Cola Co 5,500 375,375
Pepsico Inc 2,400 88,200
Philip Morris Co. Inc 9,300 409,200
Procter & Gamble Co 500 68,937
Sbarro Inc 1,000 29,250
Seagrams Co. Ltd. (a) 3,300 132,825
UST Inc 2,400 68,400
Whitman Corp 1,400 33,775
Wrigley William Jr., Co 1,900 112,575
---------------
1,342,537 3.7%
---------------
BUILDING & CONSTRUCTION
Centex Corp 4,600 183,425
Tyco Lab (a) 600 38,100
---------------
221,525 0.6%
---------------
BUSINESS SERVICES
First Data Corp 3,400 136,000 0.4%
---------------
See accompanying notes to the financial statements.
1
PANAGORA ASSET ALLOCATION FUND
PORTFOLIO OF INVESTMENTS - CONTINUED
MAY 31, 1997
SHARE MARKET PERCENT OF
DESCRIPTION AMOUNT VALUE (NOTE 1) NET ASSETS
- ----------------------------------------------------------------------------------------------------------------------------------
CHEMICALS
Hercules Inc 2,600 $ 121,875
Lubrizol Corp 2,000 71,250
Millipore Corp 2,700 116,438
Monsanto Co 900 39,600
PPG Industries 1,000 58,125
Praxair, Inc 1,700 89,462
Thiokol Corp 2,100 150,937
Union Carbide Corp 900 42,075
---------------
689,762 1.9%
---------------
COMMUNICATIONS
Bay Networks* 1,600 39,200 0.1%
---------------
COMPUTER EQUIPMENT
Autodesk Inc 900 34,988
International Business Machines Corp 2,000 173,000
Oracle Corp* 2,150 100,243
Tandem Computers Inc* 2,400 34,200
---------------
342,431 0.9%
---------------
COMPUTER SOFTWARE & PROCESSING
3 Com Corp.* (a) 400 19,400
Compaq Computer * (a) 1,600 173,200
CUC International Inc 7,850 180,550
Dell Computer Corp 900 101,250
EMC Corp. * 3,700 147,538
Microsoft Corp 4,600 570,400
Seagate Technology, Inc 1,300 52,813
Sun Microsystems Inc 1,800 58,050
---------------
1,303,201 3.6%
---------------
DIVERSIFIED
Aeroquip-Vickers Inc 2,300 99,762
Corning Inc 700 35,263
Pall Corp 2,600 61,425
---------------
196,450 0.5%
---------------
ELECTRIC UTILITIES
DQE Inc 2,500 70,312
Entergy Corp 7,400 195,175
GPU, Inc 5,600 196,000
Niagara Mohawk Power Corp* 2,700 23,625
Peco Energy Co 5,200 98,800
Southern Co 4,100 87,125
Texas Utilities Co 2,600 89,375
Unicom Corp 1,700 38,675
---------------
799,087 2.2%
---------------
ELECTRONICS
General Electric Co 8,800 531,300
Illinova Corp 2,800 61,250
Intel Corp 2,400 363,600
Micron Technology Inc.* 1,700 72,250
---------------
1,028,400 2.9%
---------------
See accompanying notes to the financial statements.
2
PANAGORA ASSET ALLOCATION FUND
PORTFOLIO OF INVESTMENTS - CONTINUED
MAY 31, 1997
SHARE MARKET PERCENT OF
DESCRIPTION AMOUNT VALUE (NOTE 1) NET ASSETS
- ----------------------------------------------------------------------------------------------------------------------------------
ENERGY SERVICES
PG & E Corp 1,400 $ 32,375 0.1%
---------------
ENTERTAINMENT & LEISURE
Kingworld Productions Inc 3,000 112,875
Walt Disney Company 3,500 286,562
---------------
399,437 1.1%
---------------
EQUIPMENT
Medtronic Inc 1,000 74,000 0.2%
---------------
FINANCIAL SERVICES
Asarco Inc 2,500 77,812
Beneficial Corp 1,700 109,225
Green Tree Financial Corp 2,300 80,500
J P Morgan & Co. Inc 1,900 204,250
MBNA Corp 2,625 88,922
MGIC Investment Corp 1,700 151,300
Morgan Stanley, Dean Witter, Discover & Co 2,100 86,625
Morgan Stanley Group Inc. (a) 1,200 81,000
Salomon Inc. 2,900 155,513
---------------
1,035,147 2.9%
---------------
FOREST & PAPER PRODUCTS
Boise Cascade Corp 2,400 91,200
Champion International 2,200 108,625
Kimberly-Clark Corporation 1,000 50,125
---------------
249,950 0.7%
---------------
HEALTH CARE
Shared Medical 800 42,400 0.1%
---------------
HEAVY MACHINERY
Cincinnati Milacron 1,200 27,750
Thermo Electron Corp 2,600 89,700
---------------
117,450 0.3%
---------------
INSURANCE
Allstate Corp 1,870 137,679
American International Group 400 54,150
Cigna Corp 400 69,500
Conseco Inc 800 32,000
Marsh & McLennan Companies Inc 1,300 171,275
St. Paul Companies 1,800 128,925
Torchmark Corp 1,300 85,313
Travelers, Inc 900 49,387
Unum Corp 400 31,650
USF&G Corp 1,500 32,250
---------------
792,129 2.2%
---------------
LODGING
HFS Inc.* 400 21,550
Hilton Hotels 1,400 39,550
Marriott International Inc 600 34,650
---------------
95,750 0.3%
---------------
See accompanying notes to the financial statements.
3
PANAGORA ASSET ALLOCATION FUND
PORTFOLIO OF INVESTMENTS - CONTINUED
MAY 31, 1997
SHARE MARKET PERCENT OF
DESCRIPTION AMOUNT VALUE (NOTE 1) NET ASSETS
- ----------------------------------------------------------------------------------------------------------------------------------
MANUFACTURING
Westinghouse Electric Corp 3,500 $ 70,875 0.2%
---------------
MEDICAL SUPPLIES
Baxter International Inc 800 42,200
Becton Dickinson & Co 1,800 88,650
Quest Diagnostics, Inc.* 1 9
---------------
130,859 0.4%
---------------
METALS & MINING
Amerada Hess Corp 200 10,700
Engelhard Corp 5,200 112,450
Newmont Mining Corp 2,100 82,163
Phelps Dodge Corp 1,200 100,350
Williams Co. Inc 2,850 125,756
---------------
431,419 1.2%
---------------
OFFICE EQUIPMENT
Ikon Office Solutions Inc 4,200 121,800
Xerox Corp 400 27,100
---------------
148,900 0.4%
---------------
OIL & GAS
Amoco Corp 500 44,688
Chevron Corp 1,800 126,000
Enron Corporation 1,600 65,200
Exxon Corp 6,400 379,200
Halliburton Co 700 54,163
Mobil Corp 700 97,913
Oneok Inc 3,000 90,750
Oryx Energy Co.* 1,200 27,750
Rowan Companies, Inc.* 2,000 46,250
Royal Dutch Petroleum (a) 2,000 390,500
Santa Fe Energy Resources Inc.* 2,600 39,325
Schlumberger Ltd 100 11,912
Tenneco Inc 1,100 49,225
Texaco Inc 1,200 130,950
Unocal Corp 1,700 72,462
USX-Marathon Group 3,000 89,250
---------------
1,715,538 4.8%
---------------
PACKAGING & CONTAINERS
Ball Corp 3,400 99,025
Crown Cork & Seal Inc 1,300 75,725
---------------
174,750 0.5%
---------------
PERSONAL CARE PRODUCTS
Ecolab Inc 2,900 120,713
Gillette Co 1,500 133,312
Johnson & Johnson 2,900 173,638
---------------
427,663 1.2%
---------------
PHARMACEUTICALS
Abbott Laboratories 1,100 69,300
Alza Corp Class A * 6,200 182,900
Bristol-Myers Squibb Co 1,800 132,075
Eli Lilly & Co 600 55,800
Merck & Co. Inc 1,700 152,788
See accompanying notes to the financial statements.
4
PANAGORA ASSET ALLOCATION FUND
PORTFOLIO OF INVESTMENTS - CONTINUED
MAY 31, 1997
SHARE MARKET PERCENT OF
DESCRIPTION AMOUNT VALUE (NOTE 1) NET ASSETS
- ----------------------------------------------------------------------------------------------------------------------------------
PHARMACEUTICALS - (CONTINUED)
Pfizer Inc 1,500 $ 154,312
Pharmacia & Upjohn Inc 3,525 122,053
Schering-Plough Corp 500 45,375
---------------
914,603 2.5%
---------------
PRINTING & PUBLISHING
Gibson Greetings Inc.* 3,600 78,300
Tribune Co 1,500 64,875
---------------
143,175 0.4%
---------------
RETAILERS
Dayton-Hudson Corp 4,200 202,125
Gap Inc 1,200 41,100
Harcourt General Inc 1,700 80,537
Home Depot 4,100 258,300
Lowe's Co. Inc 4,500 177,187
Sears Roebuck 1,700 83,513
The Pep Boys 2,000 62,500
TJX Companies Inc 1,900 91,200
---------------
996,462 2.8%
---------------
TELECOMMUNICATION
Alltel Corp 2,600 85,475
Andrew Corp 1,738 47,347
AT & T Corp 500 18,438
Cabletron Systems Inc. * 4,100 180,400
Frontier Corp 9,200 169,050
Lucent Technologies (a) 3,600 229,050
Motorola Inc 1,700 112,838
Sprint Corp 2,200 107,525
Tellabs Inc 1,100 55,275
Worldcom Inc 2,500 74,063
---------------
1,079,461 3.0%
---------------
TELEPHONE SYSTEMS
Ameritech Corp 700 45,850
BellSouth Corp 1,400 63,525
Nynex Corp 4,100 220,375
SBC Communications, Inc 800 46,800
---------------
376,550 1.0%
---------------
TEXTILES & APPAREL
Nike, Inc 1,100 62,700
Reebok International Ltd 1,700 69,700
Stride Rite Corp 3,900 59,475
---------------
191,875 0.5%
---------------
TRANSPORTATION
APL Ltd 1,900 57,475 0.2%
------------------------------------
TOTAL COMMON STOCK (Cost $16,770,612) 17,650,277 48.9%
------------------------------------
</TABLE>
See accompanying notes to the financial statements.
5
PANAGORA ASSET ALLOCATION FUND
PORTFOLIO OF INVESTMENTS-CONTINUED
MAY 31, 1997
<TABLE>
<CAPTION>
MATURITY FACE MARKET PERCENT OF
DESCRIPTION COUPON DATE AMOUNT VALUE (NOTE 1) NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------------------
LONG - TERM DEBT
<S> <C> <C> <C> <C>
US Government Obligations
US Treasury Note 7.875% 04/15/98$ 375,000 $ 381,445
US Treasury Note 5.875% 10/31/98 810,000 808,228
US Treasury Note 6.375% 01/15/99 925,000 929,047
US Treasury Note 6.875% 07/31/99 220,000 222,750
US Treasury Note 5.875% 11/15/99 855,000 847,251
US Treasury Note 8.500% 02/15/2000 285,000 300,051
US Treasury Note 8.750% 08/15/2000 100,000 106,688
US Treasury Note 7.750% 02/15/2001 450,000 469,265
US Treasury Note 8.000% 05/15/2001 175,000 184,133
US Treasury Note 7.500% 05/15/2002 475,000 494,742
US Treasury Note 5.750% 08/15/2003 275,000 263,656
US Treasury Bond 10.750% 08/15/2005 320,000 401,100
US Treasury Bond 9.375% 02/15/2006 80,000 94,175
US Treasury Bond 7.875% 11/15/2007 900,000 954,843
US Treasury Bond 10.625% 08/15/2015 250,000 343,828
US Treasury Bond 8.750% 05/15/2017 425,000 504,554
US Treasury Bond 7.875% 02/15/2021 302,000 331,634
US Treasury Bond (a) 6.250% 08/15/2023 105,000 95,681
US Treasury Bond (a) 6.875% 08/15/2025 120,000 118,091
US Treasury Bond 6.000% 02/15/2026 470,000 413,600
-----------------------------
TOTAL LONG - TERM DEBT (Cost $8,304,237) 8,264,762 22.9%
-----------------------------
SHORT-TERM INVESTMENTS
COMMERCIAL PAPER
Bank of Ireland 5.50% 06/02/97 900,550 900,550 2.5%
---------------
REPURCHASE AGREEMENT
IBT Repurchase Agreement 5.07%, dated 5/30/97, to be repurchased at $9,183,096
on 6/2/97, collateralized by U.S. Government Obligations with rates of 7.00% and
7.125% and maturity dates of 5/20/22 and 6/20/26,
with an aggregate market value of $9,638,624. 9,179,217 9,179,217 25.5%
---------------
</TABLE>
See accompanying notes to the financial statements.
6
PANAGORA ASSET ALLOCATION FUND
PORTFOLIO OF INVESTMENTS-CONTINUED
MAY 31, 1997
<TABLE>
<CAPTION>
MATURITY FACE MARKET PERCENT OF
DESCRIPTION RATE DATE AMOUNT VALUE (NOTE 1) NET ASSETS
- -----------------------------------------------------------------------------------------------------------------------------------
US GOVERNMENT OBLIGATIONS
<S> <C> <C> <C> <C>
U.S. Treasury Bill (b) 4.83% 06/26/97 $ 10,000 $ 9,933
U.S. Treasury Bill (b) 5.13% 06/26/97 60,000 59,444
U.S. Treasury Bill (b) 5.11% 06/26/97 250,000 247,161
U.S. Treasury Bill (b) 5.10% 06/26/97 10,000 9,890
U.S. Treasury Bill (b) 5.14% 06/26/97 170,000 167,937
U.S. Treasury Bill (b) 4.72% 06/26/97 80,000 79,412
U.S. Treasury Bill (b) 5.06% 06/26/97 110,000 108,392
U.S. Treasury Bill (b) 4.86% 06/26/97 350,000 347,401
U.S. Treasury Bill (b) 5.22% 06/26/97 135,000 133,219
-------------
1,162,789 3.2%
---------------------------
TOTAL SHORT-TERM INVESTMENTS (Cost $11,242,556) 11,242,556 31.2%
---------------------------
TOTAL INVESTMENTS (Cost $36,317,405) 37,157,595 103.0%
Excess of Liabilities over Other Assets (1,076,673) -3.0%
-----------------------------
NET ASSETS $ 36,080,922 100.0%
=============================
NOTES TO THE PORTFOLIO OF INVESTMENTS
(a) All or a portion of this security is on loan.
(b) This security is held as collateral for open futures contracts.
* Non-income producing security.
</TABLE>
See accompanying notes to the financial statements.
7
PANAGORA ASSET ALLOCATION FUND
SCHEDULE OF OPEN FUTURES CONTRACTS
MAY 31, 1997
<TABLE>
<CAPTION>
NET UNREALIZED
NUMBER OF APPRECIATION
CONTRACTS TYPE EXPIRATION DATE CONTRACT VALUE (DEPRECIATION)
- ---------------- ----------------------------------------------------------- -------------------- -----------------------------
<S> <C> <C> <C> <C>
LONG:
127 U.S. Treasury Note 10 Year Index September 1997 $ 13,592,969 $ 65,531
-----------------------------
$ 65,531
=============================
SHORT:
41 Standard & Poor's 500 Index June 1997 $ 17,437,300 $ (1,335,300)
-----------------------------
$ (1,335,300)
=============================
</TABLE>
See accompanying notes to the financial statements.
8
PANAGORA INTERNATIONAL EQUITY FUND
PORTFOLIO OF INVESTMENTS
MAY 31, 1997
<TABLE>
<CAPTION>
SHARE MARKET PERCENT OF
DESCRIPTION AMOUNT VALUE (NOTE 1) NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------------------
COMMON STOCK (unless otherwise indicated)
<S> <C> <C> <C>
ARGENTINA
Astra Cia Argentina Depetro 1,365 $ 2,731
Banco Frances Del Rio Plata 529 5,742
Banco Galicia Y Buenos Aires 1,128 7,448
Ciadea 878 3,513
Molinos Rio de La Plata 423 1,650
Perez Companc SA 12,050 92,228
Siderar S.A.I.C. * 360 1,578
Siderca SA 9,000 21,611
Telefonica de Argentina B 20,842 75,068
YPF Sociedade Anonima 3,121 93,364
------------
304,933 1.1%
------------
AUSTRALIA
Amatil Ltd. Coca Cola 6,100 70,741
Amcor Ltd 7,000 46,464
Australian Gas & Light Co. Ltd 3,100 18,519
Boral Ltd 12,800 40,919
Brambles Industries Ltd 2,600 46,914
Broken Hill Proprietary Co. Ltd 21,750 312,933
Burns Philp & Co. Ltd 8,000 11,780
Coles Myer Ltd 12,000 56,086
CRA Ltd 3,900 64,066
Crown Limited * 7,800 12,497
CSR Ltd 10,550 38,797
Email Ltd 4,500 13,973
Fosters Brewing Group Ltd 21,500 42,321
General Property Trust 12,500 23,651
Gio Australia Holdings Ltd 6,500 19,142
Goodman Fielder Limited 13,000 16,861
Howard Smith Ltd 2,100 18,906
ICI Australia Ltd 3,500 32,444
James Hardie Industries Ltd 5,500 16,785
Leighton Holdings Ltd 3,500 16,289
Lend Lease Corp Ltd 2,700 53,600
M.I.M. Holdings Limited 17,800 26,618
National Australia Bank Ltd. (a) 16,150 231,400
Newcrest Mining Limited 3,800 9,480
News Corp Ltd. - Preferred 16,800 63,319
News Corp Ltd 22,200 98,745
Normandy Mining Limited 17,600 21,619
North Limited 7,800 29,874
Pacific Dunlop Ltd 11,200 31,360
Pioneer International Ltd 10,000 34,104
QBE Insurance Group Ltd 3,200 19,075
QCT Resources Ltd 10,500 12,898
RGC Limited 3,400 13,489
Rothmans Holdings Ltd 2,000 13,733
Santos Ltd 6,000 24,628
See accompanying notes to the financial statements.
9
PANAGORA INTERNATIONAL EQUITY FUND
PORTFOLIO OF INVESTMENTS-CONTINUED
MAY 31, 1997
SHARE MARKET PERCENT OF
DESCRIPTION AMOUNT VALUE (NOTE 1) NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------------------
AUSTRALIA - (CONTINUED)
Southcorp Holdings Ltd 6,500 $ 24,300
Sydney Harbour Casino Ltd. * 8,000 13,056
TABCORP Holdings Limited 3,500 17,330
Western Mining Corp. Holding Ltd 12,300 79,673
Westfield Trust 12,500 23,747
Westpac Banking Corp 19,900 108,253
------------
1,870,389 7.1%
------------
AUSTRIA
Austria Mikro Systeme Internalional AG 250 19,460
Austrian Airline * 250 39,149
Bank Austria AG-Participating Certificate 200 5,696
Bank Austria AG-Preferred 600 21,046
Bank Austria AG 4,210 270,740
Bau Holding AG 400 30,568
Bbag Oest Brau-Beteiligungs 600 35,528
Boehler-Uddeholm AG 750 56,750
BWT AG 150 20,420
Constantia Iso Holding AG 133 5,998
Constantia Verpack 67 3,881
Creditanstalt-Bankverein-Preferred 1,100 45,466
Creditanstalt-Bankverein 1,971 116,546
EA-Generali AG 500 124,066
Flughafen Wien AG 1,450 61,761
Lenzing AG * 100 5,738
Mayr-Melnhof Karton AG 800 40,189
OEMV AG 2,000 253,727
Oest Elektrizatswirts A 2,290 164,671
Radex-Heraklith Industrial AG 1,130 48,792
Steyr-Daimler-Puch AG * 900 20,746
Universale Bau AG 100 3,758
Va Technologie AG 1,050 185,569
Wienerberger Baustoff Industrie AG 500 102,309
------------
1,682,574 6.3%
------------
BELGIUM
Bekaert SA 13 7,730
Cimentaries CBR Strips 20 3
Cimenteries CBR Cementbed 130 11,883
Delhaize-Le Lion SA-Preferred 299 14,965
Electrabel SA-Strip 58 50
Electrabel (a) 323 72,681
Fortis AG 215 42,002
GBL Group 139 22,279
Generale De Banque SA 88 34,947
Gervaert Photo-Producten NV 151 13,350
Glaverbel 40 5,396
Kredietbank NPV 77 31,897
Kredietbank NV 10 4,114
Petrofina SA NPV 139 49,156
Reunies Electrobel & Tractebel-Strip 13 6
See accompanying notes to the financial statements
10
PANAGORA INTERNATIONAL EQUITY FUND
PORTFOLIO OF INVESTMENTS-CONTINUED
MAY 31, 1997
SHARE MARKET PERCENT OF
DESCRIPTION AMOUNT VALUE (NOTE 1) NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------------------
BELGIUM - (CONTINUED)
Reunies Electrobel & Tractebel 81 $ 35,748
Royal Belge SA-Strip 96 19
Royal Belge 96 27,378
Solvay Et Cie A NPV 50 30,373
The Union Miniere Group * 149 12,068
Tractebel Put Warrants * 81 806
------------
416,851 1.6%
------------
BRAZIL
Aracruz Celulose SA-Preferred 1,000 2,035
Banco Bradesco SA 2,150,000 17,142
Banco Itau SA 26,000 13,351
Cia Cervejaria Brahma 16,000 11,607
Cia Energetica De Minas Gerais 395,000 18,070
Cia Souza Cruz Industry e Commerce 1,000 9,299
Electrobras-Preferred 30,000 14,761
Electrobras 117,000 55,163
Patroleo Brasile 100,000 23,901
White Martins SA 2,709 8,852
Telebras-Preferred 879,000 121,210
Usiminas-Preferred 3,700,000 4,007
Vale Do Rio Doce-Preferred 900 19,872
------------
319,270 1.2%
------------
CHILE
Chilgener SA ADR (a) 270 7,425
Cia de Telecomunicaciones de Chile SA ADR (a) 1,445 49,491
Empresa Nacional de Electricidad ADR 3,200 72,000
Enersis SA ADR (a) 2,790 96,953
Maderas y Sinteticos Sociedad ADR 500 7,750
------------
233,619 0.9%
------------
DENMARK
Investeringsselskab AF 1 61 0.0%
------------
FRANCE
Accor SA 135 18,720
Air Liquide 305 46,787
Alcatel Alsthom 697 75,509
AXA Co 1,300 77,853
Banque National de Paris 950 39,010
BIC 125 18,417
Bouygues 100 8,663
Canal Plus 100 16,952
Carrefour Supermarche 175 114,964
Casino Etabl Econ 450 20,288
Cie Generale des Eaux 524 64,487
Compagnie Bancaire 110 12,184
Compagnie de Saint Goban 370 51,115
Compagnie Financiere de Suez 725 36,996
Compagnie Financiere Paribas 625 40,268
Comptoirs Modernes 15 6,817
See accompanying notes to the financial statements
11
PANAGORA INTERNATIONAL EQUITY FUND
PORTFOLIO OF INVESTMENTS-CONTINUED
MAY 31, 1997
SHARE MARKET PERCENT OF
DESCRIPTION AMOUNT VALUE (NOTE 1) NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------------------
FRANCE - (CONTINUED)
Eridania Beghin 100 $ 14,005
Essilor International Say 70 17,763
Euro Disneyland Sca * 100 157
Euro Disneyland Sca-Warrants * 600 109
Groupe Danone 325 48,954
Groupe Saint Louis 25 5,768
Havas SA 275 18,542
Imetal 100 13,173
Lafarge Coppee 355 22,706
Lagardere Groupe 700 20,603
Legrand SA 125 20,128
L'Oreal 300 108,941
LVMH Co 380 92,082
Lyonnaise des Eaux-Dumez 275 27,027
Michelin B French Registered (a) 550 30,059
Pathe SA 75 17,290
Pernod-Ricard 250 11,938
Peugeot SA 225 22,269
Primagaz Cie 100 9,291
Printemps 110 46,142
Promodes 100 33,887
Rhone Polenc (a) 1,550 50,241
Sagem SA 30 15,080
Sanofi SA 425 36,907
Schneider SA 550 26,436
SEITA 275 9,362
Sidel SA 175 12,285
Simco 85 7,367
Societe Eurafrance SA 30 12,340
Societe Generale (a) 400 44,443
Societe National Elf-Aquitaine 1,220 122,017
Sodexho 50 23,227
Technip SA 75 7,709
Thomson CSF 650 18,534
Total Cie Francaise Petroles 1,025 93,808
Usinor Sacilor 1,700 25,518
Valeo SA 300 17,820
------------
1,752,958 6.6%
------------
GERMANY
Aachen Und Muenchener Betei 50 46,341
Adidas AG 350 36,806
Allianz AG Holdings 2,000 423,575
BASF AG (a) 5,350 197,463
Bayer AG (a) 6,150 238,700
Bayer Hypoth-Und Wechsel Bank AG 2,000 63,566
Bayerische Vereins Bank AG 2,350 96,787
Beiersdorf AG 800 42,650
Bilfinger & Berger Bau AG 500 19,480
Buderus AG 50 25,485
See accompanying notes to the financial statements
12
PANAGORA INTERNATIONAL EQUITY FUND
PORTFOLIO OF INVESTMENTS-CONTINUED
MAY 31, 1997
SHARE MARKET PERCENT OF
DESCRIPTION AMOUNT VALUE (NOTE 1) NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------------------
GERMANY - (CONTINUED)
CKAG Colonia Konzern AG 350 $ 33,833
Continental AG 1,200 27,299
Daimler Benz AG 4,450 342,829
Degussa AG 1,000 48,655
Deutsche Bank AG 4,400 244,115
Deutsche Telekom AG 18,700 415,215
Douglas Holding AG 300 10,774
Dresdner Bank AG (a) 3,750 131,379
Heidelberger Zement AG 500 46,869
Hochtief 700 29,527
Karstadt AG 120 42,393
Linde AG 100 68,838
Lufthansa German 3,000 47,823
MAN AG 120 34,378
Mannesmann AG 300 121,976
Merck KGaA 1,350 55,561
Metro AG 1,000 109,526
Muenchener Rueckversicherungs 59 150,360
Preussag AG 100 26,364
RWE AG-Preferred 1,700 59,160
RWE AG 3,000 127,951
Sap AG Vorzug 300 54,660
Sap AG 450 80,356
Schering AG 650 65,347
SGL Carbon AG 250 36,177
Siemens AG German 4,900 276,535
Thyssen AG 270 61,374
Veba AG 4,250 240,524
Viag AG 200 91,159
Volkswagen AG (a) 250 161,697
Volkswagen AG-Preferred 100 49,212
------------
4,482,719 16.9%
------------
GREAT BRITAIN
Abbey National 1,450 20,898
Arjo Wiggins Appleton PLC 1,433 3,917
Barclay's PLC 1,500 29,144
Bass PLC 1,100 14,278
BG PLC 4,200 13,990
Boots Co. PLC 1,100 12,757
British Aerospace PLC 500 10,169
British Airways PLC 1,300 15,129
British Petroleum Co. PLC 5,000 59,295
British Sky Broadcasting PLC 1,700 16,000
British Telecommunications PLC 5,800 42,010
BTR Limited 3,900 12,672
B.A.T. Industries 2,900 25,989
Cable & Wireless 2,200 17,915
Cadbury Schweppes PLC 1,300 11,650
Centrica PLC * 4,200 4,400
See accompanying notes to the financial statements
13
PANAGORA INTERNATIONAL EQUITY FUND
PORTFOLIO OF INVESTMENTS-CONTINUED
MAY 31, 1997
SHARE MARKET PERCENT OF
DESCRIPTION AMOUNT VALUE (NOTE 1) NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------------------
GREAT BRITAIN - (CONTINUED)
Chubb Security PLC 7,960 $ 57,069
Energy Group PLC 1,705 15,266
General Electric Co. PLC 2,166 12,356
Glaxo Wellcome PLC 3,408 68,140
Granada Group PLC 1,000 14,183
Grand Metropolitan PLC 2,100 19,524
Great Universal Stores 1,100 11,632
Guinness PLC 2,200 20,490
Hanson Trust PLC 2,131 10,970
HSBC Holdings PLC 900 27,939
HSBC Holdings PLC 1,700 52,773
Imperial Chemical Industries 1,200 15,969
Lloyds Tsb Group PLC 5,000 50,251
Marks & Spencer PLC 2,800 23,306
National Power PLC 1,400 12,638
Prudential Corp 2,000 20,101
Reed International Ltd 1,400 13,830
Reuters Holdings PLC 1,800 20,212
Royal & Sun Alliance Insurance Group PLC 1,800 13,538
RTZ Corp 1,750 30,048
Sainsbury PLC 2,200 12,604
Smithkline Beecham PLC 3,136 53,975
Tesco PLC 2,500 15,366
Unilever Limited 900 24,108
Vodafone Group PLC 3,347 14,847
Zeneca Group PLC 900 27,305
------------
968,653 3.7%
------------
GREECE
Commercial Bank Of Greece 800 39,601
Credit Bank Greece 901 66,589
Ergo Bank SA 620 43,763
Hellas Can SA 100 1,833
Hellenic Bottling Co 1,400 52,875
Hellenic Sugar 1,100 7,583
Heracles General Cement Co 1,600 31,681
Intracom SA 520 25,321
Michaniki SA - Rights * 1,000 807
Michaniki SA 1,000 8,800
Titan Cement Co 300 29,932
------------
308,785 1.2%
------------
INDONESIA
Bank International Indonesia 39,751 32,683
Barito Pacific Timber 9,500 8,592
Pt Astra International 7,000 26,763
Pt Gudang Garam 10,000 43,165
Pt Indah Kiat Pulp & Paper 12,485 9,239
Pt Indocement Tunggal Prakarsa 18,000 22,199
Pt Indostat 6,000 17,883
Unilever 500 9,250
------------
169,774 0.6%
------------
See accompanying notes to the financial statements
14
PANAGORA INTERNATIONAL EQUITY FUND
PORTFOLIO OF INVESTMENTS-CONTINUED
MAY 31, 1997
SHARE MARKET PERCENT OF
DESCRIPTION AMOUNT VALUE (NOTE 1) NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------------------
IRELAND
Allied Irish Banks PLC 300 $ 2,288
CRH PLC 100 986
Fii Fyffes 100 142
Irish Life PLC 100 514
James Crean PLC 2,500 8,685
Kerry Group PLC 55 532
Smurfit Jefferson Group 400 1,100
Woodchester Investments PLC 12,300 53,880
------------
68,127 0.3%
------------
ITALY
Alleanza Assicuraz 278 1,309
Arnoldo Mondadori Editore SPA 2,200 12,761
Assicurazione Generali 18,315 311,924
Banco Ambrosiano Veneto 11,400 28,467
Banco Popolare Di Milano 4,000 21,519
Bank Commerciale Italiana 38,400 75,845
Benetton 4,000 55,977
Bulgari SPA 1,300 25,693
Burgo (Caritere) SPA 1,700 9,928
Credito Italiano 47,000 69,908
Edison SPA 13,700 65,104
Eni SPA (a) 163,200 816,795
Falck Acciaierie & Ferriere Lombarde 3,000 11,559
Fiat Italian-Private Placement 20,000 33,870
Fiat Risp-Non Convertable 15,300 26,841
Fiat SPA 69,000 227,060
Istituto Banc San Paolo Torina 17,000 106,886
Istituto Mobiliare Italiano 12,600 110,365
Istituto Nazionale Delle Assic 85,000 117,446
Italcenenti Fabbriche Riunit 2,100 12,220
Italgas 13,600 41,967
Magnetti Marelli SPA 5,600 8,945
Marzotto & Figi SPA 700 5,775
Mediaset SPA 24,500 105,563
Mediobanca Banca Di Credito 10,170 57,823
Montedison SPA 97,060 59,260
Montedison SPA-RNC 20,000 12,766
Olivetti * 58,300 16,999
Olivetti-Private Placement * 400 298
Parmalat Finanziaria SPA 23,700 33,838
Pirelli SPA 31,600 68,982
RAS SPA 6,150 46,922
Rinascente - Warrants * 100 38
Rinascente 2,000 9,673
Riunione Adriatica di Sicurta SPA 4,000 20,034
SAI 1,600 11,274
Sirti SPA 6,800 39,161
Snia BPD * 14,600 11,949
Telecom Italia -Di Risp 34,200 75,527
Telecom Italia Mobile - DRNC 34,000 59,586
Telecom Italia Mobile 110,400 324,508
Telecom Italia SPA 136,900 374,595
------------
3,526,960 13.3%
------------
See accompanying notes to the financial statements.
15
PANAGORA INTERNATIONAL EQUITY FUND
PORTFOLIO OF INVESTMENTS-CONTINUED
MAY 31, 1997
SHARE MARKET PERCENT OF
DESCRIPTION AMOUNT VALUE (NOTE 1) NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------------------
JAPAN
Aida Engineering Limited 3,000 $ 21,453
Amada Co. Ltd 3,000 25,398
Asahi Bank Ltd 4,000 26,162
Asahi Chemical Industry Co Ltd 100 557
ASICS Corp. * 14,000 28,878
Chiyoda Fire & Marine Insurance Co 7,350 29,691
Citizen Watch Co. Ltd 5,000 37,946
Dai Nippon Printing Co. Ltd 6,200 124,160
Daido Steel Co 800 2,544
Dai-Ichi Kangyo Bank 2,790 34,051
Daikyo Inc 10,000 35,582
Daito Trust Construction 6,000 66,523
Daiwa House Industry 1,600 18,840
Daiwa Kosho Lease Co. Ltd 7,000 52,643
Daiwa Securities 3,000 22,097
Fuji Bank 8,100 104,426
Fuji Photo Film 2,800 108,535
Fujisawa Pharmaceutical 7,000 66,180
Fujita Corp 20,000 35,582
Fujitsu Ltd 4,200 51,259
Fukuyama Transporting Co 2,000 13,494
Gakken 9470 11,000 55,307
Gunze Ltd 16,000 72,884
Hazama-Gumi 9,000 17,018
Hitachi Seisakusho Ltd 16,100 171,586
Hokuriku Bank 4,000 13,511
Honda Motor Co. Ltd 2,000 58,788
House Food Industry 3,000 50,795
Inax 3,000 20,911
Industrial Bank of Japan 5,800 69,789
Iwatani International Corp 40 175
JGC Engineering & Construction 7,000 38,505
Joyo Bank 680 3,331
Kamigumi Co. Ltd 10,000 59,734
Kansai Electric Power 3,900 73,408
Kawasaki Steel 4,400 12,933
Kirin Brewery Co. Ltd 9,000 88,956
Komatsu Ltd 15,400 116,476
Kumagai Gumi Co 28,000 45,724
Kurabo Industries 22,000 56,725
Kyudenko Co., Ltd 5,000 40,997
Long Term Credit Bank of Japan 5,000 16,330
Maeda Corp 7,000 38,805
Maeda Road Construction Co 2,000 16,416
Marubeni Corp 6,000 25,526
Marudai Food Co. Ltd 16,800 72,918
Matsushita Electric Industries 11,600 218,341
Mitsubishi Corp. 12,000 141,298
Mitsubishi Electric 8,000 45,380
See accompanying notes to the financial statements.
16
PANAGORA INTERNATIONAL EQUITY FUND
PORTFOLIO OF INVESTMENTS-CONTINUED
MAY 31, 1997
SHARE MARKET PERCENT OF
DESCRIPTION AMOUNT VALUE (NOTE 1) NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------------------
JAPAN - (CONTINUED)
Mitsubishi Heavy 12,300 $ 88,590
Mitsubishi Trust 3,000 43,060
Mitsui Marine & Fire Insurance 400 2,682
Mitsui Trust & Banking 2,400 18,070
Mizuno Corp 7,000 43,799
Mori Seiki 3,000 46,670
Nagasakiya * 6,000 19,287
Nagase & Co 7,000 47,469
Nagoya Railroad Co. Ltd 6,000 22,793
Nichido Fire & Marine Insurance 50 305
Nichiei Fudosan 8,000 18,427
Nippon Fire & Marine Insurance 1,000 4,753
Nippon Hodo 2,000 15,952
Nippon Light Metal Co 600 2,346
Nippon Oil Co 19,200 97,361
Nippon Sheet Glass Co. Ltd 18,000 66,678
Nippon Shinpan Co 4,000 13,820
Nippon Steel Corp 900 2,638
Nippon Yakin Kogyo * 16,000 35,754
Nishi-Nippon Bank 5,000 25,784
Nissan Motors 30,000 199,055
Nisshinbo Industries Inc 4,000 34,070
Nomura Securities Co. Ltd 5,000 59,304
Orient Corp 6,000 20,627
Renown Inc. * 6,000 13,820
Sakura Bank Ltd 11,400 68,292
Sanyo Electric Co. Ltd 22,000 92,841
Seino Transportation Co. Ltd 3,000 32,488
Sekisui House Ltd 8,000 78,384
Seven Eleven Japan Ltd 100 7,245
Sharp Corp 3,000 38,676
Shiseido Co 2,000 29,222
Sony Corp 900 75,883
Sumitomo Bank 8,693 120,290
Sumitomo Corp 14,000 123,936
Sumitomo Forestry 3,000 32,488
SXL Corp 4,000 24,478
Teijin Limited 5,000 21,100
The Bank of Tokyo Mitsubishi 12,400 215,281
Tohoku Electric Power 6,000 102,621
Tokai Bank 8,200 67,517
Tokyo Electric Power Co. Inc 5,000 95,402
Tokyo Steel Manufacturing 4,000 49,506
Tokyu Construction 6,000 12,376
Toyo Engineering 13,000 58,101
Toyo Exterior 5,000 68,758
Toyo Trust & Banking 3,000 21,324
Toyobo Co. Ltd 800 2,035
Toyoda Automatic Loom Works 3,000 64,976
See accompanying notes to the financial statements.
17
PANAGORA INTERNATIONAL EQUITY FUND
PORTFOLIO OF INVESTMENTS-CONTINUED
MAY 31, 1997
SHARE MARKET PERCENT OF
DESCRIPTION AMOUNT VALUE (NOTE 1) NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------------------
JAPAN - (CONTINUED)
Toyota Motor Co 6,986 $ 200,544
Tsumura & Co 7,000 54,027
UBE Industries Ltd 400 1,135
Yamaichi Securities 9,000 25,526
Yasuda Trust & Banking 9,000 27,073
------------
5,303,207 20.0%
------------
MEXICO
Alfa SA A 692 4,094
Cemex SA B 2,575 10,547
Cifra SA De Cv A 2,031 3,471
Cifra SA De Cv B 16,600 28,457
Empressa La Moderna 1,700 8,382
Fomento Economico Mexicano 2,700 14,336
Grupo Financiero Banamex B 300 649
Grupo Financiero Banamex L 25 50
Grupo Financiero Bancomer B 7,800 2,929
Grupo Financiero Bancomer L 289 87
Grupo Industrial Bimbo A 1,000 6,625
Grupo Mexico SA Series B 4,600 16,574
Grupo Modelo SA 4,000 25,006
Grupo Televisa SA 500 7,162
Kimberly Clark 5,000 17,320
Telefonos de Mexico 36,400 80,899
------------
226,588 0.9%
------------
NEW ZEALAND
Fletcher Forestry Shares 3,900 5,139 0.0%
------------
NORWAY
Aker AS A 2,450 44,586
Aker AS B 490 7,988
Bergesen dy ASA A 2,800 64,727
Bergesen dy ASA B 1,200 27,656
Christiania Bank Og Kreditkasse 26,600 91,582
Dyno Industrier ASA 1,400 35,020
Elkem ASA 2,600 50,787
Hafslund Nycomed ASA A 3,000 16,653
Hafslund Nycomed ASA B 3,700 22,878
Kvaerner ASA B 600 31,197
Kvaerner ASA A 1,800 103,204
Leif Hoegh & Co ASA 1,600 31,029
Norsk Hydro 11,000 550,309
Norske Skogindustrier ASA A 1,250 44,969
Nycomed ASA A 3,400 46,585
Nycomed ASA B 2,400 32,378
Orkla ASA A 1,875 163,628
Orkla Borregaard 550 42,896
Petroleum Geo-Services ASA * 1,700 71,669
Storebrand ASA * 13,150 86,484
------------
1,566,225 5.9%
------------
See accompanying notes to the financial statements.
18
PANAGORA INTERNATIONAL EQUITY FUND
PORTFOLIO OF INVESTMENTS-CONTINUED
MAY 31, 1997
SHARE MARKET PERCENT OF
DESCRIPTION AMOUNT VALUE (NOTE 1) NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------------------
PHILIPPINES
Ayala Land Inc 10,650 $ 8,479
Manila Electirc 1,755 9,848
Petron Corp 43,470 11,867
Philippine Long Distance 600 17,744
Philippine National Bank 2,475 16,328
San Miquel Corp 3,241 9,768
Sm Prime Holdings 54,600 15,526
------------
89,560 0.3%
------------
PORTUGAL
Banco Comercial Portugues 1,900 33,394
Banco Espirito Santo 1,300 27,058
Banco Portuguese de Invest SA 858 13,917
Banco Totta & Acores 645 9,244
Cimentos De Portugal SA 1,100 24,296
Jeronimo Martins 400 27,302
Portugal Telecom 2,592 99,928
Sonae Industria E Investimento 700 26,388
------------
261,527 1.0%
------------
SINGAPORE
United Overseas Bank 1 10 0.0%
------------
SOUTH AFRICA
Amalgamated Banks of South Africa 1,500 9,265
De Beers Centenary AG 550 19,263
Driefontein 500 4,218
Liberty Life Association of Africa 425 11,889
Nedcor Ltd 450 8,761
Rembrandt Group Limited 1,400 14,099
Sasol Limited 850 10,415
South African Breweries Ltd 525 14,745
Tiger Oats Limited 800 13,606
Vaal Reefs Exploration & Mining 100 5,997
------------
112,258 0.4%
------------
SPAIN
Acerinox SA 250 41,996
Alba Corp. 300 33,029
Argentaria SA 2,375 118,405
Autopistas Concesionaria Espanola Accion 4,300 52,998
Banco Bilbao Vizcaya 4,300 304,889
Banco Central Hispano 3,100 100,135
Banco de Santander 2,350 200,634
Corporacion Mapfre 600 32,156
Cros SA * 1,600 1,230
Dragados y Construcciones 1,400 27,143
Ebro Agricolas 1,200 23,016
El Aguila * 200 990
Empresa Nacional de Celulosa 200 2,957
Empresa Nacional de Electricidad 3,900 298,130
Fomento Construction y Contra 300 33,423
Gas Natural Sdg SA 500 95,416
See accompanying notes to the financial statements.
19
PANAGORA INTERNATIONAL EQUITY FUND
PORTFOLIO OF INVESTMENTS-CONTINUED
MAY 31, 1997
SHARE MARKET PERCENT OF
DESCRIPTION AMOUNT VALUE (NOTE 1) NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------------------
SPAIN - (CONTINUED)
General De Aguas D'Barcelona 900 $ 36,394
Iberdrola SA 14,000 172,068
Inmobil Metro Vasco - Central 200 7,783
Inmobiliaria Urbis SA Accion * 400 2,977
Portland Valderr 100 6,938
Prosegur Compania Securidad 500 6,543
Repsol SA 5,650 236,688
Sarrio SA 500 1,786
Tabacalera Spani 800 40,659
Telefonica de Espana 9,600 277,192
Union Electrica Fenosa SA 5,750 50,962
Uralita SA 500 4,847
Vallehermoso SA 1,000 25,273
Viscofan Envolturas 200 4,044
Zardoya Otis 100 12,533
------------
2,253,234 8.5%
------------
THAILAND
Bangkok Bank Co. Ltd 3,600 32,065
Charoen Pokphand Feedmill 100 302
Industrial Finance Corp. (Fb) 3,300 5,945
Land & House PCL - Rights 2,200 1,514
Land & House PCL 2,200 2,806
Phatra Thanakit Co. Ltd 2,400 3,960
PTT Exploration & Production PCL 1,600 22,283
Shinawatra Computer Co 1,100 8,016
Siam Bank Co. Ltd 1,000 4,939
Siam Cement Co. Ltd 500 10,850
Thai Farmers Bank PCL-Foreign 900 4,445
Thai Farmers Bank PCL 2,100 8,672
Thai Telephone & Telecom * 5,000 2,378
United Communication 1,300 6,158
------------
114,333 0.4%
------------
TURKEY
Aksa Akrilik Kimya Sanayii - Rights * 114,710 4,164
Aksa Akrilik Kimya Sanayii 137,652 10,969
Arcelik AS 140,508 15,675
Brisa Bridgestone Sabanci-Y 30,000 10,624
Cimsa 105,000 13,200
Cukurova Elektrik 4,200 6,098
Ege Biracilik Ve Malt Sanay 26,636 6,980
Eregli Demir Ve Celik Fabrik 178,325 23,998
Migros 14,000 9,321
Netas Telekomunik * 31,000 10,430
Otosan Otomobil 45,400 25,082
Tofas Otomobil Fabrik 252,000 12,851
Trakya Cam SA 256,904 10,008
Turkiye Garanti Bankasi AS 671,944 27,128
Turkiye Is Bankasi AS C 206,200 66,453
Yapi ve Kredi Bankasi AS 1,211,000 28,734
------------
281,715 1.1%
--------------------------------
TOTAL COMMON STOCK (Cost $25,577,538) 26,319,469 99.3%
--------------------------------
</TABLE>
See accompanying notes to the financial statements.
20
PANAGORA INTERNATIONAL EQUITY FUND
PORTFOLIO OF INVESTMENTS-CONTINUED
MAY 31, 1997
<TABLE>
<CAPTION>
MATURITY FACE MARKET PERCENT OF
DESCRIPTION RATE DATE AMOUNT VALUE (NOTE 1) NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------------------
SHORT-TERM INVESTMENTS
<S> <C> <C> <C> <C> <C>
COMMERCIAL PAPER
Bank of Ireland 5.500% 06/02/97 $ 2,164,662 $ 2,164,662 8.2%
------------
REPURCHASE AGREEMENT
IBT Repurchase Agreement 5.07%, dated 5/30/97,
to be repurchased at $94,170 on 6/2/97,
collateralized by U.S. Government Obligations
with a rate of 7.125% and a maturity date of
8/20/23 with an aggregate market value of
$98,486. 94,130 94,130 0.4%
-----------------------
TOTAL SHORT-TERM INVESTMENTS (Cost $2,258,792) 2,258,792 8.6%
-----------------------
TOTAL INVESTMENTS (Cost $27,836,330) 28,578,261 107.9%
Excess of Liabilities over Other Assets (2,082,359) -7.9%
-----------------------
NET ASSETS $ 26,495,902 100.0%
=======================
NOTES TO PORTFOLIO OF INVESTMENTS
ADR American Depository Receipt
(a) All or a portion of this security is on loan.
* Non-income producing security.
</TABLE>
See accompanying notes to the financial statements
21
THE PANAGORA INSTITUTIONAL FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
MAY 31, 1997
<TABLE>
<CAPTION>
====================================================================================================================================
ASSET INTERNATIONAL
ALLOCATION EQUITY
FUND FUND
------------------- -------------------
<S> <C> <C>
ASSETS:
Investments, at value * (Note 1) - Including investments in
Repurchase agreements of $ 9,179,217 for the Asset Allocation
Fund. (See accompanying portfolios) $37,157,595 $28,578,261
Cash 155 -
Foreign currency, at value** - 66,671
Receivable from:
Securities sold 703,528 -
Dividends and interest 171,301 179,286
Unamortized organization costs (Note 5) 4,231 4,309
------------------- -------------------
Total assets 38,036,810 28,828,527
------------------- -------------------
LIABILITIES:
Payable for:
Securities purchased 930,377 -
Investment advisory fees (Note 2) 32,643 8,723
Variation margin on open futures contracts (Note 6) 40,813 -
Capital stock redeemed 1,015 -
Payable to custodian - 91,282
Payable upon return of securities loaned (Note 1) 900,551 2,164,662
Accrued expenses and other liabilities 50,489 67,958
------------------- -------------------
Total Liabilities 1,955,888 2,332,625
------------------- -------------------
NET ASSETS $36,080,922 $26,495,902
=================== ===================
NET ASSETS CONSIST OF:
Paid-in capital $34,802,892 $24,236,764
Undistributed net investment income 306,875 (475,254)
Accumulated net realized gain on investments,
closed futures contracts and foreign currency transactions 1,400,734 2,001,107
Net unrealized appreciation (depreciation) on investments,
open futures contracts, and net other assets (429,579) 733,285
------------------- -------------------
NET ASSETS $36,080,922 $26,495,902
=================== ===================
NUMBER OF FUND SHARES ISSUED AND OUTSTANDING (NOTE 4) 2,833,803 2,281,180
=================== ===================
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE OF
BENEFICIAL INTEREST OUTSTANDING $12.73 $11.62
=================== ===================
* Cost of investments $36,317,405 $27,836,330
** Cost of foreign currency - $74,796
</TABLE>
See accompanying notes to the financial statements.
22
THE PANAGORA INSTITUTIONAL FUNDS
STATEMENTS OF OPERATIONS
YEAR ENDED MAY 31, 1997
<TABLE>
<CAPTION>
===================================================================================================================================
ASSET INTERNATIONAL
ALLOCATION EQUITY
FUND FUND
----------------- ------------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends (net of foreign withholding taxes *) $216,465 $390,857
Interest 367,768 224,276
----------------- ------------------
Total investment income 584,233 615,133
----------------- ------------------
EXPENSES:
Investment Advisory fees (Note 2) 99,468 191,889
Custody, transfer agent and administration fees 112,445 214,379
Audit and legal fees 26,369 30,755
Registration and filing fees 10,124 10,108
Trustees' fees and expenses (Note 2) 11,479 11,504
Amortization of organization costs (Note 5) 4,157 4,139
Other 5,057 3,122
----------------- ------------------
Total operating expenses 269,099 465,896
Interest expense (Note 3) - 4,517
----------------- ------------------
Total expenses 269,099 470,413
Less expenses waived or reimbursed by the Advisor (Note 2) (119,900) (202,175)
----------------- ------------------
Net expenses 149,199 268,238
NET INVESTMENT INCOME 435,034 346,895
----------------- ------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (NOTES 1 AND 3):
Net Realized Gain (Loss) On:
Security transactions 1,928,333 1,510,200
Closed futures contracts (341,974) 933,810
Foreign currency related transactions - (537,175)
----------------- ------------------
Net realized gain 1,586,359 1,906,835
----------------- ------------------
Net change in unrealized appreciation (depreciation) of:
Securities (46,683) (292,884)
Open futures contracts (1,245,135) (365,910)
Foreign currency and net other assets - 88,429
----------------- ------------------
Net unrealized (depreciation) during the period (1,291,818) (570,365)
----------------- ------------------
NET REALIZED AND UNREALIZED GAIN 294,541 1,336,470
----------------- ------------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $729,575 $1,683,365
================= ==================
* Net of foreign taxes withheld of: $1,151 $44,311
</TABLE>
See accompanying notes to the financial statements.
23
THE PANAGORA INSTITUTIONAL FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
PANAGORA ASSET ALLOCATION FUND
<TABLE>
<CAPTION>
====================================================================================================================================
YEAR ENDED YEAR ENDED
MAY 31, 1997 MAY 31, 1996
----------------- ------------------
INCREASE/(DECREASE) IN NET ASSETS FROM:
<S> <C> <C>
OPERATIONS:
Net investment income $435,034 $209,454
Net realized gain on investments and closed futures contracts 1,586,359 835,024
Net change in unrealized appreciation (depreciation) on
investments and open futures contracts (1,291,818) 570,433
----------------- ------------------
Net increase in net assets resulting from operations 729,575 1,614,911
----------------- ------------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (250,562) (185,985)
Net realized gains (642,586) (688,774)
----------------- ------------------
Total distributions to shareholders (893,148) (874,759)
----------------- ------------------
FUND SHARE TRANSACTIONS (NOTE 4):
Proceeds from sale of shares 26,580,724 1,840,215
Net asset value of shares issued to shareholders
in payment of distributions declared 893,148 874,759
Cost of shares repurchased (1,168,381) (805,294)
----------------- ------------------
Net increase in net assets resulting from
Fund share transactions 26,305,491 1,909,680
----------------- ------------------
TOTAL INCREASE IN NET ASSETS 26,141,918 2,649,832
NET ASSETS:
Beginning of year 9,939,004 7,289,172
----------------- ------------------
End of year * $36,080,922 $9,939,004
================= ==================
* Including undistributed net
investment income of: $306,875 $93,185
</TABLE>
See accompanying notes to the financial statements.
24
THE PANAGORA INSTITUTIONAL FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
PANAGORA INTERNATIONAL EQUITY FUND
<TABLE>
<CAPTION>
====================================================================================================================================
YEAR ENDED YEAR ENDED
INCREASE (DECREASE) IN NET ASSETS FROM: MAY 31, 1997 MAY 31, 1996
------------------ -----------------
<S> <C> <C>
OPERATIONS:
Net investment income $346,895 $248,550
Net realized gain on investments, closed futures
contracts, and foreign currency transactions 1,906,835 579,256
Net change in unrealized appreciation (depreciation) on
investments, open futures contracts, forward currency contracts,
and net other assets (570,365) 720,911
------------------ -----------------
Net increase in net assets resulting from operations 1,683,365 1,548,717
------------------ -----------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (168,571) (248,550)
In excess of net investment income - (111,102)
Net realized gains (611,080) -
------------------ -----------------
Total distributions to shareholders (779,651) (359,652)
------------------ -----------------
FUND SHARE TRANSACTIONS (NOTE 4):
Proceeds from sale of shares 6,251,105 3,365,610
Net asset value of shares issued to shareholders
in payment of distributions declared 774,541 356,498
Cost of shares repurchased (3,601,335) (703,407)
------------------ -----------------
Net increase in net assets resulting from
Fund share transactions 3,424,311 3,018,701
------------------ -----------------
TOTAL INCREASE IN NET ASSETS 4,328,025 4,207,766
NET ASSETS:
Beginning of period 22,167,877 17,960,111
------------------ -----------------
End of period * $26,495,902 $22,167,877
================== =================
* Including distributions in excess of net investment income ($475,254) ($165,344)
</TABLE>
See accompanying notes to the financial statements.
25
THE PANAGORA INSTITUTIONAL FUNDS
FINANCIAL HIGHLIGHTS
PANAGORA ASSET ALLOCATION FUND
<TABLE>
<CAPTION>
====================================================================================================================================
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
MAY 31, 1997 MAY 31, 1996 MAY 31, 1995 MAY 31, 1994*
------------- ------------ --------------- --------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD: $12.24 $11.26 $10.01 $10.00
------------- ------------ --------------- --------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.29 0.28 0.22 0.14
Net realized and unrealized gain on investments 1.23 1.97 1.18 0.02
------------- ------------ --------------- --------------
Total from investment operations 1.52 2.25 1.40 0.16
------------- ------------ --------------- --------------
LESS DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income (0.29) (0.27) (0.15) (0.10)
Net realized gains (0.74) (1.00) - (0.05)
------------- ------------ --------------- --------------
Total distributions (1.03) (1.27) (0.15) (0.15)
------------- ------------ --------------- --------------
NET ASSET VALUE, END OF PERIOD: $12.73 $12.24 $11.26 $10.01
============= ============ =============== ==============
TOTAL RETURN 12.68% 21.05% 14.13% 1.63%
============= ============ =============== ==============
RATIOS / SUPPLEMENTAL DATA:
Net assets, end of period (000's) $36,081 $9,939 $7,289 $2,871
Net expenses to average daily net assets 0.90% 0.90% 0.90% 0.90%
Net investment income to average daily net assets 2.62% 2.41% 2.46% 2.08%
Portfolio turnover rate 106% 59% 77% 50%
Average commission rate paid (1) $0.049 $0.040 - -
Effect of voluntary expense limitation during the period:
Per share benefit to net investment income $0.07 $0.15 $0.19 $0.53
Ratios before expense limitation:
Expenses to average daily net assets 1.62% 2.21% 3.07% 8.96%
Net investment income (loss) to average daily net assets 1.90% 1.10% 0.28% (5.98%)
* The Fund commenced operations on June 1, 1993.
(1) For fiscal years beginning on or after September 1, 1995, a fund is required
to disclose its average commission rate per share. Average commission rate paid
is computed by dividing the total dollar amount of commissions paid during the
period by the total number of shares purchased and sold during the period for
which commissions were charged.
</TABLE>
See accompanying notes to the financial statements.
26
THE PANAGORA INSTITUTIONAL FUNDS
FINANCIAL HIGHLIGHTS
PANAGORA INTERNATIONAL EQUITY FUND
<TABLE>
<CAPTION>
====================================================================================================================================
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
MAY 31, 1997 MAY 31, 1996 MAY 31, 1995 MAY 31, 1994 *
------------- ------------- -------------- ------------------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD: $11.22 $10.62 $10.75 $10.00
------------- ------------- -------------- ------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) (0.05) (0.01) 0.33 0.11
Net realized and unrealized gain on investments 0.77 0.81 0.19 0.89
------------- ------------- -------------- ------------------
Total from investment operations 0.72 0.80 0.52 1.00
------------- ------------- -------------- ------------------
LESS DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income (0.07) - (0.13) (0.03)
In excess of net investment income - (0.20) (0.06) (0.22)
From net realized gains (0.25) - (0.27) -
In excess of net realized gains - - (0.19) -
------------- ------------- -------------- ------------------
Total distributions (0.32) (0.20) (0.65) (0.25)
------------- ------------- -------------- ------------------
NET ASSET VALUE, END OF PERIOD: $11.62 $11.22 $10.62 $10.75
============= ============= ============== ==================
TOTAL RETURN 6.51% 7.62% 5.09% 10.12%
============= ============= ============== ==================
RATIOS / SUPPLEMENTAL DATA:
Net assets, end of period (000's) $26,496 $22,168 $17,960 $14,955
Net operating expenses to average daily net assets 1.10% 1.10% 1.10% 1.10%
Interest expenses to average daily net assets (Note 3) 0.02% - - -
Net investment income to average daily net assets 1.45% 1.24% 1.39% 0.93%
Portfolio turnover rate 41% 67% 218% 160%
Average commission rate paid (1) $0.001 $0.002 - -
Effect of voluntary expense limitation during the period:
Per share benefit to net investment income ($0.03) $0.10 $0.41 $0.16
Ratios before expense limitation:
Expenses to average daily net assets 1.94% 2.17% 2.85% 2.42%
Net investment income (loss) to average daily net assets 0.61% 0.17% (0.36%) (0.39%)
* The Fund commenced operations on June 1, 1993.
(1) For fiscal years beginning on or after September 1, 1995, a fund is required
to disclose its average commission rate per share. Average commission rate paid
is computed by dividing the total dollar amount of commissions paid during the
period by the total number of shares purchased and sold during the period for
which commissions were charged.
</TABLE>
See accompanying notes to the financial statements.
27
THE PANAGORA INSTITUTIONAL FUNDS
NOTES TO FINANCIAL STATEMENTS
The PanAgora Institutional Funds (the "Trust"), formerly the PanAgora
Funds, was organized under the laws of the Commonwealth of Massachusetts on
January 27, 1993 as a Massachusetts business trust and is registered under
the Investment Company Act of 1940, as amended (the "1940 Act"), as an
open-end management investment company. The Trust consists of two
separately managed investment series: PanAgora Asset Allocation Fund and
PanAgora International Equity Fund, (the "Funds"). Both of the Funds
commenced operations on June 1, 1993.
The Funds' investment objective is to maximize total return, consisting of
capital appreciation and current income. In order to achieve its investment
objective, the PanAgora Asset Allocation Fund actively allocates its assets
among U.S. equity securities, fixed income securities, cash and cash
equivalents and the PanAgora International Equity Fund actively allocates
its assets among international equity markets.
1. SIGNIFICANT ACCOUNTING POLICIES
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts and disclosures in the
financial statements. Actual results could differ from those estimates.
The following is a summary of significant accounting policies for the
Funds. Such policies are in conformity with generally accepted accounting
principles for investment companies and are consistently followed by the
Funds in the preparation of the financial statements.
PORTFOLIO VALUATION
Equity securities and other similar investments traded on a recognized U.S.
or foreign securities exchange or the National Association of Securities
Dealers Automated Quotation System (NASDAQ) are valued at their last sale
price on the principal exchange on which they are traded or NASDAQ (if
NASDAQ is the principal market for such securities). If no sale occurs,
securities are valued at the mean between the closing bid and asked price.
Unlisted equity securities for which market quotations are readily
available are valued at the mean between the most recent bid and asked
price. Debt securities and other fixed-income investments of the Funds will
be valued at prices supplied by independent pricing agents selected by the
Board of Trustees. Short-term obligations maturing in sixty days or less
are valued at amortized cost. Amortized cost valuation involves initially
valuing a security at its cost, and thereafter, assuming a constant
amortization to maturity of any discount or premium, regardless of the
impact of fluctuating interest rates on the market value of the security.
Securities whose market value does not, in the Advisor's opinion, reflect
fair value, are valued at fair value using methods determined in good faith
by the Board of Trustees.
REPURCHASE AGREEMENTS
Each Fund may engage in repurchase agreement transactions. Under the terms
of a typical repurchase agreement, the Fund takes possession of an
underlying debt obligation (i.e. collateral) subject to an obligation of
the seller to repurchase, and the Fund to resell, the obligation at an
agreed-upon price and time, thereby determining the yield during the Fund's
holding period. This arrangement results in a fixed rate of return that is
not subject to market fluctuations during the Fund's holding period. The
value of the collateral is at least equal at all times to the total amount
of
28
THE PANAGORA INSTITUTIONAL FUNDS
NOTES TO FINANCIAL STATEMENTS
REPURCHASE AGREEMENTS - CONTINUED
the repurchase obligations, including interest. In the event of
counterparty default, the Fund has the right to use the collateral to
offset losses incurred. There is potential loss to the Fund in the event
the Fund is delayed or prevented from exercising its rights to dispose of
the collateral securities, including the risk of a possible decline in the
value of the underlying securities during the period while the Fund seeks
to assert its rights. The Fund's investment advisor, acting under the
supervision of the Board of Trustees, reviews the value of the collateral
and the creditworthiness of those banks and dealers with which the Fund
enters into repurchase agreements to evaluate potential risks.
FUTURES CONTRACTS
The Funds will engage in futures transactions only for bona fide hedging
and non-hedging purposes as defined in regulations of the Commodity Futures
Trading Commission. Upon entering into a futures contract, each Fund is
required to deposit with the broker an amount of cash or cash equivalents
equal to a certain percentage of the contract amount. This is known as the
"initial margin." Subsequent payments ("variation margin") are made or
received by the Funds each day, depending on the daily fluctuation of the
value of the contract.
Futures contracts are marked-to-market daily and the daily changes in the
value of the contract are recorded as unrealized gains or losses. The Funds
recognize a realized gain or loss when the contract is closed.
There are several risks in connection with the use of futures contracts as
a hedging device. The change in value of futures contracts primarily
corresponds with the value of their underlying instrument or index, which
may not correlate with the change in value of the hedged investments. In
addition, there is the risk that the Fund may not be able to enter into a
closing transaction because of an illiquid secondary market.
FOREIGN CURRENCY
The books and records of the Funds are maintained in United States (U.S.)
dollars. Foreign currencies, investments and other assets and liabilities
are translated into U.S. dollars at the exchange rates prevailing at the
end of the period, and purchases and sales of investment securities, income
and expenses are translated on the respective dates of such transactions.
The Funds do not isolate that portion of the results of changes in foreign
currency exchange rates from the fluctuations arising from changes in the
market prices of securities held at period end. Net realized foreign
currency gains and losses result from changes in exchange rates, including
foreign currency gains and losses between trade date and settlement date on
investment securities transactions, foreign currency transactions and the
difference between the amounts of interest and dividends recorded on the
books of the Funds and the amount actually received. The portion of foreign
currency gains and losses related to fluctuations in exchange rates between
the initial trade date and subsequent sale trade date is included in
realized gains and losses on security transactions.
29
THE PANAGORA INSTITUTIONAL FUNDS
NOTES TO FINANCIAL STATEMENTS
FORWARD FOREIGN CURRENCY CONTRACTS
The PanAgora International Equity Fund may enter into forward foreign
currency contracts. Forward foreign currency contracts are valued at the
forward rate and are marked-to-market daily. The change in market value is
recorded by the Fund as an unrealized gain or loss. When the contract is
closed or delivery is taken, the Fund records a realized gain or loss equal
to the difference between the value of the contract at the time it was
opened and the value at the time it was closed.
The use of forward foreign currency contracts does not eliminate
fluctuations in the underlying prices of the Fund's securities, but it does
establish a rate of exchange that can be achieved in the future. Although
forward foreign currency contracts can limit the risk of loss due to a
decline in the value of the hedged currency, they also limit any potential
gain that might result should the value of the currency increase. In
addition, the Fund could be exposed to risks if the counterparties to the
contracts are unable to meet the terms of their contracts.
SECURITY LENDING
The Funds may lend its securities to brokers, dealers and other financial
organizations. The loans are collateralized at all times with cash. As with
other extensions of credit, the Funds may bear the risk of delay in
recovery or even loss of rights in the collateral should the borrower of
the securities fail financially. The Funds receive compensation for lending
its securities. As of May 31, 1997, the PanAgora Asset Allocation Fund and
the PanAgora International Equity Fund loaned securities having a market
value of $882,574 and $2,093,541, respectively, collateralized by cash in
the amount of $900,551 and $2,164,662, respectively, which was invested in
short-term investments.
SECURITIES TRANSACTIONS AND INVESTMENT INCOME
Securities transactions are recorded as of the trade date. Realized gains
or losses from securities sold are recorded on the identified cost basis.
Interest income is recorded on the accrual basis and consists of interest
accrued and, if applicable, discount earned less premiums amortized.
Dividend income is recorded on the ex-dividend date, except that certain
dividends from foreign securities are recorded as soon as the Fund is
informed of the ex-dividend date.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Each Fund declares and pays dividends from net investment income, if any,
and distributes net short-term capital gains, if any, on an annual basis.
Each Fund also distributes, at least annually, substantially all of the
long-term capital gains in excess of available capital losses, if any,
which it realizes for each taxable year. Income distributions and capital
gain distributions are determined in accordance with income tax regulations
which may differ from generally accepted accounting principles. These
differences are primarily due to differing treatments of income and gains
on various investment securities held by each Fund, timing differences and
differing characterization of distributions made by each Fund. Permanent
differences relating to shareholder distributions will result in
reclassifications to paid-in capital.
30
THE PANAGORA INSTITUTIONAL FUNDS
NOTES TO FINANCIAL STATEMENTS
FEDERAL INCOME TAXES
It is the policy of the Funds to qualify as a regulated investment
company, by complying with the requirements under Subchapter M of the
Internal Revenue Code of 1986, as amended, applicable to regulated
investment companies and by distributing substantially all of its earnings
to its shareholders. Therefore, no provision for federal income or excise
tax is necessary. The International Equity Fund elected to defer to its
fiscal year ending May 31, 1998, $382,299 of losses recognized during the
period from November 1, 1996 to May 31, 1997.
2. MANAGEMENT FEE AND OTHER TRANSACTIONS WITH AFFILIATES
The Trust has entered into an investment advisory agreement (the "Advisory
Agreement") with PanAgora Asset Management, Inc. ("PanAgora"). Under the
Advisory Agreement, the Trust, on behalf of each Fund, pays a monthly fee
at an annual rate of the value of each Fund's average daily net assets as
follows:
PanAgora Asset Allocation Fund 0.60%
PanAgora International Equity Fund 0.80%
PanAgora has agreed to voluntarily waive and reimburse a portion or all of
its respective fees and expenses of the Asset Allocation Fund and
International Equity Fund to the extent that the Funds' total annual
expenses exceed 0.90% or 1.10% of their average daily net assets,
respectively.
PanAgora 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 value of the
average daily net assets of each Fund. The minimum fee, with respect to
both funds, is $15,000 per year. The Funds do not pay any fees to Funds
Distributor, Inc.
The Trust has entered into Administration, Custodian and Transfer Agency
and Service Agreements with Investors Bank & Trust Company ("Investors
Bank").
No officer, director or employee of PanAgora, Investors Bank or any parent
or subsidiary of those corporations receives any compensation from the
Trust for serving as a Trustee or officer of the Trust. The Trust pays each
Trustee who is not any officer, director, or employee of PanAgora and their
affiliates or Investors Bank $5,000 per annum plus $1,000 per meeting
attended and reimburses each such Trustee for travel and out-of-pocket
expenses.
3. INVESTMENT TRANSACTIONS
Costs of purchases and proceeds from sales of investment securities,
excluding short-term investments, during the year ended May 31, 1997 were
as follows:
Purchases Sales
----------------- ----------------
PanAgora Asset Allocation Fund $ 30,696,560 $ 14,847,677
PanAgora International Equity Fund 16,865,742 8,039,296
The Asset Allocation Fund's purchases and sales include U.S. Government
security purchases and sales of $ 7,420,334 and $ 305,305, respectively.
31
THE PANAGORA INSTITUTIONAL FUNDS
NOTES TO FINANCIAL STATEMENTS
3. INVESTMENT TRANSACTIONS- CONTINUED
For the year ended May 31, 1997, aggregated gross unrealized appreciation
for all securities in which there is an excess of value over tax cost and
aggregate gross unrealized depreciation for all securities in which there
is an excess of tax cost over value were as follows:
<TABLE>
<CAPTION>
TAX BASIS TAX BASIS
UNREALIZED UNREALIZED NET UNREALIZED
APPRECIATION DEPRECIATION APPRECIATION
------------------- ------------------ ----------------------
<S> <C> <C> <C>
PanAgora Asset Allocation Fund $ 1,225,143 $ (391,844) $ 833,299
PanAgora International Equity Fund 2,732,736 (2,162,730) 570,006
</TABLE>
The International Equity Fund engaged in borrowings for temporary cash
management purposes. The average daily balance of borrowings outstanding
during the year ended May 31, 1997 was $72,279 at a weighted average
interest rate of 6.25%. The maximum amount of borrowing during the year was
$1,163,892.
4. SHARES OF BENEFICIAL INTEREST
For the year ended May 31, 1997 an unlimited number of shares of beneficial
interest without par value were authorized. Changes in shares of beneficial
interest were as follows:
Year Ended Year Ended
May 31, 1997 May 31, 1996
-------------- ----------
PANAGORA ASSET ALLOCATION FUND:
Shares sold 2,041,903 156,639
Shares issued to shareholders in
reinvestment of distributions 72,614 76,272
Shares repurchased (92,864) (68,247)
------------- ----------
Net increase 2,021,653 164,664
Fund shares:
Beginning of year 812,150 647,486
------------- ----------
End of year 2,833,803 812,150
============= ==========
32
THE PANAGORA INSTITUTIONAL FUNDS
NOTES TO FINANCIAL STATEMENTS
4. SHARES OF BENEFICIAL INTEREST - CONTINUED
Year Ended Year Ended
May 31, 1997 May 31, 1996
---------- -----------
PANAGORA INTERNATIONAL EQUITY FUND:
Shares sold 562,044 319,471
Shares issued to shareholders in
reinvestment of distributions 69,986 33,194
Shares repurchased (326,221) (67,770)
---------- ----------
Net increase 305,809 284,895
Fund shares:
Beginning of year 1,975,371 1,690,476
---------- ----------
End of year 2,281,180 1,975,371
========== ==========
5. ORGANIZATION COSTS
Each Fund has borne all costs in connection with its organization. Such
costs are being amortized on the straight-line method over a period of five
years from the commencement of operations for each Fund. In the event that
any of the initial shares of the Funds are redeemed during such
amortization period, the Funds will be reimbursed for any unamortized costs
in the same proportion as the number of shares redeemed bears to the number
of initial shares held at the time of redemption.
6. FINANCIAL INSTRUMENTS
The Funds may purchase financial instruments with off-balance sheet risk in
the normal course of its investment activities. The Asset Allocation Fund
may invest in futures contracts and the International Equity Fund may
invest in forward currency contracts and futures contracts. The notional or
contractual amounts of these instruments represent the investment the Funds
have in particular classes of financial instruments and do not represent
the amounts potentially subject to risk. The measurement of the risks
associated with these instruments is meaningful only when all related and
offsetting transactions are considered. As of May 31, 1997, the Asset
Allocation Fund had open futures contracts for which a summary is included
with its portfolio of investments.
7. CONCENTRATION
For the year ended May 31, 1997 a substantial portion of the PanAgora
International Equity Fund's net assets consist of securities denominated in
foreign currencies. Changes in currency exchange rates will affect the
value of and investment income from such securities. Foreign securities may
be
33
THE PANAGORA INSTITUTIONAL FUNDS
NOTES TO FINANCIAL STATEMENTS
7. CONCENTRATION - CONTINUED
subject to greater price volatility, more limited capitalization and
liquidity, and higher rates of inflation than securities of companies based
in the United States.
8. BENEFICIAL INTEREST
At May 31, 1997, PanAgora Asset Management, Inc. and affiliated entities
were record owners of 6.45% and 6.22% of the outstanding shares of the
PanAgora Asset Allocation Fund and PanAgora International Equity Fund,
respectively. Certain other unaffiliated companies were each record owners
of more than 10% of the outstanding shares of the Funds as follows.
UNAFFILIATED COMPANIES
# of Shareholders % of Ownership
------------------------------------------
PanAgora Asset Allocation Fund 3 92.84%
PanAgora International Equity Fund 3 92.67%
34
THE PANAGORA INSTITUTIONAL FUNDS
FEDERAL INCOME TAX INFORMATION ON DISTRIBUTIONS - (UNAUDITED)
- --------------------------------------------------------------------------------
1. For distributions made during the fiscal year ended May 31, 1997, the Asset
Allocation Fund and the International Equity Fund designated $408,033 and
$310,702, respectively as long term capital gains.
2. Taxes on foreign source interest and dividend income have been withheld in
accordance with the applicable country's tax treaty with the United States.
At the close of the PanAgora International Equity Fund's fiscal year the
total foreign source income was $435,168 and the withholding tax associated
with that income was $44,311. Dividends received by shareholders of the
fund which are derived from foreign source income and foreign taxes paid by
the Fund are to be treated, to the extent allowable under the Internal
Revenue code, as if paid and received by the shareholders of the fund.
35
REPORT OF INDEPENDENT ACCOUNTANTS
To the Shareholders and Board of Trustees of the
PanAgora Institutional Funds:
We have audited the accompanying statements of assets and liabilities of
the PanAgora Institutional Funds (consisting of the PanAgora Asset
Allocation Fund and the PanAgora International Equity Fund), including the
schedules of portfolio of investments, as of May 31, 1997, and the related
statements of operations for the year then ended and the statements of
changes in net assets and the financial highlights for each of the periods
presented. These financial statements and financial highlights are the
responsibility of the Funds' management. Our responsibility is to express
an opinion on these financial statements and financial highlights based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
May 31, 1997 by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable
basis for our opinion.
In our opinion, the financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position
of The PanAgora Institutional Funds as of May 31, 1997, the results of
their operations for the year then ended and the changes in their net
assets and their financial highlights for each of the periods presented, in
conformity with generally accepted accounting principles.
/s/ COOPERS & LYBRAND L.L.P.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
July 18, 1997
36
|
|