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Previous: PANAGORA FUNDS, NSAR-A, 1998-01-27 |
Next: VAN KAMPEN AMERICAN CAPITAL INSURED INCOME TRUST SER 51, 24F-2NT, 1998-01-27 |
<PAGE> 1
The PanAgora Institutional Funds
President's Letter
January 14, 1998
Dear Fellow Shareholders:
These are exciting investment times. As I write this letter, Asian markets are
in a dramatic slide. The U.S. stock market is in a trading range, unable to
reach new highs despite a huge drop in long-term interest rates. Consequently,
we are pleased to present this investment review in the semi-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, endowment funds,
401(k) plans and individual investors. The PanAgora Institutional Funds are a
series of funds. PanAgora Asset Allocation Fund invests in a mix of U. S.
stocks, bonds and cash equivalents. PanAgora International Equity Fund invests
in stocks outside the U. S.
PANAGORA ASSET ALLOCATION FUND
The 1997 return for the U.S. stock market was outstanding. For the first time in
history, the stock market returned greater than 20% for three years in a row.
Bonds also turned in a good, though less spectacular year.
The large annual return masks the weakness in the market itself. A good first
quarter ended on a sharp down note in March and early April when the Federal
Reserve (Fed) raised interest rates to slow an economy growing at a 4.6% annual
rate. This caused a substantial shift in market psychology and the return of
market volatility which had been below average since 1992. However, the majority
of the stock market's 1997 return was generated in a four month period from
mid-April through early August. During that period, the S&P 500 stock index rose
about 27%. This strong return was based upon Wall Street's expectation that the
so-called "Goldilocks" economy will continue. The Goldilocks scenario, with
which we disagree, depends upon the following conditions:
1. Inflation will continue at low levels (annually 2% or less).
2. The economy will not over-heat, but grow modestly, or even slow.
3. Despite full employment, wages will not rise because of
productivity gains.
4. The Fed will not need to raise interest rates.
5. Because the Fed will not raise rates, earnings will continue
growing at a 10% - 15 % rate.
6. Good earnings growth will not cause inflation to surge.
7. Baby Boomers will be a source of endless liquidity since they have
now learned that the only way to save for their retirement is to
buy and hold common stocks.
8. Nothing unexpected will happen that cannot be handled by the
Federal Reserve or the government.
<PAGE> 2
This Goldilocks outlook depends upon a number of assumptions. The first
assumption is that the current state of low inflation, low unemployment and
strong growth is a permanent structural change. Old methods for anticipating
inflation are no longer valid. Second, that the current state of economic
affairs will continue indefinitely. Based on these two assumptions, stocks can
sell at substantial multiples to their current earnings. In addition, the
Goldilocks outlook depends on the assumption that the stock market will
continue rising indefinitely because of the earnings outlook, and that any
pullback will be temporary and a buying opportunity. In fact, investors are
substantially justified at paying almost any price for "good" companies since
their earnings prospects are practically unlimited in the "long-term."
Because of the Goldilocks scenario, stocks had a substantial run between April
and early August after a rocky first quarter. However, since August, the market
has made little progress. First there were a number of sell-offs in August tied
to realization that the economy was growing at a much faster rate than expected.
Then the Japanese Prime Minister mentioned that a continued slide in the
Japanese yen might cause the Japanese to sell some of their substantial hoard of
US treasuries. This resulted in a U.S. Market decline of 5.60% in August.
However, continued optimism that the Fed would not raise rates resulted in yet
another market rally in September erasing the August losses.
October brought a global market crisis. Southeast Asia, the world's fastest
growing economic region, had a series of financial crisis tied to an excess of
foreign debt and the collapse of their currencies. As the currency crisis
threatened Hong Kong, the markets gyrated wildly. November, following the
up-and-down pattern of the previous months, generated positive stock market
gains again in the U.S. The markets began to feel that the Asian crisis was
over, and would not effect us much anyway.
December was another down month until the last week when the U.S. Market
once again recovered. The crisis in Asia, though, continued and widened.
South Korea was on the verge of default as their currency and markets tumbled.
The Japanese stock market also dropped substantially due to a combination of
factors. First, the Japanese have substantial investment and loans to Korea.
Second, Japanese financial institutions began failing as bad business practices
finally caught up with many firms. Yamaichi Securities, one of the largest
brokerage firms in Japan and the world, went into bankruptcy. The Korean stock
market and currency went into free fall, and had to be rescued by the
International Monetary Fund. Reforms in both Japan and Korea were announced,
but as the year came to a close, it was unclear whether the reforms were
enough.
US Treasury bonds were a safe haven through the turmoil. From September through
December bonds turned in substantial gains.
FUND PERFORMANCE
The Asset Allocation Fund relies on PanAgora Asset Management's US
Tactical Asset Allocation discipline which overweighted stocks in the first
quarter, but reduced equities to its minimum weighting in April. With the Fed
raising rates, the combination of high earnings expectations, tight monetary
policy and extreme stock market valuations made stocks a very
<PAGE> 3
risky investment. However, the stock market rallied and relative performance
suffered. From August through the end of the year, stocks gave mediocre
performance, and the Fund added value. During the market meltdown in October,
the PanAgora Asset Allocation Fund was one of the best performing mutual funds
in the US. The purpose of tactical asset allocation is to reduce downside risk,
and the Fund has followed that strategy. Stock market risk continues to be high.
The economic situation has not yet been resolved. In the interim, the PanAgora
Asset Allocation Fund will continue to protect principal by investing primarily
in bonds and cash.
PANAGORA INTERNATIONAL EQUITY FUND
From the handover of Hong Kong to China on July 1 to the recent International
Monetary Fund (IMF) bailout of South Korea, South East Asian financial markets
have dominated the news. Investors' concerns pertaining to the viability of
China's "one country, two systems" plan for Hong Kong were soon replaced with
questions concerning the future of the Hong Kong dollar. The devaluation of the
Thai baht triggered a speculative attack on the region's currencies. Although
the U.S. dollar/Hong Kong dollar peg was not broken, all other south east Asian
currencies were devalued. This led to IMF bailout packages for Thailand,
Indonesia, and South Korea. The market turmoil spread to Australia, New Zealand,
and Japan. Fortunately, the Fund held underweight positions in Australia, Hong
Kong, Japan, Malaysia, and Singapore.
Our strategic position in emerging markets detracted from performance
as the South East Asian crisis spreads to other emerging markets, causing
emerging markets as a group, to significantly underperform our MSCI EAFE GDP
benchmark (MSCI EAFE GDP is the Morgan Stanley Capital International Europe
Australia Far East Index weighted by the Gross Domestic Product of each
country). However, we remain committed to this emerging market strategy
because these markets, over the long term, offer potential for exceptional
growth.
In the developed markets, the Fund continues to underweight the Pacific
countries such as Japan, Hong Kong, and Malaysia. The recent negative sentiment
surrounding the region's massive financial and economic restructuring overwhelms
attractive valuation measures. Conversely, a stronger U.S. dollar, strengthening
economies, improving prospects for European Monetary Union and accelerating
corporate restructurings are expected to provide significant support for
European equity markets. The Fund is currently holding overweight positions in
countries such as Austria, Norway, Finland, Italy, and Spain.
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
<PAGE> 4
PANAGORA ASSET ALLOCATION FUND
PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
SHARE MARKET PERCENT OF
DESCRIPTION AMOUNT VALUE (NOTE 1) NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCK
AIRLINES
AMR Corp. 700 $ 84,831
US Airways Group, Inc.* 1,200 66,150
---------------
150,981 0.4%
---------------
AUTOMOTIVE
Ford Motor Co 3,800 163,400
General Motors Corp 2,400 146,400
---------------
309,800 0.8%
---------------
BANKING
BankAmerica Corp 600 43,800
Bankers Trust New York Corp 1,000 118,563
Barnett Banks, Inc 200 14,075
Chase Manhattan Corp 724 78,645
Citicorp 600 71,962
First Chicago NBD Corp 762 59,627
FIRSTPLUS Financial Group, Inc. (a)* 1,200 45,750
Golden West Financial Corp 500 44,812
Nationsbank Corp 900 54,056
Norwest Corp 2,200 82,362
PNC Bank Corp 1,100 59,194
Wells Fargo & Co 100 30,725
---------------
703,571 1.9%
---------------
BEVERAGES, FOOD & TOBACCO
Coca-Cola Co 2,600 162,500
Philip Morris Co., Inc 4,400 191,400
Procter & Gamble Co 1,000 76,313
RJR Nabisco Holdings Corp 3,000 109,312
Sbarro, Inc 500 14,000
UST, Inc 1,100 33,962
Whitman Corp 600 15,788
Wrigley, William Jr., Co 900 71,213
---------------
674,488 1.8%
---------------
BUILDING & CONSTRUCTION
Centex Corp 1,700 107,737
Foster Wheeler Corp 1,100 33,894
---------------
141,631 0.4%
---------------
CHEMICALS
EI Dupont de Nemours & Co 800 48,450
Hercules, Inc 1,200 58,274
Lubrizol Corp 900 35,100
Nalco Chemical 1,500 58,219
Premark International, Inc 1,900 49,638
Solutia, Inc 80 1,825
Thiokol Corp 1,000 82,625
---------------
334,131 0.9%
---------------
COMMERCIAL SERVICES
Gibson Greetings, Inc 1,700 39,737
Olsten Corp 3,900 58,013
---------------
97,750 0.3%
---------------
</TABLE>
See accompanying notes to the financial statements. 1
<PAGE> 5
PANAGORA ASSET ALLOCATION FUND
PORTFOLIO OF INVESTMENTS - CONTINUED
NOVEMBER 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
SHARE MARKET PERCENT OF
DESCRIPTION AMOUNT VALUE (NOTE 1) NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMUNICATIONS
Bay Networks* 700 $ 21,044
Northern Telecom Ltd.(a) 600 53,888
---------------
74,932 0.2%
---------------
COMPUTER EQUIPMENT
Applied Magnetics Corp(a)* 900 15,188
Autodesk, Inc 400 15,375
Compaq Computer 560 34,965
Dell Computer Corp.* 300 25,256
International Business Machine Corp 1,000 109,562
Oracle Corp.* 1,525 50,802
Silicon Graphics, Inc.* 2,200 28,875
---------------
280,023 0.7%
---------------
COMPUTER SOFTWARE & PROCESSING
3 Com Corp.* 500 18,125
Adobe Systems, Inc 2,000 84,000
Cisco Systems, Inc.* 600 51,750
Computer Associates International, Inc 900 46,856
CUC International, Inc.(a) 3,750 107,813
EMC Corp.* 400 12,125
Microsoft Corp 2,200 311,300
Netscape Communications Corp 46 1,311
Remedy Corp 600 26,175
---------------
659,455 1.8%
---------------
COSMETICS & PERSONAL CARE
Colgate-Palmolive Co 600 40,088 0.1%
---------------
DIVERSIFIED
Aeroquip-Vickers, Inc 1,700 86,806
Corning, Inc 300 12,731
---------------
99,537 0.3%
---------------
ELECTRIC UTILITIES
DQE, Inc 1,200 39,825
Entergy Corp 3,500 91,000
GPU, Inc 2,700 106,650
Niagara Mohawk Power Corp.* 1,300 12,431
Texas Utilities Co 1,200 48,000
---------------
297,906 0.8%
---------------
ELECTRONICS
General Electric Co 4,200 309,750
Intel Corp 2,300 178,538
Texas Instruments 400 19,700
---------------
507,988 1.3%
---------------
ENERGY SERVICES
PG&E Corp 700 19,775 0.1%
---------------
ENTERTAINMENT & LEISURE
Kingworld Productions, Inc 1,400 76,125
Walt Disney Company 1,700 161,394
---------------
237,519 0.6%
---------------
</TABLE>
See accompanying notes to the financial statements. 2
<PAGE> 6
PANAGORA ASSET ALLOCATION FUND
PORTFOLIO OF INVESTMENTS - CONTINUED
NOVEMBER 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
SHARE MARKET PERCENT OF
DESCRIPTION AMOUNT VALUE (NOTE 1) NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FINANCIAL SERVICES
Asarco, Inc 1,200 $ 29,850
A.G. Edwards, Inc 1,300 44,038
Bear Stearns Companies, Inc 1,400 58,100
Beneficial Corp 800 62,100
Green Tree Financial Corp.(a) 1,100 33,688
J. P. Morgan & Co.,Inc 900 102,768
MBNA Corp 487 12,936
Merrill Lynch & Co., Inc 1,200 84,225
MGIC Investment Corp 1,600 93,500
Morgan Stanley, Dean Witter, Discover & Co 480 26,070
Paine Webber Group, Inc 900 30,262
Salomon, Inc 1,600 133,400
---------------
710,937 1.9%
---------------
HEALTH CARE
Shared Medical 400 25,600 0.1%
---------------
HEAVY MACHINERY
Applied Materials, Inc 1,400 46,200
Caterpillar, Inc 800 38,350
Cincinnati Milacron 600 17,738
---------------
102,288 0.3%
---------------
INSURANCE
Allstate Corp 870 74,711
American International Group, Inc 300 30,244
Cigna Corp 200 33,450
Conseco, Inc 400 18,625
St. Paul Companies 900 72,000
TIG Holdings, Inc 1,800 57,938
Torchmark Corp 1,200 48,975
Travelers, Inc 1,950 98,475
Unum Corp 300 14,231
USF&G Corp 700 14,131
---------------
462,780 1.2%
---------------
LODGING
Hilton Hotels 700 21,788
Marriott International, Inc 300 21,731
---------------
43,519 0.1%
---------------
MANUFACTURING
Tyco International Ltd 800 31,400 0.1%
---------------
MEDICAL SUPPLIES
Baxter International, Inc 400 20,250
Becton Dickinson & Co 900 46,406
Guidant Corp 600 38,550
Medtronic, Inc 1,000 47,750
---------------
152,956 0.4%
---------------
METALS & MINING
Phelps Dodge Corp 600 39,750
USX-US Steel Group, Inc 2,700 84,544
---------------
124,294 0.3%
---------------
</TABLE>
See accompanying notes to the financial statements. 3
<PAGE> 7
PANAGORA ASSET ALLOCATION FUND
PORTFOLIO OF INVESTMENTS - CONTINUED
NOVEMBER 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
SHARE MARKET PERCENT OF
DESCRIPTION AMOUNT VALUE (NOTE 1) NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OFFICE EQUIPMENT
Xerox Corp 200 $ 15,537 0.0%
---------------
OIL & GAS
Amerada Hess Corp 100 5,600
Amoco Corp 200 18,000
Chevron Corp 800 64,150
Devon Energy Corporation 600 23,325
Enron Corp 800 31,000
Exxon Corp 3,100 189,100
Mobil Corp 600 43,163
Oneok Inc 1,400 52,325
Oryx Energy Co.* 600 16,200
Rowan Companies, Inc.* 1,000 34,000
Royal Dutch Petroleum Co.(a) 3,800 200,212
Santa Fe Energy Resources, Inc.* 1,200 13,425
Schlumberger Ltd 400 32,925
Sun Company, Inc 800 32,350
Tenneco, Inc 500 21,655
Texaco, Inc 1,390 78,508
USX-Marathon Group 1,500 51,375
---------------
907,313 2.4%
---------------
PACKAGING & CONTAINERS
Ball Corp 1,600 61,600 0.2%
---------------
PERSONAL CARE PRODUCTS
Ecolab, Inc 1,400 71,400
Gillette Co 700 64,618
Johnson & Johnson 1,400 88,113
---------------
224,131 0.6%
---------------
PHARMACEUTICALS
Abbott Laboratories 500 32,500
Allergan, Inc 900 30,488
Alza Corp. Class A.* 3,000 80,063
Bristol-Myers Squibb Co 1,300 121,713
Crescendo Pharmaceuticals Corp.* 150 1,716
Eli Lilly & Co 600 37,837
Interneuron Pharmaceuticals, Inc 1,400 16,712
Merck & Co., Inc 1,200 113,475
Pfizer, Inc 1,500 109,125
Pharmacia & Upjohn, Inc 25 843
Schering-Plough Corp 400 25,075
Warner-Lambert Company 300 41,963
---------------
611,510 1.6%
---------------
RESTAURANTS
Boston Chicken, Inc.(a) 3,500 28,109
Tricon Global Restaurants, Inc 120 4,058
---------------
32,167 0.1%
---------------
</TABLE>
See accompanying notes to the financial statements. 4
<PAGE> 8
PANAGORA ASSET ALLOCATION FUND
PORTFOLIO OF INVESTMENTS - CONTINUED
NOVEMBER 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
SHARE MARKET PERCENT OF
DESCRIPTION AMOUNT VALUE (NOTE 1) NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
RETAILERS
Dayton-Hudson Corp 1,500 $ 99,656
Gap Inc 600 32,213
Home Depot 2,850 159,422
Lowe's Co., Inc.(a) 2,100 96,468
Office Depot, Inc 2,600 61,425
Sears Roebuck 800 36,650
Tech Data Corp 800 32,300
TJX Companies, Inc 1,800 62,100
---------------
580,234 1.5%
---------------
TELECOMMUNICATION
Airtouch Communications, Inc 2,900 113,825
Alltel Corp 1,200 47,700
Andrew Corp 838 22,194
Cabletron Systems, Inc.* 2,000 46,000
Lucent Technologies 1,100 88,138
Tellabs, Inc 500 26,000
---------------
343,857 0.9%
---------------
TELEPHONE SYSTEMS
Ameritech Corp 300 23,119
AT & T Corp 2,300 128,512
Bell Atlantic Corp 1,548 138,158
BellSouth Corp 700 38,325
SBC Communications, Inc 400 29,125
Worldcom, Inc 1,200 38,400
---------------
395,639 1.0%
---------------
TEXTILES & APPAREL
Stride Rite Corp 1,900 22,681 0.1%
---------------
TRANSPORTATION
Tidewater, Inc 900 50,456 0.1%
-------------------------
TOTAL COMMON STOCK (Cost $8,419,384) 9,528,474 25.3%
---------------
</TABLE>
See accompanying notes to the financial statements. 5
<PAGE> 9
PANAGORA ASSET ALLOCATION FUND
PORTFOLIO OF INVESTMENTS - CONTINUED
NOVEMBER 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
MATURITY FACE MARKET PERCENT OF
DESCRIPTION RATE DATE AMOUNT VALUE (NOTE 1) NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
LONG-TERM DEBT
US GOVERNMENT OBLIGATIONS
US Treasury Note (b) 5.875% 10/31/98 $ 810,000 $ 811,013
US Treasury Note (b) 6.375% 01/15/99 925,000 931,070
US Treasury Note (b) 6.875% 07/31/99 220,000 223,575
US Treasury Note 6.000% 08/15/99 950,000 952,969
US Treasury Note (b) 5.875% 11/15/99 855,000 856,335
US Treasury Note (a) (b) 8.500% 02/15/2000 285,000 300,497
US Treasury Note 6.750% 04/30/2000 500,000 510,312
US Treasury Note 8.750% 08/15/2000 450,000 482,203
US Treasury Note 7.750% 02/15/2001 450,000 474,609
US Treasury Note 8.000% 05/15/2001 175,000 186,429
US Treasury Note (a) 6.250% 10/31/2001 400,000 405,000
US Treasury Note (a) 7.500% 05/15/2002 675,000 716,976
US Treasury Note (a) 5.750% 08/15/2003 275,000 273,195
US Treasury Note (a) 6.625% 05/15/2007 200,000 210,125
US Treasury Bond (b) 10.750% 08/15/2005 320,000 413,800
US Treasury Bond (b) 9.375% 02/15/2006 655,000 799,919
US Treasury Bond (b) 7.875% 11/15/2007 900,000 979,313
US Treasury Bond (b) 10.625% 08/15/2015 250,000 371,172
US Treasury Bond (b) 8.750% 05/15/2017 425,000 549,844
US Treasury Bond 8.875% 08/15/2017 395,000 517,450
US Treasury Bond (b) 7.875% 02/15/2021 302,000 365,420
US Treasury Bond (a) (b) 6.250% 08/15/2023 105,000 106,444
US Treasury Bond (b) 6.875% 08/15/2025 395,000 433,512
US Treasury Bond (a) (b) 6.000% 02/15/2026 470,000 461,481
---------------
TOTAL LONG-TERM DEBT (COST $12,073,392) 12,332,663 32.7%
---------------------------
SHORT-TERM INVESTMENTS
COMMERCIAL PAPER
Bank of Ireland 5.50% 12/01/97 3,148,381 3,148,381 8.3%
---------------
REPURCHASE AGREEMENT
IBT Repurchase Agreement 5.22%, dated
11/28/97, to be repurchased at $9,049,511
on 12/1/97, collateralized by Federal
National Mortgage Association with rates
of 6.48% and 7.414% and maturity dates of
7/11/02 and 7/01/24, with an aggregate
market value of $9,498,014. 9,045,576 9,045,576 24.0%
---------------
</TABLE>
See accompanying notes to the financial statements. 6
<PAGE> 10
PANAGORA ASSET ALLOCATION FUND
PORTFOLIO OF INVESTMENTS - CONTINUED
NOVEMBER 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
MATURITY FACE MARKET PERCENT OF
DESCRIPTION RATE DATE AMOUNT VALUE (NOTE 1) NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
US GOVERNMENT OBLIGATIONS
US Treasury Bill (b) 4.765% 12/18/97 1,175,000 1,161,936 3.1%
---------------
TOTAL SHORT-TERM INVESTMENTS (at Amortized Cost) 13,355,893 35.4%
------------------------
TOTAL INVESTMENTS (Cost $33,848,669) 35,217,030 93.4%
Excess of Other Assets over Liabilities 2,482,816 6.6%
-------------------------
NET ASSETS $ 37,699,846 100.0%
=========================
</TABLE>
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.
See accompanying notes to the financial statements. 7
<PAGE> 11
PANAGORA ASSET ALLOCATION FUND
SCHEDULE OF OPEN FUTURES CONTRACTS
NOVEMBER 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
Net Unrealized
Number of Appreciation
Contracts Type Expiration Date Contract Value (Depreciation)
- ---------------- ----------------------------------- ---------------------------- ------------------ -------------------
<S> <C> <C> <C> <C>
LONG:
22 Standard & Poor's 500 Index March 1998 $ 5,309,700 $ (106,000)
29 U.S. Treasury Note 10 Year Index March 1998 3,229,875 5,757
===================
$ (100,243)
===================
SHORT:
43 Standard & Poor's 500 Index December 1997 $ 10,266,250 $ (114,612)
14 U.S. Treasury Bond 10 Year Index December 1997 1,562,750 (4,375)
===================
$ (118,987)
===================
</TABLE>
See accompanying notes to the financial statements. 8
<PAGE> 12
PANAGORA INTERNATIONAL EQUITY FUND
PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
SHARE MARKET PERCENT OF
DESCRIPTION AMOUNT VALUE (NOTE 1) NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
COMMON STOCK (UNLESS OTHERWISE INDICATED)
ARGENTINA
Astra Cia Argentina Depetro 1,365 $ 2,335
Banco Frances Del Rio Plata 529 4,763
Banco Galicia Y Buenos Aires 1,128 6,601
Ciadea 1,054 1,403
Molinos Rio De La Plata 423 931
Perez Companc SA 3,589 25,563
Siderar S.A.I.C 360 1,523
Siderca SA 2,413 6,614
Telefonica de Argentina B 6,142 20,337
YPF Sociedade Anonima 921 31,049
---------------------
101,119 0.4%
---------------------
AUSTRIA
Austria Mikro Systeme International AG 250 15,109
Austrian Airlines AG * 2,500 53,387
Bank Austria AG-Participating Certificate 200 4,916
Bank Austria AG-Preferred EM.II 1,464 60,167
Bank Austria AG-Preferred 600 24,900
Bank Austria AG EM.II 2,628 121,875
Bank Austria AG 4,210 196,769
Bau Holding AG 400 22,886
Bbag Oest Brau Beteiligungs AG 600 29,010
Boehler-Uddeholm AG 750 50,647
BWT AG 150 23,389
Constantia Iso Holding AG 133 6,109
Constantia Verpack AG 67 3,707
EA-Generali AG 500 118,055
Flughafen Wien AG 1,450 59,089
Lenzing AG * 100 5,439
Mayr-Melnhof Karton AG 800 44,804
OEMV AG 2,000 260,268
Oest Elektrizatswirts AG - Class A 2,290 183,429
Radex-Heraklith Industrial AG 1,130 40,977
Steyr-Daimler-Puch AG 900 25,638
Universale Bau AG 100 3,546
Va Technologie AG 1,050 158,141
Wienerberger Baustoff Industrie AG 500 97,165
---------------------
1,609,422 6.2%
---------------------
BELGIUM
Bekaert SA 13 8,080
Cie Belge de Paribas 151 6,326
Cimentaries CBR-Strips 20 2
Cimenteries CBR Cementbed 130 11,643
Delhaize-Le Lion SA-Preferred 299 15,114
Electrabel SA-Strip 58 18
Electrabel (a) 323 72,231
Fortis AG 215 42,764
GBL Group 139 21,041
Generale De Banque SA 88 36,385
</TABLE>
See accompanying notes to the financial statements. 9
<PAGE> 13
PANAGORA INTERNATIONAL EQUITY FUND
PORTFOLIO OF INVESTMENTS - CONTINUED
NOVEMBER 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
SHARE MARKET PERCENT OF
DESCRIPTION AMOUNT VALUE (NOTE 1) NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BELGIUM - (CONTINUED)
Gevaert NV 151 $ 6,513
Glaverbel 40 5,692
Kredietbank NPV 77 31,043
Kredietbank NV 10 4,004
Petrofina SA NPV 139 53,652
Reunies Electrobel & Tractebel-Strip 65 2
Reunies Electrobel & Tractebel 405 34,714
Royal Belge SA-Strip 96 8
Royal Belge 96 25,292
Solvay Et Cie A NPV 500 30,014
The Union Miniere Group * 149 10,725
Tractebel Put Warrants 81 414
---------------------
415,677 1.6%
---------------------
BRAZIL
Aracruz Celulose-Preferred 1,000 1,424
Banco Bradesco SA-Preferred 1,400,000 10,336
Banco Itau SA-Preferred 26,000 11,625
Cia Cervejaria Brahma-Preferred 8,000 5,301
Cia Energetica De Minas Gerais-Preferred 195,000 9,492
Cia Souza Cruz Industry e Commerce 1,000 7,753
Electrobras-Preferred 30,000 14,739
Electrobras 78,000 36,423
Patroleo Brasile-Preferred 55,000 12,048
Telebras-Preferred 479,000 50,262
Usiminas-Preferred 370 2,368
Vale Rio Doce-Preferred B 500 8,970
White Martins SA* 2,709 3,663
---------------------
174,404 0.7%
---------------------
CHILE
Chilgener SA ADR 1,070 26,750
Cia de Telecomunicaciones de Chile SA ADR (a) 2,645 71,580
Empresa Nacional de Electricidad ADR (a) 1,200 22,275
Enersis SA ADR 1,690 50,489
Madeco SA ADR 400 6,750
Maderas Y Sinteticos Sociedad ADR 500 5,000
Quimica Y Minera Chile SA ADR 200 9,200
---------------------
192,044 0.7%
---------------------
DENMARK
Investeringsselskab AF 1 46 0.0%
---------------------
FINLAND
Amer-Yhthymae Oy A * 1,000 20,994
Cultor Oy 1 525 28,047
Cultor Oy 2 275 14,485
Instrumentarium Group A 550 18,145
Kemira Oy 4,600 43,976
Kesko Oy 3,225 45,944
Kone Corp. B 235 26,430
</TABLE>
See accompanying notes to the financial statements. 10
<PAGE> 14
PANAGORA INTERNATIONAL EQUITY FUND
PORTFOLIO OF INVESTMENTS - CONTINUED
NOVEMBER 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
SHARE MARKET PERCENT OF
DESCRIPTION AMOUNT VALUE (NOTE 1) NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FINLAND - (CONTINUED)
Merita Ltd. A 25,950 $ 131,337
Metra Oy A 500 12,653
Metra Oy B 1,425 34,725
Nokia AB A 6,900 553,578
Nokia AB K 2,625 210,600
Outokumpo Oy A 4,425 60,966
Pohjola Insurance Co. A 750 27,836
Pohjola Insurance Co. B 725 27,316
Sampo Insurance Co. Ltd. A 1,610 50,098
Stockmann AB A 300 18,558
Stockmann AB B 275 16,903
UPM-Kymmeme Corp 8,525 182,972
---------------------
1,525,563 5.9%
---------------------
FRANCE
Accor SA 135 25,508
Air Liquide 305 47,972
Alcatel Alsthom 697 87,325
AXA Co 1,300 94,290
Banque National de Paris 950 46,322
BIC 250 17,341
Bouygues 100 10,108
Canal Plus 100 17,388
Carrefour Supermarche 135 72,203
Casino Etabl Econ 185 10,248
Cie Generale des Eaux 524 69,199
Compagnie Bancaire 110 16,426
Compagnie de Saint Goban 370 50,240
Compagnie Financiere de Suez 14,500 37,315
Compagnie Financiere Paribas 625 45,131
Compagnie Gen De Eaux-Warrants 524 320
Comptoirs Modernes 15 7,327
Eridania Beghin 100 15,542
Essilor International SAY 70 19,507
Euro Disneyland Sca * 100 133
Euro Disneyland Sca-Warrants* 600 62
France Telecom SA 3,170 116,354
Groupe Danone 325 51,833
Havas SA 275 17,949
Imetal 100 11,851
Lafarge Coppee 355 23,440
Lagardere Groupe 700 20,147
Legrand SA 125 23,809
L'Oreal 300 114,790
LVMH Co 380 65,495
Lyonnaise des Eaux-Dumez 275 29,565
Michelin B 550 29,612
Pernod-Ricard 250 12,698
Peugeot SA 225 25,409
Primagaz Cie 100 8,310
</TABLE>
See accompanying notes to the financial statements. 11
<PAGE> 15
PANAGORA INTERNATIONAL EQUITY FUND
PORTFOLIO OF INVESTMENTS - CONTINUED
NOVEMBER 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
SHARE MARKET PERCENT OF
DESCRIPTION AMOUNT VALUE (NOTE 1) NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
FRANCE - (CONTINUED)
Printemps 59 $ 30,167
Promodes 100 36,739
Rhone Polenc 1,550 69,648
Sagem SA 30 13,506
Sanofi SA 425 42,526
Schneider SA 550 29,425
SEITA 275 9,773
Sidel SA 175 9,946
Simco 85 6,044
Societe Eurafrance SA 30 12,088
Societe Generale 400 52,553
Societe National Elf-Aquitaine 1,040 120,614
Sodexho 15 7,992
Sodexho-Rights 15 211
Technip SA 75 7,771
Thomson CSF 650 18,796
Total Cie Francaise Petroles 1,025 107,594
Usinor Sacilor 600 9,427
Valeo SA 300 19,829
---------------------
1,845,818 7.1%
---------------------
GERMANY
Aachen Und Muenchener Betei 50 51,254
Adidas AG 350 49,285
Allianz Holdings AG 1,700 403,145
BASF AG 4,550 160,884
Bayer AG 5,350 197,872
Bayer Hypoth-Und Wechsel Bank AG 1,700 73,693
Bayerische Vereins Bank AG 2,000 118,714
Beiersdorf AG 500 20,966
Bilfinger & Berger Bau AG 300 11,033
CKAG Colonia Konzern AG 150 12,665
Continental AG 600 15,181
Daimler Benz AG 3,800 268,945
Degussa AG 500 23,176
Deutsche Bank AG(a) 3,950 253,149
Deutsche Telekom AG 15,900 322,099
Douglas Holding AG 300 10,880
Dresdner Bank AG 3,650 141,470
Heidelberger Zement AG 275 21,504
Hochtief AG 450 18,615
Karstadt AG 70 24,315
Linde AG 50 31,138
Lufthansa AG 2,300 43,661
MAN AG 70 20,824
Mannesmann AG 300 139,567
Merck KGaA 1,450 52,750
Metro AG 1,720 78,946
Muenchener Rueckversicherungs-Gesellschaft 590 184,213
Preussag AG 100 28,588
</TABLE>
See accompanying notes to the financial statements. 12
<PAGE> 16
PANAGORA INTERNATIONAL EQUITY FUND
PORTFOLIO OF INVESTMENTS - CONTINUED
NOVEMBER 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
SHARE MARKET PERCENT OF
DESCRIPTION AMOUNT VALUE (NOTE 1) NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
GERMANY - (CONTINUED)
PWA AG (Papierwerke Waldhof-Aschaffenburg) 100 $ 19,210
RWE AG-Preferred 1,400 56,365
RWE AG 2,550 124,917
SAP AG Vorzug Preferred 350 107,692
SAP AG 400 116,277
Schering AG 450 44,114
SGL Carbon AG 150 19,337
Siemens AG 4,100 240,575
Thyssen AG 220 52,359
Veba AG 3,650 216,756
Viag AG 200 101,567
Volkswagen AG-Preferred 50 22,723
Volkswagen AG-Rights 200 0
Volkswagen AG 200 113,331
---------------------
4,013,755 15.5%
---------------------
GREAT BRITAIN
Abbey National 1,450 22,889
Arjo Wiggins Appleton PLC 1,433 4,080
Associated British Foods PLC 2,000 18,380
Barclay's PLC 1,500 36,086
Bass PLC 1,100 15,752
BG PLC 3,706 16,947
BOC Group PLC 1,000 16,030
Boots Co. PLC 1,100 16,123
British Aerospace PLC 500 13,629
British Airways PLC 1,300 11,838
British Petroleum Co. PLC 6,200 84,912
British Sky Broadcasting PLC 1,700 12,602
British Steel PLC 4,000 9,316
British Telecommunications PLC 5,800 44,752
BTR Limited 3,900 13,469
B.A.T. Industries 2,900 25,992
Cable & Wireless 2,200 19,549
Cadbury Schweppes PLC 1,300 13,425
Centrica PLC * 4,200 6,138
Commercial Union PLC 1,100 15,103
EMI Group PLC 1,300 9,768
General Electric Co. PLC 2,166 14,158
GKN PLC 550 11,925
Glaxo Wellcome PLC 3,408 78,945
Granada Group PLC 1,000 14,219
Grand Metropolitan PLC 2,100 19,069
Great Universal Stores 1,100 12,972
Guinness PLC 2,200 19,903
Hanson Trust PLC 2,131 10,806
HSBC Holdings PLC (Frankfurt) 1,700 43,740
HSBC Holdings PLC (London) 900 23,157
Imperial Chemical Industries 1,200 17,521
</TABLE>
See accompanying notes to the financial statements. 13
<PAGE> 17
PANAGORA INTERNATIONAL EQUITY FUND
PORTFOLIO OF INVESTMENTS - CONTINUED
NOVEMBER 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
SHARE MARKET PERCENT OF
DESCRIPTION AMOUNT VALUE (NOTE 1) NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
GREAT BRITAIN - (CONTINUED)
Kingfisher PLC 1,200 $ 16,638
Land Securities PLC 1,000 16,224
Legal & General Group PLC 1,900 16,165
Lloyds TSB Group PLC 5,000 57,490
Marks & Spencer PLC 2,800 29,011
National Grid Group PLC 3,000 15,112
National Power PLC 1,400 13,338
Pearson PLC 1,000 13,899
Peninsular & Orient Steam Navigation Co 1,000 10,799
Prudential Corp 2,000 21,766
Railtrack Group PLC 1,000 16,763
Reed International PLC 1,400 14,824
Reuters Holdings PLC 1,800 20,257
Rolls Royce PLC 3,000 11,978
Royal Bank of Scotland Group PLC 1,300 14,915
Royal & Sun Alliance Insurance Group PLC 1,800 16,345
RTZ Corp 1,750 21,227
Safeway PLC 2,000 10,917
Sainsbury PLC 2,200 18,068
Schroders PLC 400 11,496
Scottish Power PLC 2,200 17,790
Scottish & Newcastle PLC 1,200 14,095
SmithKline Beecham PLC 6,272 62,025
Tesco PLC 2,500 20,153
Unilever Limited 3,600 28,308
United Utilities PLC 1,000 12,804
Vodafone Group PLC 3,347 22,245
Williams PLC 5,306 28,784
Zeneca Group PLC 900 28,657
---------------------
1,295,288 5.0%
---------------------
GREECE
Aluminum of Greece SA 150 8,680
Commercial Bank of Greece 280 11,102
Credit Bank Greece 281 16,905
Ergo Bank SA 180 9,750
Hellas Can SA 100 1,444
Hellenic Bottling Co 760 17,893
Hellenic Telecommunications Organization SA 2,580 50,775
Heracles General Cement Co 340 6,937
Intracom SA 200 9,750
National Bank of Greece SA * 100 9,360
Titan Cement Co 160 7,511
---------------------
150,107 0.6%
---------------------
HUNGARY
Danubius Hotel & Spa Rt. * 300 9,016
Gedeon Richter Rt 250 23,623
MOL Magyar Olaj-es Gazipari Rt 1,250 26,318
OTP Bank Rt 400 12,482
---------------------
71,439 0.3%
---------------------
</TABLE>
See accompanying notes to the financial statements. 14
<PAGE> 18
PANAGORA INTERNATIONAL EQUITY FUND
PORTFOLIO OF INVESTMENTS - CONTINUED
NOVEMBER 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
SHARE MARKET PERCENT OF
DESCRIPTION AMOUNT VALUE (NOTE 1) NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
INDONESIA
Bank Internasional Indonesia 39,751 $ 5,177
Barito Pacific Timber 9,500 4,037
PT Astra International Inc 14,000 7,293
PT Gudang Garam 10,000 21,247
PT Indah Kiat Pulp & Paper 12,485 2,909
PT Indocement Tunggal Prakarsa 18,000 7,772
PT Indosat 6,000 13,612
PT Telekomunikasi Indonesia 33,000 24,202
Unilever 500 3,461
---------------------
89,710 0.3%
---------------------
IRELAND
Allied Irish Banks PLC 300 2,624
CRH PLC 100 1,171
Fyffes PLC 100 153
Irish Life PLC 100 511
James Crean PLC 2,500 4,929
Kerry Group PLC 55 603
Smurfit, Jefferson Group 400 1,156
Woodchester Investments PLC 12,300 44,675
---------------------
55,822 0.2%
---------------------
ITALY
Alleanza Assicuraz 278 1,356
Arnoldo Mondadori Editore SPA 2,200 17,361
Assicurazione Generali 16,315 365,810
Banca Popolare Di Milano 4,000 21,926
Banco Ambrosiano Veneto-Rights 11,400 41,187
Banco Ambrosiano Veneto 11,400 37,289
Bank Commerciale Italiana (a) 38,400 109,876
Benetton 4,160 63,632
Bulgari SPA 5,200 26,374
Burgo (Caritere) SPA 1,700 10,002
Credito Italiano (a) 47,000 128,556
Edison SPA 13,700 74,185
Eni SPA (a) 147,850 861,500
Falck Acciaierie & Ferriere Lombarde 3,000 13,034
Fiat Italian (Private Placement) 22,000 33,728
Fiat SPA - RNC 16,830 26,532
Fiat SPA 67,600 195,540
Istituto Banc San Paolo Torina 14,500 120,082
Istituto Mobiliare Italiano 12,600 131,390
Istituto Nazionale Delle Assic 73,500 127,308
Italcenenti Fabbriche Riunit 2,100 13,363
Italgas 13,600 52,652
Magnetti Marelli SPA 5,600 9,120
Marzotto & Figi SPA 700 7,504
Mediaset SPA 24,500 121,029
Mediobanca Banca Di Credito 10,170 71,432
Montedison SPA 97,060 79,903
Montedison SPA-RNC 20,000 11,351
Olivetti Group* 37,312 20,934
</TABLE>
See accompanying notes to the financial statements. 14
<PAGE> 19
PANAGORA INTERNATIONAL EQUITY FUND
PORTFOLIO OF INVESTMENTS - CONTINUED
NOVEMBER 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
SHARE MARKET PERCENT OF
DESCRIPTION AMOUNT VALUE (NOTE 1) NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
ITALY - (CONTINUED)
Olvetti Group Preferred * 256 $ 231
Parmalat Finanziaria SPA 23,700 34,277
Pirelli SPA 31,600 78,883
RAS SPA - RNC 4,000 25,219
RAS SPA 6,150 57,239
Rinascente-Rights 2,000 15,202
Rinascente-Warrants 100 122
SAI 1,600 16,199
Sirti SPA 3,800 22,955
Snia BPD SPA 14,600 14,494
Telecom Italia Mobile 110,400 445,228
Telecom Italia Mobile - RNC 34,000 74,273
Telecom Italia SPA 67,556 421,697
Telecom Italia SPA - RNC 19,884 78,060
---------------------
4,078,035 15.7%
---------------------
JAPAN
Aida Engineering Limited 6,000 25,374
Amada Co., Ltd 3,000 15,060
Asahi Bank Ltd 4,000 16,916
Asahi Chemical Industry Co. Ltd 100 431
Asahi Glass Co., Ltd 7,000 44,679
ASICS Corp. * 22,000 20,675
Chiyoda Corp. * 13,000 21,991
Chiyoda Fire & Marine Insurance Co 7,350 21,931
Citizen Watch Co., Ltd 5,000 31,522
Dai Nippon Printing Co. Ltd 2,200 43,590
Daido Steel Co 800 1,178
Dai-Ichi Kangyo Bank 790 6,187
Daito Trust Construction 4,000 25,813
Dai-Tokyo Fire & Marine Insurance 5,000 19,187
Daiwa House Industry 1,600 12,906
Daiwa Kosho Lease Co. Ltd 14,000 71,157
Daiwa Securities 5,000 17,425
Fuji Bank 10,100 54,182
Fuji Photo Film 1,800 64,704
Fujita Corp 31,000 11,653
Fujitsu Ltd 4,200 47,036
Gakken 9470 15,000 30,778
Green Cross * 11,000 30,323
Gunze Ltd 20,000 48,085
Hitachi Seisakusho Ltd 21,100 149,546
Honda Motor Co., Ltd 1,000 36,181
Inax 3,000 10,901
Industrial Bank of Japan 7,800 69,637
Ito-Yokado Co., Ltd 1,000 45,109
Iwatani International Corp 40 95
Joyo Bank 680 2,727
JUSCO Co 1,000 16,759
Kamigumi Co. Ltd 10,000 39,862
</TABLE>
See accompanying notes to the financial statements. 16
<PAGE> 20
PANAGORA INTERNATIONAL EQUITY FUND
PORTFOLIO OF INVESTMENTS - CONTINUED
NOVEMBER 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
SHARE MARKET PERCENT OF
DESCRIPTION AMOUNT VALUE (NOTE 1) NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
JAPAN - (CONTINUED)
Kansai Electric Power 6,900 $ 117,261
Kawasaki Steel 400 658
Kirin Brewery Co. Ltd 14,000 107,777
Komatsu Ltd 10,400 62,389
Kyocera Corp 700 33,769
Kyudenko Co., Ltd 7,000 37,059
Long Term Credit Bank of Japan 5,000 8,419
Maeda Corp 7,000 21,654
Maeda Road Construction Co 2,000 10,040
Marubeni Corp 11,000 27,481
Marudai Food Co. Ltd 22,800 51,067
Matsushita Electric Industries 13,600 211,951
Mitsubishi Corp 11,000 85,802
Mitsubishi Electric 10,000 27,645
Mitsubishi Heavy 16,300 64,082
Mitsubishi Oil Co. 10,000 22,320
Mitsubishi Paper Mills 12,000 24,622
Mitsubishi Steel * 19,000 25,742
Mitsubishi Trust 3,000 39,940
Mitsui Marine & Fire Insurance 400 1,974
Mitsui Trust & Banking 400 674
Mizuno Corp 11,000 39,972
Mori Seiki 4,000 43,543
Nagoya Railroad Co. Ltd 10,000 35,163
NEC Corporation 2,000 21,145
Nichido Fire & Marine Insurance 50 262
Nichiei Fudosan 8,000 6,892
Nikon Corp 2,000 22,241
Nippon Beet Sugar Manufacturing Co., Ltd 13,000 23,314
Nippon Chemical Industrial Co., Ltd 16,000 52,627
Nippon Hodo 2,000 8,145
Nippon Light Metal Co 600 1,132
Nippon Metal Industry Co. Ltd 25,000 35,046
Nippon Oil Co 17,200 59,942
Nippon Sheet Glass Co. Ltd 23,000 45,031
Nippon Shinpan Co 4,000 4,856
Nippon Steel Corp 38,900 71,896
Nippon Telegraph & Telephone Corp 28 230,245
Nippon Yakin Kogyo * 16,000 14,159
Nishi-Nippon Bank 5,000 15,428
Nissan Motors 37,000 160,819
Nisshin Oil Mills Ltd 8,000 22,931
Nisshinbo Industries Inc 7,000 39,909
Nomura Securities Co. Ltd 5,000 61,869
Ohbayashi-Gumi Corp 9,000 42,290
Ono Pharmaceutical Co 2,000 51,688
Orient Corp 6,000 11,136
Pioneer Electronic Corp 2,000 34,772
</TABLE>
See accompanying notes to the financial statements. 17
<PAGE> 21
PANAGORA INTERNATIONAL EQUITY FUND
PORTFOLIO OF INVESTMENTS - CONTINUED
NOVEMBER 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
SHARE MARKET PERCENT OF
DESCRIPTION AMOUNT VALUE (NOTE 1) NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
JAPAN - (CONTINUED)
Sakura Bank Ltd 14,400 $ 50,297
Sanyo Electric Co. Ltd 28,000 78,941
Seino Transportation Co. Ltd 3,000 19,148
Sekisui House Ltd 8,000 57,514
Seven Eleven Japan Ltd 100 6,931
Sharp Corp 3,000 20,064
Snow Brand Milk Product Co. Ltd 7,000 17,981
Sumitomo Bank (a) 12,693 161,036
Sumitomo Corp 17,000 107,174
SXL Corp 4,000 10,901
Teijin Limited 9,000 23,612
Tekken Corp 12,000 17,668
The Bank of Tokyo Mitsubishi 16,400 237,607
Tohoku Electric Power Co., Inc 7,000 105,803
Tokai Bank 10,200 54,718
Tokio Marine & Fire Insurance 3,000 28,428
Tokyo Electric Power Co. Inc 8,000 143,472
Tokyo Steel Manufacturing 9,000 54,624
Toshiba Corporation 5,000 22,476
Toyo Engineering 17,000 21,701
Toyo Exterior 5,000 36,221
Toyo Kanetsu 30,000 21,615
Toyo Seikan Kaisha 5,000 83,405
Toyo Trust & Banking 6,000 39,236
Toyobo Co., Ltd 800 1,222
Toyota Motor Co 9,986 287,795
UBE Industries Ltd 400 720
Uniden Corp 2,000 20,362
Yamaha Corp 2,000 28,037
Yasuda Trust & Banking 15,000 12,804
---------------------
4,963,892 19.1%
---------------------
KOREA
Korea Fund, Inc (a) 14,700 101,981 0.4%
---------------------
MEXICO
Alfa SA A 692 5,207
Cemex SA B 1,475 7,273
Cifra Sa De Cv A 2,031 4,045
Cifra Sa De Cv B 3,400 7,161
Empressa La Moderna 1,700 8,341
Fomento Economico Mexicano 700 5,795
Grupo Financiero Banamex B 300 661
Grupo Financiero Banamex L 25 49
Grupo Financiero Bancomer B 7,800 4,435
Grupo Financiero Bancomer L 289 113
Grupo Industrial Bimbo A 1,000 8,218
Grupo Mexico SA Series B 1,000 3,823
Grupo Modelo SA 1,000 8,486
Grupo Televisa SA 500 9,326
Kimberly Clark 1,500 6,702
Telefonos de Mexico 10,400 25,957
---------------------
105,592 0.4%
---------------------
</TABLE>
See accompanying notes to the financial statements. 18
<PAGE> 22
PANAGORA INTERNATIONAL EQUITY FUND
PORTFOLIO OF INVESTMENTS - CONTINUED
NOVEMBER 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
SHARE MARKET PERCENT OF
DESCRIPTION AMOUNT VALUE (NOTE 1) NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NEW ZEALAND
Brierley Investments Ltd 8,950 $ 6,350
Carter Holt Harvey Ltd 5,800 8,409
Fisher & Paykel Industries Ltd 450 1,438
Fletcher Challenge Energy 350 1,425
Fletcher Challenge Ltd 250 730
Fletcher Challenge Paper 600 766
Fletcher Forestry Shares 6,170 5,672
Lion Nathan Ltd 1,950 4,620
Telecom Corp. of New Zealand 6,000 30,798
---------------------
60,208 0.2%
---------------------
NORWAY
Aker ASA A 2,450 43,240
Aker ASA B 490 7,627
Bergesen dy ASA A 2,800 71,791
Bergesen dy ASA B 1,200 30,351
Bona Shipholding Ltd. * 113 1,413
Christiania Bank Og Kreditkasse 26,600 95,741
Dyno Industrier ASA 1,400 27,238
Elkem ASA 2,600 36,854
Hafslund Nycomed ASA A 3,700 22,110
Hafslund Nycomed ASA B 3,000 14,175
Kvaerner ASA A 600 27,349
Kvaerner ASA B 1,800 88,801
Leif Hoegh & Co. ASA 1,600 31,351
Norsk Hydro 11,000 566,364
Norske Skogindustrier ASA A 1,250 38,216
Nycomed ASA A 3,400 88,120
Nycomed ASA B 2,400 60,034
Orkla ASA A 1,875 161,550
Orkla ASA B 550 42,420
Petroleum Geo-Services ASA * 1,700 109,382
Storebrand ASA * 13,150 89,361
---------------------
1,653,488 6.4%
---------------------
PHILIPPINES
Ayala Land Inc 50,312 19,794
C&P Homes, Inc 55,000 3,462
Filinvest Land Inc 68,600 3,023
Manila Electric 6,255 21,655
Metro Pacifc Corp 99,750 5,708
Metropolitan Bank & Trust Co 4,200 34,249
Petron Corp 180,470 17,040
Philippine Long Distance Telephone 2,200 52,876
Philippine National Bank 2,475 6,126
San Miquel Corp 11,240 13,990
Prime Holdings 148,000 23,290
---------------------
201,213 0.8%
---------------------
PORTUGAL
Banco Comercial Portugues SA 1,250 26,349
Banco Espirito Santo 750 21,089
Banco Portuguese de Invest SA 600 13,330
</TABLE>
See accompanying notes to the financial statements. 19
<PAGE> 23
PANAGORA INTERNATIONAL EQUITY FUND
PORTFOLIO OF INVESTMENTS - CONTINUED
NOVEMBER 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
SHARE MARKET PERCENT OF
DESCRIPTION AMOUNT VALUE (NOTE 1) NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
PORTUGAL - (CONTINUED)
Banco Totta & Acores 645 $ 12,165
Cimentos De Portugal SA 700 17,722
EDP-Electricidade de Portugal SA 2,900 52,589
Jeronimo Martins 625 19,745
Portugal Telecom 1,500 69,063
Sonae Industria E Investimento 350 13,076
---------------------
245,128 0.9%
---------------------
SINGAPORE
United Overseas Bank 1 6 0.0%
---------------------
SOUTH AFRICA
Amalgamated Banks of South Africa 1,500 9,232
Anglo American Industrial Corp. Ltd 350 9,222
Barlow Ltd 750 7,133
De Beers Centenary AG 1,050 22,046
Driefontein 500 3,407
First National Bank 1,450 12,238
Imperial Holdings Ltd 650 8,122
Investec Group Ltd 300 11,931
Liberty Life Association of Africa 425 10,761
Nedcor Ltd 450 10,189
Rembrandt Group Limited 1,400 10,735
Rustenburg Platinum Holdings Ltd 550 8,570
Sasol Limited 1,700 17,129
South African Breweries Ltd 875 21,434
Tiger Oats Limited 800 11,363
Vaal Reefs Exploration & Mining 100 3,458
---------------------
176,970 0.7%
---------------------
SPAIN
Acerinox SA 200 31,240
Alba Corp. Finance 250 26,983
Argentaria SA 2,100 130,221
Autopistas Concesionaria Espanola Accion 4,100 54,696
Banco Bilbao Vizcaya SA 10,650 321,635
Banco Central Hispanoamericano 5,600 107,367
Banco Santander A 7,900 238,848
Corporacion Mapfre 500 24,402
Dragados Y Construcciones 1,000 21,251
Ebro Agricolas 900 15,566
Empresa Nacional de Electricidad 17,100 321,549
Fomento De Construction Y Contractors 1,000 39,619
Gas Natural SDG SA 2,500 123,684
General De Aguas D'Barcelona 750 30,770
General De Aguas D'Barcelona-Rights 750 353
Iberdrola SA (a) 14,900 190,283
Inmobil Metro Vasco-Central 500 21,553
Prosegur Compania Securidad 1,200 11,986
Repsol SA 4,650 201,063
Tabacalera Spani 600 45,814
</TABLE>
See accompanying notes to the financial statements. 20
<PAGE> 24
PANAGORA INTERNATIONAL EQUITY FUND
PORTFOLIO OF INVESTMENTS - CONTINUED
NOVEMBER 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
SHARE MARKET PERCENT OF
DESCRIPTION AMOUNT VALUE (NOTE 1) NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
SPAIN - (CONTINUED)
Telefonica de Espana 15,025 $ 433,113
Union Electrica Fenosa SA 5,100 51,113
Vallehermoso SA 800 23,463
Zardoya Otis 200 23,262
---------------------
2,489,834 9.6%
---------------------
THAILAND
Advance Argo PCL - Rights 430 63
Advance Argo PCL * 4,300 3,799
Bangkok Bank Co. Ltd 6,900 20,319
Bangkok Expressway PCL * 9,000 5,963
Bank of Ayudhya PCL 6,500 4,426
Charoen Pokphand Feedmill 100 113
Electricity Generating PCL 4,000 7,607
Industrial Finance Corp. 3,300 1,620
Land & House PCL 2,200 661
Phatra Thanakit Co 2,400 1,413
PTT Exploration & Production PCL 3,000 32,834
Shinawatra Computer Co 1,100 3,968
Siam Cement Co. Ltd 1,350 10,469
Siam Commercial Bank Co. Ltd 3,200 5,183
TelecomAsia Corp. PCL * 22,400 7,009
Thai Farmers Bank PCL-Foreign 5,700 14,267
Thai Farmers Bank PCL 2,100 3,762
Thai Petrochemical Industry PCL 22,000 3,293
Thai Telephone & Telecom * 5,000 638
United Communication 1,300 702
---------------------
128,109 0.5%
---------------------
TURKEY
Aksa Akrilik Kimya Sanayii 137,652 10,727
Arcelik AS 92,124 8,120
Brisa Bridgestone Sabanci 10,000 5,059
Cimsa 15,000 2,644
Cukurova Elektrik 4,200 8,048
Ege Biracilik Ve Malt Sanay 53,272 5,444
Eregli Demir Ve Celik Fabrik 63,325 8,413
Migros 14,000 13,235
Netas Telekomunik * 31,000 12,197
Otosan Otomobil 14,400 11,221
Tofas Otomobil Fabrik 128,000 7,031
Trakya Cam Sanayii SA 74,904 5,167
Turkiye Garanti Bankasi AS 386,944 20,761
Turkiye Is Bankasi AS C 508,520 55,217
Yapi Ve Kredi Bankasi AS 576,000 17,954
---------------------
191,238 0.7%
------------------------------------
TOTAL COMMON STOCK (Cost $26,864,950) 25,935,908 99.9%
------------------------------------
</TABLE>
See accompanying notes to the financial statements. 21
<PAGE> 25
PANAGORA INTERNATIONAL EQUITY FUND
PORTFOLIO OF INVESTMENTS - CONTINUED
NOVEMBER 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
MATURITY FACE MARKET PERCENT OF
DESCRIPTION RATE DATE AMOUNT VALUE (NOTE 1) NET ASSETS
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
SHORT-TERM INVESTMENTS
COMMERCIAL PAPER
Bank of Ireland 5.500% 12/01/97 2,016,534 $ 2,016,534 7.7%
------------------------------------
TOTAL INVESTMENTS (Cost $28,881,484) 27,952,442 107.6%
Excess of Liabilities over Other Assets (1,982,460) -7.6%
------------------------------------
NET ASSETS $ 25,969,982 100.0%
====================================
</TABLE>
NOTES TO PORTFOLIO OF INVESTMENTS
ADR American Depository Receipt
(a) All or a portion of this security is on loan.
* Non-income producing security.
See accompanying notes to the financial statements. 22
<PAGE> 26
PANAGORA INTERNATIONAL EQUITY FUND
SCHEDULE OF FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
NOVEMBER 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
Settlement Units of In Exchange for Appreciation
Date Deliver/Receive Currency (in U.S. Dollars) (Depreciation)
- ----------------- -------------------------- ------------------- ---------------------- -------------------
<S> <C> <C> <C> <C>
Contracts to buy currency:
01/07/98 Spanish Peseta 6,418,720 $ 43,074 $ (884)
01/07/98 French Franc 548,445 93,105 (1,781)
01/07/98 Italian Lira 442,410,660 255,907 (4,772)
===================
$ (7,437)
===================
Contracts to sell currency:
01/07/98 Spanish Peseta 6,418,720 $ 43,074 $ 927
01/07/98 French Franc 548,445 93,105 1,895
01/07/98 Italian Lira 442,410,660 255,907 5,092
===================
$ 7,914
===================
</TABLE>
See accompanying notes to the financial statements. 23
<PAGE> 27
THE PANAGORA INSTITUTIONAL FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
NOVEMBER 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
=================================================================================================================================
ASSET INTERNATIONAL
ALLOCATION EQUITY
FUND FUND
----------------------- ---------------------
<S> <C> <C>
ASSETS:
Investments, at value * (Note 1) - Including investments in
Repurchase agreements of $9,045,576 for the Asset Allocation
Fund. (see accompanying portfolios) $35,217,030 $27,952,442
Cash 5,507,661 -
Foreign currency, at value** - 61,418
Receivable from:
Securities sold - 108,933
Investment Advisor - 1,011
Dividends and interest 217,435 51,684
Variation margin on open futures contracts (Note 6) 525 -
Unrealized gain on forward foreign currency contracts (Note 6) - 477
Unamortized organization costs (Note 5) 2,153 2,240
----------------------- ---------------------
Total assets 40,944,804 28,178,205
----------------------- ---------------------
LIABILITIES:
Payable for:
Securities purchased - 138,586
Investment advisory fees (Note 2) 38,160 -
Payable upon return of securities loaned (Note 1) 3,148,381 2,016,534
Accrued expenses and other liabilities 58,417 53,103
----------------------- ---------------------
Total Liabilities 3,244,958 2,208,223
----------------------- ---------------------
NET ASSETS $37,699,846 $25,969,982
======================= =====================
NET ASSETS CONSIST OF:
Paid-in capital $34,467,592 $24,738,757
Undistributed net investment income 903,929 (429,935)
Accumulated net realized gain on investments,
closed futures contracts and foreign currency transactions 1,179,193 2,672,620
Net unrealized appreciation (depreciation) on investments,
open futures contracts, and net other assets 1,149,132 (1,011,460)
----------------------- ---------------------
NET ASSETS $37,699,846 $25,969,982
======================= =====================
NUMBER OF FUND SHARES ISSUED AND OUTSTANDING (NOTE 4) 2,808,484 2,322,435
======================= =====================
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE OF
BENEFICIAL INTEREST OUTSTANDING $13.42 $11.18
======================= =====================
* Cost of investments $33,848,669 $28,881,484
** Cost of foreign currency - $73,929
</TABLE>
See accompanying notes to the financial statements. 24
<PAGE> 28
THE PANAGORA INSTITUTIONAL FUNDS
STATEMENTS OF OPERATIONS
SIX MONTHS ENDED NOVEMBER 30, 1997 (UNAUDITED)
<TABLE>
<CAPTION>
==================================================================================================================================
ASSET INTERNATIONAL
ALLOCATION EQUITY
FUND FUND
--------------------- ------------------------
<S> <C> <C>
INVESTMENT INCOME:
Dividends (net of foreign withholding taxes *) $126,940 $188,163
Interest 635,878 8,301
--------------------- ------------------------
Total investment income 762,818 196,464
--------------------- ------------------------
EXPENSES:
Investment Advisory fees (Note 2) 110,518 109,924
Custody, transfer agent and administration fees 60,691 113,252
Audit and legal fees 20,587 18,579
Registration and filing fees 4,693 4,398
Trustees' fees and expenses (Note 2) 6,257 6,256
Amortization of organization costs (Note 5) 2,078 2,069
Other 2,237 2,335
--------------------- ------------------------
Total operating expenses 207,061 256,813
Less expenses waived or reimbursed by the Advisor (Note 2) (41,297) (105,668)
--------------------- ------------------------
Net expenses 165,764 151,145
NET INVESTMENT INCOME 597,054 45,319
--------------------- ------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS (NOTES 1 AND 3):
Net realized gain (loss) on:
Security transactions 2,205,151 647,011
Closed futures contracts (2,426,692) (22,771)
Foreign currency related transactions - (21,989)
--------------------- ------------------------
Net realized gain (loss) (221,541) 602,251
--------------------- ------------------------
Net change in unrealized appreciation (depreciation) of:
Securities 528,172 (1,602,268)
Open futures contracts 1,050,540 -
Foreign currency and net other assets - (73,215)
------------------------
---------------------
Net unrealized appreciation (depreciation) during the period 1,578,712 (1,675,483)
--------------------- ------------------------
NET REALIZED AND UNREALIZED GAIN (LOSS) 1,357,171 (1,073,232)
--------------------- ------------------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $1,954,225 ($1,027,913)
===================== ========================
* Net of foreign taxes withheld of: $1,429 $21,897
</TABLE>
See accompanying notes to the financial statements. 25
<PAGE> 29
THE PANAGORA INSTITUTIONAL FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
PANAGORA ASSET ALLOCATION FUND
<TABLE>
<CAPTION>
=================================================================================================================================
SIX MONTHS ENDED
NOVEMBER 30, 1997 YEAR ENDED
(UNAUDITED) MAY 31, 1997
------------------- -----------------
<S> <C> <C>
INCREASE/(DECREASE) IN NET ASSETS FROM:
OPERATIONS:
Net investment income $597,054 $435,034
Net realized gain (loss) on investments and closed futures contracts (221,541) 1,586,359
Net change in unrealized appreciation (depreciation) on
investments and open futures contracts 1,578,712 (1,291,818)
------------------- -----------------
Net increase in net assets resulting from operations 1,954,225 729,575
------------------- -----------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income - (250,562)
Net realized gains - (642,586)
------------------- -----------------
Total distributions to shareholders - (893,148)
------------------- -----------------
FUND SHARE TRANSACTIONS (NOTE 4):
Proceeds from sale of shares 751,361 26,580,724
Net asset value of shares issued to shareholders
in payment of distributions declared - 893,148
Cost of shares repurchased (1,086,662) (1,168,381)
------------------- -----------------
Net increase in net assets resulting from
Fund share transactions (335,301) 26,305,491
------------------- -----------------
TOTAL INCREASE IN NET ASSETS 1,618,924 26,141,918
NET ASSETS:
Beginning of year 36,080,922 9,939,004
------------------- -----------------
End of year * $37,699,846 $36,080,922
=================== =================
* Including undistributed net
investment income of: $903,929 $306,875
</TABLE>
See accompanying notes to the financial statements. 26
<PAGE> 30
THE PANAGORA INSTITUTIONAL FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
PANAGORA INTERNATIONAL EQUITY FUND
<TABLE>
<CAPTION>
================================================================================================================================
SIX MONTHS ENDED
NOVEMBER 30, 1997 YEAR ENDED
INCREASE (DECREASE) IN NET ASSETS FROM: (UNAUDITED) MAY 31, 1997
------------------ -----------------
<S> <C> <C>
OPERATIONS:
Net investment income $45,319 $346,895
Net realized gain on investments, closed futures
contracts, and foreign currency transactions 602,251 1,906,835
Net change in unrealized (depreciation) on
investments, open futures contracts, forward currency contracts,
and net other assets (1,675,483) (570,365)
------------------ -----------------
Net increase (decrease) in net assets resulting from operations (1,027,913) 1,683,365
------------------ -----------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income - (168,571)
In excess of net investment income - -
Net realized gains - (611,080)
------------------ -----------------
Total distributions to shareholders - (779,651)
------------------ -----------------
FUND SHARE TRANSACTIONS (NOTE 4):
Proceeds from sale of shares 1,515,910 6,251,105
Net asset value of shares issued to shareholders
in payment of distributions declared - 774,541
Cost of shares repurchased (1,013,917) (3,601,335)
------------------ -----------------
Net increase in net assets resulting from
Fund share transactions 501,993 3,424,311
------------------ -----------------
TOTAL INCREASE (DECREASE) IN NET ASSETS (525,920) 4,328,025
NET ASSETS:
Beginning of period 26,495,902 22,167,877
------------------ -----------------
End of period * $25,969,982 $26,495,902
================== =================
* Including distributions in excess of net investment income ($429,935) ($475,254)
</TABLE>
See accompanying notes to the financial statements. 27
<PAGE> 31
The PanAgora Institutional Funds
Financial Highlights
PanAgora Asset Allocation Fund
<TABLE>
<CAPTION>
====================================================================================================================================
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD
SIX MONTHS ENDED
NOVEMBER 30, 1997 YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
(UNAUDITED) MAY 31, 1997 MAY 31, 1996 MAY 31, 1995 MAY 31, 1994*
----------------- ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD: $12.73 $12.24 $11.26 $10.01 $10.00
----------------- ------------ ----------- ----------- ------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income 0.20 0.29 0.28 0.22 0.14
Net realized and unrealized gain on investments 0.49 1.23 1.97 1.18 0.02
----------------- ------------ ----------- ----------- ------------
Total from investment operations 0.69 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: $13.42 $12.73 $12.24 $11.26 $10.01
================= ============ =========== =========== ============
TOTAL RETURN 5.42% 12.68% 21.05% 14.13% 1.63%
================= ============ =========== =========== ============
RATIOS / SUPPLEMENTAL DATA:
Net assets, end of period (000's) $37,700 $36,081 $9,939 $7,289 $2,871
Net expenses to average daily net assets 0.90%** 0.90% 0.90% 0.90% 0.90%
Net investment income to average daily
net assets 3.24%** 2.62% 2.41% 2.46% 2.08%
Portfolio turnover rate 33% 106% 59% 77% 50%
Average commission rate paid (1) $0.035 $0.049 $0.040 - -
Effect of voluntary expense limitation
during the period:
Per share benefit to net investment
income $0.01 $0.07 $0.15 $0.19 $0.53
Ratios before expense limitation:
Expenses to average daily net assets 1.12%** 1.62% 2.21% 3.07% 8.96%
Net investment income (loss) to average
daily net assets 3.02%** 1.90% 1.10% 0.28% (5.98%)
</TABLE>
* The Fund commenced operations on June 1, 1993.
** Annualized
(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.
See accompanying notes to the financial statements. 28
<PAGE> 32
THE PANAGORA INSTITUTIONAL FUNDS
FINANCIAL HIGHLIGHTS
PANAGORA INTERNATIONAL EQUITY FUND
<TABLE>
<CAPTION>
====================================================================================================================================
FOR A FUND SHARE OUTSTANDING THROUGHOUT EACH PERIOD
SIX MONTHS ENDED
NOVEMBER 30, 1997 YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
(UNAUDITED) MAY 31, 1997 MAY 31, 1996 MAY 31, 1995 MAY 31, 1994*
----------------- ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD: $11.62 $11.22 $10.62 $10.75 $10.00
----------------- ------------- ------------ ------------ ------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) 0.02 (0.05) (0.01) 0.33 0.11
Net realized and unrealized gain on investments (0.46) 0.77 0.81 0.19 0.89
----------------- ------------- ------------ ------------ ------------
Total from investment operations (0.44) 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: $11.18 $11.62 $11.22 $10.62 $10.75
================= ============= ============ ============ ============
TOTAL RETURN -3.79% 6.51% 7.62% 5.09% 10.12%
================= ============= ============ ============ ============
RATIOS / SUPPLEMENTAL DATA:
Net assets, end of period (000's) $25,970 $26,496 $22,168 $17,960 $14,955
Net operating expenses to average daily net assets 1.10%** 1.10% 1.10% 1.10% 1.10%
Interest expenses to average daily net assets - 0.02% - - -
Net investment income to average daily net assets 0.33%** 1.45% 1.24% 1.39% 0.93%
Portfolio turnover rate 24% 41% 67% 218% 160%
Average commission rate paid (1) $0.005 $0.001 $0.002 - -
Effect of voluntary expense limitation during the period:
Per share benefit to net investment income $0.05 $0.03 $0.10 $0.41 $0.16
Ratios before expense limitation:
Expenses to average daily net assets 1.88%** 1.94% 2.17% 2.85% 2.42%
Net investment income (loss) to average daily net assets -0.45%** 0.61% 0.17% (0.36%) (0.39%)
</TABLE>
* The Fund commenced operations on June 1, 1993.
** Annualized
(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.
See accompanying notes to the financial statements. 29
<PAGE> 33
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
30
<PAGE> 34
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.
31
<PAGE> 35
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 November 30, 1997, the PanAgora Asset Allocation Fund
and the PanAgora International Equity Fund loaned securities having a
market value of $3,054,834 and $1,934,646, respectively, collateralized by
cash in the amount of $3,148,381 and $2,016,534, 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.
32
<PAGE> 36
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.
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 an 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 six months ended November 30,
1997 were as follows:
<TABLE>
<CAPTION>
Purchases Sales
----------------- -----------------
<S> <C> <C>
PanAgora Asset Allocation Fund $ 8,188,033 $ 15,267,771
PanAgora International Equity Fund 8,829,317 6,621,073
</TABLE>
The Asset Allocation Fund's purchases and sales include U.S. Government
security purchases and sales of $ 4,153,962 and $ 381,328, respectively.
33
<PAGE> 37
THE PANAGORA INSTITUTIONAL FUNDS
NOTES TO FINANCIAL STATEMENTS
3. INVESTMENT TRANSACTIONS- CONTINUED
At November 30, 1997, aggregate gross unrealized appreciation for all
securities in which there is an excess of value over tax cost and aggregate
gross unrealized depreciation for all securities in which there is an
excess of tax cost over value were as follows:
<TABLE>
<CAPTION>
TAX BASIS TAX BASIS
UNREALIZED UNREALIZED NET UNREALIZED
APPRECIATION DEPRECIATION APPRECIATION
------------ ------------ --------------
<S> <C> <C> <C>
PanAgora Asset Allocation Fund $ 1,670,532 $ (302,171) $ 1,368,361
PanAgora International Equity Fund 3,292,161 (4,221,203) (929,042)
</TABLE>
4. SHARES OF BENEFICIAL INTEREST
For the six months ended November 30, 1997 an unlimited number of shares of
beneficial interest without par value were authorized. Changes in shares of
beneficial interest were as follows:
<TABLE>
<CAPTION>
Six Months Ended
November 30, 1997 Year Ended
(Unaudited) May 31, 1997
---------------- ----------------
<S> <C> <C>
PANAGORA ASSET ALLOCATION FUND:
Shares sold 57,569 2,041,903
Shares issued to shareholders in reinvestment of
distributions 72,614
-
Shares repurchased (82,888) (92,864)
---------------- ----------------
Net increase (25,319) 2,021,653
Fund shares:
Beginning of year 2,833,803 812,150
---------------- ----------------
End of year 2,808,484 2,833,803
================ ================
</TABLE>
34
<PAGE> 38
THE PANAGORA INSTITUTIONAL FUNDS
NOTES TO FINANCIAL STATEMENTS
4. SHARES OF BENEFICIAL INTEREST - CONTINUED
<TABLE>
<CAPTION>
Six Months Ended
November 30, 1997 Year Ended
(Unaudited) May 31, 1997
---------------- ----------------
<S> <C> <C>
PANAGORA INTERNATIONAL EQUITY FUND:
Shares sold 127,884 562,044
Shares issued to shareholders in reinvestment of
distributions - 69,986
Shares repurchased (86,629) (326,221)
---------------- ----------------
Net increase 41,255 305,809
Fund shares:
Beginning of year 2,281,180 1,975,371
---------------- ----------------
End of year 2,322,435 2,281,180
================ ================
</TABLE>
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 November 30, 1997 the Asset
Allocation Fund had open futures contracts for which a summary is included
with its portfolio of investments.
7. CONCENTRATION
For the six months ended November 30, 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
35
<PAGE> 39
THE PANAGORA INSTITUTIONAL FUNDS
NOTES TO FINANCIAL STATEMENTS
7. CONCENTRATION - CONTINUED
securities may be 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 November 30, 1997, PanAgora Asset Management, Inc. and affiliated
entities were record owners of 6.42% and 6.00% 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.
<TABLE>
<CAPTION>
UNAFFILIATED COMPANIES
----------------------
# of Shareholders % of Ownership
---------------------------------------------
<S> <C> <C>
PanAgora Asset Allocation Fund 3 93.30%
PanAgora International Equity Fund 3 92.92%
</TABLE>
36
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