As filed with the Securities and Exchange Commission on February 28,
1997 Securities Act File No. 33-92712 Investment Company Act File No.
811-9050
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
X
Pre-Effective Amendment No.
Post-Effective Amendment No. 6
X
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940
X
Amendment No. 10
X
PANORAMA TRUST
(Exact Name of Registrant as Specified in Charter)
One Exchange Place, Boston, MA 02109
Registrant's Telephone Number, including Area Code: 011-171-972-6800
Name and Address of Agent for Service: Copies to:
Gail A. Hanson, Esq. Joseph P. Barri, Esq.
Panorama Trust Hale and Dorr
One Exchange Place 60 State Street
Boston, MA. 02109 Boston, MA. 02109
Approximate Date of Proposed Public Offering: As soon as practicable after
the Registration Statement becomes effective.
It is proposed that the filing will become effective:
immediately upon filing pursuant to paragraph (b) on __________
pursuant to paragraph (b) 60 days after filing pursuant to
paragraph (a)(1)
on pursuant to paragraph (a)(1) X 75 days after filing pursuant
to paragraph (a)(2)
on __________ pursuant to paragraph (a)(2) of Rule 485.
The Registrant previously has filed a declaration of indefinite
registration of its shares, pursuant to Rule 24f-2 under the Investment Company
Act of 1940, as amended. The Registrant's Rule 24f-2 Notice for the fiscal year
ended December 31, 1996 was filed on February 26, 1997.
EXPLANATORY NOTE
This Post-Effective Amendment relates only to Pictet Eastern European Fund,
a series of Panorama Trust (the "Trust"). The prospectus and statement of
additional information of Pictet Global Emerging Markets Fund and Pictet
International Small Companies Fund, series of the Trust are incorporated by
reference to Post-Effective Amendment Nos. 4 and 5, respectively and are not
affected by this Post-Effective Amendment.
<PAGE>
PANORAMA TRUST
PICTET EASTERN EUROPEAN FUND
FORM N-1A
CROSS REFERENCE SHEET
PURSUANT TO RULE 485 (a)
Part A.
Item No. Prospectus Caption
1. Cover Page Cover Page
2. Synopsis Expenses of the Fund
3. Condensed Financial Information Not Applicable
4. General Description of Registrant Investment Objective and
Policies; Investment
Techniques; Risk Factors;
General Information
5. Management of the Fund Management of the Fund;
Dividends, Distributions,
Taxes and Other Information;
General Information
5A. Management's Discussion of Not Applicable
Fund Performance
6. Capital Stock and Other Securities Purchase of Shares; Redemption
of Shares; Exchange of Shares
Valuation of Shares;
Dividends, Capital Gains
Distribution and Taxes;
General Information
7. Purchase of Securities Being Offered Purchase of Shares
8. Redemption or Repurchase Redemption of Shares; Exchange
of Shares
9. Pending Legal Proceedings Not Applicable
Part B. Statement of Additional
Item No. Information Caption
10. Cover Page Cover Page
11. Table of Contents Table of Contents
12. General Information and History Investment Objective and
Policies; General Information
13. Investment Objectives and Policies Investment Objective and
Policies; Investment
Limitations
14. Management of the Registrant Management of the Fund;
Investment Advisory and Other
Services
15. Control Persons and Principal Holders of Securities
Management of the Fund;
Investment Advisory and Other
Services
16. Investment Advisory and Other Services Management of the Fund;
Investment Advisory and Other
Services; Distributor
17. Brokerage Allocation Portfolio Transactions
18. Capital Stock and Other Securities Organization of the Trust
19. Purchase, Redemption and Pricing of Purchase of Shares; Redemption
Securities Being Offered of Shares; Exchange of Shares;
Net Asset Value Determination
20. Tax Status Additional Information
Concerning Taxes
21. Underwriters Distributor
22. Calculation of Performance Data Performance Calculations
23. Financial Statements Not Applicable
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission but has not yet become effective. These
securities may not be sold nor may offers to buy be accepted prior to the time
the registration statement becomes effective. This prospectus shall not
constitute an offer to sell or the solicitation of an offer to buy nor shall
there be any sale of these securities in any State in which such offer,
solicitation or sale would be unlawful prior to registration or qualification
under the securities laws of any such State.
Subject to Completion
Preliminary Prospectus dated __________, 1997
PICTET EASTERN EUROPEAN FUND
One Exchange Place Boston, Massachusetts 02109
Prospectus - May 15, 1997
Panorama Trust, a Massachusetts business trust (the "Trust"), is a no-load,
diversified, open-end management investment company which currently offers
shares of three series, one of which is the Pictet Eastern European Fund (the
"Fund"). The investment objective of the Fund is capital appreciation. The Fund
attempts to achieve this objective by investing in a carefully selected and
continuously managed diversified portfolio consisting primarily of equity
securities (including depositary shares and receipts and securities convertible
into equity securities, such as warrants, convertible bonds, debentures or
convertible preferred stock) of companies in Eastern Europe. Shares of the Fund
are subject to investment risks, including the possible loss of principal.
Shareholders redeeming shares held less than six months will be charged a 2%
redemption fee paid to the Fund to offset transaction costs of buying and
selling portfolio securities.
This Prospectus, which should be retained for future reference, sets forth
certain information that you should know before you invest. A Statement of
Additional Information ("SAI") containing additional information about the Fund
has been filed with the Securities and Exchange Commission. The SAI, dated May
15, 1997, as amended or supplemented from time to time, is incorporated by
reference into this Prospectus. A copy of the SAI may be obtained, without
charge, by calling the Trust at 514-288-0253.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
EXPENSES OF THE FUND
The following table illustrates the expenses and fees expected to be
incurred by the Fund for the current fiscal year.
Shareholder Transaction Expenses
Sales Load Imposed on
Purchases.................................................................. NONE
Sales Load Imposed on Reinvested
Dividends....................................................... NONE Deferred
Sales
Load..........................................................................
NONE Redemption
Fees............................................................................
2%* Exchange
Fees...........................................................................
NONE
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* Shares held six months or more are not subject to the redemption fee.
Annual Fund Operating Expenses
(as a percentage of average net assets)
Investment Advisory Fees........................................ 1.25%
Other Expenses.................................................. .75%
----
Total Operating Expenses............................ .......... 2.00%
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__________________________ However, the investment adviser has voluntarily
undertaken to waive its fees or to reimburse expenses as may be necessary to
limit total operating expenses to 2.00% of the Fund's average net assets.
.........The purpose of the above table is to assist an investor in
understanding the various costs and expenses that an investor in the Fund will
bear directly or indirectly. "Other Expenses" is based on estimated amounts for
the current fiscal year. Actual expenses may be greater or less than such
estimates. For further information concerning the Fund's expenses see
"Investment Adviser" and "Administrative Services."
.........The following example illustrates the estimated expenses that an
investor in the Fund would pay on a $1,000 investment over various time periods
assuming (i) a 5% annual rate of return and (ii) redemption at the end of each
time period.
1 Year 3 Years
$20 $63
THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES OR PERFORMANCE. THE ABOVE FIGURES ARE ESTIMATES ONLY. ACTUAL EXPENSES
MAY BE GREATER OR LESSER THAN THOSE SHOWN.
<PAGE>
INVESTMENT OBJECTIVE
The investment objective of the Fund is capital appreciation. The Fund
pursues its objective by investing in a carefully selected and continuously
managed diversified portfolio consisting primarily of equity securities (which
include depositary shares and receipts and securities convertible into equity
securities, such as warrants, convertible bonds, debentures or convertible
preferred stock) of companies in Eastern Europe. All investments entail some
risks (see "Risk Factors"), and there is no assurance that the investment
objective of the Fund can be achieved.
INVESTMENT POLICIES
The Fund is designed for individuals and institutions who wish to diversify
their investment programs in international equities to take advantage of
opportunities in the newly reorganized capital and securities markets of Eastern
Europe. The Fund normally will invest at least 65% of its assets in equity
securities (which include depositary shares and receipts and securities
convertible into equity securities) of companies located in, or which conduct a
significant portion of their business in, countries which are generally
considered to comprise Eastern Europe, i.e., the member countries of the former
Warsaw Pact, including the European successor states of the former Soviet Union.
These equity securities may include shares of other investment companies that
invest primarily in Eastern European stocks. The Fund will focus on equity
securities, but may also invest in debt securities of companies in Eastern
Europe. Such securities will have ratings within the four highest categories
established by Moody's Investor Services ("Moody's"), Standard & Poor's Rating
Service, a division of McGraw-Hill Companies, Inc. ("S&P"), or a similar
nationally recognized statistical rating organizations ("NRSROs") or if not
rated, be of comparable quality as determined by Pictet International Management
Limited (the "Adviser"). The NSROs' description of these bond ratings are set
forth in the Appendix to the Statement of Additional Information.
It is expected that the Fund's initial investment activities will be
focused on Hungary, the Czech Republic, Poland and Russia. These countries are
already at a relatively advanced stage in their transition to a market-based
economy. However, over time, the Fund may shift its investment focus to other
Eastern European countries. The Adviser believes that their relatively
well-developed capital and stock markets can handle transactions of a large
enough size to permit fund investment. However, the trading volume of the stock
exchanges in these markets may be substantially lower than that in developed
markets, and the purchase and sale of portfolio securities may not always be
made at an advantageous price or in a timely manner. The Adviser generally will
decide when and how much to invest in these developing markets based upon its
assessment of their continuing development.
The Fund, in its portfolio, may include securities of companies located in,
or which conduct a significant portion of their business in Eastern Europe. As
noted above, investments in equity securities issued by companies in these
"developing countries" or "emerging markets" involve exposure to economic
structures that are generally less diverse and mature, with political systems
that may have less stability than those of "developed countries."
The Fund invests primarily in equity securities of companies, selected for
their superior potential based on a series of macro- and micro- economic
analyses, whose securities are listed on a securities exchange, have an
established over-the-counter market or are "thinly traded." The selection of the
securities in which the Fund will invest will not be limited to companies of any
particular size, or to securities traded in any particular marketplace, and will
be based only upon the expected contribution such security will make to
achieving the Fund's investment objective.
<PAGE>
Portfolio Turnover. Since the Fund seeks capital appreciation, it will
dispose of a security, regardless of the time it has been held, to realize
gains, to avoid anticipated reductions of value, or to reduce or eliminate a
position in a security which is no longer believed to offer the potential for
suitable gains. Portfolio turnover is expected not to exceed an annual rate of
100% under normal circumstances. Such a turnover rate may reflect substantial
short term trading and corresponding brokerage costs to the Fund.
INVESTMENT STRATEGY
The Adviser's approach in emerging markets aims to identify companies with
strong or strengthening balance sheets, as defined by the improvement in their
net working capital over time. Financial ratios (such as "current" ratios,
"quick" ratios and net worth) should also be strong. In particular, the Adviser
looks for companies with industrial capacity that is undervalued on an
international basis. Companies should also have the ability to generate
substantial excess cash flow which, in addition to funding growth, may be
distributed to shareholders in the form of dividends. Valuation methods
traditionally used in developed markets are not necessarily applicable in
emerging and developing markets.
The Adviser will usually undertake extensive financial research to
compensate for the poor quality of financial and economic information available.
In addition, company visits are normally made either by a member of the
management team or by local advisers.
In general, the Fund's investment portfolio will be chosen using a
"bottom-up" investment strategy so that country exposures emerge as a result of
an overall assessment of the best investment opportunities. However, the Adviser
will seek to avoid excessive exposure to any one country and will take into
account country risk in its assessment of individual investment opportunities.
INVESTMENT TECHNIQUES
Equity Securities. The Fund invests in equity securities of U.S. and
foreign companies. Equity securities consist of exchange-traded,
over-the-counter ("OTC") and unlisted common and preferred stocks, warrants,
rights, convertible debt securities, trust certificates, limited partnership
interests and equity participations. The prices of the Fund's equity investments
will change in response to stock market movements.
Warrants and Convertible Securities. Warrants acquired by the Fund will
entitle it to buy common stock from the issuer at a specified price and time.
Warrants are subject to the same market risks as stocks, but may be more
volatile in price. The Fund's investments in warrants will not entitle it to
receive dividends or exercise voting rights and will become worthless if the
warrants cannot be profitably exercised before their expiration dates.
Convertible debt securities and preferred stock acquired by the Fund will
entitle it to acquire the issuer's stock by exchange or purchase. Convertible
securities are subject both to the credit and interest rate risks associated
with fixed income securities and to the stock market risk associated with equity
securities.
Depositary Receipts. The Fund may purchase American Depositary Receipts
("ADRs"), American Depositary Shares ("ADSs"), European Depositary Receipts
("EDRs"), Global Depositary Receipts ("GDRs"), and Global Depositary Shares
("GDSs") (collectively, "Depositary Receipts"). ADRs and ADSs are typically
issued by a U.S. bank or trust company and evidence ownership of underlying
securities issued by a foreign corporation. EDRs, GDSs and GDRs are typically
issued by foreign banks or trust companies, although they also may be issued by
U.S. banks or trust companies, and evidence ownership of underlying securities
issued by either a foreign or a U.S. corporation. For purposes of the Fund's
investment policies, the Fund's investments in Depositary Receipts will be
deemed to be investments in the underlying securities.
Debt Securities. Bonds and other debt instruments are used by issuers to
borrow money from investors. The issuer pays the investor a fixed or variable
rate of interest, and must repay the amount borrowed at maturity. Some debt
securities, such as zero coupon bonds, do not pay current interest, but are
purchased at a discount from their face values. In general, bond prices rise
when interest rates fall, and vice versa. Debt securities have varying degrees
of quality and varying levels of sensitivity to changes in interest rates.
Longer-term bonds are generally more sensitive to interest rate changes than
short-term bonds.
Privatizations. The Fund may invest in privatizations. The Fund believes
that foreign government programs of selling interests in government-owned or
controlled enterprises ("privatizations") may represent opportunities for
significant capital appreciation. The ability of U.S. entities, such as the
Fund, to participate in privatizations may be limited by local law, or the terms
for participation may be less advantageous than for local investors. There can
be no assurance that privatization programs will be available or successful.
Illiquid Securities. The Fund will not invest more than 15% of its net
assets in securities that are illiquid as determined by the Adviser under the
supervision of the Board of Trustees. An illiquid security is one which may not
be sold or disposed of in the ordinary course of business within seven days at
approximately the price at which the Fund has valued the security.
Investment Companies. The Fund may invest up to 10% of its total assets in
shares of other investment companies investing in securities in which it may
otherwise invest. Because of restrictions on direct investment by U.S. entities
in certain countries, other investment companies may provide the most practical
or only way for the Fund to invest in certain markets. Such investments may
involve the payment of substantial premiums above the net asset value of those
investment companies' portfolio securities and are subject to limitations under
the 1940 Act. In addition to the advisory fees and other expenses that the Fund
bears directly in connection with its own operations, as a shareholder of
another investment company the Fund would bear its "pro rata" portion of the
other investment company's advisory fees and other expenses. Therefore, to the
extent that the Fund invests in shares of other investment companies, the Fund's
shareholders will be subject to expenses of such other investment companies, in
addition to expenses of the Fund. The Fund also may incur a tax liability to the
extent it invests in the stock of a foreign issuer that is a "passive foreign
investment company" regardless of whether such "passive foreign investment
company" makes distributions to the Fund.
Strategic Transactions. The Adviser does not, as a general rule, intend to
regularly enter into strategic transactions for the purpose of reducing currency
and market risk, for two reasons. First, since financial derivatives in Eastern
European markets currently must be tailor-made to the Fund's specifications,
they are extremely costly and illiquid instruments, and as such do not offer a
cost-effective way to reduce currency and market risk. Second, the Fund is
intended for investors with a long-term investment horizon and it is the
Adviser's view that any short-term losses due to fluctuations in local
currencies or stock market values will be compensated over the long term by the
capital appreciation of the portfolio securities. Notwithstanding the foregoing,
the Adviser may, from time to time as circumstances dictate, engage in strategic
transactions as described below.
Currency Transactions. When the Fund needs to convert assets denominated in
one currency to a different currency, it normally conducts foreign currency
exchange transactions on a spot or cash basis at the prevailing rate in the
currency exchange market. In addition, the Fund may engage in the following
strategic currently transactions: (1) entering into privately traded forward
foreign currency exchange contracts, (2) purchasing and selling exchange traded
currency futures contracts and options on futures and (3) purchasing and writing
exchange traded and OTC options on currency. Forward contracts and futures
contracts create an obligation (and corresponding right) to purchase or sell a
specified currency at an agreed price at a future date. Options on currency
futures give the purchaser the right to assume a position in the underlying
futures contract. Call and put options on currency give the purchaser the right
to purchase or sell a specified currency at a designated exercise price by
exercising the option before it expires.
The Fund will enter into currency contracts for non-speculative purposes.
For example, the Fund may use currency contracts to "lock in" the U.S. dollar
price of a security that the Fund has contracted to purchase or sell. In
addition, the Fund may use contracts involving the sale of currency to hedge
against a decline in the value of portfolios securities denominated in that
currency if the Advisor determines that there is a pattern of correlation
between the two currencies. All forward and futures contracts involving the
purchase of currency and all options written by the Fund will be covered by
maintaining cash or liquid assets in a segregated account.
The Fund's success in using currency contracts will usually depend on the
Adviser's ability to forecast exchange rate movements correctly. If exchange
rates move in an unexpected direction, the Fund may not achieve the intended
benefits of, or may realize losses on, a currency contract.
Options on Securities and Securities Indices. The Fund may purchase put and
call options on securities traded on U.S. exchanges and, to the extent permitted
by law, foreign exchanges. The Fund may purchase call options on securities
which it intends to purchase in order to limit the risk of a substantial
increase in the market price of such security. The Fund may purchase put options
on particular securities in order to protect against a decline in the market
value of the underlying security below the exercise price less the premium paid
for the option. Put options allow the Fund to protect unrealized gain in an
appreciated security that it owns without selling that security. Prior to
expiration, most options may be sold in a closing sale transaction. Profit or
loss from the sale depends upon whether the amount received is more or less than
the premium paid plus transactions costs.
The Fund may seek to enhance income or hedge against a decrease in its
portfolio value by writing (i.e., selling) covered call options. A call option
is "covered" if the Fund owns the optioned securities or has the right to
acquire such securities without additional consideration, the Fund causes its
custodian to segregate assets having a value sufficient to meet its obligations
under the option, or the Fund owns an offsetting call option or other derivative
contracts.
The Fund may write covered put options in an attempt to realize enhanced
income when it is willing to purchase the underlying security at the exercise
price. A put option is "covered" if the Fund causes its custodian to segregate
assets with a value not less than the exercise price of the option or holds a
put option on the underlying security. The Fund also may purchase call options
for the purpose of acquiring the underlying securities for its portfolio or
purchase put options for hedging purposes. The Fund will not enter into any
options on securities or securities indices if the sum of the initial margin
deposits and premiums paid for any such option or options would exceed 5% of its
total assets, and will not enter into options with respect to more than 25% of
its total assets.
Except as specified in the preceding pages and as described under
"Investment Limitations" in the SAI, the Fund's investment objective and
policies are not fundamental, and the Board may change such policies without
shareholder approval.
Temporary Investments. As determined by the Adviser, for temporary
defensive purposes when market conditions warrant, the Fund may invest up to
100% of its total assets in the following: (1) high-quality (that is, rated
Prime-1 by Moody's or A-1 or better by S&P or, if unrated, of comparable
quality, (as determined by the Adviser) money market securities, denominated in
U.S. dollars or in the currency of any foreign country, issued by entities
organized in the U.S. or any foreign country; (2) short-term (less than twelve
months to maturity) and medium-term (not greater than five years to maturity)
obligations issued or guaranteed by the U.S. Government or the governments of
foreign countries, their agencies or instrumentalities; (3) finance company and
corporate commercial paper, and other short-term corporate obligations;
obligations (including certificates of deposit, time deposits and bankers'
acceptances) of banks; and (4) repurchase agreements with banks and
broker-dealers with respect to such securities.
Repurchase Agreements. The Fund may enter into repurchase agreements. A
repurchase agreement consists of the sale to the Fund of a debt obligation
together with an agreement to have the selling counterparty repurchase the
security at a specified future date and repurchase price. If a repurchase
agreement counterparty defaults on its repurchase obligation, the Fund may,
under some circumstances, be limited or delayed in disposing of the repurchase
agreement collateral, which could result in a loss to the Fund.
Borrowing and Reverse Repurchase Agreements. The Fund may borrow money from
banks or through reverse repurchase agreements solely for temporary or emergency
(and not for leverage) purposes. The aggregate amount of such borrowings and
reverse repurchase agreements may not exceed one-third of the Fund's total
assets.
RISK FACTORS
All investments involve risk and there can be no guarantee against loss
resulting from an investment in the Fund, nor can there be any assurance that
the Fund's investment objective will be attained. As with any investment in
securities, the value of, and income from, an investment in the Fund can
decrease as well as increase, depending on a variety of factors which may affect
the values and income generated by the Fund's securities, including general
economic conditions, market factors and currency exchange rates. An investment
in the Fund is not intended as a complete investment program.
Foreign Securities. The Fund may purchase securities of issuers located in
any foreign country, consistent with its investment objective. Investing in
securities issued by companies and governments of foreign nations involves
special risks and considerations not typically associated with investing in U.S.
companies. These risks and considerations include differences in accounting,
auditing and financial reporting standards, generally higher, non-negotiable
commission rates on foreign portfolio transactions, longer settlement periods,
the possibility of expropriation or confiscatory taxation, adverse changes in
investment or exchange control regulations, political instability which could
affect U.S. investment in foreign countries and potential restrictions on the
flow of international capital. Also, changes in foreign exchange rates will
affect, favorably or unfavorably, the value of those securities in the Fund's
portfolio which are denominated or quoted in currencies other than the U.S.
dollar. In addition, in many countries there is less publicly available
information about issuers than is available in reports about companies in the
United States. Moreover, the dividend or interest income or gain from the Fund's
foreign portfolio securities may be subject to foreign withholding or other
foreign taxes, thus reducing the net amount of income available for distribution
to the Fund's shareholders. Further, foreign securities often trade with less
frequency and volume than domestic securities and, therefore, may exhibit
greater price volatility. Foreign companies are not generally subject to uniform
accounting, auditing and financial reporting standards, and auditing practices
and requirements may not be comparable to those applicable to U.S. companies.
Further, the Fund may encounter difficulties or be unable to pursue legal
remedies and obtain judgments in foreign courts.
These risks are often heightened for investments in certain Eastern
European countries as well as other developing or emerging markets, where the
risks include the possibility that such countries may revert to a centrally
planned economy. Developing countries may also impose restrictions on the Fund's
ability to repatriate investment income or capital. Even if there is no outright
restriction on repatriation of investment income or capital, the mechanics of
repatriation may adversely affect certain aspects of the operations of the Fund.
Some of the currencies in emerging markets have experienced, and may in the
future experience, devaluations relative to the U.S. dollar, and major
adjustments may be made periodically in such currencies. Certain developing
countries face serious exchange constraints.
Governments of some developing countries exercise substantial influence
over many aspects of the private sector. In some countries, the government owns
or controls many companies, including the largest in the country. As such,
government actions in the future could have a significant effect on economic
conditions in developing countries in these regions, which could affect private
sector companies, the Fund and the value of its securities. Furthermore, certain
developing countries are among the largest debtors to commercial banks and
foreign governments and are dependent on foreign economic assistance. Trading in
debt obligations issued or guaranteed by such governments or their agencies and
instrumentalities involves a high degree of risk.
In many emerging markets, there is less government supervision and
regulation of business and industry practices, stock exchanges, brokers and
listed companies than in the United States. The foreign securities markets of
many of the countries in which the Fund may invest may also be smaller, less
liquid, and subject to greater price volatility than those in the United States.
For more information regarding Risk Factors see Appendix.
PURCHASE OF SHARES
Shares of the Fund are sold without a sales commission on a continuous
basis to the Adviser (or its affiliates) or to other institutions (the
"Institutions") acting on behalf of the Institution's or an affiliate's clients,
at the net asset value per share next determined after receipt of the purchase
order by the transfer agent. See "Valuation of Shares." The minimum initial
investment for the Fund is $100,000; the minimum for subsequent investments for
the Fund is $10,000. The Fund reserves the right to reduce or waive the minimum
initial and subsequent investment requirements from time to time. Beneficial
ownership of shares will be reflected on books maintained by the Adviser or the
Institutions.. A prospective investor wishing to purchase shares in the Fund
should contact the Adviser or his or her Institution.
Purchase orders for shares are accepted only on days on which both the
Adviser and the Federal Reserve Bank of New York are open for business. It is
the responsibility of the Adviser or Institution to transmit orders for shares
purchased to First Data Investor Services Group, Inc. ("FDISG"), the Fund's
transfer agent, and deliver required funds to [NAME OF CUSTODIAN], the Fund's
custodian, on a timely basis. Payment in cash for Fund shares must be made in
federal funds immediately available to [ NAME OF CUSTODIAN ] by 12:00 noon
Eastern time on the day after the purchase order is received by the transfer
agent. Shareholders should contact the Adviser for appropriate purchase/wire
procedures. Shareholders should also contact the Adviser for information on an
in-kind purchase of Fund shares. See Purchase of Shares in the SAI.
The Trust and its distributor reserve the right, in their discretion, to
suspend the offering of shares of the Fund or reject purchase orders when, in
the judgment of management, such suspension or rejection is in the best
interests of the Fund. Purchases of the Fund's shares will be made in full and
fractional shares of the Fund calculated to three decimal places. In the
interest of economy and convenience, certificates for shares will not be issued.
General. The issuance of shares is recorded on the books of the Trust. The
transfer agent will send to each shareholder of record a statement of shares of
the Fund owned after each purchase or redemption transaction relating to such
shareholder. Neither the distributor, the Adviser nor the Institutions are
permitted to withhold placing orders to benefit themselves by a price change.
Distribution Agreement. First Data Distributors, Inc. (the "Distributor")
is the principal underwriter and distributor of shares of the Fund pursuant to a
distribution agreement with the Trust. The Distributor is located at 4400
Computer Drive, Westborough, Massachusetts 01581.
REDEMPTION OF SHARES
Shares of the Fund may be redeemed at any time, without cost (except as
described below), at the net asset value of the Fund next determined after
receipt of the redemption request by the transfer agent. The net asset value of
redeemed shares may be more or less than the purchase price of the shares
depending on the market value of the investment securities held by the Fund. An
investor wishing to redeem shares should contact the Adviser or his or her
Institution. It is the responsibility of the Adviser or Institution to transmit
promptly redemption orders to the transfer agent.
If a shareholder redeems shares of the Fund (including shares to be
exchanged), which have been held for less than six months, the Trust will deduct
from the proceeds a redemption charge of 2% of the amount of the redemption.
This amount is retained by the Fund to offset the Fund's costs of purchasing and
selling securities.
Payment of the redemption proceeds will ordinarily be made by wire within
one business day, but in no event more than three business days, after receipt
of the order in proper form by the transfer agent. The Fund may suspend the
right of redemption or postpone the date of payment at times when the New York
Stock Exchange (the "Exchange") is closed, or under any emergency circumstances
as determined by the Securities and Exchange Commission (the "Commission"). See
"Valuation of Shares" for the days on which the Exchange is closed.
If the Board determines that it would be detrimental to the best interests
of the remaining shareholders of the Fund to make payment wholly or partly in
cash, the Fund may pay the redemption proceeds in whole or in part by a
distribution in kind of securities held by the Fund in lieu of cash in
conformity with applicable rules of the Commission. Investors may incur
brokerage charges on the sale of portfolio securities received as a redemption
in kind.
The Fund reserves the right, upon 30 days' written notice, to redeem an
account in the Fund if the net asset value of the account's shares falls below
$100,000 because of redemptions and is not increased to at least such amount
within such 30-day period.
<PAGE>
EXCHANGE OF SHARES
Shareholders may exchange shares of the Fund for shares of other series of
the Trust based on the relative net asset values per share of the series at the
time the exchange is effected. Currently, shares of the Fund may be exchanged
for shares of Pictet Global Emerging Markets Fund and Pictet International Small
Companies Fund. No sales charge or other fee is imposed in connection with
exchanges (except the redemption fee for shares held less than six months).
Before requesting an exchange, shareholders should obtain and read the
prospectus of the series whose shares will be acquired in the exchange.
Prospectuses can be obtained by calling the Trust at (514) 288-0253.
All exchanges are subject to applicable minimum initial and subsequent
investment requirements of the series whose shares will be acquired. In
addition, an exchange is permitted only between accounts that have identical
registrations. Shares of a series may be acquired in an exchange only if the
shares are currently being offered and are legally available for sale in the
state of the shareholder's residence.
An exchange involves the redemption of shares of the Fund and the purchase
of shares of another series. Shares of the Fund will be redeemed at the net
asset value per share of the Fund next determined after receipt of an exchange
request in proper form. Shareholders that are not exempt from taxation may
realize a taxable gain or loss in an exchange transaction. See "Dividends,
Capital Gains Distributions and Taxes."
A shareholder wishing to exchange shares of the Fund should contact the
Adviser or his or her Institution. The exchange privilege may be modified or
terminated at any time subject to shareholder notification. The Trust reserves
the right to limit the number of times an investor may exercise the exchange
privilege.
VALUATION OF SHARES
The net asset value of the Fund is determined by dividing the total market
value of its investments and other assets, less any of its liabilities, by the
total outstanding shares of the Fund. The Fund's net asset value per share is
determined as of the close of regular trading on the Exchange on each day that
the Adviser and Exchange is open for business and the Fund receives an order to
purchase or redeem its shares. Currently the Exchange is closed on weekends and
the customary national business holidays of New Year's Day, Presidents' Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day (or the days on which they are observed).
Equity securities listed on a U.S. securities exchange for which market
quotations are available are valued at the last quoted sale price as of the
close of the Exchange's regular trading hours on the day the valuation is made.
Generally, securities listed on a foreign exchange and unlisted foreign
securities are valued at the latest quoted sales price available before the time
when assets are valued. Price information on listed securities is taken from the
exchange where the security is primarily traded. Unlisted U.S. equity securities
and listed securities not traded on the valuation date for which market
quotations are readily available are valued at the mean between the asked and
bid prices. The value of securities for which no quotations are readily
available (including restricted securities) is determined in good faith at fair
value using methods determined by the Board. Foreign currency amounts are
translated into U.S. dollars at the bid prices of such currencies against U.S.
dollars last quoted by a major bank. One or more pricing services may be used to
provide securities valuations in connection with the determination of the net
asset value of the Fund.
<PAGE>
DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAXES
DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS
The Fund normally will distribute at least annually to shareholders
substantially all of its net investment income and any net realized capital
gain. Undistributed net investment income is included in the Fund's net assets
for the purpose of calculating net asset value per share. Therefore, on the
Fund's "ex-dividend" date, the net asset value per share excludes the dividend
(i.e., is reduced by the per share amount of the dividend). Dividends paid
shortly after the purchase of shares of the Fund by an investor, although in
effect a return of a portion of the purchase price, are taxable to the investor.
Dividends or distributions will automatically be reinvested in additional shares
of the Fund at the net asset value next determined after the dividend is
declared unless a shareholder has requested that the cash value of the dividend
be paid in accordance with instructions furnished by the shareholder.
FEDERAL TAXES
The Fund intends to qualify each year as a "regulated investment company"
under the Internal Revenue Code of 1986, as amended (the "Code"). Such
qualification generally relieves the Fund of liability for Federal income taxes
to the extent its earnings are distributed in accordance with the Code.
Qualification as a regulated investment company under the Code for a
taxable year requires, among other things, that the Fund distribute to its
shareholders an amount at least equal to 90% of its investment company taxable
income and 90% of its net tax-exempt interest income (if any) for such taxable
year. In general, the Fund's investment company taxable income will be its net
investment income, including interest and dividends, subject to certain
adjustments, certain net foreign currency gains, and any excess of its net
short-term capital gain over its net long-term capital loss, if any, for such
year. The Fund intends to distribute as dividends substantially all of its
investment company taxable income each year. Such dividends will be taxable as
ordinary income to the Fund's shareholders who are not exempt from Federal
income taxes, whether such income or gain is received in cash or reinvested in
additional shares. Subject to the limitations prescribed in the Code, the
dividends received deduction for corporations will apply to such ordinary income
distributions only to the extent they are attributable to qualifying dividends
received by the Fund from domestic corporations for the taxable year. It is
anticipated that only a small part (if any) of the dividends paid by the Fund
will be eligible for the dividends received deduction.
Substantially all of the Fund's net long-term capital gain, if any, in
excess of its net short-term capital loss will be distributed at least annually
to its shareholders. The Fund generally will have no tax liability with respect
to such gains and the distributions will be taxable to the shareholders who are
not exempt from Federal income taxes as long-term capital gains, regardless of
how long the shareholders have held the shares and whether such gains are
received in cash or reinvested in additional shares.
The impact of dividends or distributions which are expected to be declared
or have been declared, but not paid, should be carefully considered prior to
purchasing such shares. Any dividend or distribution paid shortly after a
purchase of shares prior to the record date will have the effect of reducing the
per share net asset value by the per share amount of the dividend or
distribution. All or a portion of such dividend or distribution, although in
effect a return of a portion of the purchase price, is subject to tax. A taxable
gain or loss may be realized by a shareholder upon redemption or transfer of
shares of the Fund, depending upon the tax basis of such shares and their value
at the time of redemption or transfer.
It is expected that dividends, certain interest income and possibly certain
capital gains earned by the Fund from foreign securities will be subject to
foreign withholding taxes or other foreign taxes. If more than 50% of the value
of the Fund's total assets at the close of its taxable year consists of equity
or debt securities of foreign corporations, the Fund may elect, for U.S. Federal
income tax purposes, to treat certain foreign taxes paid by it, including
generally any withholding taxes and other foreign income taxes, as paid by its
shareholders. If the Fund makes this election, the amount of such foreign taxes
paid by the Fund will be included in its shareholders' income pro rata (in
addition to any dividends and distributions actually received by them), and each
shareholder who is subject to U.S. tax will generally, subject to certain
limitations under the Code, be entitled (a) to credit a proportionate amount of
such taxes against U.S. Federal income tax liabilities, or (b) if deductions are
itemized, to deduct such proportionate amount from U.S. income.
Miscellaneous. Dividends declared in October, November or December payable
to shareholders of record on a specified date in such a month will be deemed to
have been received by the shareholders on December 31, in the event such
dividends are paid during January of the following year.
A 4% nondeductible excise tax is imposed under the Code on regulated
investment companies that fail to currently distribute for each calendar year
specified percentages of their ordinary taxable income and capital gain net
income (excess of capital gains over capital losses) earned in specified
periods. The Fund expects that it will generally make sufficient distributions
or deemed distributions of its ordinary taxable income and any capital gain net
income for each calendar year to avoid liability for this excise tax.
The foregoing summarizes some of the important tax considerations generally
affecting the Fund and its shareholders and is not intended as a substitute for
careful tax planning. Accordingly, potential investors in the Fund should
consult their tax advisers with specific reference to their own tax situations.
The foregoing discussion of tax consequences is based on tax laws and
regulations in effect on the date of this Prospectus, which are subject to
change.
Shareholders will be advised at least annually as to the Federal income tax
consequences of the Fund's distributions.
The Fund will be required in certain cases to withhold and remit to the
United States 31% of taxable dividends (including capital gain distributions) or
gross proceeds realized upon a redemption or other sale of shares paid to
shareholders who are subject to this "backup withholding" because they have
failed to provide a correct, certified taxpayer identification number in the
manner required, have received IRS Notice of their failure properly to include
on their return payments of taxable interest or dividends, or have failed to
certify to the Fund that they are not subject to backup withholding when
required to do so or that they are "exempt recipients."
STATE AND LOCAL TAXES
Shareholders may also be subject to state and local or foreign taxes on
distributions from, or the value of an investment in, the Fund. A shareholder
should consult with a tax adviser with respect to the tax status of an
investment in or distributions from the Fund in a particular state, locality or
other jurisdiction that may impose tax on the shareholder.
MANAGEMENT OF THE FUND
The Board of Trustees has overall responsibility for the management of the
Fund under the laws of the Commonwealth of Massachusetts governing the
responsibilities of trustees of business trusts. The SAI identifies and provides
information about the Trustees and officers of the Trust.
<PAGE>
INVESTMENT ADVISER
The Trust, on behalf of the Fund, has entered into an investment advisory
agreement with Pictet International Management Limited. Subject to the control
and supervision of the Trust's Board and in conformance with the stated
investment objective and policies of the Fund, the Adviser manages the
investment and reinvestment of the assets of the Fund. The Adviser's advisory
and portfolio transaction services also include making investment decisions for
the Fund, placing purchase and sale orders for portfolio transactions and
employing professional portfolio managers and security analysts who provide
research services to the Fund. The Adviser is entitled to receive from the Fund
for its investment services a fee, computed daily and payable monthly, at the
annual rate of 1.25% of the average daily net assets of the Fund.
The Adviser is an affiliate of Pictet & Cie (the "Bank"), a Swiss private
bank, which was founded in 1805. As of December 31, 1996, the Bank managed in
excess of $50 billion for institutional and private clients. The Bank is owned
by seven partners. The Adviser was established in 1980 and manages institutional
investment funds with a particular emphasis on the investment needs of U.S. and
international institutional clients seeking to invest in the international fixed
income and equity markets. Registered with the Commission in 1981 and regulated
by the Investment Management Regulatory Organization, Pictet's London office has
managed international portfolios for U.S. tax-exempt clients since 1981 and U.K.
pension funds since 1984. Pictet currently manages approximately [$ ] billion
for more than [ ] accounts.
Yves J.B. Kuhn, who is a Senior Investment Manager of the Adviser, is the
portfolio manager of the Fund. Prior to joining the Adviser in 19__, he spent
three years in consultancy and industry, essentially concerned with the
restructuring and cost savings programs of major utility and consumer goods
companies. In 1994, he was key in creating the First Russian Frontiers Trust,
listed on the London Stock Exchange and in 1995, he launched the Pictet Targeted
Fund-Eastern Europe, registered in Luxembourg.
ADMINISTRATIVE SERVICES
FDISG serves as the Trust's administrator, accounting agent and transfer
agent and in that capacity supervises the Trust's day-to-day operations, other
than management of the Fund's investments. FDISG is a wholly owned subsidiary of
First Data Corporation. For its services as accounting agent, FDISG is entitled
to receive a fee from the Trust computed daily and payable monthly at the annual
rate of .04% of the aggregate average daily net assets of the Trust, subject to
a $50,000 annual minimum from the Fund. For administrative services, the FDISG
is entitled to receive $220,000 per annum from the Trust. In addition, for its
services as transfer agent, FDISG is to be paid separate compensation.
FDISG is located at One Exchange Place, Boston, Massachusetts 02109.
EXPENSES
The Fund bears its own operating expenses including: taxes; interest;
miscellaneous fees (including fees paid to Board members); Commission fees;
state Blue Sky fees; costs of preparing and printing prospectuses and statements
of additional information for regulatory purposes and for distribution to
existing shareholders; amortization of organizational costs; investment advisory
fees; administration fees; charges of the custodian, any sub-custodians and the
transfer and dividend agent; certain insurance premiums; outside auditing,
pricing and legal expenses; costs of shareholders' reports and meetings; and any
extraordinary expenses. The Fund also pays for brokerage fees and commissions,
if any, in connection with the purchase and sale of its portfolio securities.
The Adviser has voluntarily undertaken not to impose its fees or to make
any other arrangements necessary to limit total ordinary operating expenses of
the Fund to 2.00% of the Fund's average daily net assets. The Adviser may modify
or terminate this undertaking at any time.
PERFORMANCE CALCULATIONS
The Fund may advertise or quote total return data from time to time. Total
return will be calculated on an average annual total return basis, and may also
be calculated on an aggregate total return basis, for various periods. Average
annual total return reflects the average annual percentage change in value of an
investment in the Fund over the measuring period. Aggregate total return
reflects the total percentage change in value over the measuring period. Both
methods of calculating total return assume that dividends and capital gain
distributions made by the Fund during the period are reinvested in Fund shares.
The Fund may compare its total return to that of other investment companies
with similar investment objectives and to stock and other relevant indices or to
rankings prepared by independent services or other financial or industry
publications that monitor the performance of mutual funds or investments similar
to the Fund. For example, the total return of the Fund may be compared to data
prepared by Lipper Analytical Services, Inc., Micropal and the International
Financial Corporation Composite Index. Total return and other performance data
as reported in national financial publications such as Money Magazine, Forbes,
Barron's, The Wall Street Journal and The New York Times, or in local or
regional publications, may also be used in comparing the performance of the
Fund.
Performance quotations will represent the Fund's past performance, and
should not be considered as representative of future results. Since performance
will fluctuate, performance data for the Fund should not be used to compare an
investment in the Fund's shares with bank deposits, savings accounts and similar
investment alternatives which often provide an agreed or guaranteed fixed
yield/return for a stated period of time. Performance is generally a function of
the kind and quality of the instruments held in the Fund, portfolio maturity,
operating expenses and market conditions. Any fees charged by the Adviser or
Institutions to their clients will not be included in the Fund's calculations of
total return.
GENERAL INFORMATION
DESCRIPTION OF SHARES AND VOTING RIGHTS
The Trust was organized as a Massachusetts business trust on May 23, 1995.
The Declaration of Trust authorizes the Trustees to classify and reclassify any
unissued shares into one or more series and classes of shares. Currently, the
Trust has three series, one of which is the Fund. Each series currently has only
one class of shares. The Trust offers shares of beneficial interest, $.001 par
value, for sale to the public. When matters are submitted for shareholder vote,
shareholders of the Fund will have one vote for each full share owned and
proportionate, fractional votes for fractional shares held. Under Massachusetts
law and the Declaration of Trust, the Trust is not required and does not
currently intend to hold annual meetings of shareholders for the election of
Trustees except as required under the 1940 Act. There will normally be no
meetings of shareholders for the purpose of electing Trustees unless less than a
majority of the Trustees holding office has been elected by shareholders, at
which time the Trustees then in office will call a shareholders' meeting for the
election of Trustees. Any Trustee may be removed from office upon the vote of
shareholders holding at least two-thirds of the Trust's outstanding shares at a
meeting called for that purpose. The Trustees are required to call a meeting of
shareholders upon the written request of shareholders holding at least 10% of
the Trust's outstanding shares. In addition, the Trust will assist shareholders
who meet certain criteria in communicating with other shareholders in seeking
the holding of such meeting.
Shareholder inquiries should be addressed to the Trust at the address or
telephone number stated on the cover page.
CUSTODIAN
[ NAME OF CUSTODIAN AND ADDRESS ]
INDEPENDENT ACCOUNTANTS
Coopers & Lybrand L.L.P., located at One Post Office Square, Boston,
Massachusetts 02109, serves as independent accountants for the Trust and will
audit its financial statements annually.
COUNSEL
Hale and Dorr serves as counsel to the Trust.
REPORTS
Shareholders receive unaudited semi-annual financial statements and audited
annual financial statements.
<PAGE>
==============================================================================
D
APPENDIX
RISK FACTORS
Investing in securities in Eastern Europe (the "Region") involves certain
considerations not usually associated with investing in securities of issuers in
more developed capital markets including (i) political and economic
considerations, (ii) the small size of the markets for securities in the Region
and the low or non-existent volume of trading and (iii) certain policies which
may restrict the Fund's investment opportunities. In addition, accounting and
financial reporting standards are not equivalent to Generally Accepted
Accounting Principles or International Accounting Standards.
Political and General Economic Risks. The governments of the countries of
the Region are currently implementing reforms directed at political and economic
liberalization, including efforts to decentralize the economic decision making
process, to move towards a more market-oriented economy and to foster a
multi-party political system. There can be no assurance that these reforms will
continue or, if continued, will achieve the goals set by the governments in the
Region. In addition, there is uncertainty whether current political trends in
the Region will continue, thereby allowing governments to continue to liberalize
their political and economic environment. Countries in the Region may be subject
to a great amount of social, political and economic instability resulting from,
among other things:
(i) attempted or actual changes in government through extra-constitutional
means;
(ii) popular unrest associated with demands for improved political,
economic and social conditions; and
(iii) hostile relations with neighboring countries or territories.
The Region's countries have historically engaged in a significant amount of
trade with each other. Often such trade is barter-based, utilizing products that
might not be marketable in the West.
Some of the Region's countries have a substantial external debt. Some
governments have entered into debt restructuring agreements with foreign
creditors and some are currently in negotiations about rescheduling their debt.
There can be no assurance that such negotiations will reach a successful
conclusion. Moreover, in many cases it may be necessary to adopt economic
policies to facilitate debate service requirements, such as taking steps to
control inflation, and these policies may lead to periods of lower economic
growth.
In addition to the specific risks of investing in the Region discussed
herein, the results of the Fund's activities may be affected by general economic
conditions in the Region. The economies of the countries in the Region have been
characterized by declining real Gross Domestic Product ("GDP") (although the
trend is now improving), high inflation, rising unemployment and declining
personal income (in real terms). Countries in the Region lack a developed
infrastructure. Telecommunications generally are poor and banks and financial
systems are not well developed. There is a limited supply of domestic savings in
the Region and businesses can experience difficulty in obtaining working
capital.
<PAGE>
Currency Risk. Many of the Region's currencies are not fully convertible.
In addition, the currencies of some of the countries in the Region have
depreciated in value substantially against the U.S. dollar and may depreciate
further in the future. Since the net asset value of the Fund will be calculated
and reported in U.S. dollars, further depreciation in these currencies could
have an adverse impact on the performance of the Fund.
Fiscal. Changes in local exchange control regulations, tax laws,
withholding taxes and economic or monetary policies may also affect the value of
an investment in the Fund. In particular, certain changes may give rise to a
capital gains tax liability on certain of the Fund's investment gains.
The tax laws and regulations are often unclearly drafted and difficult for
companies to comply with, with the consequence that a company may incur
penalties (sometimes substantial) despite using all reasonable efforts to ensure
compliance. The tax laws and regulations may be given retroactive effect. This
may result in imposition of additional tax liabilities which are not taken into
account when calculating the Fund's net asset value prior to the date of such
change.
Lack of Market Economy. Businesses in the Region do not have an established
history of operating within a market-oriented economy. Relative to companies
operating in western economies, companies in the Region are, in general,
characterized by a lack of (i) management with the experience of operating in
the free market environment, (ii) modern technology and (iii) a sufficient
capital base with which to develop and expand their operations.
Illiquidity of Investments. The securities in which the Fund may invest may
not be listed or traded on any securities market for the foreseeable future and,
in some cases, may not be registered for resale under the securities laws of any
country. Many jurisdictions in the Region are in the process of developing stock
exchanges and formulating rules and regulations. It is unlikely that stock
exchanges in the Region will, in the foreseeable future, offer the liquidity
available in western securities markets. Accordingly, there may be no readily
available market for the timely liquidation of investments made by the Fund.
Possible Business Failures. The risk to the investor of potential business
failures in the Region is increased given the generally poor level of financial
information which is available relative to standards of such information for
western companies. However, the Fund has a diversified portfolio to limit this
potential risk.
Reporting Standards. Accounting standards in the Region do not generally
correspond to Generally Accepted Accounting Principles or International
Accounting Standards. In addition, auditing requirements and standards differ
from those generally accepted in the international capital markets. Accordingly,
the Adviser may have access to less financial information on investment
candidates and the Fund's investments than would normally be the case in more
sophisticated markets.
Environmental Risks. The lack of environmental controls in the Region has
led to widespread pollution of the air, ground and water resources. The
legislative framework for environmental liability and the extent of any exposure
of businesses to the costs of pollution clean-up have not been fully
established. Accordingly, the extent of the responsibility, if any, for
pollution-related liabilities of any business may not be determinable at the
time the Fund is considering an investment. Environmental liability could have a
significant adverse effect on the performance of companies in which the Fund
invests.
Legal Risks. The rate of legislative change in the Region has been and is
likely to continue to be rapid and the content of proposed legislation when
eventually adopted into law is difficult or impossible to predict. It is
similarly difficult to anticipate the impact of legislative reforms on the
companies in which the Fund will invest. Although there is significant political
support for legislative change to facilitate and reinforce movement to a market
economy, it is not certain that legislation when enacted will advance these
objectives either consistently or in a coherent manner. Moreover, it will be
more difficult for the Fund to obtain effective redress or enforcement of its
rights, in certain countries in the Region, than in western jurisdictions.
Employment and labor legislation tends to be pro-employee, particularly in
matters such as termination of employment, maternity benefits, overtime
restrictions and trade union participation. In addition, although substantial
revisions to the commercial law of Russia have been enacted, the judicial and
civil procedure system in the Region has not been modernized to a material
extent. As a result, not only do courts lack experience in commercial dispute
resolution, but many of the procedural remedies for enforcement and the
protection of legal rights typically found in western jurisdictions are not
available in the Region.
Company law in the countries in the Region may not contain the same
pre-emption provisions as would normally exist in more developed countries. The
companies in which the Fund invests may issue further shares at a discount to
the market value thereby diluting the Fund's interest.
Specific risks associated with the legal systems in the Region include (i)
the untested nature of the independence of the judiciary and its immunity from
economic, political or nationalistic influences; (ii) inconsistencies between
and among laws, statutory provisions, decrees, orders, resolutions and
regulations; (iii) the lack of well-developed judicial or administrative
guidance on interpreting the applicable rules; (iv) a high degree of discretion
on the part of governmental authorities; (v) the lack of procedural remedies for
enforcement and protection of legal rights typically found in western
jurisdictions; (vi) legislation issued by different executive, legislative and
administrative bodies being subject to change in status in relation to other
legislation; and (vii) legislation and decisions of state bodies being issued
with retrospective effect which annul or amend earlier legislation, procedures,
decisions or possible interpretations thereof.
The laws in the Region regulating ownership, control and corporate
governance of companies as well as protection of minority shareholders have been
adopted very recently and have virtually never been tested in the courts.
Disclosure and reporting requirements are minimal and anti-fraud and insider
trading legislation, as it is understood in more developed markets, is generally
rudimentary. The concept of fiduciary duties on the part of management or
directors to their companies as a whole is limited. The regulation of nominees
in certain securities markets in the Region is not well-developed and in some
cases there is no developed uniform understanding of how nominees are to be
treated in practice by market regulators, registrars of securities and the
taxation authorities. The regulatory requirements for participants in the
securities markets in the Region as well as the structure of relevant regulatory
authorities are subject to constant change. This may result in challenges to the
validity of any license, permission, consent or registration which is required
in the context of trades in securities in the particular country and which were
originally obtained in compliance with the laws.
Issuers in certain of the countries in the Region are allowed by law to
restrict the rights of foreign investors to participate in the subscription of
securities. This may result in the disenfranchisement of foreign investors in
respect of their rights to participate in bonus issues, rights issues or other
corporate actions. This may in turn result in dilution of holdings and loss of
voting powers.
Speculative Nature of Investments. The Fund's portfolio will be subject to
risks similar to those inherent in development or venture capital investment.
Investment in unlisted companies is more speculative and involves a higher
degree of risk than is normally associated with equity investment on established
stock exchanges.
Settlement and Custodial Default. Prospective investors should be aware
that settlement and safe custody of securities in the Region involves certain
risks and considerations which do not normally apply when settling transactions
and providing safe custody services in more developed countries, including:
(i) inadequate governmental supervision and regulation of the securities
markets and the participants in those markets;
(ii) inefficient clearing or settlement systems;
(iii) possible limitations to foreign ownership imposed by governments; and
(iv) difficult access to share ownership records.
Neither the Fund nor the Adviser can guarantee that sub-custodial and
counterparty risk will be eliminated, nor will the Adviser accept any
responsibility for such risk.
Verification and perfection of legal ownership in securities differs in the
countries in the Region and is less effective than in western jurisdictions. In
certain countries, for example, securities are only issued in bearer form. As a
result, the risks associated with safe custody are greater. In other countries,
no certificates are issued and legal ownership of shares is perfected through
registration either in the share register of the company or at a central
depository, in either case by a third party over whom neither the Fund nor the
Adviser may have control.
In certain countries in the Region, the market practice is settlement
against production of evidence of title to securities in the form of extracts
from the shareholders' register. Such extracts do not in themselves constitute
securities or constitute definitive evidence of title or ownership rights. As
such, these extracts do not guarantee that title to the securities has in fact
passed. In addition, fraudulent or incorrect registration may result in title
being removed from the securities register of an issuer. Access to securities
registers may also be limited and therefore be difficult to check.
Furthermore, management of certain issuers may view the securities
registration process as a manifestation of their control over the issuers and
either refuse to register transfers involving foreign owners or delay the
registration process indefinitely.
Many of the Fund's transactions are undertaken through local brokers in the
Region and the Fund is subject to the risk of default by such brokers.
<PAGE>
PICTET EASTERN EUROPEAN FUND
One Exchange Place
Boston, Massachusetts 02109
Prospectus
Dated May 15, 1997
Investment Adviser Administrator and Transfer Agent
Pictet International Management Limited First Data Investor Services Group,
Inc. Cutlers Garden One Exchange Place 5 Devonshire Square Boston, MA 02109
London, United Kingdom EC2M 4LD Distributor
First Data Distributors, Inc. 440 Computer Drive Westboro, MA 01581
Table of Contents
Page Page
<TABLE>
<CAPTION>
<S>
<C> <C>
Expenses of the Fund...................... 2 Exchange of
Shares....................................... 10
Investment Objective and Policies......... 3 Valuation of
Shares.................................... 10
Investment Strategy...........................
4......................................................Dividends,
Capital Gain Distributions and Taxes...... 11
Investment Techniques..................... 4 Management of the
Fund................................. 12
Risk Factors.............................. 7 Performance
Calculations............................... 14
Purchase of Shares........................ 8 General
Information.................................... 14
Redemptions of Shares..................... 9 Appendix-Risk
Factors.................................. A-1
</TABLE>
No person has been authorized to give any information or to make any
representations not contained in this Prospectus, or in the Trust's Statement of
Additional Information, in connection with the offering made by this Prospectus
and, if given or made, such information or representations must not be relied
upon as having been authorized by the Trust or its Distributor. This Prospectus
does not constitute an offering by the Trust or the Distributor in any
jurisdiction in which such offering may not lawfully be made.
<PAGE>
Subject to Completion
Preliminary Prospectus dated __________, 1997
PICTET EASTERN EUROPEAN FUND
STATEMENT OF ADDITIONAL INFORMATION
May 15, 1997
.........This Statement of Additional Information is not a prospectus but should
be read in conjunction with Panorama Trust's (the "Trust") Prospectus for Pictet
Eastern European Fund (the "Fund") dated May 15, 1997 (the "Prospectus").
To obtain the Prospectus, please call the Trust at 514-288-0253.
.........Capitalized terms used in this Statement of Additional Information
and not otherwise defined have the same meanings given to them in the
Prospectus.
Table of Contents Page
Investment Objective and Policies.......................... 2
Purchase of Shares......................................... 10
Redemption of Shares....................................... 11
Investment Limitations..................................... 11
Management of the Fund...................................... 12
Investment Advisory and Other Services...................... 14
Distributor................................................ 15
Portfolio Transactions.................................... 15
Additional Information Concerning Taxes...................... 15
Performance Calculations.................................... 19
General Information...................................... 19
Appendix - Description of Ratings and U.S. Government Securities
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
The following policies supplement the investment objective and policies
set forth in the Prospectus:
Depositary Receipts. The Fund may purchase American Depositary Receipts
("ADRs"), American Depositary Shares ("ADSs"), European Depositary Receipts
("EDRs"), Global Depositary Receipts ("GDRs") and Global Depositary Shares
("GDSs"), (collectively, "Depositary Receipts"). ADRs and ADSs are typically
issued by a U.S. bank or trust company to evidence ownership of underlying
securities issued by a foreign corporation. EDRs and GDRs are typically issued
by foreign banks or trust companies, although they also may be issued by U.S.
banks or trust companies, and evidence ownership of underlying securities issued
by either a foreign or a United States corporation. Generally, Depositary
Receipts in registered form are designed for use in the U.S. securities market
and Depositary Receipts in bearer form are designed for use in securities
markets outside the United States. Depositary Receipts may not necessarily be
denominated in the same currency as the underlying securities into which they
may be converted. Depositary Receipts may be issued pursuant to sponsored or
unsponsored programs. In sponsored programs, an issuer has made arrangements to
have its securities traded in the form of Depositary Receipts. In unsponsored
programs, the issuer may not be directly involved in the creation of the
program. Although regulatory requirements with respect to sponsored and
unsponsored programs are generally similar, in some cases it may be easier to
obtain financial information from an issuer that has participated in the
creation of a sponsored program. Accordingly, there may be less information
available regarding issuers of securities underlying unsponsored programs and
there may not be a correlation between such information and the market value of
the Depositary Receipts. Depositary Receipts also involve the risks of other
investments in foreign securities, as discussed below. For purposes of the
Fund's investment policies, the Fund's investments in Depositary Receipts will
be deemed to be investments in the underlying securities.
Convertible Securities. Convertible securities are fixed-income
securities that may be converted at either a stated price or stated rate into
underlying shares of common stock. Convertible securities have general
characteristics similar to both fixed-income and equity securities. Although to
a lesser extent than with fixed-income securities generally, the market value of
convertible securities tends to decline as interest rates increase and,
conversely, tends to increase as interest rates decline. In addition, because of
the conversion feature, the market value of convertible securities tends to vary
with fluctuations in the market value of the underlying common stocks and,
therefore, also will react to variations in the general market for equity
securities. A unique feature of convertible securities is that as the market
price of the underlying common stock declines, convertible securities tend to
trade increasingly on a yield basis, and so may not experience market value
declines to the same extent as the underlying common stock. When the market
price of the underlying common stock increases, the prices of the convertible
securities tend to rise as a reflection of the value of the underlying common
stock. While no securities investments are without risk, investments in
convertible securities generally entail less risk than investments in common
stock of the same issuer.
As fixed-income securities, convertible securities are investments that
provide for a stable stream of income with generally higher yields than common
stocks. Of course, like all fixed-income securities, there can be no assurance
of current income because the issuers of the convertible securities may default
on their obligations. Convertible securities, however, generally offer lower
interest or dividend yields than non-convertible securities of similar quality
because of the potential for capital appreciation. A convertible security, in
addition to providing fixed income, offers the potential for capital
appreciation through the conversion feature, which enables the holder to benefit
from increases in the market price of the underlying common stock. There can be
no assurance of capital appreciation, however, because securities prices
fluctuate.
Convertible securities generally are subordinated to other similar but
non-convertible securities of the same issuer, although convertible bonds, as
corporate debt obligations, enjoy seniority in the right of payment to all
equity securities, and convertible preferred stock is senior to common stock, of
the same issuer. Because of the subordination feature, however, convertible
securities typically have lower ratings than similar non-convertible securities.
When-Issued and Forward Commitment Transactions. The Fund may purchase
when-issued securities and enter into other forward commitments to purchase or
sell securities. The value of securities purchased on a when-issued or forward
commitment basis may decline between the purchase date and the settlement date.
Warrants. Because a warrant does not carry with it the right to
dividends or voting rights with respect to the securities that the warrant
holder is entitled to purchase, and because it does not represent any rights to
the assets of the issuer, a warrant may be considered more speculative than
certain other types of investments. In addition, the value of a warrant does not
necessarily change with the value of the underlying securities and a warrant
ceases to have value if it is not exercised prior to its expiration date.
Preferred Stock. Preferred stocks, like debt obligations, are generally
fixed-income securities. Shareholders of preferred stocks normally have the
right to receive dividends at a fixed rate when and as declared by the issuer's
board of directors, but do not participate in other amounts available for
distribution by the issuing corporation. Dividends on the preferred stock may be
cumulative, and all cumulative dividends usually must be paid prior to common
shareholders receiving any dividends. Preferred stock dividends must be paid
before common stock dividends and, for that reason, preferred stocks generally
entail less risk than common stocks. Upon liquidation, preferred stocks are
entitled to a specified liquidation preference, which is generally the same as
the par or stated value, and are senior in right of payment to common stock.
Preferred stocks are, however, equity securities in the sense that they do not
represent a liability of the issuer and, therefore, do not offer as great a
degree of protection of capital or assurance of continued income as investments
in corporate debt securities. In addition, preferred stocks are subordinated in
right of payment to all debt obligations and creditors of the issuer, and
convertible preferred stocks may be subordinated to other preferred stock of the
same issuer.
Foreign Investments. International investments are subject to a variety
of risks of loss beyond the risks ordinarily associated with investing in the
U.S. and other mature securities markets. The discussion of risks set forth
below refers to the better understood risks of investing in less developed
markets but is not intended, and should not be assumed, to be a complete list of
all possible risks. Although the Board of Trustees, the Adviser, and the
Custodian and subcustodians each review and attempt to minimize the risks of
which they are aware, and even if neither the Trustees nor any service provider
to the Fund has failed to fulfill its duties to the Fund, it is entirely
possible that the Fund may lose some or all of its investment in one or more
securities in an emerging or politically unstable market. An example of such a
loss may involve a fraud in a foreign market not reasonably preventable by the
service providers, notwithstanding oversight by the Trustees and procedures of
each service provider generally considered to be adequate to prevent such a
fraud. In any such case, it is likely that the Fund would not be reimbursed for
any such loss.
Investing in foreign companies involves certain special considerations
which are not typically associated with investing in U.S. companies. Because the
stocks of foreign companies are frequently denominated in foreign currencies,
and because the Fund may temporarily hold uninvested reserves in bank deposits
in foreign currencies, the Fund may be affected favorably or unfavorably by
changes in currency rates and in exchange control regulations, and may incur
costs in connection with conversions between various currencies. The investment
policies of the Fund permit the Fund to enter into forward foreign currency
exchange contracts in order to hedge its holdings and commitments against
changes in the level of future currency rates. Such contracts involve an
obligation to purchase or sell a specific currency at a future date at a price
set at the time of the contract.
Because foreign companies are not generally subject to uniform
accounting, auditing and financial reporting standards and may have policies
that are not comparable to those of domestic companies, there may be less
information available about certain foreign companies than about domestic
companies. Securities of some foreign companies are generally less liquid and
more volatile than securities of comparable domestic companies. There is
generally less government supervision and regulation of stock exchanges, brokers
and listed companies than in the United States. In addition, there is the
possibility of expropriation or confiscatory taxation, political or social
instability, or diplomatic developments which could affect U.S. investments in
foreign countries.
Although the Fund will endeavor to achieve most favorable execution
costs in its portfolio transactions, fixed commissions on many foreign stock
exchanges are generally higher than negotiated commissions on U.S. exchanges.
Certain foreign governments levy withholding taxes on dividend and interest
income and, in some cases, also tax certain capital gains. Although in some
countries a portion of these taxes are reduced under applicable income tax
treaties and/or are recoverable, the non-recovered portion of foreign taxes will
reduce the income received or returned from foreign companies the stock or
securities of which are held by the Fund.
Brokerage commissions, custodial services, and other services relating
to investment in foreign securities markets are generally more expensive than in
the United States. Foreign securities markets also have different clearance and
settlement procedures, and in certain markets there have been times when
settlements have been unable to keep pace with the volume of securities
transactions, making it difficult to conduct such transactions. Delays in
settlement could result in temporary periods when assets of the Fund are
uninvested and no return is earned thereon. The inability of the Fund to make
intended security purchases due to settlement problems could cause the Fund to
miss attractive investment opportunities. Inability to dispose of portfolio
securities due to settlement problems could result either in losses to the Fund
due to subsequent declines in value of the portfolio security or, if the Fund
has entered into a contract to sell the security, could result in possible
liability to the purchaser.
In addition, excess cash invested with depository institutions
domiciled outside the continental United States, as with any offshore deposits,
may be subject to both sovereign actions in the jurisdiction of the depository
institution and sovereign actions in the jurisdiction of the currency, including
but not limited to freeze, seizure, and diminution. The risk associated with the
repayment of principal and payment of interest on such instruments by the
institution with whom the deposit is ultimately placed will be borne exclusively
by the Fund.
Other Investment Companies. The Fund may invest up to 10% of its total
assets in securities issued by other investment companies investing in
securities in which the Fund can invest, provided that such investment companies
invest in portfolio securities in a manner consistent with the Fund's investment
objective and policies. Applicable provisions of the 1940 Act require that the
Fund limit its investments so that, as determined immediately after a securities
purchase is made: (a) not more than 10% of the value of the Fund's total assets
will be invested in the aggregate in securities of investment companies as a
group; (b) the Fund and any company or companies controlled by the Fund will not
own together more than 3% of the total outstanding shares of any one investment
company at the time of purchase; and (c) the Fund will not invest more than 5%
of its total assets in any one investment company. As a shareholder of another
investment company, the Fund would bear its pro rata portion, along with other
shareholders, of the other investment company's expenses, including advisory
fees. These expenses would be in addition to the advisory and other expenses
that the Fund bears directly in connection with its own operations.
Illiquid Securities. The Fund may invest up to 15% of its net assets in
illiquid securities. The term "illiquid securities" for this purpose means
securities that cannot be disposed of within seven days in the ordinary course
of business at approximately the price at which the Fund has valued the
securities and includes, among other securities, repurchase agreements maturing
in more than seven days, certain restricted securities and securities that are
otherwise not freely transferable. Restricted securities may be sold only in
privately negotiated transactions or in public offerings with respect to which a
registration statement is in effect under the Securities Act of 1933, as amended
("1933 Act"). Illiquid securities acquired by the Fund may include those that
are subject to restrictions on transferability contained in the securities laws
of other countries. Securities that are freely marketable in the country where
they are principally traded, but that would not be freely marketable in the
United States, will not be considered illiquid. Where registration is required,
a Fund may be obligated to pay all or part of the registration expenses and a
considerable period may elapse between the time of the decision to sell and the
time the Fund may be permitted to sell a security under an effective
registration statement. If, during such a period, adverse market conditions were
to develop, the Fund might obtain a less favorable price than prevailed when it
decided to sell.
In recent years a large institutional market has developed for certain
securities that are not registered under the 1933 Act, including securities sold
in private placements, repurchase agreements, commercial paper, foreign
securities and corporate bonds and notes. These instruments often are restricted
securities because the securities are sold in transactions not requiring
registration. Institutional investors generally will not seek to sell these
instruments to the general public, but instead will often depend either on an
efficient institutional market in which such unregistered securities can be
resold readily or on an issuer's ability to honor a demand for repayment.
Therefore, the fact that there are contractual or legal restrictions on resale
to the general public or certain institutions does not necessarily mean that
such investments are illiquid.
Rule 144A under the 1933 Act establishes a safe harbor from the
registration requirements of the 1933 Act for resales of certain securities to
qualified institutional buyers. Institutional markets for restricted securities
sold pursuant to Rule 144A in many cases provide both readily ascertainable
values for restricted securities and the ability to liquidate an investment to
satisfy share redemption orders. Such markets might include automated systems
for the trading, clearance and settlement of unregistered securities of domestic
and foreign issuers, such as the PORTAL System sponsored by the National
Association of Securities Dealers, Inc. An insufficient number of qualified
buyers interested in purchasing Rule 144A-eligible restricted securities,
however, could adversely affect the marketability of such portfolio securities
and result in the Fund's inability to dispose of such securities promptly or at
favorable prices.
The Board of Trustees has delegated the function of making day-to-day
determinations of liquidity to the Adviser pursuant to guidelines approved by
the Board. The Adviser takes into account a number of factors in reaching
liquidity decisions, including, but not limited to: (i) the frequency of trades
for the security, (ii) the number of dealers that quote prices for the security,
(iii) the number of dealers that have undertaken to make a market in the
security, (iv) the number of other potential purchasers, and (v) the nature of
the security and how trading is effected (e.g., the time needed to sell the
security, how bids are solicited and the mechanics of transfer). The Adviser
monitors the liquidity of restricted securities in the Fund's portfolio and
reports periodically on such decisions to the Board.
Hedging and Risk Management Practices. In order to hedge against
foreign currency exchange rate risks, the Fund may enter into forward foreign
currency exchange contracts ("forward contracts") and foreign currency futures
contracts, as well as purchase put or call options on foreign currencies, as
described below. The Fund also may conduct its foreign currency exchange
transactions on a spot (i.e., cash) basis at the spot rate prevailing in the
foreign currency exchange market.
The Fund also may purchase other types of options and futures and may,
in the future, write covered options, as described below and in the Prospectus.
Forward Contracts. The Fund may enter into forward contracts to attempt
to minimize the risk from adverse changes in the relationship between the U.S.
dollar and foreign currencies. A forward contract, which is individually
negotiated and privately traded by currency traders and their customers,
involves an obligation to purchase or sell a specific currency for an
agreed-upon price at a future date.
The Fund may enter into a forward contract, for example, when it enters
into a contract for the purchase or sale of a security denominated in a foreign
currency or is expecting a dividend or interest payment in order to "lock in"
the U.S. dollar price of a security, dividend or interest payment. When a Fund
believes that a foreign currency may suffer a substantial decline against the
U.S. dollar, it may enter into a forward contract to sell an amount of that
foreign currency approximating the value of some or all of the Fund's portfolio
securities denominated in such currency, or when the Fund believes that the U.S.
dollar may suffer a substantial decline against a foreign currency, it may enter
into a forward contract to buy that currency for a fixed dollar amount.
In connection with the Fund's forward contract purchases, the Fund's
custodian will maintain in a segregated account cash, and/or liquid securities
of any type or maturity with a value equal to the amount of the Fund's purchase
commitments. Segregated assets used to cover forward contracts will be marked to
market on a daily basis. While these contracts are not presently regulated by
the Commodity Futures Trading Commission ("CFTC"), the CFTC may in the future
regulate them, and limit the ability of the Fund to achieve potential gains from
a positive change in the relationship between the U.S. dollar and foreign
currencies. Unanticipated changes in currency prices may result in poorer
overall performance by the Fund than if it had not entered into such contracts.
The Fund generally will not enter into a forward foreign currency exchange
contract with a term greater than one year.
While transactions in forward contracts may reduce certain risks, such
transactions themselves entail certain other risks. Thus, while the Fund may
benefit from the use of hedging positions, unanticipated changes in interest
rates, securities prices or currency exchange rates may result in a poorer
overall performance for the Fund than if it had not entered into any hedging
positions. If the correlation between a hedging position and portfolio position
which is intended to be protected is imperfect, the desired protection may not
be obtained, and the Fund may be exposed to risk of financial loss.
Perfect correlation between the Fund's hedging positions and portfolio
positions may be difficult to achieve because hedging instruments in many
foreign countries are not yet available. In addition, it is not possible to
hedge fully against currency fluctuations affecting the value of securities
denominated in foreign currencies because the value of such securities is likely
to fluctuate as a result of independent factors not related to currency
fluctuations.
Futures Contracts and Options on Futures Contracts. To hedge against
movements in interest rates, securities prices or currency exchange rates, the
Fund may purchase and sell various kinds of futures contracts and options on
futures contracts. The Fund also may enter into closing purchase and sale
transactions with respect to any such contracts and options. Futures contracts
may be based on various securities (such as U.S. Government securities),
securities indices, foreign currencies and other financial instruments and
indices.
The Fund will file a notice of eligibility for exclusion from the
definition of the term "commodity pool operator" with the CFTC and the National
Futures Association, which regulate trading in the futures markets, before
engaging in any purchases or sales of futures contracts or options on futures
contracts. Pursuant to Section 4.5 of the regulations under the Commodity
Exchange Act, the notice of eligibility will include the representation that the
Fund would use futures contracts and related options for bona fide hedging
purposes within the meaning of the CFTC regulations, provided that the Fund
might hold positions in futures contracts and related options that do not fall
within the definition of bona fide hedging transactions if the aggregate initial
margin and premiums required to establish such positions would exceed 5% of the
Fund's net assets (after taking into account unrealized profits and unrealized
losses on any such positions) and that in the case of an option that is
in-the-money at the time of purchase, the in-the-money amount might be excluded
from such 5%.
The Fund will attempt to determine whether the price fluctuations in
the futures contracts and options on futures used for hedging purposes are
substantially related to price fluctuations in securities held by the Fund or
which it expects to purchase. The Fund's futures transactions generally will be
entered into only for traditional hedging purposes, i.e., futures contracts will
be sold to protect against a decline in the price of securities or currencies
and will be purchased to protect the Fund against an increase in the price of
securities it intends to purchase (or the currencies in which they are
denominated). All futures contracts entered into by the Fund are traded on U.S.
exchanges or boards of trade licensed and regulated by the CFTC or on foreign
exchanges.
Positions taken in the futures markets are not normally held to
maturity but are instead liquidated through offsetting or "closing" purchase or
sale transactions, which may result in a profit or a loss. While the Fund's
futures contracts on securities or currencies will usually be liquidated in this
manner, the Fund may make or take delivery of the underlying securities or
currencies whenever it appears economically advantageous. A clearing corporation
associated with the exchange on which futures on securities or currencies are
traded guarantees that, if still open, the sale or purchase will be performed on
the settlement date.
By using futures contracts to hedge its positions, the Fund seeks to
establish more certainty then would otherwise be possible with respect to the
effective price, rate of return or currency exchange rate on portfolio
securities or securities that the Fund proposes to acquire. For example, when
interest rates are rising or securities prices are falling, the Fund can seek,
through the sale of futures contracts, to offset a decline in the value of its
current portfolio securities. When rates are falling or prices are rising, the
Fund, through the purchase of futures contracts, can attempt to secure better
rates or prices than might later be available in the market with respect to
anticipated purchases. Similarly, the Fund can sell futures contracts on a
specified currency to protect against a decline in the value of such currency
and its portfolio securities which are denominated in such currency. The Fund
can purchase futures contracts on a foreign currency to fix the price in U.S.
dollars of a security denominated in such currency that the Fund has acquired or
expects to acquire. Loss from investing in futures transactions by the Fund is
potentially unlimited.
As part of its hedging strategy, the Fund also may enter into other
types of financial futures contracts if, in the opinion of the Adviser, there is
a sufficient degree of correlation between price trends for the Fund's portfolio
securities and such futures contracts. Although under some circumstances prices
of securities in the Fund's portfolio may be more or less volatile than prices
of such futures contracts, the Adviser will attempt to estimate the extent of
this difference in volatility based on historical patterns and to compensate for
it by having the Fund enter into a greater or lesser number of futures contracts
or by attempting to achieve only a partial hedge against price changes affecting
the Fund's securities portfolio. When hedging of this character is successful,
any depreciation in the value of portfolio securities can be substantially
offset by appreciation in the value of the futures position. However, any
unanticipated appreciation in the value of the Fund's portfolio securities could
be offset substantially by a decline in the value of the futures position.
<PAGE>
The acquisition of put and call options on futures contracts gives the
Fund the right (but not the obligation), for a specified price, to sell or
purchase the underlying futures contract at any time during the option period.
Purchasing an option on a futures contract gives the Fund the benefit of the
futures position if prices move in a favorable direction, and limits its risk of
loss, in the event of an unfavorable price movement, to the loss of the premium
and transaction costs.
The Fund may terminate its position in an option contract by selling an
offsetting option on the same series. There is no guarantee that such a closing
transaction can be effected. The Fund's ability to establish and close out
positions on such options is dependent upon a liquid market.
The Fund will engage in transactions in futures contracts and related
options only to the extent such transactions are consistent with the
requirements of the Internal Revenue Code of 1986, as amended, for maintaining
their qualification as a regulated investment company for Federal income tax
purposes.
Options on Securities, Securities Indices and Currencies. The Fund may
purchase put and call options on securities in which it has invested, on foreign
currencies represented in its portfolio and on any securities index based in
whole or in part on securities in which the Fund may invest. The Fund also may
enter into closing sales transactions in order to realize gains or minimize
losses on options it has purchased.
The Fund normally will purchase call options in anticipation of an
increase in the market value of securities of the type in which it may invest or
a positive change in the currency in which such securities are denominated. The
purchase of a call option would entitle the Fund, in return for the premium
paid, to purchase specified securities or a specified amount of a foreign
currency at a specified price during the option period.
The Fund may purchase and sell options traded on U.S. and foreign
exchanges. Although the Fund will generally purchase only those options for
which there appears to be an active secondary market, there can be no assurance
that a liquid secondary market on an exchange will exist for any particular
option or at any particular time. For some options, no secondary market on an
exchange may exist. In such event, it might not be possible to effect closing
transactions in particular options, with the result that the Fund would have to
exercise its options in order to realize any profit and would incur transaction
costs upon the purchase or sale of the underlying securities.
Secondary markets on an exchange may not exist or may not be liquid for
a variety of reasons including: (i) insufficient trading interest in certain
options; (ii) restrictions on opening transactions or closing transactions
imposed by an exchange; (iii) trading halts, suspensions or other restrictions
may be imposed with respect to particular classes or series of options; (iv)
unusual or unforeseen circumstances which interrupt normal operations on an
exchange; (v) inadequate facilities of an exchange or the Options Clearing
Corporation to handle current trading volume at all times; or (vi)
discontinuance in the future by one or more exchanges for economic or other
reasons, of trading of options (or of a particular class or series of options),
in which event the secondary market on that exchange (or in that class or series
of options) would cease to exist, although outstanding options on that exchange
that had been issued by the Options Clearing Corporation as a result of trades
on that exchange would continue to be exercisable in accordance with their
terms.
Although the Fund does not currently intend to do so, it may, in the
future, write (i.e., sell) covered put and call options on securities,
securities indices and currencies in which it may invest. A covered call option
involves the Fund's giving another party, in return for a premium, the right to
buy specified securities owned by the Fund at a specified future date and price
set at the time of the contract. A covered call option serves as a partial hedge
against the price decline of the underlying security. However, by writing a
covered call option, the Fund gives up the opportunity, while the option is in
effect, to realize gain from any price increase (above the option exercise
price) in the underlying security. In addition, the Fund's ability to sell the
underlying security is limited while the option is in effect unless the Fund
effects a closing purchase transaction.
The Fund also may write covered put options that give the holder of the
option the right to sell the underlying security to the Fund at the stated
exercise price. The Fund will receive a premium for writing a put option but
will be obligated for as long as the option is outstanding to purchase the
underlying security at a price that may be higher than the market value of that
security at the time of exercise. In order to "cover" put options it has
written, the Fund will cause its custodian to segregate cash, cash equivalents,
U.S. Government securities or other liquid securities with at least the value of
the exercise price of the put options. In segregating such assets, the custodian
either deposits such assets in a segregated account or separately identifies
such assets and renders them unavailable for investment. The Fund will not write
put options if the aggregate value of the obligations underlying the put options
exceeds 25% of the Fund's total assets.
There is no assurance that higher than anticipated trading activity or
other unforeseen events might not, at times, render certain of the facilities of
the Options Clearing Corporation inadequate, and result in the institution by an
exchange of special procedures that may interfere with the timely execution of
the Fund's orders.
While transactions in forward contracts, options, futures contracts and
options on futures (i.e., "hedging positions") may reduce certain risks, such
transactions themselves entail certain other risks. Thus, while the Fund may
benefit from the use of hedging positions, unanticipated changes in interest
rates, securities prices or currency exchange rates may result in a poorer
overall performance for the Fund than if it had not entered into any hedging
positions. If the correlation between a hedging position and portfolio position
which is intended to be protected is imperfect, the desired protection may not
be obtained, and the Fund may be exposed to risk of financial loss.
Perfect correlation between the Fund's hedging positions and portfolio
positions may be difficult to achieve because hedging instruments in many
foreign countries are not yet available. In addition, it is not possible to
hedge fully against currency fluctuations affecting the value of securities
denominated in foreign currencies because the value of such securities is likely
to fluctuate as a result of independent factors not related to currency
fluctuations.
Repurchase Agreements. The Fund may enter into repurchase agreements
with qualified brokers, dealers, banks and other financial institutions deemed
creditworthy by its Adviser. In a repurchase agreement, the Fund purchases a
security and simultaneously commits to resell that security at a future date to
the seller (a qualified bank or securities dealer) at an agreed upon price plus
an agreed upon market rate of interest (itself unrelated to the coupon rate or
date of maturity of the purchased security). The Fund would generally enter into
repurchase transactions to invest cash reserves and for temporary defensive
purposes. Delays or losses could result if the other party to the agreement
defaults or becomes insolvent.
The securities held subject to a repurchase agreement may have stated
maturities exceeding 13 months, but the Adviser currently expects that
repurchase agreements will mature in less than 13 months. The seller under a
repurchase agreement will be required to maintain the value of the securities
subject to the agreement at not less than 101% of the repurchase price including
accrued interest. The Fund's administrator and the Adviser will mark to market
daily the value of the securities purchased, and the Adviser will, if necessary,
require the seller to deposit additional securities to ensure that the value is
in compliance with the 101% requirement stated above. The Adviser will consider
the creditworthiness of a seller in determining whether the Fund should enter
into a repurchase agreement, and the Fund will only enter into repurchase
agreements with banks and dealers which are determined to present minimal credit
risk by the Adviser under procedures adopted by the Board of Trustees.
In effect, by entering into a repurchase agreement, the Fund is lending
its funds to the seller at the agreed upon interest rate, and receiving
securities as collateral for the loan. Such agreements can be entered into for
periods of one day (overnight repo) or for a fixed term (term repo). Repurchase
agreements are a common way to earn interest income on short-term funds.
The use of repurchase agreements involves certain risks. For example,
if the seller of a repurchase agreement defaults on its obligation to repurchase
the underlying securities at a time when the value of these securities has
declined, the Fund may incur a loss upon disposition of them. Default by the
seller would also expose the Fund to possible loss because of delays in
connection with the disposition of the underlying obligations. If the seller of
an agreement becomes insolvent and subject to liquidation or reorganization
under the Bankruptcy Code or other laws, a bankruptcy court may determine that
the underlying securities are collateral not within the control of the Fund and
therefore subject to sale by the trustee in bankruptcy. Further, it is possible
that the Fund may not be able to substantiate its interest in the underlying
securities.
Repurchase agreements that do not provide for payment to the Fund
within seven days after notice without taking a reduced price are considered
illiquid securities.
Reverse Repurchase Agreements. The Fund may enter into reverse
repurchase agreements. In a reverse repurchase agreement the Fund sells a
security and simultaneously commits to repurchase that security at a future date
from the buyer. In effect, the Fund is temporarily borrowing funds at an agreed
upon interest rate from the purchaser of the security, and the sale of the
security represents collateral for the loan. The Fund retains record ownership
of the security and the right to receive interest and principal payments on the
security. At an agreed upon future date, the Fund repurchases the security by
remitting an amount equal to the proceeds previously received, plus interest. In
certain types of agreements, there is no agreed upon repurchase date and
interest payments are calculated daily, often based on the prevailing overnight
repurchase rate. These agreements, which are treated as if reestablished each
day, are expected to provide the Fund with a flexible borrowing tool. Reverse
repurchase agreements are considered to be borrowings by a fund under the
Investment Company Act of 1940, as amended (the "1940 Act").
The Adviser will consider the creditworthiness of the other party in
determining whether the Fund will enter into a reverse repurchase agreement.
Under normal circumstances the Fund will not enter into reverse repurchase
agreements if entering into such agreements would cause, at the time of entering
into such agreements, more than 33 1/3% of the value of its total assets to be
subject to such agreements.
The use of reverse repurchase agreements involves certain risks. For
example, the other party to the agreement may default on its obligation or
become insolvent and unable to deliver the securities to the Fund at a time when
the value of the securities has increased. Reverse repurchase agreements also
involve the risk that the Fund may not be able to establish its right to receive
the underlying securities.
PURCHASE OF SHARES
The purchase price of shares of the Fund is the net asset value next
determined after receipt of the purchase order by the transfer agent. The Fund
and its distributor reserve the right in their sole discretion (i) to suspend
the offering of its shares, (ii) to reject purchase orders when in the judgment
of management such rejection is in the best interest of the Fund, and (iii) to
reduce or waive the minimum for initial and subsequent investments from time to
time.
<PAGE>
REDEMPTION OF SHARES
The Fund may suspend redemption privileges or postpone the date of
payment (i) during any period that the New York Stock Exchange (the "Exchange")
is closed, or trading on the Exchange is restricted as determined by the
Commission, (ii) during any period when an emergency exists as defined by the
rules of the Commission as a result of which it is not reasonably practicable
for the Fund to dispose of securities owned by it, or fairly to determine the
value of its assets, and (iii) for such other periods as the Commission may
permit.
If a shareholder redeems shares of the Fund which have been held less
than six months (including shares to be exchanged), the Fund will deduct from
the proceeds a redemption charge of 2% of the amount of the redemption. This
amount is retained by the Fund to offset the Fund's costs of purchasing and
selling securities. Redemption proceeds may be greater or less than the
shareholder's initial cost depending on the market value of the securities held
by the Fund.
PORTFOLIO TURNOVER
The portfolio turnover rate of the Fund will depend upon market and
other conditions and it will not be a limiting factor when the Adviser believes
that portfolio changes are appropriate. Although the portfolio turnover rate may
vary from year to year, the Adviser expects, during normal market conditions,
that the Fund's portfolio turnover rate will not exceed 100%.
INVESTMENT LIMITATIONS
The Fund is subject to the following restrictions which are fundamental
policies and may not be changed without the approval of the lesser of: (1) 67%
of the voting securities of the Fund present at a meeting if the holders of more
than 50% of the outstanding voting securities of the Fund are present or
represented by proxy, or (2) more than 50% of the outstanding voting securities
of the Fund. The Fund will not:
(1) enter into commodities or commodity contracts, other than
financial and currency furtures contracts, options on futures
contracts, options on securities, indices and currency,
forward contracts, swaps and other financial or currency
derivative contracts;
(2) purchase or sell real estate (including real estate limited
partnership interests), although it may purchase and sell
securities of companies which deal in real estate and may
purchase and sell securities which are secured by interests in
real estate;
(3) make loans except (i) by purchasing bonds, debentures or
similar obligations (including repurchase agreements and money
market instruments, such as bankers acceptances and commercial
paper, and selling securities on a when issued, delayed
settlement or forward delivery basis) which are publicly or
privately distributed, (ii) by entering into repurchase
agreements and (iii) through the lending of its portfolio
securities;;
(4) purchase on margin or sell short except as permitted by the 1940 Act;
<PAGE>
(5) with respect to 75% of its total assets, at the time of
purchase invest more than 5% of its total assets or purchase
more than 10% of the outstanding voting securities of the
securities of any single issuer (other than obligations issued
or guaranteed by the U.S. Government, its agencies,
enterprises or instrumentalities);
(6) issue senior securities, except that the Trust or the Fund may
issue shares of more than one series or class, may borrow
money in accordance with investment limitation (7) below and
may enter into reverse repurchase agreements;
(7) borrow money, except that the Fund may borrow money as a
temporary measure for extraordinary or emergency purposes and
may enter into reverse repurchase agreements in an amount not
exceeding 331/3% of its total assets at the time of the
borrowing;
(8) underwrite the securities of other issuers, except to the extent that
the purchase and subsequent disposition of securities may be deemed
underwriting;
(9) acquire any securities of companies within one industry if, as
a result of such acquisition, 25% or more of the value of the
Fund's total assets would be invested in securities of
companies within such industry; other than obligations issued
or guaranteed by the U.S. Government, its agencies,
enterprises or instrumentalities.
In addition, as non-fundamental policies, the Fund will not invest more
than 15% of its net assets, at the time of purchase, in illiquid securities,
including repurchase agreements which have maturities of more than seven days;
the Fund will not make additional investments while borrowings representing more
than 5% of the Fund's total assets are outstanding; and the Fund will not invest
for the purpose of exercising control over management of any company.
If a percentage restriction is adhered to at the time an investment is
made, a later increase in percentage resulting from a change in value of assets
will not constitute a violation of such restriction, except that any borrowings
by the Fund that exceed the limitation set forth in investment limitation 7
above must be reduced to meet such limitation within the period required by the
1940 Act (currently three days, not including Sundays and holidays).
MANAGEMENT OF THE FUND
Board Members and Officers. The business and affairs of the Trust are managed
under the direction of its Board. The Trust's officers, under the supervision of
the Board, manage the day to day operations of the Trust. The Board Members set
broad policies for the Trust and choose its officers. The following is a list of
the Board Members and officers of the Trust and a brief statement of their
principal occupations during the past five years. Each Trustee who is an
"interested person" of the Trust, as defined in the 1940 Act, is indicated by an
asterisk.
<PAGE>
<TABLE>
<CAPTION>
Name, Address and Position Age Principal Occupation During Past Five Years
<S> <C>
Jean G. Pilloud*, President 53 Senior Manager of Pictet & Cie.
and Chairman
Pictet & Cie
29, Boulevard Georges-Favon
1204 Geneva
Switzerland
Jean-Francois Demole* , Trustee 35 Chief Executive Officer of Pictet
(Canada) & Company Pictet Canada & Company Ltd. Ltd., since March 1994; Vice
President of Pictet & Cie, 1800 McGill College Avenue, December 1990 to March
1994. Suite 2900 Montreal, Quebec H3A3J6
Jeffrey P. Somers,* Trustee 54 Officer, Director and Stockholder of Morse,
Barnes-Brown Morse, Barnes-Brown & Pendleton & Pendleton (law firm); Associate
lawyer and Partner, 1601 Trapelo Road Gadsby & Hannah, prior to February 1995.
Reservoir Place Waltham, MA 02154
Bruce W. Schnitzer, Trustee 53 Chairman of the Board of Wand Partners, Inc;
Director, Wand Partners, Inc. Chartwell Re Corporation, Life Partners Group,
Inc., 630 Fifth Avenue, Suite 2435 PennCorp Financial Group and AMRESCO Inc. New
York, NY 10111 David J. Callard, Trustee 58 President, Wand Partners, Inc. Wand
Partners, Inc. Director, Waverly, Inc.; 630 Fifth Avenue, Suite 2435 Director,
Chartwell Re Corporation. New York, NY 10111
Gail A. Hanson, Secretary 55 Counsel, First Data Investor Services Group,
Inc. Ms. First Data Investor Services Group, Inc. Hanson has been employed by
First Data Investor Services One Exchange Place Group, Inc. since September
1994. Previously, she was Boston, MA. 02109 employed as an Associate at Bingham,
Dana & Gould prior to 1994.
Michael C. Kardok, Treasurer 37 Vice President, First Data Investor
Services Group, Inc. First Data Investor Services Group, Inc. Mr. Kardok has
been employed by First Data Investor One Exchange Place Services Group, Inc.
since May 1994. He was employed by Boston, MA 02109 The Boston Company Advisors,
Inc. as Vice President, Assistant Treasurer and Financial Manager prior to May
1994.
Remuneration of Board Members. The Trust pays each Board member (except those
employed by the Adviser or its affiliates) an annual fee of $5,000 plus $500 for
each Board and committee meeting attended and out-of-pocket expenses incurred in
attending such meetings.
</TABLE>
COMPENSATION TABLE
The following table sets forth the compensation paid to the Trustees
for the Trust for the fiscal year ended December 31, 1996. No compensation is
paid to any officers of the Trust by the Fund.
<TABLE>
<CAPTION>
PENSION OR
RETIREMENT
BENEFITS TOTAL
AGGREGATE ACCRUED AS PART COMPENSATION
COMPENSATION OF FUND EXPENSES FROM THE TRUST
NAME OF PERSON AND POSITION FROM THE TRUST AND COMPLEX
PAID
TO TRUSTEES
<S> <C> <C> <C>
David J. Callard $8,500 0 $8,500
Trustee
Jean-Francois Demole 0 0 $0
Trustee
Jean G. Pilloud 0 0 $0
Trustee
Bruce W. Schnizter $8,500 0 $8,500
Trustee
Jeffrey P. Somers $8,500 0 $8,500
Trustee
</TABLE>
INVESTMENT ADVISORY AND OTHER SERVICES
As noted in the Prospectus, the Adviser is entitled to receive a fee
from the Fund for its services, calculated daily and payable monthly, at the
annual rate of 1.25% of the Fund's average daily net assets. Currently, the
Adviser has voluntarily agreed not to impose its fees and to make any other
arrangements necessary to assure that the net operating expenses of the Fund
will not exceed 2.00% of the Fund's average daily net assets. The Adviser,
located at Cutlers Garden, 5 Devonshire Square, London, England EC2M 4LD, is a
wholly-owned subsidiary of Pictet (Canada) and Company Ltd. ("Pictet Canada").
Pictet Canada is a partnership, whose principal activity is investment
accounting, custody and securities brokerage. Pictet Canada has two general
partners, Pictet Advisory Services Overseas and FINGEST, and seven limited
partners, each of whom is also a partner of Pictet & Cie, a Swiss private bank
founded in 1805.
Administrative services are provided to the Trust by First Data
Investor Services Group, Inc. ("FDISG"), pursuant to an administration
agreement. See "Administrative Services" in the Prospectus for information
concerning the substantive provisions of the administration agreement.
Custody services are provided to the Fund by ____________.
DISTRIBUTOR
Shares of the Fund are distributed continuously and are offered without a
sales charge by First Data Distributors, Inc. (the "Distributor") pursuant to a
distribution agreement between the Trust and the Distributor. The Distributor is
a wholly owned subsidiary of FDISG.
PORTFOLIO TRANSACTIONS
The investment advisory agreement authorizes the Adviser to select the
brokers or dealers that will execute the purchases and sales of investment
securities for the Fund and directs the Adviser to use its best efforts to
obtain the best available price and most favorable execution with respect to all
transactions for the Fund. The Adviser, may, however, consistent with the
interests of the Fund, select brokers on the basis of the research, statistical
and pricing services they provide to the Adviser. Information and research
received from such brokers will be in addition to, and not in lieu of, the
services required to be performed by the Adviser under the investment advisory
agreement. A commission paid to such brokers may be higher than that which
another qualified broker would have charged for effecting the same transaction,
provided that such commissions are paid in compliance with the Securities
Exchange Act of 1934, as amended, and that the Adviser determines in good faith
that such commission is reasonable in terms either of the transaction or the
overall responsibility of the Adviser to the Fund and the Adviser's other
clients.
Some securities considered for investment by the Fund may also be
appropriate for other clients of the Adviser. If the purchase or sale of
securities is consistent with the investment policies of the Fund and one or
more of these other clients served by the Adviser and is considered at or about
the same time, transactions in such securities will be allocated among the Fund
and clients in a manner deemed fair and reasonable by the Adviser. While in some
cases this practice could have a detrimental effect on the price, value or
quantity of the security as far as the Fund is concerned, in other cases it is
believed to be beneficial to the Fund.
ADDITIONAL INFORMATION CONCERNING TAXES
General. The following summarizes certain additional tax considerations
generally affecting the Fund and its shareholders. No attempt is made to present
a detailed explanation of the tax treatment of the Fund or its shareholders, and
the discussion here and in the Prospectus is not intended as a substitute for
careful tax planning. Potential investors should consult their tax advisers with
specific reference to their own tax situation.
The Fund is treated as a separate taxable entity under the Internal
Revenue Code of 1986, as amended (the "Code"), and intends to elect to be
treated, and to qualify each year, as a regulated investment company.
Qualification as a regulated investment company under the Code requires, among
other things, that the Fund distribute to its shareholders an amount equal to at
least the sum of 90% of its investment company taxable income and 90% of its
tax-exempt interest income (if any) net of certain deductions for a taxable
year. In addition, the Fund must satisfy certain requirements with respect to
the source of its income for each taxable year. At least 90% of the gross income
of the Fund for a taxable year must be derived from dividends, interest,
payments with respect to securities loans, gains from the sale or other
disposition of stock, securities or foreign currencies, and other income
(including, but not limited to, gains from forward contracts) derived with
respect to its business of investing in such stock, securities or currencies.
The Treasury Department may by regulation exclude from qualifying income foreign
currency gains which are not directly related to the Fund's principal business
of investing in stock or securities. Any income derived by the Fund from a
partnership or trust is treated for this purpose as derived with respect to its
business of investing in stock, securities or currencies only to the extent that
such income is attributable to items of income which would have been qualifying
income if realized by the Fund in the same manner as by the partnership or
trust.
The Fund will not be treated as a regulated investment company under
the Code if 30% or more of its gross income for a taxable year is derived from
gains realized on the sale or other disposition of the following investments
held for less than three months: (1) stock and securities (as defined in section
2(a)(36) of the 1940 Act) and (2) foreign currencies (and forward contracts on
foreign currencies) that are not directly related to the Fund's principal
business of investing in stock and securities. Interest (including original
issue discount and accrued market discount) received by the Fund upon maturity
or disposition of a security held for less than three months will not be treated
as gross income derived from the sale or other disposition of such security
within the meaning of this requirement. However, income which is attributable to
realized market appreciation will be treated as gross income from the sale or
other disposition of securities for this purpose.
In order to qualify as a regulated investment company, the Fund must
also diversify its holdings so that, at the close of each quarter of its taxable
year, (i) at least 50% of the market value of its total (gross) assets is
comprised of cash, cash items, United States Government securities, securities
of other regulated investment companies and other securities limited in respect
of any one issuer to an amount not greater in value than 5% of the value of the
Fund's total assets and to not more than 10% of the outstanding voting
securities of such issuer, and (ii) not more than 25% of the value of its total
assets is invested in the securities of any one issuer (other than United States
Government securities and securities of other regulated investment companies) or
two or more issuers controlled by the Fund and engaged in the same, similar or
related trades or businesses.
Any distribution of the excess of net long-term capital gain over net
short-term capital loss and appropriately designated by the Fund is taxable to
shareholders as long-term capital gain, regardless of how long the shareholder
has held the Fund's shares and whether such distribution is received in cash or
additional Fund shares. The Fund will designate such distributions as capital
gain dividends in a written notice mailed to shareholders within 60 days after
the close of the Fund's taxable year. Shareholders should note that, upon the
redemption or other sale of Fund shares, if the shareholder has not held such
shares for tax purposes for more than six months, any loss on the sale of those
shares will be treated as long-term capital loss to the extent of the capital
gain dividends received with respect to the shares. Losses on a redemption or
other sale of shares may also be disallowed under wash sale rules if other
shares of the Fund are acquired (including dividend reinvestments) within a
prescribed period.
An individual's net long-term capital gains are taxable at a maximum
effective rate of 28%. Ordinary income of individuals is taxable at a maximum
nominal rate of 39.6%, but because of limitations on itemized deductions
otherwise allowable and the phase-out of personal exemptions, the maximum
effective marginal rate of tax for some taxpayers may be higher. For
corporations, long-term and short-term capital gains and ordinary income are
both taxable at a maximum nominal rate of 35% (although surtax provisions apply
at certain income levels to result in higher effective marginal rates).
If the Fund retains net capital gain for reinvestment, the Fund may
elect to treat such amounts as having been distributed to shareholders. As a
result, the shareholders would be subject to tax on undistributed net capital
gain, would be able to claim their proportionate share of the Federal income
taxes paid by the Fund on such gain as a credit against their own Federal income
tax liabilities, and would be entitled to an increase in their basis in their
Fund shares.
If for any taxable year the Fund does not qualify for the special
Federal income tax treatment afforded regulated investment companies, all of its
taxable income will be subject to Federal income tax at regular corporate rates
(without any deduction for distributions to its shareholders). In such event,
dividend distributions would be taxable as ordinary income to shareholders to
the extent of the Fund's current and accumulated earnings and profits and would
be eligible for the dividends received deduction for corporations.
Foreign Taxes. Income (including, in some cases, capital gains)
received from sources within foreign countries may be subject to withholding and
other income or similar taxes imposed by such countries. If more than 50% of the
value of the Fund's total assets at the close of its taxable year consists of
stock or securities of foreign corporations, the Fund will be eligible and may
elect to "pass-through" to its shareholders the amount of foreign income and
other qualified foreign taxes paid by it. If this election is made, each taxable
shareholder will be required to include in gross income (in addition to
dividends and distributions actually received) his pro rata share of the
qualified foreign taxes paid by the Fund, and will be entitled either to deduct
(as an itemized deduction) his pro rata share of foreign taxes in computing his
taxable income or to use it as a foreign tax credit against his U.S. Federal
income tax liability, subject to limitations. No deduction for foreign taxes may
be claimed by a shareholder who does not itemize deductions, but such a
shareholder may be eligible to claim the foreign tax credit (see below). If the
Fund makes this election, each shareholder will be notified within 60 days after
the close of the Fund's taxable year.
Generally, a credit for foreign taxes is subject to the limitation that
it may not exceed the shareholder's U.S. tax attributable to his or her foreign
source taxable income. For this purpose, if the pass-through election is made,
the source of the Fund's income flows through to its shareholders. With respect
to the Fund, gains from the sale of securities will be treated as derived from
U.S. sources and certain currency gains, including currency gains from foreign
currency denominated debt securities, receivables and payables, will be treated
as ordinary income derived from U.S. sources. The limitation on the foreign tax
credit is applied separately to foreign source passive income (as defined for
purposes of the foreign tax credit), including the foreign source passive income
passed through by the Fund. Shareholders may be unable to claim a credit for the
full amount of their proportionate share of the foreign taxes paid by the Fund.
Foreign taxes may not be deducted in computing alternative minimum taxable
income and the foreign tax credit can be used to offset only 90% of the
alternative minimum tax (as computed under the Code for purposes of this
limitation) imposed on corporations and individuals. If the Fund is not eligible
to or does not make the election to "pass through" to its shareholders its
foreign taxes, the foreign taxes it pays will reduce investment company taxable
income and the distributions by the Fund will be treated as United States source
income.
The Fund may invest up to 10% of its total assets in the stock of
foreign investment companies. Such companies are likely to be treated as
"passive foreign investment companies" ("PFICs") under the Code. Certain other
foreign corporations, not operated as investment companies, may also satisfy the
PFIC definition. A portion of the income and gains that the Fund derives from an
equity investment in a PFIC may be subject to a non-deductible federal income
tax (including an interest-equivalent amount) at the Fund level. In some cases,
the Fund may be able to avoid this tax by electing to be taxed currently on its
share of the PFIC's income, whether or not such income is actually distributed
by the PFIC or by making an election (if available) to mark its PFIC investments
to market or by otherwise managing its PFIC investments. The Fund will endeavor
to limit its exposure to the PFIC tax by any available techniques or elections.
Because it is not always possible to identify a foreign issuer as a PFIC in
advance of making the investment, the Fund may incur the PFIC tax in some
instances.
Other Tax Matters. Special rules govern the Federal income tax
treatment of certain transactions denominated in terms of a currency other than
the U.S. dollar or determined by reference to the value of one or more
currencies other than the U.S. dollar. The types of transactions covered by the
special rules include the following: transactions in foreign currency
denominated debt instruments, foreign currency denominated payables and
receivables, foreign currencies and foreign currency forward contracts. With
respect to transactions covered by the special rules, foreign currency gain or
loss is calculated separately from any other gain or loss on the underlying
transaction (subject to certain netting rules) and is generally, absent an
election that may be available in some cases, taxable as ordinary gain or loss.
Any gain or loss attributable to the foreign currency component of a transaction
engaged in by the Fund which is not subject to the special currency rules (such
as foreign equity investments other than certain preferred stocks) will be
treated as capital gain or loss and will not be segregated from the gain or loss
on the underlying transaction. Mark to market and other tax rules applicable to
certain currency forward contracts may affect the amount, timing and character
of the Fund's income, gain or loss and hence of its distributions to
shareholders. It is anticipated that some of the non-U.S. dollar denominated
investments and foreign currency contracts the Fund may make or enter into will
be subject to the special currency rules described above.
The Fund may recognize income currently each taxable year for Federal
income tax purposes under the Code's original issue discount rules in the amount
of the unpaid, accrued interest with respect to bonds structured as zero coupon
or deferred interest bonds or pay-in-kind securities, even though it receives no
cash interest until the security's maturity or payment date. As discussed above,
in order to qualify for treatment as a regulated investment company, the Fund
must distribute substantially all of its income to shareholders. Thus, the Fund
may have to dispose of its portfolio securities under disadvantageous
circumstances to generate cash or leverage itself by borrowing cash, so that it
may satisfy the distribution requirement.
The Fund is not liable for Massachusetts corporate excise taxes or
franchise taxes and, provided that it qualifies as a regulated investment
company, will not be required to pay Massachusetts income tax.
Exchange control regulations that may restrict repatriation of
investment income, capital, or the proceeds of securities sales by foreign
investors may limit the Fund's ability to make sufficient distributions to
satisfy the 90% and calendar year distribution requirements described above.
Different tax treatment, including penalties on certain excess
contributions and deferrals, certain pre-retirement and post-retirement
distributions and certain prohibited transactions, is accorded to accounts
maintained as qualified retirement plans. Shareholders should consult their tax
advisers for more information.
The foregoing discussion related solely to U.S. Federal income tax law
as applicable to U.S. persons (i.e., U.S. citizens or residents and U.S.
domestic corporations, partnerships, trusts or estates) subject to tax under
such law. The discussion does not address special tax rules applicable to
certain classes of investors, such as tax-exempt entities, insurance companies,
and financial institutions. Dividends, capital gain distributions, and ownership
of or gains realized on the redemption (including an exchange) of Fund shares
may also be subject to state and local taxes. Shareholders should consult their
own tax advisers as to the Federal, state or local tax consequences of ownership
of shares of, and receipt of distributions from, the Fund in their particular
circumstances.
Non-U.S. investors not engaged in a U.S. trade or business with which
their investment in the Fund is effectively connected will be subject to U.S.
Federal income tax treatment that is different from that described above. These
investors may be subject to nonresident alien withholding tax at the rate of 30%
(or a lower rate under an applicable tax treaty) on amounts treated as ordinary
dividends from the Fund and, unless an effective IRS Form W-8 or authorized
substitute is on file, to 31% backup withholding on certain other payments from
the Fund. Non-U.S. investors should consult their tax advisers regarding such
treatment and the application of foreign taxes to an investment in the Fund.
PERFORMANCE CALCULATIONS
The Fund may advertise its average annual total return. The Fund
computes such return by determining the average annual compounded rate of return
during specified periods that equates the initial amount invested to the ending
redeemable value of such investment according to the following formula:
T = [( ERV )1/n - 1]
P
Where: T = average annual total return.
ERV = ending redeemable value at the end
of the period covered by the
computation of a hypothetical $1,000
payment made at the beginning of the
period.
P = hypothetical initial payment of $1,000.
n = period covered by the computation, expressed in terms of years.
The Fund computes its aggregate total return by determining the
aggregate rates of return during specified periods that likewise equate the
initial amount invested to the ending redeemable value of such investment. The
formula for calculating aggregate total return is as follows:
T = [( ERV ) - 1]
P
The calculations of average annual total return and aggregate total
return assume the reinvestment of all dividends and capital gain distributions.
The ending redeemable value (variable "ERV" in each formula) is determined by
assuming complete redemption of the hypothetical investment and the deduction of
all nonrecurring charges at the end of the period covered by the computations.
The Fund's average annual total return and aggregate total return do not reflect
any fees charged by Institutions to their clients.
GENERAL INFORMATION
Dividends and Capital Gain Distributions
The Fund's policy is to distribute substantially all of its net
investment income, if any, together with any net realized capital gains in the
amount and at the times that will generally avoid both income and the Federal
excise tax on undistributed income and gains (see discussion under "Dividends,
Capital Gain Distributions and Taxes" in the Prospectus). The amounts of any
income dividends or capital gain distributions cannot be predicted.
Any dividend or distribution paid shortly after the purchase of shares
of the Fund by an investor may have the effect of reducing the per share net
asset value of the Fund by the per share amount of the dividend or distribution.
Furthermore, such dividends or distributions, although in effect a return of a
portion of the purchase price, are subject to income taxes as set forth in the
Prospectus.
Massachusetts Business Trust
The Trust is an entity of the type commonly known as a "Massachusetts
business trust". Under Massachusetts law, shareholders of such a business trust
may, under certain circumstances, be held personally liable as partners for its
obligations. However, the risk of a shareholder incurring financial loss on
account of shareholder liability is limited to circumstances in which both
inadequate insurance exists and the Trust itself is unable to meet its
obligations.
<PAGE>
APPENDIX -- DESCRIPTION OF RATINGS AND U.S. GOVERNMENT SECURITIES
I. Description of Commercial Paper Ratings
Description of Moody's highest commercial paper rating: Prime-1 ("P-1")
- --judged to be of the best quality. Issuers rated P-1 (or related supporting
institutions) are considered to have a superior capacity for repayment of
short-term promissory obligations.
Description of S&P highest commercial papers ratings: A-1+ -- this
designation indicates the degree of safety regarding timely payment is
overwhelming. A-1 -- this designation indicates the degree of safety regarding
timely payment is either overwhelming or very strong.
Description of Bond Ratings
The following summarizes the ratings used by S&P for corporate and
municipal debt:
AAA - Debt rated AAA has the highest rating assigned by S&P. Capacity
to pay interest and repay principal is extremely strong.
AA - Debt rated AA has a very strong capacity to pay interest and
repay principal and differs from the highest rated issues only in a
small degree.
A - Debt rated A has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse
effects of changes in circumstances and economic conditions than debt
in higher rated categories.
BBB - Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher
rated categories.
Plus (+) or Minus (-): The ratings from AA to BBB may be modified by
the addition of a plus or minus sign to show relative standing within the major
rating categories.
The following summarizes the ratings used by Moody's for corporate and
municipal long-term debt: Aaa - Bonds that are rated Aaa are judged to
be of the best quality. They carry the smallest degree of investment
risk and are generally referred to as "gilt edge." Interest payments
are protected by a large or by an exceptionally stable margin and
principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.
Aa - Bonds that are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high-grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities
or fluctuation of protective elements may be of greater amplitude or
there may be other elements present which make the long-term risks
appear somewhat larger than in Aaa securities.
<PAGE>
A - Bonds that are rated A possess many favorable investment
attributes and are to be considered upper medium grade obligations.
Factors giving security to principal and interest are considered
adequate, but elements may be present which suggest a susceptibility to
impairment sometime in the future.
Baa - Bonds that are rated Baa are considered medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest
payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics
as well.
Moody's applies numerical modifiers (1, 2 and 3) with respect to
corporate bonds rated Aa, A and Baa. The modifier 1 indicates that the bond
being rated ranks in the higher end of its generic rating category; the modifier
2 indicates a mid-range ranking; and the modifier 3 indicates that the bond
ranks in the lower end of its generic rating category. Those bonds in the Aa, A
and Baa categories which Moody's believes possess the strongest investment
attributes, within those categories are designated by the symbols Aa1, A1 and
Baa1, respectively.
II. Description of U.S. Government Securities and Certain Other Securities
The term "U.S. Government securities" refers to a variety of securities
which are issued or guaranteed by the United States Government, and by various
instrumentalities which have been established or sponsored by the United States
Government.
U.S. Treasury securities are backed by the "full faith and credit" of
the United States Government. Securities issued or guaranteed by Federal
agencies and U.S. Government sponsored enterprises or instrumentalities may or
may not be backed by the full faith and credit of the United States. In the case
of securities not backed by the full faith and credit of the United States, an
investor must look principally to the agency, enterprise or instrumentality
issuing or guaranteeing the obligation for ultimate repayment, and may not be
able to assert a claim against the United States itself in the event the agency,
enterprise or instrumentality does not meet its commitment. Agencies which are
backed by the full faith and credit of the United States include the Export
Import Bank, Farmers Home Administration, Federal Financing Bank and others.
Certain agencies, enterprises and instrumentalities, such as the Government
National Mortgage Association are, in effect, backed by the full faith and
credit of the United States through provisions in their charters that they may
make "indefinite and unlimited" drawings on the Treasury, if needed to service
its debt. Debt from certain other agencies, enterprises and instrumentalities,
including the Federal Home Loan Bank and Federal National Mortgage Association,
are not guaranteed by the United States, but those institutions are protected by
the discretionary authority for the U.S. Treasury to purchase certain amounts of
their securities to assist the institution in meeting its debt obligations.
Finally, other agencies, enterprises and instrumentalities, such as the Farm
Credit System and the Federal Home Loan Mortgage Corporation, are federally
chartered institutions under Government supervision, but their debt securities
are backed only by the creditworthiness of those institutions, not the U.S.
Government.
Some of the U.S. Government agencies that issue or guarantee securities
include the Export-Import Bank of the United States, Farmers Home
Administration, Federal Housing Administration, Maritime Administration, Small
Business Administration and The Tennessee Valley Authority.
An instrumentality of the U.S. Government is a Government agency
organized under Federal charter with Government supervision. Instrumentalities
issuing or guaranteeing securities include, among others, Overseas Private
Investment Corporation, Federal Home Loan Banks, the Federal Land Banks, Central
Bank for Cooperatives, Federal Intermediate Credit Banks and the Federal
National Mortgage Association.
<PAGE>
C: OTHER INFORMATION
Item 24. Financial Statements and Exhibits.
List all financial statements and exhibits filed as part of the
Registration Statement.
(a) Financial Statements:
None
(b) Exhibits:
(1)(a) Declaration of Trust initially filed on May 24, 1995 is incorporated
by reference to Post-Effective No. 3 as filed with the Securitie and Exchange
Commission January 2, 1996 ("Post-Effective Amendment No. 3"). (1)(b) Amendment
to the Declaration of Trust dated June 8, 1995 initially filed on September 21,
1995 is incorporated by reference to Post- Effective Amendment No. 3. (1)(c)
Amendment to the Declaration of Trust dated December 8, 1995 is incorporated by
reference to Post-Effective Amendment No. 3. (1)(d) Amendment to Declaration of
Trust dated March 1, 1996 is incorporated by reference to Post-Effective
Amendment No. 4 as filed with the SEC April 1, 1996 ("Post-Effective Amendment
No. 4"). (2) By-Laws initially filed on May 24, 1995 is incorporated by
reference to Post-Effective Amendment No. 3. (3) Not Applicable. (4) Not
Applicable. (5)(a) Investment Advisory Agreement between Registrant and Pictet
International Management Limited with respect to Pictet Global Emerging Markets
Fund is incorporated by reference to Post-Effective Amendment No. 3. (5)(b)
Supplement dated January 2, 1996 to the Investment Advisory Agreement between
Registrant and Pictet International Management Limited with respect to Pictet
International Small Companies Fund is incorporated by reference to
Post-Effective Amendment No. 4. (6)(a) Distribution Agreement between Registrant
and 440 Financial Distributors, Inc. ("440 Distributors") is incorporated by
reference to Post-Effective Amendment No. 3. (6)(b) Supplement dated January 2,
1996 to the Distribution Agreement dated between Registrant and 440 Distributors
with respect to Pictet International Small Companies Fund is incorporated by
reference to Post-Effective Amendment No. 4. (7) Not Applicable. (8)(a)
Custodian Agreement between Registrant and Brown Brothers Harriman & Co. with
respect to Pictet Global Emerging Markets Fund is incorporated by reference
to Post-Effective Amendment No. 3. (8)(b)Amendment to Custodian Agreement
dated January 10, 1996 between Registrant and Brown Brothers Harriman & Co. with
respect to International Small Companies Fund is incorporated by reference to
Post-Effective Amendment No. 4. (8)(c) Amendment to Custodian Agreement
dated September 13, 1996 between Registrant and Brown Brothers Harriman & Co. is
filed herein. (9)(a) Transfer Agency Agreement between Registrant and The
Shareholder Services Group, Inc. is incorporated by reference to Post-Effective
Amendment No. 3. (9)(b) Supplement dated January 2, 1996 to the Transfer Agency
and Services Agreement between Registrant and First Data Investor Services
Group, Inc. with respect to Pictet International Small Companies Fund is
incorporated by reference to Post-Effective Amendment No. 4. (9)(c)
Administration Agreement between Registrant and The Shareholder Services Group,
Inc. is incorporated by reference to Post-Effective Amendment No. 3. (9)(d)
Supplement dated January 2, 1996 to the Administration Agreement between
Registrant and First Data Investor Services Group, Inc.with respect to Pictet
International Small Companies Fund is incorporated by reference to
Post-Effective Amendment No. 4. (10) Not Applicable. (11) Not Applicable. (12)
Not Applicable. (13)(a) Purchase Agreement dated October 2, 1995 is incorporated
by reference to Post-Effective Amendment No. 3. (13)(b) Purchase Agreement dated
February 1, 1996 with respect to Pictet International Small Companies is
uncorporated by reference to Post- Effective Amendment No. 4. (14) Not
Applicable. (15) Not Applicable. (16) Not Applicable. (17) Not Applicable.
Item 25. Persons Controlled by or Under Common Control with Registrant.
Registrant is not controlled by or under common control with any
person.
Item 26. Number of Holders of Securities.
As of December 31, 1996, there are, with respect to the Pictet
Global Emerging Markets Fund, 6 record holders of the Registrant's shares of
beneficial interest, $.001 par value.
As of December 31, 1996, there are, with respect to the Pictet
International Small Companies Fund, 3 record holders of the Registrant's shares
of beneficial interest, $.001 par value.
Item 27. Indemnification.
Under Section 4.3 of Registrant's Declaration of Trust, any past
or present Trustee or officer of Registrant (hereinafter referred to as a
"Covered Person") is indemnified to the fullest extent permitted by law against
all liability and all expenses reasonably incurred by him or her in connection
with any claim, action, suit or proceeding to which he or she may be a party or
otherwise involved by reason of his or her being or having been a Covered
Person. This provision does not authorize indemnification when it is determined,
in the manner specified in the Declaration of Trust, that such Covered Person
has not acted in good faith in the reasonable belief that his or her actions
were in or not opposed to the best interests of Registrant. Moreover, this
provision does not authorize indemnification when it is determined, in the
manner specified in the Declaration of Trust, that such Covered Person would
otherwise be liable to Registrant or its shareholders by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of his or her
duties. Expenses may be paid by Registrant in advance of the final disposition
of any claim, action, suit or proceeding upon receipt of an undertaking by or on
behalf of such Covered Person to repay such expenses to Registrant in the event
that it is ultimately determined that indemnification of such expenses is not
authorized under the Declaration of Trust and the Covered Person either provides
security for such undertaking or insures Registrant against losses from such
advances or the disinterested Trustees or independent legal counsel determines,
in the manner specified in the Declaration of Trust, that there is reason to
believe the Covered Person will be found to be entitled to indemnification.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended (the "Securities Act"), may be permitted to
Trustees, officers and controlling persons of the Registrant pursuant to the
foregoing provisions or otherwise, the Registrant has been advised that in the
opinion of the SEC such indemnification is against public policy as expressed in
the Securities Act and is therefore, unenforceable. In the event that a claim
for indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a Trustee, officer, or controlling
person of the Registrant in connection with the successful defense of any claim,
action, suit or proceeding) is asserted against the Registrant by such Trustee,
officer or controlling person in connection with the shares being registered,
the Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Securities Act and will be governed by the final adjudication
of such issue.
Item 28. Business and Other Connections of Investment Adviser.
Pictet International Management Limited (the "Adviser") is an
affiliate of Pictet & Cie (the "Bank"), a Swiss private bank, which was founded
in 1805. The Bank manages the accounts for institutional and private clients and
is owned by seven partners. The Adviser, established in 1980, manages the
investment needs of clients seeking to invest in the international fixed revenue
and equity markets.
The list required by this Item 28 of officers and directors of
Pictet International Management Limited, together with the information as to any
other business, profession, vocation or employment of substantial nature engaged
in by such officers and directors during the past two years, is incorporated by
reference to Schedules A and D of Form ADV filed by Pictet International
Management Limited pursuant to the Investment Advisers Act of 1940 (SEC File No.
801-15143).
Item 29. Principal Underwriters.
(a) 440 Distributors, the Trust's Distributor, also acts as
principal underwriter and distributor for The Galaxy
Funds, the Galaxy VIP Fund, The Galaxy II Fund, the Armada
Funds (formerly known as NCC Funds), BT Insurance Funds
Trust, the AMBAC Funds and Wilshire Target Funds, Inc.
(b) The information required by this Item 29 (b) with respect
to each director, officer, or partner of 440 Distributors
is incorporated by reference to Schedule A of Form BD
filed by 440 Financial Distributors, Inc. with the
Securities and Exchange Commission pursuant to the
Securities Act of 1934 (File No. 8-45467).
(c) 440 Distributors will not be paid any compensation from the Registrant
for its services as principal underwriter.
Item 30. Location of Accounts and Records.
All accounts books and other documents required to be maintained
by Registrant by Section 31(a) of the Investment Company Act of 1940, as
amended, and the Rules thereunder will be maintained at the offices of:
Pictet International Management Limited
Cutlers Garden
5 Devonshire Square
London, England EC2M 4LD
(records relating to its functions as investment adviser)
Brown Brothers Harriman & Co.
40 Water Street
Boston, Massachusetts 02109
(records relating to its functions as custodian)
First Data Investor Services Group, Inc. One Exchange Place Boston,
Massachusetts 02109 (records relating to its functions as transfer agent and
administrator)
440 Financial Distributors, Inc.
440 Computer Drive
Westboro, Massachusetts 01581-5120
(records relating to its functions as distributor)
Item 31. Management Services.
Not Applicable.
Item 32. Undertakings.
(a) Not Applicable.
(b) The Registrant hereby undertakes to file a post-effective
amendment, using financial statements which need not be certified, regarding
Pictet Eastern European Fund within four to six months after the
effective date of the Registration Statement under the Securities Act of 1933.
(c) The undersigned Registrant will afford to shareholders of the
Fund the rights provided by Section 16(c) of the Investment Company Act of 1940,
as amended, so long as Registrant does not hold annual meetings of its
shareholders.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended,
and the Investment Company Act of 1940, as amended, Panorama Trust has duly
caused this Post-Effective Amendment No.6 to its Registration Statement
to be signed on its behalf by the undersigned, thereunto duly authorized, in the
City of Boston, and Commonwealth of Massachusetts, on the 28th day of
February 1997 .
PANORAMA TRUST
By /s/ Jean G. Pilloud Jean G. Pilloud Chairman, President and Trustee
Pursuant to the requirements of the Securities Act of 1933, as amended,
this Post-Effective Amendment No. 6 to the Registration Statement of
Panorama Trust has been signed by the following persons in the capacities and on
the dates indicated:
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ Jean G. Pilloud Chairman, President February 28, 1997 (Jean G.
Pilloud) and Trustee (principal executive officer)
/s/ Michael C. Kardok Treasurer February 28, 1997 (Michael C.
Kardok) (principal financial and accounting officer)
/s/ Jean-Francois Demole Trustee February 28, 1997 (Jean-Francois
Demole)
/s/ Jeffrey P. Somers, Esq. Trustee February 28, 1997 (Jeffrey P.
Somers, Esq.)
/s/ Bruce W. Schnitzer Trustee February 28, 1997 (Bruce W.
Schnitzer)
/s/ David J. Callard Trustee February 28, 1997 (David J. Callard)
</TABLE>
<PAGE>
EXHIBIT INDEX
Exhibit
Page
Description Number
8(b) Amendment dated September 13, 1996 between Registrant and
Brown Brothers Harriman & Co.
<PAGE>
BROWN BROTHERS HARRIMAN & CO.
AMENDMENT TO THE CUSTODIAN AGREEMENT
AMENDMENT entered into as of this 13th day of September, 1996 to the
Custodian Agreement among PANORAMA TRUST (the "Fund") and each of the Funds
listed in Appendix B (collectively the "Funds," individually a "Fund"), and
BROWN BROTHERS HARRIMAN & CO. (the "Custodian") dated as of September 15, 1995
as amended (the "Agreement"). In consideration of the Custodian's offering
sub-custodial services to the Funds in Russia, the Funds and the Custodian agree
that the Agreement is hereby amended as follows:
1 . Section 2. 1, Safekeeping, is amended by the addition of the following
phrase at the end of said ------------- ----------- Section:
"provided, however, that the Custodian's responsibility for
safekeeping equity securities of Russian issuers ("Russian
Equities") hereunder shall be limited to the safekeeping of
relevant share extracts from the share registration books
maintained by the entities providing share registration services to
issuers of Russian Equities (each a "Registrar") indicating an
investor's ownership of such securities (each a "Share Extract")."
2. Section 2.3, Registration, is amended by the addition of the following
at the end of said Section:
"However, with respect to Russian Equities, the Custodian shall
instruct a Sub-custodian to endeavor to assure that registration
thereof shall be reflected on the books of the issuer's Registrar,
subject to the following conditions, but shall in no event be liable
for losses or costs incurred as a result of delays or failures in the
registration process, including without limitation the inability to
obtain or enforce relevant Share Extracts. Such registration may be in
the name of a nominee of a Sub-custodian. In the event registration is
in the name of a Fund, such Fund hereby acknowledges that only the
Custodian or Sub-custodian may give instructions to the Registrar to
transfer or engage in other transactions involving the Russian Equities
so registered.
A Sub-custodian may from time to time enter into contracts with
Registrars with respect to the registration of Russian Equities
("Registrar Contracts"). Such Registrar Contracts may provide for (i)
regular share confirmations by the Sub-custodian, (ii)
reregistrations within set timeframes, (iii) use of a Sub-custodian's
nominee name, (iv) direct access by auditors of the Sub-custodian or
its clients to share registers, and (v) specification of the
Registrar's responsibilities and liabilities. It is hereby
acknowledged and agreed that the Custodian does not represent or
warrant that such Registrar Contracts are enforceable.
If a Fund instructs the Custodian to settle a purchase of a
Russian Equity, the Custodian will instruct a Sub-custodian to
endeavor on a best efforts basis to reregister the Russian Equity and
obtain a Share Extract in a timely manner.
After completion of reregistration of a Russian Equity in
respect of which a Sub-custodian has entered into a Registrar
Contract, the Custodian shall instruct the Sub-custodian to monitor
such registrar on a best efforts basis and to notify the Custodian
upon the Sub-custodian's obtaining knowledge of the occurrence of any
of the following events ("Registrar Events"): (i) a Registrar has
eliminated a shareholder from the register or has altered
registration records; (ii) a Registrar has refused to register
securities in the name of a particular purchaser and the purchaser or
seller has alleged that the registrar's refusal to so register was
unlawful; (iii) a Registrar holds for its own account shares of an
issuer for which it serves as registrar; (iv) if a Registrar Contract
is in effect with a Registrar, the Registrar notifies the
Sub-custodian that it will no longer be able materially to comply
with the terms of the Registrar Contract; or (v) if a Registrar
Contract is in effect with a Registrar, the Registrar has materially
breached such Contract. The Custodian shall inform the Funds of the
occurrence of a Registrar Event provided the Custodian has in fact
received actual notice thereof from the Sub-custodian.
It shall be the sole responsibility of each Fund to contact the
Custodian prior to executing any transaction in a Russian Equity to
determine whether a Registrar Contract exists in respect of such
issuer.
If a Fund instructs the Custodian by Proper Instruction to
settle a purchase of a Russian Equity in respect of which the
Sub-custodian has not entered into a Registrar Contract, then the
Custodian shall instruct the Sub-custodian to endeavor to settle such
transaction in accordance with the Proper Instruction and with the
provisions of Section 2.4 of this Agreement, notwithstanding the
absence of any such Registrar Contract and without the Custodian
being required to notify the Fund that no such Registrar Contract is
then in effect, and it being understood that neither the Custodian
nor the Sub-custodian shall be required to follow the procedure set
forth in the second preceding paragraph."
3. Section 2.4, Purchases, is amended by the addition of the following at
the end of said Section:
"Without limiting the generality of the foregoing, the
following provisions shall apply with respect to settlement of
purchases of securities in Russia. Unless otherwise instructed by
Proper Instructions acceptable to the Custodian the Custodian shall
only authorize a Sub-custodian to make payment for purchases of Russian
Equities upon receipt of the relevant Share Extract in respect of the
Fund's purchases. With respect to securities other than Russian
Equities, settlement of purchases shall be made in accordance with
securities processing or settlement practices which the Custodian in
its discretion determines to be a market practice The Custodian shall
only be responsible for securities purchased upon actual receipt of
such securities at the premises of its Sub-custodian, provided that the
Custodian's responsibility for securities represented by Share Extracts
shall be limited to the safekeeping of the relevant Share Extract upon
actual receipt of such Share Extract at the premises of the
Sub-custodian."
4. Section 2.5, Exchanges, is amended by inserting after the word
"exchange" in the first line thereof, the following phrase:
", in accordance with the registration procedures described in Section 2.3
of this Agreement,
5. Section 2.6, Sales of Securities, is amended by the addition of the
following at the end of said Section:
"Without limiting the generality of the foregoing, the following
provisions shall apply with respect to settlement of sales of
securities in Russia. Unless otherwise expressly instructed by Proper
Instructions acceptable to the Custodian, settlement of sales of
securities shall be made in accordance with securities processing or
settlement practices which the Custodian in its discretion determines
to be a market practice. Each Fund hereby expressly acknowledges that
such market practice might require delivery of securities prior to
receipt of payment and that the Fund bears the risk of payment in
instances where delivery of securities is made prior to receipt of
payment therefor in accordance with Proper Instructions received by
the Custodian or pursuant to the Custodian's determination in its
discretion that such delivery is in accordance with market practice.
The Custodian shall not be responsible for any securities delivered
from the premises of the Sub-custodian from the time they leave such
premises."
6. Section 2.8. Exercise of rights; Tender Offers, is replaced in its
entirety with the following:
"Section 2.8. Rights. Tender Offers and any other Corporate Actions
-- Upon timely receipt of Proper Instructions, to endeavor to take
any action required by the terms of a rights offer, tender offer, put
call, merger, consolidation, reorganization or other corporate.
action affecting securities held on behalf of a Fund. The Custodian
shall use reasonable efforts to act on such Propel Instructions but
will not be held liable for any losses or costs incurred as a result
of such actions or as a result of the Custodian's inability for
reasons beyond its control to take the actions requested by such
Proper Instructions."
7. Section 2.9, Stock Dividends. Rights, Etc., is modified by the addition
of the following paragraph at the end of said Section:
"With respect to Russian Equities, to request a Sub-custodian to
endeavor to obtain a Share Extract with respect to all Russian
Equities issued by reason of a stock dividend, bonus issue or other
distribution resulting from a corporate action not requiring
instructions from the shareholder of the security, provided that the
Custodian shall not be responsible for its inability to obtain any
such Share Extract or for the failure of a Registrar or any agent
thereof to record the Fund's ownership on the issuer's records."
8. Section 3, Powers and Duties of the Custodian with Respect to the
Appointment of Sub-custodians, is modified by the insertion of the following at
the end of the first paragraph of Section 3:
"With respect to Russia, each Fund hereby expressly acknowledges that a
Sub-custodian for Russian securities may from time to time delegate any
of its duties and responsibilities to any securities depository,
clearing agency, share registration agent or sub-sub-custodian
(collectively, "Russian Agent") in Russia, including without limitation
Rosvneshtorgbank (also called Vneshtorgbank RF) ("VTB"). Each Fund
acknowledges that the rights of the Sub-custodian against any such
Russian Agent may consist only of a contractual claim against the
Russian Agent. Notwithstanding any provision of this Agreement to the
contrary, neither the Custodian nor the Sub-custodian shall be
responsible or liable to a Fund or its shareholders for the acts or
omissions of any such Russian Agent. In the event of a loss of
securities or cash held on behalf of a Fund through any Russian Agent,
the Custodian -- shall not be responsible to a Fund or its shareholders
unless and to the extent it in fact recovers from the Sub-custodian."
9. The sixth paragraph of Section 3, Powers and Duties of the Custodian
with Respect to the Appointment of Sub-custodians, is replaced in its entirety
with the following:
"The Custodian shall be liable to a Fund for any loss or damage to the
Fund caused by or resulting from the acts or omissions of any
Sub-custodian to the extent that, under the terms set forth in the
sub-custodian agreement between the Custodian and the Sub-custodian,
the Sub-custodian has failed to perform in accordance with the standard
of conduct imposed under such sub-custodian agreement as determined in
accordance with the law which is adjudicated to govern such agreement
and in accordance with any determination to any court as to the duties
of said Sub-custodian pursuant to said agreement The Custodian shall
also be liable to a Fund for its own negligence in transmitting any
instructions received by it from the Fund and for its own negligence in
connection with the delivery of any securities or funds held by it to
any Sub-custodian. However, notwithstanding the foregoing, in the event
of any loss incurred by a Fund with respect to Russia, securities
issued by Russian issuers or settlement in Russia of securities
transactions by reason of the failure of a Sub-custodian to exercise
reasonable care as set forth in the second sentence of this paragraph
as amended, the Custodian shall only be liable to a Fund to the extent
the Sub-custodian is liable to the Custodian under the relevant
Sub-custodian Agreement and the Custodian actually recovers."
10. Section 6.1, Liability of the Custodian with Respect to Proper
Instructions:
Evidence of Authority, Etc., is amended by adding to the end of the third
paragraph the following:
"In addition, notwithstanding any other provision of this Agreement to
the contrary, with respect to Russian securities the Custodian shall
not be responsible for the title, validity or genuineness of any
property or evidence of title thereto received by it or delivered to it
pursuant to this Agreement, whether or not it is asserted that the
Custodian or a Sub-custodian did not exercise reasonable care in
accepting any such property or evidence of title, and accordingly the
Custodian shall in no event be liable to the Funds for any loss,
expense or damage suffered by a Fund as a result of the deposit to such
Fund's account of any invalid, fraudulent or forged securities, Share
Extracts or cash in Russia."
11. Section 6.2, Liability of the Custodian with Respect to Use of
Securities Systems and Foreign Depositories, is amended by the insertion of the
following at the end of said Section:
"Notwithstanding anything in this Agreement to the contrary, neither
the Custodian nor the Sub-custodian shall be responsible or liable to
a Fund or its shareholders for the acts or omissions of a Foreign
Depository in Russia, and in addition, neither the Custodian nor a
Sub-custodian shall be responsible or liable to a Fund or its
shareholders for the failure of the Custodian or Sub-custodian to
assert rights effectively against any such Foreign Depository. "
12. The first paragraph of Section 6.3, Standard of Care; Liability;
Indemnification, is replaced in its entirety with the following:
"The Custodian shall be held only to the exercise of reasonable care
in carrying out the provisions of this Agreement, provided that. the
Custodian shall not thereby be required to take any action which is
in contravention of any applicable law, rule or regulation or any
order or judgment of any court of competent jurisdiction. With
respect to securities issued by Russian issuers or settlement in
Russia of securities transactions, reasonable care shall mean
reasonable practices under the circumstances as measured by
prevailing custodial practices among international financial
institutions in Russia, and negligence as used herein shall mean the
failure to exercise reasonable care as defined in this sentence. The
Custodian shall in no event be liable for consequential or indirect
losses or from loss of goodwill.
"Notwithstanding the foregoing, the Custodian shall have no liability
in respect of any loss, damage or expense suffered by a Fund or any
shareholder of a Fund insofar as such loss, damage or expense arises
from investment risk inherent in investing in capital markets or in
holding assets in a particular country or jurisdiction, including
without limitation, (i) political, legal, economic, settlement and
custody infrastructure, and currency and exchange rate risks; (ii)
investment and repatriation restrictions; (iii)) a Fund's inability
to protect and enforce any local legal rights including rights of
title and beneficial ownership; (iv) corruption and crime in the
local market; (v) unreliable information which emanates from the
local market; (vi) volatility of banking and financial systems and
infrastructure; (vii) bankruptcy and insolvency risks of any and all
local banking agents, counterparties to cash and securities
transactions or registrars or transfer agents; and (vii) risk of
issuer insolvency or default.
"It is understood that no Registrar, whether or not any such
Registrar has entered into a contract or other arrangement with a
Sub-custodian or Foreign Depository, is or shall be considered or
deemed to be a Foreign Depository or an agent of the Custodian or any
Sub-custodian, and accordingly neither the Custodian nor the
Sub-custodian shall be responsible for or liable ~o a Fund or to the
shareholders of a Fund for the acts or omissions of any such
Registrar."
13. Section 6.3, Standard of Care; Liability Indemnification is amended
by the insertion of the following at the end of the last paragraph of said
Section:
"It is also agreed that each Fund shall be responsible for
preparation and filing of tax returns, reports and other documents
on any activities it undertakes in Russia which are to be filed
with any relevant governmental or other authority and for the
payment of any taxes, levies, duties or similar liability the Fund
incurs in respect of property held or sold in Russia or of payments
or distributions received in respect thereof in Russia.
Accordingly, each Fund hereby agrees to indemnify and hold harmless
the Custodian from any loss, cost or expense resulting from the
imposition or assessment of any such tax, duty, levy or liability
or any expenses related thereto."
14. A new Section 14, Risk Disclosure Acknowledgment. is added at the end
of the present Section 13.
"Each Fund hereby acknowledges that it has received, has read and
has understood the Custodian's Risk Disclosure Statement, a copy of
which is attached hereto and is incorporated herein by reference.
Each Fund further acknowledges that the Risk Disclosure statement
is not comprehensive, and warrants and represents to the custodian
that it has undertaken its own review of the risks associated with
investment in Russia and has concluded that such investment is
appropriate for the Fund and in no way conflicts with the Fund's
constitutive documents, investment objective, duties to its
shareholders or with any regulatory requirements applicable to the
Fund."
Except as amended above, all the provisions of the Agreement as heretofore in
effect shall remain in full force and effect.
BROWN BROTHERS HARRIMAN & CO.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the
date first set forth above.
PANORAMA TRUST BROWN BROTHERS HARRIMAN & CO.
/s/ Jean G. Pilloud /s/ Kristen Fitzwilliam Giarrusso
Name: Jean G. Pilloud Name:Kristen Fitzwilliam Giarrusso
Title: Chairman Title:
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